XREF LIMITED — Annual Report 2012

Jun 25, 2012

KING SOLOMON MINES LTD

Annual Report 2012

ARBN 122 404 666

Contents

Chairman's Review	02
Exploration Review	03
Schedule of Tenements	10
Report of the Directors	11
Statements of Comprehensive Income	15
Statements of Changes in Equity	16
Statements of Financial Position	18
Statements of Cash Flow	19
Notes to the Financial Statements	20
Directors' Disclosures	41
Independent Auditors' Report	42
Corporate Governance Statement	44
Shareholder Information	47
Corporate Directory	IBC

Chairman's Review

Dear Shareholder

Despite what was probably the most productive field season in terms of metres drilled, your Company has still yet to record a discovery which might be a game changer for its Shareholders. In such circumstances, and particularly at this time of very uncertain markets, it is easy to become pessimistic about the future. I would like to reassure you that King Solomon Mines still has unfinished business in Inner Mongolia and your Board and management are very focussed on pursuing the technical encouragement which both our major prospects, Bu Dun Hua and Mudhouse, continue to demonstrate.

BDH has been the major centre of attention over the last field season. A number of magnetic anomalies were drilled. In most instances, whilst desirable characteristics of porphyry systems were intersected, later stage intrusive activity appears to have overprinted the potential host for base and precious metals. Ironically the last hole of the season, drilled into the Ghenghis anomaly, intersected the most interesting host rocks and mineralisation style seen to date. Follow up drilling of this anomaly will be a high priority for the 2012 season.

During the off season we also reprocessed magnetic data using new diagnostic tools and have identified a previously unrecognised magnetic low which has been dubbed "Nomad". This anomaly will also be drilled in the new season.

At Mudhouse in the Sonid Zuoqi area, drilling has identified a 600 metre zone of gold mineralisation. Whilst drill density is not sufficient to quantify a JORC standard resource, it would not surprise me if the area drilled to date hosted more than 100,000 ozs of gold. Our drilling at Mudhouse has been relatively shallow and mineralisation remains open at depth and possibly along strike. As yet we don't fully understand the controls on this mineralisation, but there is clear potential to increase the dimensions of this mineralised zone with further drilling.

Your Board is very conscious of the fact that the 2012 field season is of critical importance to the Company. While we are realists when it comes to the high risk business of exploration, we continue to believe that our ground in Inner Mongolia is prospective and can deliver the discovery that we are all working and hoping for.

John C Quinn Chairman

Exploration Review

Introduction

A high level of exploration activity was maintained through the 2011-2012 reporting year. The work was spread between the Bu Dun Hua (BDH) porphyry copper project and the Sonid North gold project although some time was also spent on evaluating the Honggeer property, a tenement offered for joint venture to KSO. Work at Naogaoshandu and Marmot was limited to assisting local iron ore miners with evaluation of magnetite/hematite occurrences on each of these tenements.

The highlights of the year at BDH were firstly, the drill-hole discovery of a copper-gold anomalous intrusive-related system at Ghenghis, only 1.2km northeast of the Whitehorse copper-molybdenum target; and secondly, the recognition of a large new drill target under cover at Nomad, approximately 2.7km southeast of Ghenghis.

At Sonid North first stage pattern drilling of the Mud-house prospect defined a 600m zone of significant gold resource potential. It also provided keys to exploration for repetitions under cover along strike.

Drilling has resumed after the winter break at BDH. Geological modeling and financial scoping is under way in respect of the Mud-house prospect at Sonid North.

King Solomon Project Locations, Inner Mongolia, Peoples Republic of China

Bu Dun Hua drill-hole and geophysical target locations (magnetic low targets contoured and shaded in blues at 100m levels; magnetic high targets shown by orange hachured lines).

Bu Dun Hua Porphyry Copper Project

Eleven diamond drill-holes totaling 4,727m were completed at BDH before the winter onset. Since resumption in spring, a twelfth hole has been completed and a thirteenth commenced. The program continues to expand the extent of intrusiverelated hydrothermal alteration within the tenement and further define the distribution of base and precious metals within this large system.

In particular it has shown that porphyry-style copper mineralisation occurs where granitoid intrusive stocks or related breccias come closest to surface viz. at Whitehorse (copper-molybdenum) and northeast of Whitehorse at

Ghenghis (copper-gold). Geophysical targets further east of these prospects have yet to be tested. West and south of Whitehorse no near-surface intrusive bodies have been found and there is no significant copper mineralisation, whereas low-grade disseminated lead-zinc mineralisation is widespread. Quartz-hematite veins carrying variable silver, lead-zinc and copper mineralisation occur locally to the south (Lao Ping Tong) and east (Baiyundu) of Whitehorse.

Rhyolitic fragmental rocks with occasional flows and intercalated mudstones are prevalent throughout the tenement. They are cut by andesite or latite sub-volcanic bodies and intruded by granitoid porphyries at Whitehorse. Intrusive breccias occur at both Whitehorse and Ghenghis. Alteration intensities in these rocks, sulphide levels in particular, decrease outwards from the intrusive centres.

Whitehorse

The first hole (BDH018) of the 2011-2012 diamond drilling campaign at BDH, was a deep hole targeting the core of the 700m diameter Whitehorse granitoid porphyry stock at approximately 800m below surface. The objective was to get below the copper-diluting influence of the pervasive latestage quartz-sericite alteration encountered in the much shallower preceding holes. The hole was drilled to almost 900m below surface and encountered the intrusive rocks where expected. Once again however, strong quartz-sericite alteration was present, leaving copper-molybdenum mineralisation weak and patchy. The decision was made to move on from Whitehorse with the conclusion that despite the encouraging geology and geochemistry, commercial mineralisation was unlikely to be present within 800m of surface.

View north from BDH018 drill site at Whitehorse

The decision to move on from Whitehorse signaled the commencement of a ten hole scout drilling program targeting a number of other circular (potential porphyry) magnetic anomalies. Eight holes were drilled through an arc from south to north, west of Whitehorse, and two were drilled at Ghenghis to the northeast of Whitehorse. All but one (Royal Mongol) of the holes were sited within a 4.6km x 1.9km corridor of coalescing circular to elongate magnetic lows.

View northeast from BDH030 drill site Ghenghis

Ghenghis

Hole BDH025 at Ghenghis, approximately 1km eastnortheast of Whitehorse, encountered persistently anomalous copper, lead and zinc values throughout the first 350m of its 500m length. In hindsight the hole was drilled near the western margin of the proposed Ghenghis intrusive stock and was drilling away from the centre. BDH028, collared 400m further to the northeast, grazed down and just outside the northern flank of the proposed stock. It nevertheless yielded persistently anomalous copper, lead and zinc values throughout its 508m length and from around 150m onwards down-hole, yielded the first significantly

anomalous gold background of the program. While still predominantly in phyllic altered rhyolitic fragmental rocks, the hole passed through an intrusive breccia and carried sulphide levels not seen outside of Whitehorse. At the time of writing, a follow-up hole (BDH030) targeting the central part of the anomaly had just commenced.

South, West and North of Whitehorse

The eight holes drilled to the south, west and north of Whitehorse all intercepted hydrothermal alteration attributable to underlying or subjacent intrusive bodies, and in most instances included extensive zones of low-grade zinc ± lead mineralisation. These appear strongest in andesitic rocks but also occur throughout the rhyolitic fragmental sequences.

A single short hole at Royal Mongol, 2.4km south of Whitehorse, encountered persistent weak zinc anomalies (up to 474ppm Zn) and tens of metre zones of moderate arsenic anomalies (up to 381ppm As) in rhyolitic fragmental rocks and breccias.

A relatively deep hole, BDH020 at Lao Ping Tong (1km south of Whitehorse), encountered scores of metres of D veins, the classic porphyry copper system indicators, but failed to yield any significant copper or molybdenum values. Persistently anomalous zinc values (up to 1,680ppm Zn) through 310m were accompanied by erratically anomalous lead numbers (up to 578ppm Pb).

Hole BDH021 testing an un-named magnetic low 2.5km southwest of Whitehorse, yielded 220m of continuous strongly anomalous zinc values (up to 0.78% Zn) supported by more erratic but still strongly anomalous lead values (up to 0.43% Pb). Host rocks throughout this zone were andesitic dykes or breccias. Intensity of the anomalies dropped off in overlying and underlying rhyolitic fragmental rocks.

Quartz-hematite veins at BDH

Core shed showing current day's core run ready for logging

Approximately 2km west-southwest of Whitehorse, BDH022 at Western Khan intercepted 260m of equally persistent but slightly weaker zinc anomalism (up to 930ppm Zn) again accompanied by erratic lead anomalies (up to 785ppm Pb) in a thick rhyolitic fragmental sequence. Approximately 500m further northward, BDH023 yielded very similar results with 260m of anomalous zinc and erratic lead values (up to 794ppm Zn and 648.ppm Pb) in a sequence of latite dykes and breccias with intercalated rhyolitic fragmental units and occasional andesite dykes.

At Kublai, only 1km west of Whitehorse, BDH026 encountered erratic zones of zinc ± lead (up to 1,790ppm Zn and 503ppm Pb) throughout a 593m sequence of rhyolitic fragmental rocks. It also intersected a 26m zone of erratic molybdenum anomalies (up to 498ppm Mo) approximately 240m downhole. BDH027, drilled southward from the same collar, yielded similar geology and geochemistry.

A single hole testing an un-named magnetic low approximately 1km north of Whitehorse encountered erratically anomalous zinc values (up to 2,610ppm Zn) associated with rhyolitic breccias or underlying andesite flows.

Nomad

The large, more-or-less circular, Nomad magnetic anomaly was discovered by re-interpretation of high resolution magnetic data through the northern winter drilling stand-down. Hole BDH029, targeting the central part of the anomaly at 250m to 300m below surface was the first hole of 2012. At the time of writing results remain pending. The hole encountered rhyolitic fragmental rocks with an intervening zone of andesitic flows and tuffs. While no porphyry style alteration

was noted, zones of chlorite-carbonate alteration, crackle brecciation and associated quartz ± sulphide veinlet development were noted within the magnetic low.

Sonid North Gold Project

Work undertaken at Sonid North through the 2011-2012 year was focused strongly on the Mud-house prospect where KSO had discovered significant gold mineralisation via a sequence of soil geochemistry, RAB and RC drilling. Through the 2011 field season at Mud-house, 21 RC drill-holes were successfully completed for 3,218m and 21 diamond drill-holes for 5,562m. Outside of the Mud-house prospect, 78 RAB holes for 909m and two RC drill-holes for 355m were completed at the Sandy Ridge prospect.

View to the southeast from BDH peak

Mud-house

The 2010 and 2011 RC drilling at Mud-house confirmed the presence of gold mineralisation over a strike length of 1.4km before thickening sand cover limited the further use of this drilling technique. Subsequent diamond drilling was carried out in two phases. The first nine holes were spread through a 600m section of the mineralisation trend indicated by the RC drilling. On the basis of encouraging intercepts, the next twelve holes were sited to combine with these to provide a series of drill sections at approximate 200m intervals across approximately 1.1km of strike extent.

The diamond drilling established that gold mineralisation at Mud-house occurs within a moderately southward-dipping, west-northwest to east-southeast trending, 100m to 140m wide, package of narrow veins or shears. The package is hosted in a diorite to quartz diorite stock and has a hanging wall defined by a tens-of-metre thickness of granitic dykes. The footwall is not clearly defined and has been chosen by a drop-off, rather than cessation, of vein occurrence. There are at least two vein styles, orogenic and epithermal, with the latter appearing to increase in size and relative frequency toward the east. The package remains open along strike and down dip. Significant gold values (>0.1g/t Au) are confined

to the narrow structures but are enveloped within often broad zones of anomalous gold (< 0.1g/t Au). They are usually accompanied by moderate to strongly anomalous arsenic values and less frequently by significant silver values.

Potentially commercial mineralisation (>1.0g/t Au) occurs within a 600m section of the 1.1km of strike diamond drill tested to date. Off-sets of a prominent granite/diorite contact within this section (Fig 2) show that this is a zone of cross-faulting. Thirteen intercepts of better than 1g/t Au from ten drill-holes in this section average 1.9m in width and 3.35g/t Au in grade. Best values include 0.7m @ 8.0g/t Au and 4.0m @ 11.3g/t Au. The thirteen intercepts are accompanied by numerous additional intercepts in the 0.10 to 0.99g/t Au range. Outside of this section, gold intercepts are still common but rarely exceed 0.5g/t Au.

There is a consequent potential for discovery of an underground narrow vein resource in this central section. Drill-hole spacing is as yet too coarse to quantify the potential. The zone remains open down-dip and there is a possibility of plunge to the west or east. In addition there is the possibility of repeats of this style of mineralisation where similar cross-faulting may occur further along strike of the gold anomalous vein package. There is room for several

RC drilling at Mud-house

kilometres of strike continuity across the Sonid North and adjacent Marmot tenements. Much of this ground is sandcovered and requires scout drilling to identify suitable crossfaulting targets.

KSO has been modeling potential resource scenarios and reviewing the economics of underground mining in Inner Mongolia in order to reach a fully-informed decision on exploration priorities for this prospect.

Sandy Ridge

At Sandy Ridge, approximately 2.4km north of Mud-house, early KSO gold-in-soil anomalies peaking at 0.4g/t Au were followed up by a series of north-south oriented RAB lines. A roughly circular zone of anomalous gold-in-RAB was then tested by two RC drill-holes neither of which yielded significant gold or silver mineralisation.

Competent Person

Information in this report which relates to exploration results is based on information compiled by Mr Bruce Bell, a Member of the Australasian Institute of Mining and Metallurgy. He is a director of the Company and a full time employee of Selwyn Geosurveys Limited. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and ore Reserves (the JORC Code).

Schedule of Tenements

Tenements (other than Bu Dun Hua) are located in the Sonid Zouqi Banner (County) of Inner Mongolia, China. Bu Dun Hua is located in the Wengniute Banner (County) of Inner Mongolia, China.

Project	Exploration Licence	Area (km2)	Interest
Marmot Ridge	T15120091102036745	39.7	100%*
Sonid North	T15120091102036733	24.8	100%*
Naogaoshandu	T15120091102036738	47.2	100%*
Bu Dun Hua	T15120090420028565	25.1	100%*

* The Company holds the rights to its exploration projects through a 90% equity interest in Inner Mongolia Plate Mining Limited ("Plate"), a Sino-foreign incorporated joint venture which holds the four exploration licences referred to above. The remaining 10% interest in Plate is held by Inner Mongolia Ao Meng Xin Economic and Trade Co., Ltd ("AMX") which is jointly owned by Fu La who is a director of the Company and his wife Na Dong. The rights of the Company and AMX as shareholders of Plate are governed by an equity joint venture contract. AMX holds its 10% interest in Plate on trust for the Company.

Report of the Directors

Your Directors present the financial report of the Company for the period ended 31 March 2012. The following persons hold office as Directors at the date of this report. Their qualifications and experience are:

Mr John Quinn B.Com. Non-Executive Chairman

John Quinn has been chairman since joining the board on 2 February 2007. His career spans more than 30 years in the mining industry. He played a key role in the formation of Newmont Australia in 1987 as well as the creation of Newcrest Mining Limited in 1990 where he was Managing Director for 8 years. John was Non-Executive Chairman of Perseverance Corporation from 2001 to 2007. He was elected Chairman of un listed One Asia Resources Limited (owner of two undeveloped gold deposits in Indonesia) on 21 May 2012. He is also a director of unlisted Paradise Phosphate Limited.

Mr Stephen McPhail M.Sc., M.B.A. Managing Director

Stephen McPhail has been a director since he co-founded King Solomon in January 2003. He has over 20 years experience in the mining industry. He managed Todd Corporation Limited's gold and base metals business from 1988–1993. In 1994 co-founded Highlake Resources NL ("Highlake") and was a non-executive director until 1998. He had a key role in the IPO of Highlake and negotiated the merger of Highlake with Ballarat Goldfields in 1998. From 1999–2002, Stephen was CEO of an investment bank focused on high growth companies.

Mr Bruce Bell B.Sc. (Geology), F AusIMM (CP) Executive Director

Bruce Bell has been a director since he co-founded King Solomon in January 2003. He has over 30 years experience in the mining industry in Australia, New Zealand, North America, the Pacific Islands and China.

He has worked for Teck, Delta Gold, Highlake and Ballarat Goldfields. He was a founding shareholder and executive of Delta which listed in 1983. He was a director of Delta from 1985–89. In 1994, Bruce co-founded Highlake which he managed through an IPO and merger with Ballarat Goldfields in 1998. Bruce manages King Solomon's exploration program.

Mr Fu La

Executive Director

Fu La has been a director since 5 May 2004. He worked for 15 years in the commodity logistics industry for the Inner Mongolia Bureau of Commodity Logistics. He has participated in gold mining projects in Inner Mongolia, China. Fu La is an ethnic Mongolian and a successful entrepreneur as well as a former CPC (the Communist Party of China) official. He is responsible for acquiring minerals licences and negotiating with King Solomon's potential joint venture partners in China.

Mr Christopher Castle B.C.A., A.C.A., C.F.I.P. Non-Executive Director

Chris Castle joined the board of King Solomon on 31 October 2005. He is a chartered accountant with 30 years experience in the investment and corporate finance sectors. He manages mineral exploration investment company Widespread Portfolios Limited and rock phosphate developer Chatham Rock Phosphate Limited. Both are listed on the New Zealand Stock Exchange. He is a non-executive director of Asian Mineral Resources Limited. (listed on the Venture Exchange of the Toronto Stock Exchange) and Fiji based oil and gas explorer Akura Limited.

Interests Register

The Company is required to maintain an Interests Register in which particulars of certain transactions and matters involving Directors must be recorded. Details of the entries in this register for each of the Directors are included in this Report. Each of the Directors have made the following general disclosures:

Mr Quinn is to be regarded as interested in any transaction with One Asia Resources Limited and Paradise Phosphate Limited as he is a director of these companies.

Mr McPhail is to be regarded as interested in any transaction with Bodhi Svaha Holdings Limited as he is a director and shareholder of this company.

Mr Bell is to be regarded as interested in any transaction with Selwyn Geosurveys Limited as he is a shareholder and Director of this company.

Mr Fu La is to be regarded as interested in any transaction with Inner Mongolia Ao Meng Xin Economic and Trade Co., Ltd. as he is a director and shareholder of that company.

Mr Castle is to be regarded as interested in any transaction with Widespread Portfolios Limited as he is a director and share holder of that company. He is to be regarded as interested in any transaction with Mineral Investments Limited, Widespread Limited, Chatham Rock Phosphate Limited, Akura Limited and Asian Mineral Resources Limited as he is a director of these companies. Mineral Investments Limited and Widespread Limited are wholly owned subsidiaries of Widespread Portfolios Limited.

Directors' Interests in Shares and Options

Directors' interests in shares and options as at 31 March 2012 are set out in Director's Disclosure after Note 21 to the financial statements and the Disclosure of Directors Share Dealings at page 41 of this report.

Activities

The principal business of the Company is the acquisition, exploration and development of mineral resource projects in China.

Results

The net result from operations after applicable income tax expense was a loss of \$890,109.

Dividends

No dividends were paid or proposed during the period.

Review of Operations

A review of the operations of the Company during the financial period and the results of those operations are contained on pages 3 to 9 of this report.

Corporate Structure

King Solomon Mines Ltd is incorporated and domiciled in New Zealand.

Employees

The Company had 1 employee as at 31 March 2012. The Company uses contract geologists and other consultants as required.

Significant Changes

The Directors are not aware of any significant changes in the state of affairs of the Company occurring during the financial period, other than as disclosed in this report.

Matters Subsequent to the End of the Financial Period

There were at the date of this report no matters or circumstances which have arisen since 31 March 2012 that have significantly affected or may significantly affect:

• i) the operations of the Company,
• ii) the results of those operations, or
• iii) the state of affairs of the Company, in the financial years subsequent to 31 March 2012.

Likely Developments and Expected Results

As the Company's areas of interest are at an early stage of exploration, it is not possible to postulate likely developments and any expected results. The Company is hoping to identify other precious and base metal exploration and evaluation targets.

Remuneration Report

Directors' Benefits and Emoluments

	Director Fees 2012 \$	Option Remuneration 2012 \$	Other Remuneration 2012 \$	Director Fees 2011 \$	Option Remuneration 2011 \$	Other Remuneration 2011 \$
John Quinn	62,500			55,000
Stephen McPhail		28,917	144,098		23,659	130,480
Bruce Bell		28,917	157,168		23,659	156,259
Fu La		28,917	120,000		23,659	120,000
Chris Castle	33,778			31,190

During its annual budget review the Board reviews the Directors' Emoluments. Remuneration levels which are set to provide reasonable compensation in line with the Company's limited financial resources. During the period no Director of the Company has received or become entitled to receive a benefit (other than a benefit included in Note 11 to the accounts) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

Remuneration of the Board and Senior Management

The Board on advice from the remuneration committee will determine the fees for non-executive directors and remuneration packages for executives. The fees for Directors are disclosed below. There is no retirement scheme for Non-Executive Directors. There were no employees, not being directors of the Company, who received remuneration and benefits above NZ\$100,000 per annum.

Directors' Fees

Directors are entitled to remuneration out of the funds of the Company but the remuneration of the Non-Executive Directors may not exceed in any year the amount fixed by the Company in general meeting for that purpose. The aggregate remuneration of the Non-Executive Directors has been fixed at a maximum of \$200,000 per annum to be apportioned among the non¬ executive directors in such a manner as they determine (refer below). Directors are also entitled to be paid reasonable traveling, accommodation and other expenses incurred in consequence of their attendance at Board meetings and otherwise in the execution of their duties as directors. On 1 July 2011, Director's fees were increased from \$55,000 to \$65,000 per annum for the Chairman and from \$30,000 to \$35,000 per annum for Non-Executive Directors. Executive directors do not receive director fees. Messrs McPhail, Bell and La are considered executive directors.

Directors' Employment and Service Contracts

Neither Mr Quinn nor Mr Castle have entered into employment contracts with the Company. The Company has entered service agreements with Bodhi Svaha Holdings Limited ("BSHL"), Selwyn Geosurveys Limited ('SGL'), and Inner Mongolia Ao Meng Xin Economic and Trade Co., Ltd ('AMX') a summary of which are set out below.

Agreement Between the Company and Bodhi Svaha Holdings Limited

Stephen McPhail is engaged via an agreement between the Company and BSHL a company controlled by him. During the financial year BSHL received fees of \$144,098 for services.

The fee to BSHL for services is \$180,000 per annum, renegotiable yearly. There is a requirement for BSHL to procure that Stephen McPhail works for a minimum of thirty hours per week for forty-six weeks per year as managing director for the Company. The agreement began on 18 April 2007 with an initial term of three years, thereafter continuing indefinitely until either party terminates it.

The Company has the right to terminate the agreement at any time by giving 3 months written notice. The Company can terminate the agreement at any time by giving written notice and paying the greater of:

• (a) the amount BSHL would have received in the next twelve months; and
• (b) in the event 6 months or less remains of the current agreement, the amount BSHL would have received had the current agreement come to an end after six months.

Agreement Between the Company and Selwyn Geosurveys Limited

Bruce Bell is engaged via an agreement between the Company and SGL a company controlled by him.

The fee to SGL for services was \$995 per day. During the financial year SGL received fees of \$157,168 for services. There is a requirement for SGL to procure that Bruce Bell works for a minimum of thirty hours per week for forty-six weeks per year providing exploration management services to the Company. In all other aspects, the agreement is identical to that of BSHL above.

Agreement Between the Company and Inner Mongolia Ao Meng Xin Economic and Trade Co., Ltd

Fu La is engaged via an agreement between the Company and AMX a company controlled by him. During the financial year AMX received \$120,000 for services.

The fee to AMX for services is \$150,000 per annum. There is a requirement for AMX to procure that Fu La works for a minimum of thirty hours per week for forty-six weeks per year providing general management services to the Company including growing the Company's mineral exploration business in Inner Mongolia, China. In all other aspects, the agreement is identical to that of BSHL above.

On 1 January 2009, BSHL, SGL and AMX agreed to forego 20% of their respective fees due under their services agreements with the company. Payment of the forgone services fees incurred remains contingent on a change in circumstances for the company as set out in Note 16 to the accounts.

Share Options

Particulars of options granted over un-issued shares:

• i) There were no shares issued during the period ended 31 March 2012 by virtue of the exercise of options.
• ii) As at the end of the financial period, the Company had on issue the following numbers of options to acquire un-issued shares granted under the company's employee share option plan:

3,100,000 options, , exercisable by 29 July 2014 at 10 cents per share, 500,000 options exercisable by 25 March 2016 at 12 cents per share and 2,900,000 exercisable by 29 July 2016 at 12 cents per share.

Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company until the options are exercised.

Meetings of Directors

Board Meeting Attendance

Director	Appointed to Board	Meetings Entitled to attend (including committees)	Meetings Attended
John Quinn	2 February 2007	12	12
Stephen McPhail	28 January 2003	7	7
Bruce Bell	28 January 2003	11	9
Fu La	5 May 2004	7	5
Chris Castle	31 October 2005	12	11

Non-Executive Directors, Messrs J Quinn and C Castle and Executive Director Mr B Bell are members of the Company's Audit Committee. The Committee will review the Company's financial systems, accounting policies, half-year and annual financial statements. There were 4 Audit Committee meetings and 1 Remuneration Committee meeting during the period. Messrs J Quinn and C Castle are members of the Remuneration Committee.

Indemnification and Insurance of Directors and Officers

Every Director is indemnified by the Company for any costs in relation to a liability for an act or omission in their capacity as a Director provided that they successfully defend any legal proceedings. Directors are also indemnified by the Company for any liability to third persons or costs incurred in defending or settling a claim, provided the claim is not related to criminal liability or the breach of the Director's duty to act in good faith and to act in the best interests of the Company.

The Company has arranged directors and officers liability insurance with the amount of premium for cover under the policy not permitted to be disclosed.

Environmental Performance

King Solomon subsidiary Plate holds the rights to acquire exploration licences issued by the Inner Mongolian government authorities which specify guidelines for environmental impacts in relation to exploration activities. There have been no significant known breaches of the licence conditions.

Statements of Comprehensive Income

for the year ended 31 March 2012

		GROUP		PARENT
		2012	2011	2012	2011
	Note	\$	\$	\$	\$
Other Income
Dividend Income		377	259	377	259
Foreign Exchange Gain		21,354	–	–	–
Gain on Sale of Fixed Assets		13,479	–	–	–
Interest Received		90,929	50,982	90,104	103,835
Lease Income	7	91,564	19,175	–	–
Total Other Income		217,703	70,416	90,481	104,094
Expenses
Amortisation	8	41	–	41	–
Depreciation & Loss on Sale	9	15,425	17,719	3,062	6,329
Directors' Fees		96,278	86,190	96,278	86,190
Exploration Licence Sale (Loss) / Gain		–	–	–	80,193
Share Option Expense	12, 16	125,945	81,493	125,945	81,493
Employee Benefits Expense	10	26,978	32,784	–	–
Foreign Exchange Loss		–	148,548	58,825	21,579
Office Expenses		225,145	120,310	70,399	48,675
Professional Fees		287,896	283,572	287,896	283,572
Other Expenses		214,963	167,547	213,161	151,718
Write Off of Exploration Expenditure	3, 7	24,140	1,133,559	18,444	521,378
Write down of Fixed Asset available for sale	9	90,123	–	–	–
Impairment of Investment in Subsidiary	3	–	–	189,162	717,218
Total Expenses		1,106,934	2,071,722	1,063,213	1,998,345
Loss before Tax		(889,231)	(2,001,306)	(972,732)	(1,894,251)
Income Tax Expense	18	878	1,618	878	1,618
Loss attributable to the Owners
of the Company		(890,109)	(2,002,924)	(973,610)	(1,895,869)
Other Comprehensive Income
Currency Translation Differences		8,642	(66,976)	–	–
Total Comprehensive Income net of tax attributable to Owners of the Company		(881,467)	(2,069,900)	(973,610)	(1,895,869)
		\$/share	\$/share	\$/share	\$/share
Loss Per Share
Basic Loss per Share	14	(0.01)	(0.02)	(0.01)	(0.02)
Diluted Loss per Share	14	(0.01)	(0.02)	(0.01)	(0.02)

The above statements of comprehensive income should be read in conjunction with the accompanying notes.

Statements of Changes in Equity

for the year ended 31 March 2012

		Share Capital	Share Options	Foreign Currency Translation Reserve	Accum- ulated Loss	Total Shareholder Funds
	Note	\$	\$	\$	\$	\$
PARENT
Equity as at 1 April 2010		11,543,121	465,409	–	(6,816,180)	5,192,350
Comprehensive Income:
Loss for Year		–	–	–	(1,895,869)	(1,895,869)
Total Comprehensive Income for the Year		–	–	–	(1,895,869)	(1,895,869)
Transactions with owners:
Options Expense	12	–	81,493	–	–	81,493
Shares Issued	12	5,257,080	–	–	–	5,257,080
Capital Raising Costs	12	(197,133)	–	–	–	(197,133)
Total transactions with Owners:		5,059,947	81,493	–	–	5,141,440
Equity as at 31 March 2011		16,603,068	546,902	–	(8,712,049)	8,437,921
Equity as at 1 April 2011 Comprehensive Income:		16,603,068	546,902	–	(8,712,049)	8,437,921
Loss for Year		–	–	–	(973,610)	(973,610)
Total Comprehensive Income for the Year		–	–	–	(973,610)	(973,610)
Transactions with owners:
Options Expense	12	–	125,945	–	–	125,945
Options Expired	12	389,882	(389,882)	–	–	–
Shares Issued	12	–	–	–	–	–
Capital Raising Costs	12	–	–	–	–	–
Total transactions with Owners:		389,882	(263,937)	–	–	125,945
Equity as at 31 March 2012		16,992,950	282,965	–	(9,685,659)	7,590,256

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

Statements of Changes in Equity

for the year ended 31 March 2012

	Share Capital	Share Options	Foreign Currency Translation Reserve	Accum- ulated Loss	Total Shareholder Funds
Note	\$	\$	\$	\$	\$
GROUP
Equity as at 1 April 2010 Comprehensive Income:	11,543,121	465,409	495,328	(7,311,141)	5,192,717
Loss for Year	–	–	–	(2,002,924)	(2,002,924)
Other Comprehensive Income:
Currency Translation Differences	–	–	(66,976)	–	(66,976)
Total Comprehensive Income for the Year	–	–	(66,976)	(2,002,924)	(2,069,900)
Transactions with owners:
Options Expense 12	–	81,493	–	–	81,493
Shares Issued 12	5,257,080	–	–	–	5,257,080
Capital Raising Costs 12	(197,133)	–	–	–	(197,133)
Total transactions with Owners:	5,059,947	81,493	–	–	5,141,440
Equity as at 31 March 2011	16,603,068	546,902	428,352	(9,314,065)	8,264,257
Equity as at 1 April 2011 Comprehensive Income:	16,603,068	546,902	428,352	(9,314,065)	8,264,257
Loss for Year	–	–	–	(890,109)	(890,109)
Other Comprehensive Income:
Currency Translation Differences	–	–	8,642	–	8,642
Total Comprehensive Income for the Year	–	–	8,642	(890,109)	(881,467)
Transactions with owners:
Options Expense 12	–	125,945	–	–	125,945
Options Expired 12	389,882	(389,882)	–	–	–
Shares Issued 12	–	–	–	–	–
Capital Raising Costs 12	–	–	–	–	–
Total transactions with Owners:	389,882	(263,937)	–	–	125,945
Equity as at 31 March 2012	16,992,950	282,965		436,994 (10,204,174)	7,508,735

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

Statements of Financial Position

as at 31 March 2012

		GROUP		PARENT
	Note	2012 \$	2011 \$	2012 \$	2011 \$
SHAREHOLDERS' FUNDS
Share Capital	12	16,992,950	16,603,068	16,992,950	16,603,068
Share Options	12	282,965	546,902	282,965	546,902
Foreign Currency Translation Reserve		436,994	428,352	–	–
Accumulated Losses		(10,204,174)	(9,314,065)	(9,685,659)	(8,712,049)
TOTAL FUNDS EMPLOYED		7,508,735	8,264,257	7,590,256	8,437,921
REPRESENTED BY:
CURRENT ASSETS
Cash and Cash Equivalents	6	1,402,197	5,129,300	1,342,244	4,489,114
Prepayments		16,761	–	2,132	–
Other Receivables – Related Parties	11	842,459	24,700	3,648,116	2,088,174
Other Receivables – Tax on Interest		28,092	15,577	28,092	15,577
Other Receivables – Other		66,619	148,104	48,037	65,505
Property for Resale	9	304,762	–	–	–
Total Current Assets		2,660,890	5,317,681	5,068,621	6,658,370
CURRENT LIABILITIES
Accounts Payable – Related Parties	11	(926,856)	(41,518)	(40,617)	(41,518)
Accounts Payable – Other		(181,860)	(114,867)	(63,945)	(75,200)
Total Current Liabilities		(1,108,716)	(156,385)	(104,562)	(116,718)
NET CURRENT ASSETS		1,552,174	5,161,296	4,964,059	6,541,652
NON CURRENT ASSETS
Property Plant and Equipment	9	344,862	282,605	10,669	10,704
Intangible Assets	8	345	–	345	–
Investment in Subsidiaries	3, 13	–	–	203,381	392,543
Exploration and Evaluation Assets	7	5,611,354	2,820,356	2,411,802	1,493,022
Total Non Current Assets		5,956,561	3,102,961	2,626,197	1,896,269
NET ASSETS		7,508,735	8,264,257	7,590,256	8,437,921

On behalf of the Board

Stephen McPhail, Director 6 June 2012 Bruce Bell, Director 6 June 2012

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

Statements of Cash Flows

for the year ended 31 March 2012

			GROUP	PARENT
	Note	2012 \$	2011 \$	2012 \$	2011 \$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was received from: Interest		98,303	55,974	90,104	50,218
Dividends		269	259	269	259
Lease income received		91,564	30,679	–	–
Resident Withholding Tax refunded		16,761	45,228	16,761	45,228
		206,897	132,140	107,134	95,705
Cash was applied to: Payments to suppliers		642,144	750,974	642,823	656,156
Resident Withholding Tax on Interest		30,046	15,578	30,046	15,578
		672,190	766,552	672,869	671,734
Net cash flow – Operating activities	17	(465,293)	(634,412)	(565,735)	(576,029)
CASH FLOWS FROM INVESTING ACTIVITIES Cash was received from:
Advance from Associate	11	840,525	–	–	–
Sale of Licence Area	7	–	266,564	–	–
Sale of Property Plant and Equipment	9	103,438	25,842	406	–
		943,963	292,406	406	–
Cash was applied to: Purchase of Intangible Assets	8	508	–	508	–
Purchase of Property Plant and Equipment	9	224,282	61,366	3,433	3,335
Purchase of Property available for sale	9	394,885	–	–	–
Advance to Associate	11	840,525	–	840,525	–
Advance to Subsidiary Exploration Expenditure		– 2,729,242	– 1,626,156	720,000 958,250	1,000,000 734,100
		4,189,442	1,687,522	2,522,716	1,737,435
Net cash flow – Investing activities		(3,245,479)	(1,395,116)	(2,522,310)	(1,737,435)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was received from Issue of Shares Cash was applied to Share Raising expenses		– –	5,257,080 197,133	– –	5,257,080 197,133
Net cash flow – Financing activities		–	5,059,947	–	5,059,947
Net cash flows from all activities		(3,710,772)	3,030,419	(3,088,045)	2,746,483
Cash at Beginning of Year Exchange Gains / (Losses) on Cash Balances		5,129,300 (16,331)	2,197,912 (99,031)	4,489,114 (58,825)	1,764,210 (21,579)
Cash at End of Year		1,402,197	5,129,300	1,342,244	4,489,114
Represented by:
Cash at Bank Short Term Bank deposits	6 6	888,814 513,383	2,429,300 2,700,000	828,861 513,383	1,789,114 2,700,000
Cash at End of Year	6	1,402,197	5,129,300	1,342,244	4,489,114

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

Notes to the Financial Statements

for the year ended 31 March 2012

1. General Information

These financial statements are presented in Australian Dollars to reflect the Company listing on the ASX and the influence of the Australian regulatory environment on the raising of any further capital.

King Solomon Mines Limited ('the Company') is a limited liability company incorporated on 28 January 2003 and domiciled in New Zealand. The address of its registered office is 83 Fisher Parade, Sunnyhills, Auckland, 2010.

The Company and its subsidiaries (together 'the Group') were incorporated with the purpose of exploring and developing gold, copper and other metallic deposits in China and are profit oriented entities.

Going concern

The use of the going concern assumption is dependent on the ability of the Group to fund its planned future expenditure, the level of which is dependent on the results of current drilling campaigns at Bu Dun Hua. Should the drilling be successful, the Group will seek additional capital to fund further exploration and/or development expenditure in the area. The ability to obtain funding is dependent on the outcome of the drilling campaigns currently in progress at Bu Dun Hua, the results of which are expected within the next 3 months from the date of signing the accounts.

The financial statements of the Group have been prepared on a going concern basis. The Directors are confident that funding will be available to meet future expenditure given their ability to tailor work programmes to meet the funding available. However, there is material uncertainty related to the results of the current drilling campaigns and the ability of the Group to obtain future funding that may cast significant doubt on the ability of the Group to continue as a going concern.

These financial statements do not include any adjustments that may need to be made to reflect the situation should the Group be unable to obtain future funding. Such adjustments may include assets being realised at amounts other than the amounts at which they are currently recorded in the statement of financial position. In addition, the Group may have to provide for further liabilities that may arise and to reclassify certain non-current assets as current in the statement of financial position.

These consolidated financial statements were approved by the Board of Directors on 6 June 2012.

2. Summary of Significant Accounting Policies

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

2.1 Basis of Preparation

The consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand. The consolidated financial statements of the Group comply with New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS",) interpretations and other applicable Financial Reporting Standards. They are in compliance with International Financial Reporting Standards. The consolidated financial statements have been prepared in accordance with the requirements of the Companies Act 1993 and Financial Reporting Act 1993 and have been prepared under the historical cost convention.

The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company and Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.

New Accounting Standards

The following new standard is mandatory for the first time for the financial year beginning 1 April 2011.

NZ IAS 24 (revised) Related Party Disclosures

NZ IAS 24 is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the definition of a related party and removes the requirement for governmentrelated entities to disclose details of all transactions with the government and other government-related entities. The Group has applied the amended standard from 1 April 2011, but it has had no effect on the Group's or the parent entity's related party disclosures.

The following new standards which the Group has not early adopted are issued but not effective.

NZ IFRS 10 Consolidated Financial Statements (effective 1 January 2013)

IFRS 10, Consolidated financial statements' builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The group is yet to assess IFRS 10's full impact and intends to adopt IFRS 10 no later than the accounting period beginning on or after 1 January 2013.

NZ IFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and finan cial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption. Financial assets are classified according to their measurement, fair at either value or amortised cost. It is not expected to have a material impact on the Company or Group.

NZ IFRS 44 New Zealand Additional Disclosures (effective for accounting periods beginning on or after 1 July 2011). This standard relocates New Zealand specific disclosures that were previously embedded within the standards to one place and revises disclosures relating to compliance with NZ-IFRS, the statutory basis or reporting framework for financial state ments, audit fees, imputation credits, reconciliation of net operating cash flows to profit or loss, prospective financial statements, and elements in the statement of financial performance. The standard is not expected to have a material impact on the Group financial statements. The Group will adopt the standard for the year ending 31 March 2013.

Harmonisation Amendments: Amendments to NZ-IFRS to Harmonise with IFRS and Australian Accounting Standards (effective for accounting periods beginning on or after 1 July 2011). The harmonisation amendments relate to the joint Trans-Tasman project to align New Zealand and Australian accounting standards with IFRS and to remove disclosures to a separate standard (FRS 44) that were previously included within the associated reporting standard. This standard is not expected to have a material impact on the Group financial statements. The Group will adopt the standard for the year ending 31 March 2013.

There are a number of other amendments to accounting stand ards as part of the ongoing improvement process. None of these changes is expected to impact significantly on the Group.

The Company and Group have not adopted any standards prior to their effective date.

2.2 Consolidation

The Group financial statements consolidate the financial statements of the parent and its subsidiary.

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition costs are expensed. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income.

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

Interests in subsidiaries are held at cost less impairment in the Parent.

2.3 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments has been identified as the board.

2.4 Other Income

(a) Interest income

Interest income is recognised on a time proportion basis using the effective interest method.

(b) Dividend income

Dividend income is recognised when the right to receive payment is established.

(c) Gains on sale of Licences

Gains on sale of licences represent the differences between the carrying values at the date of sale and the sale proceeds, adjusted for any impairment, and are recognised when the contracts are unconditional.

2.5 Financial Instruments

The Group financial instruments carried on the statement of financial position include cash and bank balances, term deposits, receivables and accounts payable. The Group classifies its financial assets as loans and receivables.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These are included in current assets, except for maturities greater than 12 months after the reporting date, which are classified as non current assets. The Group's loans and receivables comprise receivables, cash and cash equivalents and term deposits in the Statement of Financial Position (note 2.12 and 2.20).

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been trans ferred and the Group has transferred substantially all risks and rewards of ownership.

The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

2.6 Property, Plant and Equipment

All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company or Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation on assets used for exploration purposes is capitalised as part of exploration and evaluation expenditure.

Depreciation on assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

• Plant and equipment 3–5 years
• Office furniture and equipment 3–12 years
• Motor vehicles 3–8 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

When an item of property plant or equipment is disposed of, the difference between the net disposal proceeds and the carrying amount is recognised as a gain or loss in the profit or loss component of the statement of comprehensive income.

Where property, plant and equipment has been designated as available for sale and is subject to a designated sale process, that property, plant and equipment is re-categorised as a current asset available for sale. Otherwise that property, plant and equipment continues to be recorded as a fixed asset and is noted as available for sale.

2.7 Intangible Assets

Software acquired

Software is recognised at historical cost. Software has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of software over its estimated useful life of 3 to 5 years.

Amortisation on assets used for exploration purposes is capital ised as part of exploration and evaluation assets (note 2.13).

2.8 Impairment of Non-financial Assets

Assets that have an indefinite useful life are not subject to amortisation or depreciation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In the case of an asset held for sale, an impairment review is completed immediately prior to sale to equate the carrying value to the sale proceeds. An impairment loss is recognised for the amount by which the asset's 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. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

2.9 Non-current assets (or disposal groups) held for sale

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.

2.10 Foreign Currency Translation

(a) Functional and presentation currency

Items included in the financial statements of the Company and Group are measured in the currency of the primary economic environment in which the Company operates ('the functional currency'). The functional currency of the Company is Australian dollars. The functional currency of the Group's Chinese subsidiary is Chinese Yuan. These financial statements are presented in Australian dollars, which is the Company and Group's presentation currency.

(b) Transactions and balances

Foreign currency transactions are initially translated to functional currencies at the rates of exchange prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

(c) Group companies

The results and financial position of the Chinese subsidiary are translated into the presentation currency as follows:

• (i) 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;
• (ii) income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
• (iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to shareholders' equity. When a foreign operation is sold, such exchange differences are recognised in the statement of comprehensive income as part of the gain or loss on sale.

2.11 Goods and Services Tax (GST)

All revenue and expense transactions are recorded net of GST. When applicable, all assets and liabilities have been stated net of GST with the exception of receivables and payables which are stated inclusive of GST.

Cash flows are presented on a gross basis. The GST components of cash flows which are recoverable from or payable to the tax authority are presented as operating cash flows.

2.12 Other Receivables

Other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment.

2.13 Exploration and Evaluation Assets

Exploration and evaluation expenditure incurred by or on behalf of the Company and Group is accumulated separately for each area of interest. Each area of interest is limited to an individual geographical area which is related to a known or probable mineral resource and is considered to constitute a favourable environment for the presence of mineral deposits. Exploration and evaluation costs related to areas of interest are carried forward to the extent that:

• (i) Rights to tenure of areas of interest are current; and
• (ii) Such costs are expected to be recouped through successful development and production of the area or, alternatively at sale; or
• (iii) Exploration and/or evaluation activities in the area of interest have not reached a stage which permits reason able assessment of the existence or otherwise of economically recoverable resources and active and significant operations in, or in relation to, the areas are continuing.

Exploration and evaluation assets are not amortised.

In the event that an area of interest is abandoned the accumulated expenditure is written off in the year that the assessment / abandonment occurs. In addition where the Directors consider the expenditure may not be recoverable under the above policy, provision is made against the exploration expenditure. The increase in the provision is charged against the results for the year.

Expenditure is not carried forward in respect of any area unless the Group's rights of tenure to that area of interest are current.

2.14 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.15 Income tax

Income Tax

The income tax expense or revenue for the year is the tax payable on the current year's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to the future benefit of unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the Company and its subsidiary operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred Tax

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 financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transactions affects neither accounting nor taxable profit or loss, it is not accounted for. 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 income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Tax is recognised in the profit or loss attributable to owners of the company component of the statement of comprehensive income, except to the extent that current and deferred tax balances which are attributable to amounts recognised directly in other comprehensive income or equity are also recognised directly in other comprehensive income or equity.

2.16 Employee benefits

(a) Current employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date, are recognised in Accounts Payable – Other, in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and is measured at the rates paid or payable.

(b) Share-based compensation

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are

included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the statements of comprehensive income, and a corresponding adjustment to equity over the remaining vesting period.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) when the options are exercised

2.17 Lease Expenditure

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

Payments made or received under operating leases are charged to the statement of comprehensive income on a straight line basis over the period of the lease.

2.18 Lease Income

Lease income is recognised on a straight line basis over the term of the lease.

2.19 Accounts Payable

Accounts payable are initially measured at fair value and subsequently measured at amortised cost using the effective interest method. Terms of trade are usually payment within 30 days.

2.20 Cash and Cash Equivalents

Cash includes bank bills, cash on hand and at bank and short term deposits less any bank overdrafts which are shown as borrowings in current liabilities on the statement of financial position.

2.21 Statement of Cash Flows

Operating activities are the principal revenue-producing activities and other activities that are not investing or financing activities.

Investing cash flows represent cash flows arising from the acquisition and disposal of non-current assets, as well as exploration expenditure.

Financing cash flows represent cash flows arising from cash transactions affecting the capital structure of the Company and Group.

Changes In Accounting Policies

There has been no change in accounting policies in the year.

3. Critical Accounting Estimates and Judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the actual results.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

There has been a write down for impairment of the King Solomon Mines Subsidiary (Inner Mongolia Plate Mining Limited) of \$189,162 (2011: \$717,218.) The carrying value of the subsidiary after impairment reflects the underlying net asset value which is estimated to approximate fair value less costs to sell.

The review of capitalised exploration at 31 March 2012 resulted in a write down of \$24,140 (2011: \$1,133,559). This reflects exploration results and commodity market conditions that did not justify the carrying value of exploration costs.

There is uncertainty in relation to the carrying value of exploration and evaluation assets after impairment. At the time of signing the financial statements, there is not sufficient data to indicate that the carrying amount of the exploration and evaluation assets is lower than the amount that could be realised through successful development or sale. Future

development and hence the recoverability of exploration and evaluation assets is dependent upon the going concern assumption outlined in note 1.

The property available for resale in note 9 has been written down by \$90,123 (2011: \$Nil) in light of current market conditions.

4. SEGMENT INFORMATION

Management has determined the operating segment based on the reports reviewed by The King Solomon Mines Limited Board which is responsible for making strategic decisions.

As at 31 March 2011, the Group is organised into one business segment; the activity of exploring and developing gold, copper and other metallic deposits.

As there is only one segment as at 31 March 2012 the disclosures on the face of the statement of comprehensive income and the statement of financial position represent the Group's one business segment.

Geographical Information:

The Group operates its business of exploration in China with the bulk of the administrative functions being performed in New Zealand and Australia.

This is demonstrated by the geographical breakdown of noncurrent assets shown in total on the Statement of Financial Position:

	NEW ZEALAND	CHINA	CONSOLIDATED
	\$	\$	\$
31 March 2011
Property Plant and Equipment	9,013	273,592	282,605
Exploration and Evaluation Assets	–	2,820,356	2,820,356
Total Non Current Assets	9,013	3,093,948	3,102,961
31 March 2012
Property Plant and Equipment	8,978	640,646	649,624
Exploration and Evaluation Assets	–	5,611,354	5,611,354
Total Non Current Assets	8,978	6,252,000	6,260,978

The above assets are recorded under the country in which the asset is located.

		GROUP	PARENT
	2012 \$	2011 \$	2012 \$	2011 \$
5. Imputation Credit Account
Balance at Beginning of Year	26,298	58,104	26,298	58,104
Foreign Exchange	1,889	(2,779)	1,889	(2,779)
Imputation Credits Received	107	–	107	–
Resident Withholding Tax Refunded	(16,689)	(44,604)	(16,689)	(44,604)
Resident Withholding Tax Paid	28,081	15,577	28,081	15,577
Balance carried forward	39,686	26,298	39,686	26,298
6. Cash and Cash Equivalents
Cash	610	202	184	118
Cash at Bank	888,204	2,429,098	828,677	1,788,996
Short Term Bank Deposits	513,383	2,700,000	513,383	2,700,000
	1,402,197	5,129,300	1,342,244	4,489,114

7. Exploration and Evaluation Expenditure

The Group is still in the exploration phase of its operations in China. All exploration and evaluation expenditure incurred since the grant of a business licence has been capitalised as exploration phase expenditure. This capitalisation is subject to continuous critical review.

As at 31 March 2012 the amount of liabilities arising from the exploration for and evaluation of mineral resources is \$42,391 (2011: \$59,583).

Total Exploration and Evaluation Expenditure incurred during the Year	2,776,688	1,716,800	937,224	848,150
Deferred geological, geophysical, drilling and other expenditure	2,776,688	1,716,800	937,224	848,150
Exploration phase costs:

The capitalised exploration and evaluation expenditure carried forward has been determined as follows:

Exploration phase:
Opening Balance	2,820,356	2,597,047	1,493,022	1,246,443
Foreign Exchange on Opening Balance	38,450	(93,368)	–	–
Expenditure incurred during the Year	2,776,688	1,716,800	937,224	848,150
Expenditure written off during the Year (Refer note 3)	(24,140)	(1,133,559)	(18,444)	(521,378)
Beyinhar North expenditure written off due to sale	–	(148,091)	–	–
Wuritu expenditure written off due to sale	–	(118,473)	–	(80,193)
Closing Balance	5,611,354	2,820,356	2,411,802	1,493,022

GROUP		PARENT
2012	2011	2012	2011
\$	\$	\$	\$

7. Exploration and Evaluation Expenditure cont'd

The expenditure is allocated over the following prospects:

Total Exploration and Evaluation Expenditure	5,611,354	2,820,356	2,411,802	1,493,022
Bu Dun Hua	2,902,091	1,647,871	1,353,462	922,789
Marmot	479,617	447,790	126,178	104,301
Naogaoshandu	255,518	250,000	255,518	250,000
Sonid North	1,974,128	474,695	676,644	215,932
Prospect

Operating Leases

Inner Mongolia Plate Mining Limited in its capacity as lessor has granted leases for the mining of Iron Ore over its exploration licences and received the following income:

Total Lease Income	91,564	19,175	-	-
Wuritu	–	19,175	–	–
Marmot	16,461	–	–	–
Naogaoshandu	75,103	–	–	–
Prospect

Sale of Exploration licences

Total Sale Value of Licences	–	266,564	–	–
Wuritu	–	118,473	–	–
Beyinhar North	–	148,091	–	–
Prospect

8. Intangible Assets

Purchased Software

Net Book Amount	345	–	345	–
Accumulated Amortisation	(12,364)	(12,202)	(12,364)	(12,202)
Cost	12,709	12,202	12,709	12,202
Year end Position
Net Amortisation	(41)	–	(41)	–
Amortisation Capitalised	122	–	122	–
Amortisation Charge	(163)	–	(163)	–
Amortisation Charges
Closing Net Book Amount	345	–	345	–
Amortisation	(163)	–	(163)	–
Additions	508	–	508	–
Opening Net Book Amount	–	–	–	–
Movements in year

	PARENT
	Motor Vehicles \$	Office Furniture and Equipment \$	Plant and Equipment \$	Total Property Plant and Equipment \$
9. Property, Plant and Equipment	cont'd
Year ending 31 March 2011
Opening Net Book Amount	–	13,812	425	14,237
Additions	–	3,335	–	3,335
Depreciation	–	(6,443)	(425)	(6,868)
Closing Net Book Amount	–	10,704	–	10,704
Year ending 31 March 2011
Depreciation & Loss on Sale	–	(6,443)	(425)	(6,868)
Depreciation Capitalised	–	114	425	539
Net Depreciation	–	(6,329)	–	(6,329)
As at 31 March 2011
Cost	–	61,202	7,268	68,470
Accumulated Depreciation	–	(50,498)	(7,268)	(57,766)
Net Book Amount	–	10,704	–	10,704
As at 1 April 2011
Cost	–	61,202	7,268	68,470
Accumulated Depreciation	–	(50,498)	(7,268)	(57,766)
Net Book Amount	–	10,704	–	10,704
Year ending 31 March 2012
Opening Net Book Amount	–	10,704	–	10,704
Additions	–	3,433	–	3,433
Disposal	–	(406)	–	(406)
Loss on Sale	–	(598)	–	(598)
Depreciation	–	(2,464)	–	(2,464)
Closing Net Book Amount	–	10,669	–	10,669
Year ending 31 March 2012
Depreciation & Loss on Sale	–	(3,062)	–	(3,062)
Net Depreciation	–	(3,062)	–	(3,062)
As at 31 March 2012
Cost	–	47,773	7,268	55,041
Accumulated Depreciation	–	(37,104)	(7,268)	(44,372)
Net Book Amount	–	10,669	–	10,669

		GROUP
	Motor Vehicles \$	Office Furniture and Equipment \$	Plant and Equipment \$	Total Property Plant and Equipment \$
9. Property, Plant and Equipment
Year ending 31 March 2011
Opening Net Book Amount	233,389	105,490	9,842	348,721
Foreign Exchange Movement	(16,134)	(6,338)	(651)	(23,123)
Additions	52,245	6,495	2,627	61,367
Disposal	(25,842)	–	–	(25,842)
Loss on Sale	(2,839)	–	–	(2,839)
Depreciation	(37,798)	(33,627)	(4,253)	(75,678)
Closing Net Book Amount	203,021	72,020	7,565	282,606
Year ending 31 March 2011
Depreciation & Loss on Sale	(40,637)	(33,627)	(4,253)	(78,517)
Depreciation Capitalised	37,798	22,319	681	60,798
Net Depreciation	(2,839)	(11,308)	(3,572)	(17,719)
As at 31 March 2011
Cost	312,966	184,573	23,789	521,328
Accumulated Depreciation	(109,945)	(112,553)	(16,224)	(238,722)
Net Book Amount	203,021	72,020	7,565	282,606
As at 1 April 2011
Cost	312,966	184,573	23,789	521,328
Accumulated Depreciation	(109,945)	(112,553)	(16,224)	(238,722)
Net Book Amount	203,021	72,020	7,565	282,606
Year ending 31 March 2012
Opening Net Book Amount	203,021	72,020	7,565	282,606
Foreign Exchange Movement	5,880	1,776	220	7,876
Additions	197,348	22,475	4,459	224,282
Disposal	(103,032)	(406)	–	(103,438)
Gain on Sale Loss on Sale	13,479 –	– (598)	– –	13,479 (598)
Depreciation	(42,509)	(33,823)	(3,013)	(79,345)
Closing Net Book Amount	274,187	61,444	9,231	344,862
Year ending 31 March 2012
Depreciation & Loss on Sale	(42,509)	(34,421)	(3,013)	(79,943)
Depreciation Capitalised	40,877	22,993	648	64,518
Net Depreciation	(1,632)	(11,428)	(2,365)	(15,425)
As at 31 March 2012
Cost	384,339	193,762	28,727	606,828
Accumulated Depreciation	(110,152)	(132,318)	(19,496)	(261,966)
Net Book Amount	274,187	61,444	9,231	344,862

Property available for Resale

Inner Mongolia Plate Mining Co Limited was unable to extend the lease of its office in Hohhot for any significant period of time and instead purchased an office during the current financial year for RMB 2,600,000 of which RMB 2,400,000 has been paid.

The Board of the company decided in December 2011 that the office is not a core activity and that the building should be considered available for sale rather than as a productive fixed asset.

10. Employee Benefit Expense

The bulk of the Company and Group personnel exploration resource is undertaken by qualified people on longer term arrangements and is initially capitalised as exploration expenditure. These personnel are supported by people at offices in New Zealand and China.

	GROUP		PARENT
	2012 \$	2011 \$	2012 \$	2011 \$
Wages and Salaries	24,417	21,245	–	–
Pension costs – Defined Contribution	1,457	6,446	–	–
Other Employee Benefits	1,104	5,093	–	–
	26,978	32,784	–	–
Number of salaried employees recorded as salary and wage expense	4	4	–	–

11. Transactions with Related Parties

Key management personnel are the directors (executive & non executive).

Anna Di has been included under this note as she is both an employee and daughter of Fu La. Michael Wilcox has been included as is both the accountant and shares trust relationships with Stephen McPhail.

King Solomon Mines Limited has provided funds to Inner Mongolia Plate Mining Limited, a subsidiary of King Solomon Mines Limited as share capital and advances.

Share based compensation was incurred and payment for consulting fees and reimbursement of expenses was made to Stephen McPhail (Director and Shareholder), to Bodhi Svaha Holdings Limited and Black Box Spatial Limited being companies in which Stephen McPhail has an interest.

Share based compensation was incurred and payment for consulting fees and reimbursement of expenses were made to Selwyn Geosurveys Limited and Black Box Spatial Limited being companies in which Bruce Bell (Director and Shareholder) has an interest.

Share based compensation was incurred and payment for consulting fees and reimbursement of expenses was made to Fu La (Director and Shareholder) and to Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited being a company in which Fu La has an interest.

In addition, King Solomon Mines Limited provided funds to Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited as a vehicle to provide funds to Inner Mongolia Plate Mining Limited.

Payment of director fees and expenses were made to John Quinn (Director and Shareholder) and to Widespread Limited (Shareholder) for Chris Castle (Director).

Payment for wages and reimbursement of expenses was made to Anna Di (Shareholder).

Payment for accounting fees was made to Michael Wilcox (Shareholder).

GROUP		PARENT
2012	2011	2012	2011
\$	\$	\$	\$

11. Transactions with Related Parties cont'd

Related Party Expenditure

(Reimbursement of expenditure, consulting fees and salary)

Black Box Spatial (29) 1,809 (29) 1,809 Bruce Bell 590 342 590 342 Bodhi Svaha Holdings Ltd 170,316 152,240 170,316 152,240 Chris Castle – 1,191 – 1,191 Fu La 326,531 57,886 190,478 – Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited 807,333 120,000 807,333 120,000 John Quinn 87,946 69,218 87,946 69,218 Selwyn Geosurveys Ltd 204,683 197,625 204,683 197,625 Stephen McPhail 1,588 2,285 1,588 2,285 Widespread Limited 38,845 34,200 38,845 34,200 Shareholders Di Anna 19,959 52,572 18,573 39,380 Michael Wilcox 26,861 17,953 26,861 17,953 1,684,623 707,321 1,547,184 636,243 Share Based Compensation Directors Stephen McPhail 28,917 23,659 28,917 23,659 Bruce Bell 28,917 23,659 28,917 23,659 Fu La 28,917 23,659 28,917 23,659 Shareholder Di Anna 2,236 5,258 2,236 5,258 88,987 76,235 88,987 76,235 Owing to Related Parties Directors Bodhi Svaha Holdings Ltd 14,205 14,176 14,205 14,176 Fu La 45,714 – – – Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited 840,525 – – – Selwyn Geosurveys Ltd 15,933 18,227 15,933 18,227 Stephen McPhail 277 373 277 373 Shareholder Di Anna 789 737 789 737 Michael Wilcox 9,413 8,005 9,413 8,005 926,856 41,518 40,617 41,518	Directors

GROUP		PARENT
2012	2011	2012	2011
\$	\$	\$	\$

11. Transactions with Related Parties cont'd

Owing by Related Parties

Subsidiary
Inner Mongolia Plate Mining Co Limited	–	–	2,805,657	2,085,657
Directors
* Bruce Bell	1,934	2,517	1,934	2,517
* Fu La	–	19,814	–	–
# Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited	840,525	–	840,525	–
Shareholder
* Di Anna	–	2,369	–	–
	842,459	24,700	3,648,116	2,088,174

* These represent advances for exploration expenditure.

These represent funding advances to Inner Mongolia Plate Mining Co Limited through Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited.

12. Share Capital And Other Reserves

Share Capital

Issued share capital is represented by:

		Number of Shares	Issue Price	Average Issue Price
			\$	\$/Share
Opening Balance	1 April 2010	90,775,040	11,543,121	0.13
Shares Issued		75,512,512	5,257,080	0.07
Capital Raising Costs		–	(197,133)
Closing Balance	31 March 2011	166,287,552	16,603,068	0.10
Opening Balance	1 April 2011	166,287,552	16,603,068	0.10
Options Expired		–	389,882
Closing Balance	31 March 2012	166,287,552	16,992,950	0.10

Share Options

Options are currently issued to directors and four employees.

Options exercisable as at balance date are as follows:

		2012		2011
	Expiry date	Average exercise price in \$A per share	Options	Average exercise price in \$A per share	Options
At 1 April	4 May 2011 *	0.30	6,279,999	0.30	6,279,999
At 1 April	29 July 2014 *	0.10	3,100,000	0.10	3,100,000
Granted	25 March 2016 *	0.12	500,000	–	–
Granted	29 July 2016 *	0.12	2,900,000	–	–
Forfeited		–	–	–	–
Exercised		–	–	–	–
Lapsed	4 May 2011	0.30	(6,279,999)	–	–
As at 31 March		0.11	6,500,000	0.23	9,379,999

* No participation in future dividends until exercised

At the 31 March 2008 Annual General Meeting, an employee share option scheme was adopted. This resolution enabled the board to issue shares and options to acquire ordinary shares. Under that resolution 400,000 options were approved by the Board to two selected employees.

Following this at the 31 March 2009 Annual General Meeting held 29 July 2009, shareholders passed a resolution authorising the Board to grant 900,000 options to each the executive directors being Stephen McPhail, Bruce Bell and Fu La or 2,700,000 options in total to executive directors.

Both sets of options were issued under the employee share purchase scheme on 31 August 2009. These have vested 33% on 29 July 2010, 33% on 29 July 2011 and will vest 34% on 29 July 2012.

A further 500,000 options were approved by the Board for one selected employee on 9 May 2011 to vest 33% on 25 March 2012, 33% on 25 March 2013 and 34% on 25 March 2014.

At the 31 March 2011 Annual General Meeting held 29 July 2011, shareholders passed a resolution authorising the Board to grant 800,000 options to each of the executive directors being Stephen McPhail, Bruce Bell and Fu La or 2,400,000 options in total to executive directors. In addition a further 500,000 options were issued to two selected employees under the same conditions.

Both sets of options were issued under the employee share purchase scheme on 29 July 2011 to vest 33% on 29 July 2012, 33% on 29 July 2013 and 34% on 29 July 2014.

The fair value of outstanding options (calculated using a binomial valuation model) and the significant inputs into the model are shown below:

Fair Value of Options to the Company			Significant Inputs into Pricing Model
Expiry Date	Number of Options Granted	Fair Value of each option \$	Total Fair Value of Options \$	Share Price \$	Risk Free Interest Rate %	Price Volatility %
29 July 2014	3,100,000	0.0643	199,330	0.08	4.920	120
25 March 2016	500,000	0.0748	37,400	0.12	5.285	112
29 July 2016	2,900,000	0.0576	167,040	0.12	4.950	111
	6,500,000		403,770

Foreign Currency Translation Reserve

The foreign currency translation reserve represents the cumulative foreign exchange differences arising from the translation of the financial statements of the Group's Chinese subsidiary from Chinese Yuan, being the functional currency of the Group's Chinese subsidiary, into Australian dollars. The differences are recognised in equity until the Group disposes of the subsidiary, at which time the differences will be transferred to the profit and loss component of the statement of comprehensive income as part of the gain or loss on sale.

13. Investment in Subsidiaries

	Principal	Country of		Equity Holding
Name of Subsidiary	Activity	Incorporation	2012	2011
Inner Mongolia Plate Mining Co Limited	Exploration	China	90%	90%

On 8 March 2006, King Solomon Mines Limited and Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited signed an agreement to form Inner Mongolia Plate Mining Co Limited, a sino foreign equity joint venture of which King Solomon Mines Limited owns 90% and Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited holds 10% in trust for King Solomon Mines Limited due to Chinese regulatory requirements.

As King Solomon Mines Limited effectively owns 100% of this subsidiary and retains all the risks and rewards of ownership, the Company has not accounted for any non-controlling interest.

Inner Mongolia Plate Mining Co Limited has a balance date of 31 December in line with Chinese requirements.

14. Earnings per Share

Basic

Basic earnings per share is calculated by dividing the deficit attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the year.

The Company and Group recorded losses for the years ended 31 March 2012 and 31 March 2011. Diluted earnings per share has not been calculated because the effect of including the share options in the calculation would be anti-dilutive. Hence the diluted earnings per share is the same as the basic earnings per share.

	GROUP		PARENT
	2012 \$	2011 \$	2012 \$	2011 \$
Loss attributable to equity holders of the Company	(890,109)	(2,002,924)	(973,610)	(1,895,869)
Weighted average number of ordinary shares on issue	166,287,552	99,671,674	166,287,552	99,671,674
Basic earnings per share (\$ per share)	(0.01)	(0.02)	(0.01)	(0.02)

15. Commitments

The Company and Group lease property in New Zealand and China.

They have entered into one non cancellable operating lease in China which terminates 1 April 2013. The Group has the first call when this lease comes up for renewal.

Total Lease Commitment	9,143	19,005	–	–
Later than two year and not greater than five years	–	–	–	–
Later than one year and not greater than two years	–	8,885	–	–
Not later than one year	9,143	10,120	–	–

The Group had no other commitments at 31 March 2012 (2011: Nil).

16. Contingent Assets and Liabilities

On 1 January 2009, Bodhi Svaha Holdings Limited, Selwyn Geosurveys Limited and Inner Mongolia Ao Meng Xin Economic and Trade Co Limited agreed to reduce their respective fees due under their services agreements with the company by 20%. Under these services agreements, they respectively provide the services of Stephen McPhail, Bruce Bell and Fu La.

Payment of the forgone services fees incurred remains contingent on a change in circumstances for the company defined to be any of the following events:

• a) Control Event taking place
• b) Termination by the company of a Services Agreement without cause
• c) The company having at least \$7,500,000 in cash or cash equivalents

A Control Event includes:

• 1) A person securing control of 40% of voting rights in the company
• 2) Sale of the company or all of its assets
• 3) Merger of the company with another party

No change in circumstances creating a control event has taken place. Accordingly the amount shown below has not been recognised as a liability in these accounts but is instead recorded as a contingency.

	2012 \$	2011 \$
Services agreement fee to Bodhi Svaha Holdings Limited	117,000	81,000
Services agreement fee to Selwyn Geosurveys Limited	131,426	94,500
Services agreement fee to Inner Mongolia Ao Meng Xin Economic and Trade Limited	97,500	67,500

In addition as recorded in note 12, the Company currently has 6,500,000 options issued to executive directors and selected employees. Options are being expensed in the periods in which the options vest. Total option valuation was calculated at \$403,770 (2011: \$589,212) of which \$125,945 has been expensed for the year ended 31 March 2012 (2011: \$81,493).

The Group had no other contingent assets or liabilities at 31 March 2012 (2011: Nil).

17. Reconciliation of Financial Performance and Operating Cash Flow

(Deficit) for Year	(890,109)	(2,002,924)	(973,610)	(1,895,869)
Non Cash Items
Amortisation	41	–	41	–
Depreciation & Loss on Sale	15,425	17,719	3,062	6,330
Gain on Sale	(13,479)	–	–	–
Share Options	125,945	81,493	125,945	81,493
Foreign Exchange	(21,354)	148,548	58,825	21,579
Provisional Write down of Building	90,123	–	–	–
Write Off of Exploration Expenditure	24,140	1,400,123	18,444	520,290
Impairment of investment in Subsidiary	–	–	189,162	717,218
Movement in Working Capital
Other Receivables – Related Parties	(817,759)	1,510	(719,417)	(1,053,117)
Other Receivables – Tax on Interest	(12,515)	31,267	(12,515)	31,267
Other Receivables – Other	81,485	(74,725)	17,468	(17,015)
Prepayments	(16,761)	13,386	(2,132)	129
Accounts Payable – Related Parties	885,338	1,759	(901)	1,759
Accounts Payable – Other	66,994	43,844	(11,254)	42,138
Items classified as Investing Activities
Movement in Accounts Payable for Exploration	17,193	(29,848)	21,147	(32,231)
Increase in Advance to Subsidiary	–	–	720,000	1,000,000
Sale of Exploration Licence(s)	–	(266,564)	–	–
Net Cash from / (used in) Operating Activities	(465,293)	(634,412)	(565,735)	(576,029)

18. Income Tax Expense

Tax losses are available to carry forward subject to agreement by the relevant Chinese taxation authority for subsidiary Inner Mongolia Plate Mining Co Limited. However these losses are only able to be carried forward up to 5 years commencing at the year when the loss is incurred.

Tax losses are available to carry forward subject to agreement by the relevant New Zealand taxation authority for King Solomon Mines Limited.

However the future tax benefit of these losses has not been recognised other than by the following note as the realisation of these benefits was not yet probable.

	GROUP			PARENT
	2012 \$	2011 \$	2012 \$	2011 \$
Tax losses brought forward	11,432,885	10,136,013	6,281,310	5,068,247
Foreign exchange on loss brought forward	(183,623)	(874,572)	448,543	(242,406)
Tax loss for year	3,506,094	2,171,326	1,469,790	1,455,351
Chinese time bound tax losses forfeited	(312,678)	–	–	–
Excess imputation losses converted to loss	305	118	305	118
Future tax losses not brought to account	14,442,983	11,432,885	8,199,948	6,281,310
Prima facie tax benefit at 28%	4,044,035	3,201,208	2,295,985	1,758,767
Loss (\$A)	(889,231)	(2,001,306)	(972,732)	(1,894,251)
Non deductible difference	(96,875)	124,779	–	–
Share option expense	125,945	81,493	125,945	81,493
Impairment of investment in subsidiary	–	–	189,162	717,218
Total fair value adjustment on advance to subsidiary	–	–	–	–
Current year fair value interest	–	–	–	(53,617)
Current year capitalised expenditure	(5,611,354)	(2,820,356)	(2,411,802)	(1,493,022)
Prior year capitalised expenditure	2,820,356	2,597,045	1,493,022	1,246,443
Foreign Exchange on Prior Year capitalised expenditure	145,065	(152,981)	106,615	(59,615)
Tax loss for year	(3,506,094)	(2,171,326)	(1,469,790)	(1,455,351)

The current year tax expense of \$878 (2011: \$1,618) represents a write-off of Australian resident withholding tax paid \$770 (2011: \$1,618) and excess imputation credits \$108 (2011: \$0).

19. Fees Paid to Auditors

Fees payable to the principal auditors for audits of the King Solomon Mines Limited financial statements amounted to \$34,380 (2011: \$34,531).

Fees payable to other auditors for the audit of Inner Mongolia Plate Mining Limited amounted to \$1,802 (2011: \$1,534).

20. Exposure to Risk

Exposures to credit, foreign currency, interest rate and liquidity risks arise in the normal course of business.

Credit risk

Financial instruments which potentially expose the Group to credit risk principally consist of bank deposits and receivables.

Deposits held with major New Zealand banks are not considered to be at significant risk. Chinese Yuan are required to be held with a Chinese bank. These are not considered to be at significant risk for the Group as the bank is considered secure and most of these funds are being held on a short term basis for payment of exploration expenditure within China.

The receivables are principally withholding tax deducted from interest receipts, GST and accrued interest. The counterparties are considered secure. The funds are accessible after filing the appropriate returns or within required timeframes.

Currency risk

The Group is exposed to fluctuations in foreign currency exchange rates as a result of maintaining foreign currency denominated bank accounts and entering into foreign currency transactions. The Group incurred a foreign exchange gain in the year ended 31 March 2012 of \$21,354 (2011: \$148,548 loss) due to the appreciation of the Australian dollar relative to the United States dollar, the New Zealand dollar and Chinese Yuan.

The exposure to currencies of the Group is as follows:

	2012 \$	2011 \$
United States dollar	39,228	1,346,344
New Zealand dollar	82,473	192,321
Australian dollar	1,223,250	3,356,652
Chinese Yuan	59,953	239,072
	1,404,904	5,134,389

The potential impact on the bank accounts, net deficits and equity of movements in foreign currency exchange rates (calculated by applying the change in foreign exchange rate to foreign currencies held at balance date) is indicated below:

Potential Foreign Exchange Rate Fluctuation	5% \$	10% \$	20% \$
Impact on valuation of holding in:
United States dollar	1,961	3,923	7,846
New Zealand dollar	4,124	8,247	16,495
Chinese Yuan	2,998	5,995	11,991
Total Impact of potential change in exchange rate	9,083	18,165	36,332

If the 30 April 2012 foreign exchange rates had been applied to the 31 March 2012 holdings, a loss of \$1,531 would have been recognised on cash, bank balances and deposits due to changing mix of currencies affecting the Australian Dollar. This would have increased the loss before tax by the same amount.

Interest rate and liquidity risks

The Group receives interest on its bank deposits. Liquidity risk is not considered significant as deposits are planned to mature as required. Deposits have a weighted average maturity period of 3 days from 31 March 2012 (2011: 25 days) with a weighted average interest rate of 3.8% ( 2011 4.48%). The impact of potential changes of interest rate at 31 March 2012 (calculated by applying the appropriate change in interest to cash investments at balance date) is illustrated below:

Potential Interest Rate Fluctuation	1% \$	2% \$
Impact of potential interest rate movement
New Zealand dollar	825	1,649
Australian dollar	12,233	24,465
Chinese Yuan	600	1,199
Total Impact of potential change in interest rate	13,658	27,313

Capital Risk Management

The Group's objective when managing capital is to safeguard the group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders through its exploration activities.

In order to achieve these objectives, the Group adjusts the level of controllable expenditure on administrative functions and focuses expenditure for exploration assets on the most favourable prospects.

In 2012, the Group's strategy which was unchanged from 2011 was to focus its budgeted cash outflows (excluding any foreign exchange movements) set at the beginning of the year at these most favourable prospects.

	2012 \$	2011 \$
Cash proceeds of Capital Raising (net of Capital Raising Costs)	–	5,059,947
Actual Change in Cash	(3,727,103)	2,931,388
Reduction in Cash (excluding Capital Raising)	3,727,103	2,128,559
Foreign Exchange Loss	(16,331)	(99,031)
Actual Cash Expenditure	3,710,772	2,029,528

Fair value

The fair value of all financial instruments is not materially different from the carrying value shown below.

		GROUP		PARENT
	2012 \$	2011 \$	2012 \$	2011 \$
Loans and receivables
Cash and Cash Equivalents	1,402,197	5,129,300	1,342,244	4,489,114
Non Current Asset - Loan to Subsidiary	-	-	-	-
Other Receivables - Related Parties	842,459	24,700	3,648,116	2,088,174
Other Receivables - Other	66,619	148,104	48,037	65,505
Total loans and receivables	2,311,275	5,302,104	5,038,397	6,642,793
Financial liabilities at amortised cost
Accounts Payable – Related Parties	(926,856)	(41,518)	(40,617)	(41,518)
Accounts Payable – Other	(181,860)	(114,867)	(63,945)	(75,200)
Total financial liabilities	(1,108,716)	(156,385)	(104,562)	(116,718)

21. Post Period Events

Inner Mongolia Plate Mining Limited received permission to increase its capital from RMB21,000,000 by RMB3,000,000 (approximately \$428,000) to RB24,000,000. This capital was increased in April 2012.

There are no subsequent events that should be considered for this period.

Directors' Disclosures

Directors Holding Office

The following directors have held office during the period.

Bruce Bell	Appointed 28 January 2003
Stephen McPhail	Appointed 28 January 2003
Fu La	Appointed 5 May 2004
Chris Castle	Appointed 31 October 2005
John Quinn	Appointed 2 February 2007

Directors' Shareholding

As at 31 March 2012, the following Directors had the following relevant interests in shares in King Solomon Mines Limited.

	Beneficial	Non-Beneficial
Fu La	7,500,000	–
Stephen McPhail	4,830,000 *	1,050,000 **
Bruce Bell	3,500,000	–
Chris Castle	200,000	10,000,000 ***
John Quinn	666,000 ****	–

• * Stephen McPhail is a trustee and beneficiary of the Paradise Now Trust ("PNT"). He has a legal and beneficial interest in 4,080,000 Shares which he holds as a trustee of PNT. He has a beneficial interest in 750,000 Shares owned by BSHL which is 98% owned by the trustees of PNT. Stephen McPhail and his wife Olinka Heath each own 1% of Bodhi Svaha holdings limited ("BSHL"). He is also the sole director of BSHL.
• ** Stephen McPhail's non-beneficial interest comprises 1,050,000 Shares which he holds as a trustee of the Wilcox Arcadian Trust.
• *** Chris Castle has a relevant interest in 10,000,000 Shares which relates to the 2,724,750 Shares owned by Widespread Limited and the 7,275,250 Shares in Mineral Investments Limited as Christopher Castle is the managing director of both of these companies. Widespread Limited and Mineral Investments Limited are wholly owned by Widespread Portfolios Limited of which Chris Castle is a shareholder and the managing director.
• **** John Quinn is a trustee and a member of the Quinn Superannuation Fund which owns 666,000 Shares.

Disclosure of Directors' Share Dealings

There were no director's share dealings.

Disclosure of Directors' Share Options

As at 31 March 2012, options issued to directors were as follows:

Fu La	800,000 900,000 * 1,700,000
Stephen McPhail	800,000 900,000 * 1,700,000
Bruce Bell	800,000 900,000 * 1,700,000

• * Options were issued under the Employee Share Option Plan with an exercise price of \$0.12 and an expiry date of 29 July 2016. These options vest 33% on 29 July 2012, 33% on 29 July 2013 and 34% on 29 July 2014.
• ** Options were issued under the Employee Share Option Plan with an exercise price of \$0.10 and an expiry date of 29 July 2014. These options vest 33% on 29 July 2010, 33% on 29 July 2011 and 34% on 29 July 2012.

Independent Auditors' Report

to the shareholders of King Solomon Mines Limited

Report on the Financial Statements

We have audited the financial statements of King Solomon Mines Limited ("the Company") on pages 15 to 40, which comprise the statements of financial position as at 31 March 2012, the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 31 March 2012 or from time to time during the financial year.

Directors' Responsibility for the Financial Statements

The Directors are responsible for the preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the Company and the Group's preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Other than in our capacity as auditors we have no relationship with, or interests in King Solomon Mines Limited or any of its subsidiaries.

PricewaterhouseCoopers, 113-119 The Terrace, PO Box 243, Wellington 6140, New Zealand T: +64 (4) 462 7000, F: +64 (4) 462 7001, www.pwc.com/nz PricewaterhouseCoopers, 113-119 The Terrace, PO Box 243, Wellington 6140 New Zealand T: +64 4 462 7000, F: +64 4 462 7001, pwc.co.nz

Opinion

In our opinion, the financial statements on pages 15 to 40:

• (i) comply with generally accepted accounting practice in New Zealand; and
• (ii) comply with International Financial Reporting Standards; and
• (iii) give a true and fair view of the financial position of the Company and the Group as at 31 March 2012, and their financial performance and cash flows for the year then ended.

Emphasis of Matter

In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures in Note 1 of the financial statements concerning the ability of the Group to fund its planned future expenditure, the level of which is dependent on the results of current drilling campaigns. There are material uncertainties as to the outcome of these matters that may cast significant doubt on the ability of the Group to continue as a going concern.

These financial statements have been prepared on a going concern basis, the validity of which depends on the outcome of the current drilling campaigns and the ability of the Group to obtain future funding.

These financial statements do not include any adjustments that may need to be made to reflect the situation should the Group be unable to obtain future funding. Such adjustments may include assets being realised at amounts other than the amounts at which they are currently recorded in the statement of financial position. In addition, the Group may have to provide for further liabilities that may arise and to reclassify certain non-current assets and liabilities as current in the statement of financial position.

Report on Other Legal and Regulatory Requirements

We also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 31 March 2012:

• (i) we have obtained all the information and explanations that we have required; and
• (ii) in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those records.

Restriction on Distribution or Use

This report is made solely to the Company's shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the Company's shareholders those matters which we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholders, as a body, for our audit work, for this report or for the opinions we have formed.

Chartered Accountants Wellington 12 June 2012

Corporate Governance Statement

Corporate Governance

The Board of Directors of King Solomon Mines Ltd (KSO) is responsible for corporate governance and strives for high standards in this regard. The Board monitors the business and affairs of KSO on behalf of the shareholders by whom they are elected and to whom they are accountable. The Board draws on relevant best practice principles particularly those issued by the ASX Corporate Governance Council in August 2007. At a number of its meetings the Board examined the KSO corporate governance practices and the progress towards a review of its practice compared to the best practice principles proposed by the ASX Corporate Governance Council. While KSO is attempting to adhere to the principles proposed by ASX, it is mindful that there may be some instances where compliance is not practicable for a company of KSO's size.

The August 2007 Australian Stock Exchange Corporate Governance Council publication "Corporate Governance Principles and Recommendations" is for guidance purposes, however all listed companies are required to disclose the extent to which they have followed the recommendations; to identify any recommendations that have not been followed; and reasons for not doing so. The Company's Board of Directors has reviewed the recommendations. In many cases the Company was already achieving the standard required. In other cases the Company will have to consider new arrangements to enable compliance. In a limited number of instances, the Company may determine not to meet the standard set out in the recommendations, largely due to the recommendation being considered by the Board to be unduly onerous for a company of this size.

The following paragraphs set out the Company's position relative to each of the 8 principles contained in the ASX Corporate Governance Council's report.

Principle 1: Lay solid foundations for management and oversight

The Company has a small Board of five Directors (two Non-Executive Director plus the Managing Director, Exploration Director and a third Executive Director) and a small team of people, so roles and functions have to be flexible to meet specific requirements.

The Board's role includes the following:

• Setting and reviewing the vision, goals and strategy;
• Approving the annual strategic plan and major operating plans;
• Approving budgets;
• Reviewing and providing feedback on the performance of the Managing Director;
• Reviewing the performance of the Board and individual directors ;

• Reviewing the half-year and full year financial statements and reports and quarterly cash-flow statements ;

• Determining policies and ensuring adequate procedures are In place to manage the Identified risks;

• Having regard to the size of the company the full Board will carry out the functions sometimes delegated to a nominations committee and remuneration committee.

The role of the Chairman includes:

• Vision/Strategy. Ensures leadership in setting and reviewing vision;
• Board meetings. Setting agenda with the Managing Director/ Company Secretary, ensures directors receive all relevant information, chairs meetings and deals with conflicts;
• AGM. Chairs the AGM and ensures shareholders as a whole have an opportunity to speak on relevant matters, ensures audit partner attends;
• External. Spokesperson with the Managing Director, on company matters;
• Managing Director. Primary point of contact between the Board and External;
• Managing Director. Kept fully informed on major matters by the Managing Director, chairs the performance appraisal of the Managing Director and provides mentoring;
• Board. Initiates Board and committee performance appraisal, ensures agreed composition is maintained and director induction plans are in place.

The CEO's responsibilities and duties include:

• Vision/Strategy. Formulating with the Board the vision and strategy, developing action plans to achieve the vision and reporting regularly to the Board on progress;
• Management team and employees. Providing leadership, appoint ing and negotiating terms of employment of senior executives (with the Board approval where necessary). developing a succession plan, ensuring procedures are in place for education and training to ensure compliance with laws and policies;
• Successful implementation of the Company's exploration programme;
• Board. Responsible for bringing all matters requiring review/ approval to the Board. advising on the changes in risk profile, providing certification regarding the financial statements for the half-year and full year, reporting to the Board on a monthly basis the performance of the Company and for ensuring education of Directors on relevant matters.

Principle 2: Structure the Board to add value

The Company complies with most of the recommendations within this area as the Chairman is independent; separate from the Managing Director. The Company does not comply with the recommendation that a majority of Directors are independent, because three are Executive Directors. The Company does not have a Board nomination committee.

One of the Company's five Directors is the Non-Executive Chairman of Directors and he has not undertaken "material" consultancy work for the Company within the past three years. Each Director of the Company has the right to seek independent professional advice at the expense of the Company. Prior approval of the Chairman is required, but this will not be unreasonably withheld.

A director may be elected for a term of a maximum of three years. To ensure a gradual and controlled movement of directors, the longest serving one-third of all directors (rounded down to the nearest whole number) is expected to retire at each AGM, but shall be eligible for re-election.

Principle 3: Promote ethical and responsible decision-making

The Company has adopted a formal code of conduct, again reflecting the Company's size and the close interaction of individuals through out the organisation.

The Board's code of conduct requires that Directors and management conduct themselves with the highest ethical standards. All Directors and employees will be expected to act with integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.

The Company has established a Diversity Policy, which includes requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them. A summary of the Company's Diversity Policy is available on the Company's website at www.kingsolomonmines.com

The Company has a policy concerning trading in its securities by Directors, management, staff and significant consultants as follows:

KSO complies with the Continuous Disclosure requirements of the ASX listing rules and accordingly the market is kept fully and currently informed about all material matters which might affect trading in the Company's securities. Purchases or sales in the Company's shares by Directors, employees and key consultants should preferably be carried out in the "window", being the period commencing two days and ending 30 days following the date of announcement of the Company's annual or half yearly results, its quarterly reports or a major announcement leading in the opinion of the board to an informed market. Trading outside a trading window by Directors, employees and key consultants must only occur after consultation with the Chairman of the Board or the Managing Director. Directors, employees and key consultants are prohibited from buying or selling KSO shares at any time if they are aware of price sensitive information that has not been made public.

Principle 4: Safeguard integrity in financial reporting

The Company periodically reviews its procedures to ensure compliance with the recommendations set out under this principle.

Senior management confirms that the financial reports represent a true and fair view and are in accordance with relevant accounting standards. The Managing Director and the Chief Accountant state in writing to the Board that the Company's financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company are in accordance with

relevant accounting standards.

The Company has an Audit Committee with a formal charter approved by the Board.

The Audit Committee consists of the Non-Executive Directors Mr Quinn and Mr Castle (Audit Committee Chairman) and Executive Director Mr Bell. These Directors have applicable expertise and skills for the Audit Committee. This structure meets the ASX's guidance regarding independence, in that the majority are independent Directors and have at least three members and the Committee Chairman should not be the Chairman of the Board. The structure does not meet the requirement of all members being non-executive. This is a result of the company having a small board with three executive and 2 non-executive members. In order to have 3 members on this committee, it was necessary to include an executive director – in this case Mr. Bell who has the least involvement of the executive directors in the financial management of the company. As the board adds additional nonexecutive directors, it is envisaged that Mr. Bell will be replaced with a non-executive director. The Audit Committee reports to the Board after each Committee meeting. In conjunction with the full Board, the Committee reviews the performance of the external auditors (including scope and quality of the audit).

Principle 5: Make timely and balanced disclosure

The Company, its Directors and staff are very aware of the ASX's continuous disclosure requirements and operate in an environment where strong emphasis is placed on full and appropriate disclosure to the market. The Company has a formal written policy regarding disclosure.

Principle 6: Respect the rights of shareholders

All significant information which will be disclosed to the ASX will be then posted on the Company's website as soon as it is disclosed to the ASX. When analysts are briefed on aspects of the Company's operations, the material used in the presentation is released to the ASX and posted on the Company's website. Procedures have also been established for reviewing whether any price sensitive information has been inadvertently disclosed, and if so, this information is also immediately released to the market.

Whilst the Company does not have a communications strategy to promote effective communication with shareholders, as it believes this is excessive for small companies, the Company does communicate regularly with shareholders. The Company has requested the external auditor to attend general meetings and this has been supported by the Company's audit partner at PwC.

Principle 7: Recognise and manage risk

The Company is a small exploration company and does not believe that there is significant need for formal policies on risk oversight and management of risk. Risk management arrangements are the responsibility of the Board of Directors and senior management collectively and Risk Factors is a standing agenda item at Board meetings.

Principle 8: Remunerate fairly and responsibly

Directors believe that the size of the Company makes individual salary and contractor negotiation more appropriate than formal remuneration policies. The Remuneration Committee will seek independent external advice and market comparisons as necessary. In accordance with reporting requirements, the Company discloses the fees or salaries paid to all Directors, plus the highest paid officers.

The Company has a Remuneration Committee of the two Non-Executives of the Company which meets as and when required, to review performance matters and remuneration. There has been no formal performance evaluation of the Board during the past financial year, although its composition is reviewed at a Board meeting at least annually. The Directors work closely with management and have full access to all the Company's files and records.

Voting Rights

There are no restrictions on voting rights. On a show of hands every member present or by proxy shall have one vote and upon a poll each share shall have one vote. Option holders have no voting rights until the options are exercised.

Australian Corporations Act and acquisition of shares

The company is not subject to Chapters 6, 6A, 6B and 6C of the Australian Corporations Act dealing with the acquisition of shares (including substantial holdings and takeovers).

Shareholder Information

Information relating to shareholders at 31 May 2012 (per ASX listing rule 4.10)

Substantial Shareholders

Substantial Shareholders	Shareholding
Mineral Investments Limited*	10,000,000
Widespread Limited*	10,000,000

* Mineral Investments Limited and Widespread Limited are regarded as associates for the purpose of disclosure under the substantial shareholders provisions of the Corporations Act and accordingly both have a relevant interest in the 10,000,000 shares.

Number of ordinary shares held	Number of Holders	Ordinary Shares
1 – 1,000	14	3,752
1,001 – 5,000	38	126,577
5,001 – 10,000	106	1,010,341
10,001 – 100,000	422	18,931,393
100,001 – and over	253	146,215,489
Total	833	166,287,552

Based on the market price at 31 May 2012 there were 204 shareholders with less than a marketable parcel of 16,667 shares.

Top 20 Holders of Ordinary Shares

Name of Shareholder	Shares	% Shares Issued
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	10,440,800	6.28
FORSYTH BARR CUSTODIANS LTD	9,999,100	6.01
FU LA	7,500,000	4.51
BT PORTFOLIO SERVICES LIMITED	4,228,571	2.54
MR STEPHEN MCPHAIL + MR MICHAEL WILCOX	4,080,000	2.45
MR ALAN BRUCE BELL	3,500,000	2.10
SACHA INVESTMENTS PTY LTD	3,488,260	2.10
TOPETE PTY LTD	3,232,400	1.94
GLENLORA TRUSTEES LIMITED	3,000,000	1.80
UBS NOMINEES PTY LTD	2,768,481	1.66
SPANTECH CONSULTANCY PTY LTD	2,500,000	1.50
CUSTODIAL SERVICES LIMITED	2,088,686	1.26
COMO INVESTMENTS LIMITED	1,750,000	1.05
MR CHRISTOPHER JAMES	1,714,286	1.03
MR KEITH GEORGE MCDONALD	1,700,000	1.02
NAJAVA PTY LIMITED	1,639,286	0.99
JOHN COOK SUPER FUND PTY LTD	1,499,714	0.90
GOLDEN HORSESHOE LIMITED	1,457,000	0.88
MS SANDRA STANDAGE	1,377,286	0.83
WILLSTREET PTY LTD	1,367,858	0.82
Total of top 20 holdings	69,331,728	41.69
Other holdings	96,955,824	58.31
Total fully paid shares issued	166,287,552	100.00

Options

Name of Option holder	Shares option holder entitled to	Exercise Price	Option expiry date
Fu La	1,700,000	\$0.10 – \$0.12	29 July 2014 – 29 July 2016
Stephen McPhail	1,700,000	\$0.10 – \$0.12	29 July 2014 – 29 July 2016
Bruce Bell	1,700,000	\$0.10 – \$0.12	29 July 2014 – 29 July 2016
Anna Di	200,000	\$0.10	29 July 2014
Hui Lai Lam	200,000	\$0.10	29 July 2014
Siu Fong Cheuk	200,000	\$0.12	29 July 2016
Alfonso Latorre	800,000	\$0.12	25 March 2016 - 29 July 2016
	6,500,000

Corporate Directory

Directors

John C. Quinn (Non-Executive Chairman) Stephen J. McPhail (Managing Director) A. Bruce Bell (Executive Director) Fu La (Executive Director) Christopher D. Castle (Non-Executive Director)

Registered and Administrative Office

83 Fisher Parade Sunny Hills Aukland 2010 New Zealand Telephone: 1800 061 569 (from Australia) +644 905 9608 (from elsewhere) Facsimile: +646 364 8497

Share Registry

Computershare Investor Services Pty Limited Level 2, 45 St George's Terrace Perth WA 6000 GPO Box D182 Perth WA 6840 Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033

Australian Agent

Spencer Hamilton Ltd P.O. Box 324 Crows Nest Sydney NSW 1585 Telephone: (02) 9427 5928

Website

www.kingsolomonmines.com

ASX Code

KSO

ARBN

122 404 666

Auditors

PricewaterhouseCoopers 113-119 The Terrace Wellington New Zealand

King Solomon Mines

P.O. Box 204-065 Highbrook Auckland 2161 New Zealand