XREF LIMITED — Annual Report 2013

Jun 26, 2013

==> picture [219 x 122] intentionally omitted <==

King Solomon Mines Limited

ARBN 122 404 666

Annual Report 2013

Contents

Chairman and Managing Director Review	02
Schedule of Tenements	02
Report of the Directors	03
Statements of Comprehensive Income	07
Statements of Changes in Equity	08
Statements of Financial Position	10
Statements of Cash Flow	11
Notes to the Financial Statements	12
Directors’ Disclosures	26
Independent Auditor’s Report	27
Corporate Governance Statement	29
Shareholder Information	32

CORPORATE DIRECTORY

Directors

Christopher D. Castle (Non-Executive Chairman) Stephen J. McPhail (Managing Director) Fu La (Executive Director)

Australian Agent

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

Registered and Administrative Office

242 Marine Parade P.O Box 15 005 Otaki 5542 New Zealand Telephone: 1800 061 569 (from Australia) +646 364 8462 (from elsewhere)

Facsimile: +646 364 8497

Website

www.kingsolomonmines.com

ASX Code

KSO

Share Registry

ARBN

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

122 404 666

Auditors

PricewaterhouseCoopers 113-119 The Terrace Wellington New Zealand

1 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

Chairman and Managing Director’s Review

Dear Shareholder

As we write this letter, the mining sector is taking a severe battering from nervousness in the market around changes to governments in their accommodative stance with monetary policy to stimulate the world economy. In simple terms, governments have been printing money to keep things going and there are the first signs that this may be coming to an end. As a junior explorer, your company is not immune to the chill winds that have accompanied all of this.

Over the past year the company completed just under 7,000 metres of drilling at its exploration projects in Inner Mongolia, China. The team exploration team did a fine job in completing the work that was asked of them. Unfortunately the results were disappointing. This is not an unexpected occurrence for a junior explorer. Our business is a relatively risky one with large upside from success. The focus of a junior explorer is to increase the likelihood of success.

The company has exhausted the potential from its projects in China and must look elsewhere. The geological potential remains high in China but the regulatory regime around the granting of new licences has made it impossible to pursue the ground acquisition strategy that was desired. The company is now actively seeking to sell its projects in China and move the focus of its exploration efforts to another jurisdiction. The intention is to continue to pursue large scale targets in an appropriate geological setting.

It was with great sadness that we witnessed the passing of co-founder and ex-director Bruce Bell in February. Bruce’s vision and application of very high standards in all he did contributed much to the efforts of exploration team.

This report is deliberately “spartan” as the company is seeking to preserve its cash reserves. There is no separate section on exploration progress. All of the exploration results have previously been reported either in Quarterly reports or in the Interim report to 30 September 2012. These reports are available on the company’s website www.kingsolomonmines.com or through the ASX.

The Board remains committed to pursuing the goal of discovering a large scale mineral resource and securing the gains in value that would accrue from this outcome.

==> picture [99 x 27] intentionally omitted <==

==> picture [93 x 36] intentionally omitted <==

Chris D Castle Chairman

Stephen McPhail Managing director

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

		Area
Project	Exploration Licence	(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.

2 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

REPORT OF THE DIRECTORS

Your Directors present the financial report of the Company for the period ended 31 March 2013. The following persons hold office as Directors at the date of this report. Their qualifications and experience are:

Mr. Christopher Castle B.C.A., A.C.A., C.F.I.P.

Non- Executive Chairman

Chris Castle joined the board of King Solomon on 31 October 2005. He is a chartered accountant with over 30 years experience in the investment and corporate finance sectors. He manages mineral exploration investment company Aorere Resources 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.

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 cofounded 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. 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 as well as sales of the Company’s projects.

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. Castle is to be regarded as interested in any transaction with Aorere Resources Limited as he is a director and shareholder 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 Aorere Resources Limited.

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

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.

Directors' Interests in Shares and Options

Directors' interests in shares and options as at 31 March 2013 are set out in Director’s Disclosure after Note 21 to the financial statements and the Disclosure of Directors Share Dealings at page 26 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 $7,090,891.

3 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

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 is contained on page 2 of this report.

Corporate Structure

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

Employees

The Company had 2 employees as at 31 March 2013. 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 2013 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 2013.

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	Option	Other	Director	Option	Other
	Fees	Remuneration	Remuneration	Fees	Remuneration	Remuneration
	2013	2013	2013	2012	2012	2012
	$	$	$	$	$	$
JohnQuinn	48,750			62,500
Stephen McPhail		20,017	204,250		28,917	144,098
Bruce Bell		29,447	81,099		28,917	157,168
Fu La		20,017	174,000		28,917	120,000
Chris Castle	35,086			33,778

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

4 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

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 22 January 2013, Director's fees were decreased from $65,000 to $35,000 per annum for the Chairman. Executive directors do not receive director fees. Messrs McPhail, and La are considered executive directors.

Directors' Employment and Service Contracts

Mr Castle has not entered into an employment contract with the Company. The Company has entered service agreements with Bodhi Svaha Holdings Limited (“BSHL”) 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 $132,250 for services as well as a payment of $72,000 for termination of the previous services agreement on 1 January 2013.

The fee to BSHL for services is $8,000 per month until 30 June 2013. After 30 June 2013, BSHL is paid $720 per day for actual work undertaken up to a maximum of 10 days per month i.e. maximum payment of $7,200 per month. There is a requirement for BSHL to procure that Stephen McPhail works as managing director for the Company. The agreement began on 1 January 2013.

The Company has the right to terminate the agreement at any time by written notice. No termination payment is required other than fees earned to that time.

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 $114,000 for services as well as a payment of $60,000 for termination of the previous services agreement on 1 January 2013.

The fee to AMX for services is $8,000 per month until 30 June 2013. After 30 June 2013, AMX is paid $600 per day for actual work undertaken up to a maximum of 10 days per month i.e. maximum payment of $6,000 per month. There is a requirement for AMX to procure that Fu La works as executive director for the Company, focussing on the sale of the Company’s mineral exploration assets in China. The agreement began on 1 January 2013.

The Company has the right to terminate the agreement at any time by written notice. No termination payment is required other than fees earned to that time.

In all other aspects, the agreement is identical to that of BSHL above.

On 1 January 2009, BSHL, Selwyn Geosurveys Limited and AMX agreed to forego 20% of their respective fees due under their services agreements with the company. All three parties have agreed to waive any payment of the forgone services fees incurred.

Share Options

Particulars of options granted over un-issued shares:

i) There were no shares issued during the period ended 31 March 2013 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, 165,000 options exercisable by 25 March 2016 at 12 cents per share and 1,963,000 exercisable by 29 July 2016 at 12 cents per share.

It also had 1,000,000 options exercisable by 3 March 2014 at 5 cents per share which had been granted to broker Dayton Way Financial Pty Ltd..

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.

5 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

Meetings of Directors

Board Meeting Attendance

Director	Appointed to Board	Meetings Entitled to Attend (incl. committees)	Meetings Attended
John Quinn	2 February 2007	6	6
Stephen McPhail	28 January 2003	5	5
Bruce Bell	28 January 2003	5	3
Fu La	5 May 2004	5	4
Chris Castle	31 October 2005	7	7

Non-Executive Director, Mr C Castle and Executive Director Mr S McPhail 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 2 Audit Committee meetings and no Remuneration Committee meetings during the period. Messrs C Castle and S. McPhail 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.

6 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

STATEMENTS OF COMPREHENSIVE INCOME

for the year ended 31 March 2013

	GROUP PARENT
	Note 2013 2012 2013 2012 $ $ $ $
Other Income Dividend Income Foreign Exchange Gain Gain on Sale of Fixed Assets Interest Received Lease Income	- 377 - 377 10,214 21,354 10,176 - 15,555 13,479 - - 15,607 90,929 14,992 90,104 7 21,437 91,564 - -
Total Other Income Expenses Amortisation Depreciation Loss on Sale Directors' Fees Employee Benefits Expense Foreign Exchange Loss Office Expenses Other Expenses Professional Fees Share Option Expense Write Off of Exploration Expenditure Write down of Property for resale Impairment of Advances to Subsidiary Impairment of Investment in Subsidiary Impairment of Fixed Assets	62,813 217,703 25,168 90,481 163 41 163 41 8 15,183 14,827 3,337 2,464 8 1,558 598 1,558 598 83,836 96,278 83,836 96,278 103,630 - - - 10 33,636 26,978 - - - - - 58,825 98,449 225,145 48,874 70,399 152,733 214,963 135,678 213,161 404,642 287,896 404,642 287,896 12 131,945 125,945 131,945 125,945 3, 7 6,097,327 24,140 2,794,964 18,444 30,593 90,123 - - - - 2,399,748 - - - 1,126,008 189,162
Total Expenses Loss before Tax Income Tax Expense	7,153,695 1,106,934 7,130,753 1,063,213 (7,090,882) (889,231) (7,105,585) (972,732) 18 9 878 9 878
Other Comprehensive Income Currency Translation Differences Loss attributable to the Owners of the Company Total Comprehensive Income net of tax attributable to Owners of the Company	(7,090,891) (890,109) (7,105,594) (973,610) (4,222) 8,642 - - (7,095,113) (881,467) (7,105,594) (973,610)
Loss Per Share Basic Loss per Share Diluted Loss per Share	$/share $/share $/share $/share 14 (0.04) (0.01) (0.04) (0.01) 14 (0.04) (0.01) (0.04) (0.01)

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

7 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

STATEMENTS OF CHANGES IN EQUITY for the year ended 31 March 2013

					Total
			Share	Accumulated	Shareholder
		Share Capital	Options	Loss	Funds
PARENT	Note	$	$	$	$
Equity as at 1 April 2011		16,603,068	546,902	(8,712,049)	8,437,921
Comprehensive Income:
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)	-	-
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
Equity as at 1 April 2012		16,992,950	282,965	(9,685,659)	7,590,256
Comprehensive Income:
Loss for Year		-	-	(7,105,594)	(7,105,594)
Total Comprehensive Income for the Year		-	-	(7,105,594)	(7,105,594)
Transactions with owners:
Options Expense	12	-	131,946	-	131,946
Options Expired & Lapsed	12	(389,882)	(101,529)	491,411	-
Shares Issued	12	941,436	-	-	941,436
Capital Raising Costs	12	(37,522)	-	-	(37,522)
Total transactions with Owners:		514,032	30,417	491,411	1,035,860
Equity as at 31 March 2013		17,506,982	313,382	(16,299,842)	1,520,522

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

8 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

STATEMENTS OF CHANGES IN EQUITY for the year ended 31 March 2013

				Foreign
				Currency		Total
			Share	Translation	Accumulated	Shareholder
		Share Capital	Options	Reserve	Loss	Funds
GROUP	Note	$	$	$	$	$
Equity as at 1 April 2011		16,603,068	546,902	428,352	(9,314,065)	8,264,257
Comprehensive Income:
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)	-	-	-
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
Equity as at 1 April 2012		16,992,950	282,965	436,994	(10,204,174)	7,508,735
Comprehensive Income:
Loss for Year		-	-	-	(7,090,891)	(7,090,891)
Other Comprehensive Income:
CurrencyTranslation Differences		-	-	(4,222)	-	(4,222)
Total Comprehensive Income for the Year		-	-	(4,222)	(7,090,891)	(7,095,113)
Transactions with owners:
Options Expense	12	-	131,946	-	-	131,946
Options Expired (2013)	12	(389,882)	(101,529)	-	491,411	-
Shares Issued	12	941,436	-	-	-	941,436
Capital RaisingCosts	12	(37,522)	-	-	-	(37,522)
Total transactions with Owners:		514,032	30,417	-	491,411	1,035,860
Equity as at 31 March 2013		17,506,982	313,382	432,772	(16,803,654)	1,449,482

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

9 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

STATEMENTS OF FINANCIAL POSITION for the year ended 31 March 2013

		GROUP	GROUP	PARENT	PARENT
		2013	2012	2013	2012
	Note	$	$	$	$
SHAREHOLDERS' FUNDS
Share Capital	12	17,506,982	16,992,950	17,506,982	16,992,950
Share Options	12	313,382	282,965	313,382	282,965
Foreign Currency Translation Reserve		432,772	436,994	-	-
Accumulated Losses		(16,803,654)	(10,204,174)	(16,299,842)	(9,685,659)
TOTAL FUNDS EMPLOYED		1,449,482	7,508,735	1,520,522	7,590,256
REPRESENTED BY:
CURRENT ASSETS
Cash and Cash Equivalents	6	314,333	1,402,197	256,017	1,342,244
Prepayments		-	16,761	-	2,132
Other Receivables - Related Parties	11	7,069	842,459	1,266,104	3,648,116
Other Receivables - Tax on Interest		4,972	28,092	4,972	28,092
Other Receivables - Other		55,580	66,619	42,731	48,037
Motor Vehicles for Sale	8	107,075	-	-	-
Other Plant and Equipment for Sale	8	18,228	-	5,042	-
Property for Resale	9	275,339	304,762	-	-
Exploration and Evaluation Assets	7	995,332	-	-	-
Total Current Assets		1,777,928	2,660,890	1,574,866	5,068,621
CURRENT LIABILITIES
Accounts Payable - Related Parties	11	(27,155)	(926,856)	(27,155)	(40,617)
Accounts Payable - Other		(301,291)	(181,860)	(27,189)	(63,945)
Total Current Liabilities		(328,446)	(1,108,716)	(54,344)	(104,562)
NET CURRENT ASSETS		1,449,482	1,552,174	1,520,522	4,964,059
NON CURRENT ASSETS
Property Plant and Equipment	8	-	344,862	-	10,669
Intangible Assets		-	345	-	345
Investment in Subsidiaries	13	-	-	-	203,381
Exploration and Evaluation Assets	7	-	5,611,354	-	2,411,802
Total Non Current Assets		-	5,956,561	-	2,626,197
NET ASSETS		1,449,482	7,508,735	1,520,522	7,590,256
On behalf of the Board
Stephen McPhailDirector7 June 2013		Chris CastleDirector7 June		2013

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

10 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

STATEMENTS OF CASH FLOWS for the year ended 31 March 2013

		GROUP	GROUP	PARENT	PARENT
		2013	2012	2013	2012
	Note	$	$	$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was received from:
Interest		18,029	98,303	17,414	90,104
Dividends		-	269	-	269
Lease income received		-	91,564	-	-
Resident Withholding Tax refunded		28,120	16,761	28,120	16,761
		46,149	206,897	45,534	107,134
Cash was applied to:
Payments to suppliers		856,075	642,144	681,498	642,823
Resident WithholdingTax on Interest		5,009	30,046	5,009	30,046
		861,084	672,190	686,507	672,869
Net cash flow - Operating activities	17	(814,935)	(465,293)	(640,973)	(565,735)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was received from:
Advance from Associate	11	-	840,525	-	-
Sale of Property Plant and Equipment		5,507	103,438	732	406
		5,507	943,963	732	406
Cash was applied to:
Purchase of Intangible Assets		-	508	-	508
Purchase of Property Plant and Equipment	8	-	224,282	-	3,433
Purchase of Property available for sale		-	394,885	-	-
Advance to Associate	11	-	840,525	-	840,525
Advance to Subsidiary		-	-	18,064	720,000
Exploration Expenditure		1,173,608	2,729,242	1,342,012	958,250
		1,173,608	4,189,442	1,360,076	2,522,716
Net cash flow - Investing activities		(1,168,101)	(3,245,479)	(1,359,344)	(2,522,310)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was received from Issue of Shares		941,436	-	941,436	-
Cash was applied to Share Raising expenses		(37,522)	-	(37,522)	-
Net cash flow - Financing activities		903,914	-	903,914	-
Net cash flows from all activities		(1,079,122)	(3,710,772)	(1,096,403)	(3,088,045)
Cash at Beginning of Year		1,402,197	5,129,300	1,342,244	4,489,114
Exchange Gains / (Losses) on Cash Balances		(8,742)	(16,331)	10,176	(58,825)
Cash at End of Year		314,333	1,402,197	256,017	1,342,244
Represented by:
Cash at Bank	6	164,333	888,814	106,017	828,861
Short Term Bank deposits	6	150,000	513,383	150,000	513,383
Cash at End of Year	6	314,333	1,402,197	256,017	1,342,244

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

11 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2013

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 242 Marine Parade, Otaki Beach, Otaki, 5512

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.

These consolidated financial statements were approved by the Board of Directors on 7 June 2013.

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.

basis. As a result, the accounting policies adopted during the year were:

• Assets were measured at the lower of carrying value and net realisable value. The net realisable value of property, plant and equipment was determined by reference to relevant market prices less estimated selling costs (if any). Exploration and evaluation assets and property held for sale were determined based on the Directors’ best estimates of realisable value as no market-based evidence was available. The Parent’s investment in subsidiary and the Parent’s receivable from subsidiary were determined based on the Directors’ assessment of net assets of the subsidiary, which are subject to the above estimates of the net realisable value of property, plant and equipment, exploration and evaluation assets and property held for resale.

• Changes in the carrying amount of assets were recognised in the statement of comprehensive income;

• Non-current assets were reclassified as current assets; and

• Recognition of liabilities as a result of the decision to sell the core assets of the Group and wind up operations. However no material wind up costs were identified.

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.

Change in Basis of Preparation

The Directors have assessed the Group’s business and estimate that it will be difficult to obtain additional capital to fund further exploration and /or development expenditure. Accordingly, the Group has no realistic alternative but to sell the core assets and wind up operations. Consequently, the Group and the Company is no longer deemed to be a going concern and the financial statements have been prepared on a realisation

a) New Accounting Standards

• There have been no new or amended standards that have become effective on the Group during the year ended 31 March 2013 that have impacted the Group’s financial statements.

• b) Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group’s accounting periods beginning on or after 1 April 2013, which the Group has not early adopted. These are as follows:

NZ IFRS 13 - Fair Value Measurement . The new standard replaces existing guidance on fair value measurement in several standards with a single, unified definition of fair value and a framework for measuring and disclosing fair values. NZ IFRS 13 applies to all assets and liabilities measured at fair value, not just financial instruments. It is not expected to have a material impact on the Group. NZ IFRS 13 is applicable for financial period beginning on or after 1 January 2013.

12 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

NZ IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities. The amendment requires disclosure of information that will enable users to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with recognised financial assets and liabilities on the Group’s financial position. The amendment is not expected to have a material impact on the Group. The amendment is applicable for financial periods beginning on or after 1 January 2013.

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

NZ IFRS 9 – Financial Instruments – Classification and Measurement. This standard specifies how an entity should classify and measure financial assets, simplifying the approach compared to the current NZ IAS 39. It is not expected to have a material impact on the Group. NZ IFRS 9 is applicable for financial reporting periods beginning on or after 1 January 2015.

NZ IAS 32 – Financial Instruments Offsetting Financial Assets and Financial Liabilities. The amendment provides application guidance to addressing inconsistencies applied to offsetting criteria provided in NZ IAS 32, including clarifying the meaning of current legal enforceable right of set-off and that some gross settlement systems may be considered as the equivalent to net settlement. The amendment is not expected to have a material impact on the Group. The amendment is applicable for financial periods beginning on or after 1 January 2014.

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.

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 decisionmaker. The chief operating decision-maker, who is responsible for allocating resources and assessing

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 2.11 and 2.19).

Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred 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.

13 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

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.

2.7 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).

2.8 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.

2.9 Foreign Currency Translation

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 in the foreign currency translation reserve. 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.

2.10 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.

2.11 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.

(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

2.12 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

14 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

• 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 reasonable 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.

2.13 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.

2.14 Income tax

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.

2.16 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.

2.17 Lease Income

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

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.

2.18 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.

2.19 Cash and Cash Equivalents

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.

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.

2.15 Employee benefits

2.20 Statement of Cash Flows

(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 nonaccumulating sick leave are recognised when the leave is taken and is measured at the rates paid or payable.

(b) Share-based compensation

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.

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee

15 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

CHANGES IN ACCOUNTING POLICIES

The basis of the financial statements of the Group has changed from a Going Concern basis to a Realisable basis of preparation. The impact of this has not been significant as the bulk of the Group’s non cash assets have always been subject to a critical accounting estimate as is explained further in note 3. However non-current assets have been reclassified as current assets.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

In preparing the financial statements on a realisation basis, the Group and Company have made estimates of the net realisable value of their assets.

equipment, exploration and evaluation assets and property held for resale as disclosed in notes 11 and 13.

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 2013, 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 2013 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:

In particular, the net realisable value of property, plant and equipment was determined by reference to relevant market prices less estimated selling costs (if any) (see note 8). Exploration and evaluation assets and property held for resale were determined based on the Directors’ best estimates of realisable value (see note 7 and 9).The Parent’s investment in subsidiary and the Parent’s receivable from subsidiary were determined based on the Directors’ assessment of net assets of the subsidiary, which are subject to the estimates of property, plant and

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

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

		New Zealand	China	Consolidated
		$	$	$
31	March 2012
	Property for Resale	-	304,762	304,762
	Other Property Plant and Equipment	8,978	335,884	344,862
	Exploration and Evaluation Assets	-	5,611,354	5,611,354
	Total Non Current Assets	8,978	6,252,000	6,260,978
31	March 2013
	Property for Resale	-	275,339	275,339
	Motor Vehicles for Sale	-	107,075	107,075
	Other Plant and Equipment for Sale	3,351	14,877	18,228
	Exploration and Evaluation Assets	-	995,332	995,332
	Total Non Current Assets	3,351	1,392,623	1,395,974

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

		GROUP	GROUP	PARENT	PARENT
		2013	2012	2013	2012
		$	$	$	$
5.	IMPUTATION CREDIT ACCOUNT
	Balance Carried Forward	16,788	39,686	16,788	39,686

16 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

	GROUP		PARENT	PARENT
	2013	2012	2013	2012
	$	$	$	$
6. CASH AND CASH EQUIVALENTS
Cash	267	610	167	184
Cash at Bank	164,067	888,204	105,851	828,677
Short Term Bank Deposits	150,000	513,383	150,000	513,383
Total Cash & Cash Equivalents	314,333	1,402,197	256,017	1,342,244

7. EXPLORATION AND EVALUATION EXPENDITURE

The results of drilling at all tenements in China have not been as encouraging as hoped. All current drilling programmes have ceased and the Group intends to sell all tenements in their current state. The Directors have impaired the carrying value of the tenements based on the Directors’ best estimate of the likely sales price of each tenement. There is no active market in China for these tenements.

As at 31 March 2013 the amount of liabilities arising from the exploration for and evaluation of mineral resources is $270,668 (2012: $42,391).

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

	GROUP		PARENT
	2013	2012	2013	2012
	$	$	$	$
Exploration phase:
Opening Balance	5,611,354	2,820,356	2,411,802	1,493,022
Foreign Exchange on Opening Balance	12,282	38,450	-	-
Expenditure incurred during the Year	1,469,023	2,776,688	383,162	937,224
Expenditure written off during the Year	(6,097,327)	(24,140)	(2,794,964)	(18,444)
Closing Balance	995,332	5,611,354	-	2,411,802

The expenditure is allocated over the following prospects:

	GROUP	GROUP		PARENT
	2013	2012	2013		2012
	$	$	$		$
Prospect
Sonid North	735,332	1,974,128		-	676,644
Naogaoshandu	130,000	255,518		-	255,518
Marmot	50,000	479,617		-	126,178
Bu Dun Hua	80,000	2,902,091		-	1,353,462
Total Exploration and Evaluation Expenditure	995,332	5,611,354		-	2,411,802

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:

	GROUP	GROUP	PARENT	PARENT
	2013	2012	2013	2012
	$	$	$	$
Prospect
Naogaoshandu	-	75,103		-	-
Marmot	21,437	16,461		-	-
Total Lease Income	21,437	91,564		-	-

17 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

GROUP	PARENT
Motor Vehicles Office Furniture and Equipment Plant and Equipment Total Property Plant and Equipment $ $ $ $	Total Office Furniture and Equipment $
8. PROPERTY, PLANT AND EQUIPMENT
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 Sales & Disposals (103,032) (406) - (103,438) Gain on Sale 13,479 - - 13,479 Loss on Sale - (598) - (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 (42,509) (33,823) (3,013) (79,345) Depreciation Capitalised 40,877 22,993 648 64,518 Net Depreciation (1,632) (10,830) (2,365) (14,827) 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 Year ending 31 March 2013 Opening Net Book Amount 274,187 61,444 9,231 344,862 Foreign Exchange Movement 1,052 195 33 1,280 Sales & Disposals (48,337) (732) - (49,069) Gain / (Loss on Sale) 15,555 (1,558) - 13,997 Depreciation (43,377) (36,593) (2,167) (82,137) Provision for Impairment (92,005) (8,260) (3,365) (103,630) Closing Net Book Amount 107,075 14,496 3,732 125,303 Year ending 31 March 2013 Depreciation (43,377) (36,593) (2,167) (82,137) Depreciation Capitalised 42,694 23,443 817 66,954 Net Depreciation (683) (13,150) (1,350) (15,183) As at 31 March 2013 Cost 306,204 189,385 28,809 524,398 Accumulated Depreciation (107,124) (166,629) (21,712) (295,465) Provision for Impairment (92,005) (8,260) (3,365) (103,630) Net Book Amount 107,075 14,496 3,732 125,303	68,470 (57,766)
	10,704
	10,704 - 3,433 (406) - (598) (2,464)
	10,669
	(2,464) -
	(2,464)
	55,041 (44,372)
	10,669
	10,669 - (732) (1,558) (3,337) -
	5,042
	(3,337) -
	(3,337)
	50,104 (45,062) -
	5,042

18 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

9. PROPERTY FOR RESALE

In 2011, 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 2012 financial year for RMB 2,600,000 of which RMB 2,500,000 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.

The office does not currently have an ownership certificate and the recent Government policy in China to cool down the real estate market may restrict the market for this office.

The directors have assessed the value of the office based on the director’s best estimate of the likely sales price.

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.

New Zealand and China.
	GROUP
	2013	2012
	$	$
Wages and Salaries	26,479	24,417
Pension costs - Defined Contribution	5,020	1,457
Other Employee Benefits	2,137	1,104
	33,636	26,978
Number of salaried employees recorded as salary and
wage expense	2	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 (Past Director and Shareholder) had 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 (Past 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).

19 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

GROUP PARENT 2013 2012 2013 2012 $ $ $ $

RELATED PARTY EXPENDITURE

(Reimbursement of expenditure, consulting fees & salary)

Directors

Directors
Black Box Spatial	-	(29)	-	(29)
Bruce Bell	4,331	590	4,331	590
Bodhi Svaha Holdings Ltd	239,493	170,316	239,493	170,316
Chris Cstle	489	-	489	-
Fu La	80,867	326,531	-	190,478
Inner Mongolia Ao Meng Xin
Economic and Trade Co.	174,000	807,333	174,000	807,333
John Quinn	59,588	87,946	59,588	87,946
Selwyn Geosurveys Ltd	104,657	204,683	104,657	204,683
Stephen McPhail	9,751	1,588	9,751	1,588
Widespread Limited	40,348	38,845	40,348	38,845
Shareholders
Di Anna	13,033	19,959	13,033	18,573
Michael Wilcox	26,031	26,861	26,031	26,861
	752,588	1,684,623	671,721	1,547,184
SHARE BASED COMPENSATION
Directors
Stephen McPhail	20,017	28,917	20,017	28,917
Bruce Bell	29,447	28,917	29,447	28,917
Fu La	20,017	28,917	20,017	28,917
Shareholder
Di Anna	494	2,236	494	2,236
	69,975	88,987	69,975	88,987
OWING TO RELATED PARTIES
Directors
Bodhi Svaha Holdings Ltd	9,542	14,205	9,542	14,205
Fu La	8,000	45,714	8,000	-
# Inner Mongolia Ao Meng Xin
Economic and Trade Co. Ltd	-	840,525	-	-
Selwyn Geosurveys Ltd	-	15,933	-	15,933
Stephen McPhail	-	277	-	277
Shareholder
Di Anna	49	789	49	789
Michael Wilcox	9,564	9,413	9,564	9,413
	27,155	926,856	27,155	40,617
OWING BY RELATED PARTIES
Subsidiary
* Inner Mongolia Plate Mining Co Ltd	-	-	1,264,497	2,805,657
Directors
Bruce Bell	1,607	1,934	1,607	1,934
Fu La	5,462	-	-	-
# Inner Mongolia Ao Meng Xin Economic and Trade Co. Ltd	-	840,525	-	840,525
	7,069	842,459	1,266,104	3,648,116

20 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

• The directors have impaired the carrying values of receivables from the subsidiary based on the net assets of the subsidiary. The net assets of the subsidiary are based on the Director’s estimate of the net realisable value of tenements held and property for resale.

These represent funding advances to Inner Mongolia Plate Mining Co Limited through Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited. The directors of the Company and Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited agree to net off the receivables and the payables.

12. SHARE CAPITAL AND OTHER RESERVES

Share Capital

Issued share capital is represented by:

		Number of	Issue	Average
		Shares	Price	Issue Price
			$	$/Share
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
Opening Balance	1 April 2012	166,287,552	16,992,950	0.10
Shares Issued		56,851,708	941,436	0.02
Capital Raising Costs		-	(37,522)
Options Expired Reclassification		-	(389,882)
Closing Balance	31 March 2013	223,139,260	17,506,982	0.08

Share Options

Options are currently issued to directors, three employees and Dayton Way Financial Pty Ltd. Options issued as at balance date are as follows:

			2013		2012
			Average		Average
			exercise price		exercise price
			in $A per		in $A per
	Expiry date		share	Options	share	Options
At 1 April	4 May 2011	*	0.300	-	0.300	6,279,999
At 1 April	29 July 2014	*	0.100	3,100,000	0.100	3,100,000
At 1 April	25 March 2016	*	0.120	500,000
At 1 April	29 July 2016	*	0.120	2,900,000
Granted	25 March 2016	*	0.120	-	0.120	500,000
Granted	29 July 2016	*	0.120	-	0.120	2,900,000
Granted	3 March 2014	*	0.050	1,000,000	-	-
Granted	4 October 2014	*	0.033	1,800,000	-	-
Lapsed	4 October 2014	*	0.033	(1,800,000)	-	-
Lapsed	29 July 2016	*	0.120	(937,000)	-	-
Lapsed	25 March 2016	*	0.120	(335,000)	-	-
Lapsed	4 May2011	*	0.300	-	0.300	(6,279,999)
			0.089	6,228,000	0.110	6,500,000
* No participation	in future dividends until exercised

Option movements during the year

On 29th October 2012, 1,000,000 options were issued to Dayton Way Financial Pty Ltd., as part consideration for their work in capital raising.

21 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

In addition 1,800,000 options were issued to employees on 4[th ] October 2012. These 1,800,000 options were subsequently lapsed after company restructuring as were a further 1,272,000 options due to the death of a founding director Bruce Bell and the company restructuring.

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

	Number of		Total Fair Value		Risk Free
	Options	Fair Value of	of Options	Share	Interest	Price
Expiry Date	Granted	each option	when granted	Price	Rate	Volatility
		$	$	$	%	%
29 July 2014	3,100,000	0.0643	199,330	0.08	4.920	120
25 March 2016	165,000	0.0748	12,342	0.12	5.285	112
29 July 2016	1,963,000	0.0576	113,069	0.12	4.950	111
3 March 2014	1,000,000	0.0075	7,500	1.6	2.375	163
	6,228,000		332,241

Some of these options will only vest after certain conditions have been met. Options exercisable as at balance date are as follows:

Options Vested and therefore exercisable:

	2013	2012
Expiry Date
29 July 2014	3,100,000	2,046,000
25 March 2016	165,000	165,000
29 July 2016	891,000	-
3 March 2014	1,000,000	-
	5,156,000	2,211,000

13. INVESTMENT IN SUBSIDIARIES

		Country of	Equity	Holding
Name of Subsidiary	**Principal Activity **	Incorporation	2013	2012
Inner Mongolia Plate MiningCo 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.

The Parent’s investment in subsidiary has been fully impaired on the basis that the directors believe that after realisation of the subsidiary’s tenements (note 7) and other assets (see notes 8 and 9) and repayment of liabilities of the subsidiary, there will be no remaining funds available for the Parent.

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.

22 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

The Company and Group recorded losses for the years ended 31 March 2013 and 31 March 2012. 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	PARENT
	2013	2012	2013	2012
	$	$	$	$
Loss attributable to equity holders of the Company	(7,090,891)	(890,109)	(7,105,594)	(973,610)
Weighted average number of ordinary shares on issue	196,279,792	166,287,552	196,279,792	166,287,552
Basic earnings per share ($ per share)	(0.04)	(0.01)	(0.04)	(0.01)

15. COMMITMENTS

The Company and Group lease property in New Zealand and China. They have no non-cancellable operating leases.

The Group had no commitments at 31 March 2013 (2012: Nil).

16. CONTINGENT ASSETS AND LIABILITIES

The Group had no contingent liabilities at 31 March 2013 (2012: $345,426).

The 2012 contingent liability of $345,426 represented a contingent payment of forgone services fees incurred by Bodhi Svaha Holdings Limited, Selwyn Geosurveys Limited and Inner Mongolia Ao Meng Xin Economic and Trade Co Limited which respectively provided the services of Stephen McPhail, Bruce Bell and Fu La.

New contracts have been negotiated in the current year without this contingent liability.

17. RECONCILIATION OF FINANCIAL PERFORMANCE AND OPERATING CASH FLOW

	GROUP		PARENT
	2013	2012	2013	2012
	$	$	$	$
(Deficit) for Year	(7,090,891)	(890,109)	(7,105,594)	(973,610)
Non Cash Items
Amortisation	163	41	163	41
Depreciation	15,183	14,827	3,337	2,464
Loss on Sale	1,558	598	1,558	598
Gain on Sale	(15,555)	(13,479)	-	-
Share Options	131,945	125,945	131,945	125,945
Foreign Exchange	(10,214)	(21,354)	(10,176)	58,825
Provisional Write down of Building	30,593	90,123	-	-
Provisional Write down of Other Fixed Assets	103,630	-	-	-
Liabilities settled with Fixed Assets	43,562	-	-	-
Write Off of Exploration Expenditure	6,097,327	24,140	2,794,964	18,444
Impairment of investment in Subsidiary	-	-	1,126,008	189,162
Impairment of Advances to Subsidiary	-	-	2,399,748	-
Movement in Working Capital
Other Receivables - Related Parties	835,390	(817,759)	(17,736)	(719,417)
Other Receivables - Tax on Interest	23,120	(12,515)	23,120	(12,515)
Other Receivables - Other	11,039	81,485	5,306	17,468
Prepayments	16,761	(16,761)	2,132	(2,132)
Accounts Payable - Related Parties	(899,701)	885,338	(13,462)	(901)
Accounts Payable - Other	119,431	66,994	(36,756)	(11,254)
Items classified as Investing Activities
Movement in Accounts Payable for Exploration	(228,277)	17,193	36,406	21,147
Increase in Advance to Subsidiary	-	-	18,064	720,000
Net Cash from / (used in) Operating Activities	(814,935)	(465,293)	(640,973)	565,735

23 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

18. INCOME TAX EXPENSE

Tax losses are available to carry forward subject to review 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 as the realisation of these benefits is not probable.

	GROUP	GROUP	PARENT	PARENT
	2013	2012	2013	2012
	$	$	$	$
Income Tax Expenses
Loss ($A)	(7,090,882)	(889,231)	(7,105,585)	(972,732)
Tax @ 28%	(1,985,447)	(248,985)	(1,989,564)	(272,365)
Expenses not deductible for tax purposes	78,702	48,758	1,036,392	118,082
Timing difference and tax losses not recognised as deferred tax	1,906,745	200,227	953,172	154,283
New Zealand Excess Imputation Credits	-	108	-	108
Australian Resident Excess Withholding Tax	9	770	9	770
Income tax expenses	9	878	9	878
Calculation of cumulative deferred tax benefit not recognised
Tax losses brought forward	14,442,983	11,432,885	8,199,952	6,281,310
Foreign exchange on loss brought forward	(483,579)	(183,623)	148,586	448,543
Tax loss for year	2,193,783	3,506,094	992,280	1,469,794
Chinese time bound tax losses forfeited	(868,337)	(312,678)	-	-
Excess imputation losses converted to loss	-	305	-	305
Future tax losses not brought to account	15,284,849	14,442,983	9,340,818	8,199,952
Prima facie tax benefit at 28%	4,279,758	4,044,035	2,615,429	2,295,986

19. FEES PAID TO AUDITORS

Fees payable to the principal auditors for audits of the King Solomon Mines Limited financial statements amounted to $30,358 (2012: $34,380).

Fees payable to other auditors for the audit of Inner Mongolia Plate Mining Co Limited amounted to $1,450 (2012: $1,802).

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 ($58,316, (2012: 59,953)). 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.

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 2013 of $10,198 (2012: $21,354 gain) due to the appreciation of the Australian dollar relative to the United States dollar, the New Zealand dollar and Chinese Yuan.

24 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

The exposure to currencies of the Group is as follows:

	2013	2012
	$	$
United States dollar	658	39,228
New Zealand dollar	77,965	82,473
Australian dollar	177,680	1,223,250
Chinese Yuan	58,316	59,953
	314,619	1,404,904

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	33	66	132
New Zealand dollar	3,898	7,797	15,593
Chinese Yuan	2,916	5,832	11,663
Total Impact of potential change in exchange rate	6,847	13,695	27,388

If the 30 April 2013 foreign exchange rates had been applied to the 31 March 2013 holdings, a gain of $3,132 would have been recognised on cash, bank balances and deposits due to changing mix of currencies affecting the Australian Dollar. This would have reduced 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.

Capital Risk Management

The Group’s objective is to ensure that their net assets are sufficient to meet all present and future obligations.

Fair value

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

	GROUP	GROUP	PARENT	PARENT
	2013	2012	2013	2012
	$	$	$	$
Loans and receivables
Cash and Cash Equivalents	314,333	1,402,197	256,017	1,342,244
Other Receivables - Related Parties	7,069	842,459	1,266,104	3,648,116
Other Receivables - Other	55,580	66,619	42,731	48,037
Total loans and receivables	376,982	2,311,275	1,564,852	5,038,397
Financial liabilities at amortised cost
Accounts Payable - Related Parties	(27,155)	(926,856)	(27,155)	(40,617)
Accounts Payable - Other	(301,291)	(181,860)	(27,189)	(63,945)
Total financial liabilities	(328,446)	(1,108,716)	(54,344)	(104,562)

21. POST PERIOD EVENTS

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

25 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

DIRECTORS’ DISCLOSURES

Directors Holding Office

The following directors have held office during the period.

Bruce Bell Appointed 28 January 2003 (Resigned 17 October 2012) Stephen McPhail Appointed 28 January 2003 Fu La Appointed 5 May 2004 Chris Castle Appointed 31 October 2005 John Quinn Appointed 2 February 2007 (Resigned 14 January 2013)

Directors’ Shareholding

As at 31 March 2013, the following Directors had the following relevant interests in shares in King Solomon Mines Limited.

	Beneficial	Non-Beneficial
Fu La	8,081,688	-
Stephen McPhail	5,739,090*	1,060,000**
Chris Castle	200,000	-

* Stephen McPhail is a trustee and beneficiary of the Paradise Now Trust (“PNT”). He has a legal and beneficial interest in 4,989,090 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 1,060,000 Shares which he holds as a trustee of the Wilcox Arcadian Trust.

Disclosure of Directors’ Share Dealings

There were no director’s share dealings other than participation by Fu La and Stephen McPhail in the Share Purchase Plan. Fu La purchased 581,688 shares and PNT* purchased 909,090 shares at 1.65c under the Share Purchase Plan. These shares were allotted on 15 October 2012.

Disclosure of Directors’ Share Options

As at 31 March 2013, options issued to directors were as follows:

Fu La Stephen McPhail	800,000 900,000 1,700,000 800,000 900,000** 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 have vested.

26 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

==> picture [505 x 697] intentionally omitted <==

27 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

==> picture [506 x 729] intentionally omitted <==

28 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

CORPORATE GOVERNANCE STATEMENT

Corporate Governance

The Board of Directors of King Solomon Mines Ltd (ASX:KSO) is responsible for corporate governance and strives for high standards in this regard. The Board monitors the business and affairs of the Company 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 with 2010 amendments (including the June 2010 recommendations on diversity). Commensurate with the spirit of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 2[nd] Edition (Principles and Recommendations), the Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. At a number of its meetings the Board examined the Company’s 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 the Company 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 Australian Securities 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 reports below on how it has followed (or otherwise departed from) each of the Principles and Recommendations during the current financial year. 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 eight 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 three Directors (one Non-Executive Director, Christopher Castle, plus the Managing Director, Stephen McPhail, and a second Executive Director Fu La) and a small team of people of two part-time employees, 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; and

• 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 Managing Director / CEO’s responsibilities and duties include:

29 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

• 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, appointing and negotiating terms of employment of senior staff members (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. The process for evaluating the performance of executives and staff members has been developed by the Managing Director and the Board.

• 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 two are Executive Directors. The Company does not have a Board nomination committee because of the small size of the Board; this function is carried out by the full Board of Directors.

One of the Company’s three 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.

The process for evaluating the performance of the Board, its Committees and individual Directors is to formally review these matters at least once per year at a Board meeting that considers remuneration for the coming year.

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 throughout the organisation.

The Company’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 code of conduct and the practices necessary to maintain confidence in the Company's integrity, the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders, and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices, is set out on the Company’s website at www.kingsolomonmines.com. Because of the small size of the Company at present (two employees), there are no women in senior executive positions and no women on the Board.

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 towards 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 that 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

30 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

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 NonExecutive Director Mr Castle (Audit Committee Chairman) and Managing Director Mr McPhail. These Directors have applicable expertise and skills for the Audit Committee. This structure does not meet the ASX’s guidance regarding independence, in that the majority are not independent Directors and does not 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 NonExecutive. This is a result of the Company more recently having an even smaller Board than the preceding year with two executive and one Non-Executive members. In order to have two members on this Committee, it was necessary to include an Executive Director – in this case Mr McPhail, who is the Managing Director and who is involved in the financial management of the Company. As the Board adds additional Non-Executive Directors, it is envisaged that Mr McPhail 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 designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance, and disclose those policies or a summary of those policies.

Principle 6: Respect the rights of shareholders

All significant information that will be disclosed to the ASX will be then posted on the Company’s website at www.kingsolomonmines.com 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 at www.kingsolomonmines.com. 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 policy to promote effective communication with shareholders, as it believes this is excessive for small companies, the Company does communicate regularly with shareholders and encourages their participation at general meetings. 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 material business risks. 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. The Company receives assurance from the Managing Director and the Financial Controller that the system of risk management and internal control is sound, and that the system is operating effectively in all material respects in relation to financial reporting risks.

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 and highest paid officers, and clearly distinguishes the structure of Non-Executive Directors’ remuneration from that of Executive Directors and senior executives.

The Company has a Remuneration Committee of one Non-Executive Director and the Managing Director that 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.

The structure of the Remuneration Committee does not comply with the recommendation in that it does not consist of a majority of independent Directors but it is chaired by an independent Chair and it does not comply in that it does not have at least three members.

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).

31 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3

SHAREHOLDER INFORMATION

Information relating to shareholders at 31 May 2013 (per ASX listing rule 4.10)

SUBSTANTIAL SHAREHOLDERS

There are no substantial shareholders.

		Ordinary
Number of ordinary shares held	Number of Holders	Shares
1 - 1,000	13	2,947
1,001 - 5,000	39	131,577
5,001 - 10,000	101	962,168
10,001 - 100,000	378	17,761,526
100,001 - and over	283	204,281,042
Total	814	223,139,260

Based on the market price at 31 May 2013 there were 553 shareholders with less than a marketable parcel of 125,000 shares.

Top 20 HOLDERS OF ORDINARY SHARES

		% Shares
Name ofShareholder	Shares	Issued
FORSYTH BARR CUSTODIANS LTD	11,357,500	5.09
FU LA	8,081,688	3.62
GLENLORA TRUSTEES LIMITED	8,000,000	3.59
UBS NOMINEES PTY LTD	6,190,886	2.77
LEAHNA HARDIE	6,004,000	2.69
CUSTODIAL SERVICES LIMITED	5,347,748	2.40
STEPHEN MCPHAIL + MICHAEL WILCOX	4,989,090	2.24
BT PORTFOLIO SERVICES LIMITED	4,228,571	1.90
DAYTON WAY FINANCIAL PTY LTD	4,207,618	1.89
ALAN BRUCE BELL	3,500,000	1.57
GRAHAM BASKIVILLE-ROBINSON + HEATHER BASKIVILLE-ROBINSON	3,301,170	1.48
MALCOLM MILNE SMITH	3,298,001	1.48
TOPETE PTY LTD	3,232,400	1.45
RUSSELL STANDAGE	3,052,589	1.37
KEITH GEORGE MCDONALD	3,000,000	1.34
ANDRE GLEN WHITE + JUDITH PATRICIA WHITE	2,705,000	1.21
SPANTECH CONSULTANCY PTY LTD	2,500,000	1.12
RODNEY FLETCHER TROWSDALE + MARGARET DIANE STEWART TROWSDALE	2,429,448	1.09
CHRIS JAMES	2,320,000	1.04
GOLDEN HORSESHOE LIMITED	2,214,575	0.99
Total of top 20 holdings	89,960,284	40.32
Other holdings	133,178,976	59.68
Total fully paid shares issued	223,139,260	100.00

OPTIONS

	Shares option	Exercise	Option
Name of option holder	holder entitled to	Price	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	1,164,000	$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
Dayton Way Financial Pty Ltd	1,000,000	$0.05	3 March 2014
Alfonso Latorre	264,000	$0.12	25 March 2016 - 29 July2016
	6,228,000

32 | King Solomon Mines Limited A n n u a l R e p o r t 2 0 1 3