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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)
[   ]	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December  31, 2011
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to __________
[   ]	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	Date of event requiring this shell company report: _______________

000-17729

Commission File Number

FEC RESOURCES INC.

(Exact name of registrant as specified in its charter)

n/a

(Translation of Registrant’s name into English)

Canada

(Jurisdiction of incorporation or organization)

46 Royal Ridge Rise NW, Calgary, AB, T3G 4V2

(Address of principal executive offices)

 Carlo Pablo, (403) 290-1676, Fax (403) 770-8060, 46 Royal Ridge Rise NW Calgary, AB, T3G 4V2

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class	Name of each exchange on which registered
n/a	n/a

Securities registered pursuant to Section 12(g) of the Exchange Act:

Title of  class

Common Shares, without par value

Common Stock Purchase Warrants

1

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Exchange Act:

Title of  class

None

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the close of the period covered by the annual report.

439,143,765 Common Stock

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [   ] No [X]

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes [   ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definitions of “large accelerated filer,” “accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[   ]	Accelerated filer	[   ]
Non-accelerated filer	[X]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP	[ ]	Other	[   ]
International Financial Reporting Standards as issued  by the International Accounting Standards Board			[ X ]

If  “Other”  has been checked in response to the previous questions, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [   ] Item 18 [  ]

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

2

FEC RESOURCES, INC. (formerly “FORUM ENERGY CORPORATION”)

FORM 20-F ANNUAL REPORT FISCAL YEAR 2011

TABLE OF CONTENTS
	Page
PART I
Item 1. Identity of Directors, Senior Management and Advisers	5
Item 2. Offer Statistics and Expected Timetable	5
Item 3. Key Information	5
Item 4. Information on the Company	11
Item 4a. Unresolved Staff Comments	16
Item 5. Operating and Financial Review and Prospects	16
Item 6. Directors, Senior Management and Employees	22
Item 7. Major Shareholders and Related Party Transactions	28
Item 8. Financial Information	29
Item 9. The Listing	30
Item 10. Additional Information	31
Item 11. Quantitative and Qualitative Disclosure About Market Risk	33
Item 12. Description of Securities other than Equity Securities	33
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies	34
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	34
Item 15. Controls and Procedures	34
Item 16A. Audit Committee Financial Expert	36
Item 16B. Code of Ethics	36
Item 16C. Principal Accountant Fees and Services	36
Item 16D. Exemption from the Listing Standards for Audit Committee	37
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchaser	37
Item 16F. Change in Registrant's Certifying Accountant	37
Item 16G. Corporate Governance	37
Item 16H. Mine Safety Disclosure	38
PART III
Item 17. Financial Statements	38
Item 18. Financial Statements	100
Item 19. Exhibits	100
Signatures	101

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus contains forward-looking statements.  Forward-looking statements represent our current expectations or forecasts of future events and are based on our management's beliefs, as well as assumptions made by and information currently available to them.  You can identify these statements by the fact that they do not relate strictly to historical or current facts.  These statements may include the words "anticipate," "believe," "budget," "estimate," "expect," "intend," "objective," "plan," “probable” "possible," "potential," "project" and other words and terms of similar meaning in connection with any discussion of future operating or financial performances.

Any or all of our forward-looking statements in this Form 20-F may turn out to be incorrect.  They can be affected by inaccurate assumptions, or by known or unknown risks and uncertainties.  Many of these factors, including the risks outlined under "Risk Factors," will be important in determining our actual future results, which may differ materially from those contemplated in any forward-looking statements.  These factors include, among others, the following:

-              oil and natural gas price volatility;

- uncertainties in the estimates of proved reserves, and in the projection of future rates of production and timing of development expenditures;

- our ability to find and acquire additional reserves;

- risks associated with acquisitions, exploration, development and production;

- operating hazards attendant to the oil and natural gas business;

- potential constraints on our ability to market reserves due to limited transportation space;

- climatic conditions;

- availability and cost of labor, material, equipment and capital;

- ability to employ and retain key managerial and technical personnel;

- international, national, regional or local political and economic uncertainties, including changes in energy policies, foreign exchange restrictions and currency fluctuations;

- adverse regulatory or legal decisions, including those under environmental laws and regulations;

- environmental risks;

- the strength and financial resources of our competitors;

- general economic conditions; and

- our ability to continue as a “going concern”.

When you consider these forward-looking statements, you should keep in mind these risk factors and other cautionary statements in this prospectus.  Our forward-looking statements speak only as of the date made.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, they are subject to a variety of variables which could cause actual results or trends to differ materially.  We cannot guarantee future results, levels of activity, performance or achievements.  Except as otherwise required by United States securities laws, we are under no duty to update any of the forward looking statements after the date of this Form 20-F to conform them to actual results or to changes in our expectations.  All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement.

4

FIRST TIME APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

Effective from January 1, 2011, the Company adopted International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board.  Unless otherwise stated, all information presented herein has been prepared in accordance with IFRS and all prior period amounts have been reclassified to conform with IFRS.  These are the Company’s first consolidated financial statements prepared in accordance with IFRSs and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. Please note that our prior annual financial statements were prepared in accordance with Canadian generally accepted accounting principles, which may not be comparable to IFRS.  Please refer to Note 19 of our annual financial statements included herein for a discussion on the impact of our transition from Canadian generally accepted accounting principles to IFRS.

CURRENCY

Unless otherwise stated, “$”, when used in this Form 20-F, refers to US dollars.

ITEM  1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.

Not applicable to Form 20-F filed as annual report.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.

Not applicable to Form 20-F filed as annual report.

ITEM 3.  KEY INFORMATION.

The following is a summary of key information about our financial condition, capitalization and the risk factors pertaining to our business.

Currency Exchange Rates

Table No. 3(A)(1) below sets forth the rate of exchange for the Canadian Dollar at the end of each of the five (5) most recent fiscal years ended December 31, the average rates for each year, and the range of high and low rates for each year.  Table 3(A)(2) sets forth the high and low exchange rates for each month during the previous six (6) months.  The rate of exchange means the noon buying rate as posted by the Bank of Canada.  The Tables set forth the number of Canadian Dollars required under that formula to buy one (1) US Dollar.  The average rate means the average of the exchange rates on the last day of each month during the year.

5

Table No. 3(A)(1)

U.S. Dollar/Canadian Dollar

Currency Exchange Table No. 1

U.S. Dollar/Canadian Dollar

	Average	High	Low	Close
Fiscal Year Ended 12/31/11	0.98	1.05	0.94	1.02
Fiscal Year Ended 12/31/10	1.03	1.08	0.99	0.99
Fiscal Year Ended 12/31/09	1.14	1.30	1.03	1.05
Fiscal Year Ended 12/31/08	1.07	1.31	0.98	1.22
Fiscal Year Ended 12/31/07	1.08	1.19	0.92	0.99

The current rate of exchange was $0.9930 on May 7, 2012

Table No. 3(A)(2)                                

U.S. Dollar/Canadian Dollar

	10/11	11/11	12/11	01/12	02/12	03/12
High	1.06	1.05	1.04	1.03	1.00	1.00
Low	0.99	1.01	1.01	1.00	0.99	0.98

A.  Selected Financial Data

The following financial data summarizes selected financial data for our company prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) for the two fiscal years ended December 31, 2011 and 2010.  The information presented below for the two year period ended December 31, 2011 and 2010 is derived from our financial statements which were examined by our independent auditors.  The information set forth below should be read in conjunction with our audited annual financial statements and related notes thereto included in this annual report, and with the information appearing under the heading “Item 5 – Operating and Financial Review and Prospects”.

	Year Ended 12/31/11 (‘000)			Year Ended 12/31/10 (‘000)
Revenue	$	-		$	-
Income (loss) Before Non-controlling Interest	$	435		$	(2,925	)
Net Income (loss)	$	435		$	(2,925	)
Net Income (loss) Per Share	$	(0.00	)	$	(0.00	)
Diluted  Net Income (loss) Per Share	$	(0.00	)	$	(0.00	)
Dividends Per Share	$	0.00		$	0.00
Weighted  Avg. Shares O/S (‘000)		439,144			437,555
Working Capital	$	1,242		$	1,692
Resource Properties	$	-		$	-
Long-Term Debt	$	-		$	-
Shareholders’ Equity	$	5,965		$	5,530
Capital Stock Shares  (‘000)		439,144			439,144
Total Assets	$	6,356		$	5,919

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B. Capitalization and Indebtedness

This Form 20-F is being filed as an annual report under the U.S. Exchange Act and, as such, there is no requirement to provide any information under this item.

C. Reason for the Offer and Use of Proceeds

This Form 20-F is being filed as an annual report under the U.S. Exchange Act and, as such, there is no requirement to provide any information under this item.

D.  Risk Factors

General Business Risks

We Have Had a History of Operating Losses Which May Affect Our Ability to Continue Operations.

Although we earned $435,290 for the year ended December 31, 2011, we incurred a loss of $2,925,257 for the year ended December 31, 2010 and we have incurred operating losses in the previous fiscal years with our accumulated deficit totaling $13,825,146 as at December 31, 2011.   We also anticipate sustaining a loss from operations for the fiscal year ended December 31, 2012.  We have no sources of revenue and only show income as a result of accounting for our equity share of profits of our associates.   As a result, we may not be able to sustain operations in the future without additional debt or equity financing.

Unless We Are Able To Discover Economically  Recoverable Reserves in the Future, We May Not Be Able to Continue Operations as a Going Concern in the Long Term.

Our business success is dependent upon our ability to indirectly or directly discover economically recoverable reserves, and to bring such reserves into profitable production, and is subject to a number of risks, including environmental risks, contractual risks, legal and political risks, fluctuations in the price of oil and gas, and other factors beyond our control.

The consolidated Financial Statements included herein have been prepared by management on the basis of accounting principles applicable to a “going concern”.  Management believes the “going concern” basis, which presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future, is appropriate.  We have experienced significant operating losses and cash outflows from operations in the years ended December 31, 2011 and 2010 and have no producing properties.  Our ability to continue as a “going concern” in the long term is dependent on achieving profitable operations and upon obtaining additional financing.  The outcome of these matters cannot be predicted at this time.

Although We Believe We Have the Sufficient Working Capital as of April 25, 2012 to Support Our Business in 2012, We May Need Additional Funds in Order to Implement Our Intended Projects and There is No Assurance that Such Funds Will Be Available As, If, and When, Needed.

Funds used in operations for the fiscal years ended December 31, 2011 and 2010 were $(446,718) and $(476,057), respectively.  We have been dependent upon the proceeds of equity and debt financing in addition to the disposition of assets to fund operations.  No assurances can be given that our actual cash requirements will not exceed our budget, that anticipated revenues will be realized, that, when needed, lines of credit will be available if necessary or that additional capital will be available to us.  There is no assurance that we will be able to obtain such additional funds on terms and conditions we may deem acceptable.  Failure to obtain such additional funds may materially and adversely affect our ability to acquire interests directly or indirectly in producing oil and gas and mineral properties.

We Do Not Intend to Pay Dividends In the Foreseeable Future, and thus, You Should Not Expect to Receive Dividends.

We have paid no dividends on our common shares since inception, and do not plan to pay dividends in the foreseeable future. See "Description of Common Shares."

The Market Price of Our Common Shares Has Been, and Will Likely Continue to Be, Volatile.

The market price of our common shares has fluctuated over a wide range, and it is likely that the price of our common shares will fluctuate in the future.  Further, announcements regarding acquisitions, the status of corporate collaborations, regulatory approvals or other developments by us or our competitors could have a significant impact on the market price of our common shares.

The Value and Transferability of Our Shares May Be Adversely Impacted By the Limited Trading Market For Our Shares and the Penny Stock Rules.

There is only a limited trading market for our shares on the Over the Counter Bulletin Board Exchange (“OTCBB”).  There can be no assurance that this market will be sustained, or that we will be able to satisfy any future trading criteria that may be imposed by the Financial Industry Regulatory Authority (“FINRA”).

In addition, holders of our common shares may experience substantial difficulty in selling their securities as a result of the “penny stock rules” which apply to  our common shares.  Under the penny stock rules, the Securities and Exchange Commission imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse). For transactions covered by the rules, a broker-dealer must make a special suitability determination for the purchaser and transaction prior to the sale.  Consequently, the rules may affect the ability of broker-dealers to sell our securities, and also may affect the ability of purchasers of our stock to sell their shares in the secondary market.  It may also cause fewer broker-dealers to make a market in our common shares.

The Large Number of Shares Eligible For Future Sale By Existing Shareholders May Adversely Affect the Market Price For Our Common Shares.

Future sales of substantial amounts of common shares in the public market, or the perception that such sales could occur, could adversely affect the market price of our common shares.  At April 25, 2012, we had 439,143,765 common shares outstanding.  We currently have 270,307,423 shares available to be sold pursuant to Rule 144. We intend to include these common shares in a future Registration Statement to be filed with the United States Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, registering the common shares for sale. No prediction can be made as to the effect, if any, that sales of shares of common shares or the availability of such shares for sale will have on the market prices of our common shares prevailing from time to time.  The possibility that substantial amounts of our common shares may be sold under SEC Rule 144 into the public market may adversely affect prevailing market prices for our common shares and could impair our ability to raise capital in the future through the sale of equity securities.  A total of 270,307,423 are currently able to be resold under Rule 144.

7

Your vote may not affect the outcome of any shareholder vote since our principal stockholder currently retains approximately 51% of our outstanding stock.

For instance, Philex Mining Corporation may be able to control the outcome of all stockholder votes, including votes concerning director elections, charter and by-law amendments and possible mergers, corporate control contests and other significant corporate transactions which may not be in the interests of all shareholders.

Foreign Laws, Rules and Environmental Regulations to Which We Are Subject May Adversely Affect Our Business Operations As Well As the Market Price For Our Stock.

The production of oil and gas and the extraction of minerals by companies we invest in or by ourselves is generally subject to extensive laws, rules, orders and regulations governing a wide variety of matters, including the drilling and spacing of wells, allowable rates of production, prevention of waste and pollution and protection of the environment. In addition to the direct costs borne in complying with such regulations, operations and revenues may be impacted to the extent that certain regulations limit oil and gas and mineral production to below economic levels. Although the particular regulations applicable in each jurisdiction in which operations are conducted vary, such regulations are generally designed to ensure that oil and gas operations are carried out in a safe and efficient manner, and to ensure that similarly-situated operators are provided with reasonable opportunities to produce their respective fair share of available crude oil, natural gas, and mineral reserves. However, since these regulations generally apply to all oil and gas producers, we believe that these regulations should not put us at a material disadvantage to other oil, gas and mineral producers.

Operating Risks - Oil and Gas Exploration Activities

We Do Not Currently Directly Own Properties With Oil or Gas or Mineral Reserves. Our Failure to Find or Acquire Available Reserves May Adversely Impact Our Business Operations.

We do not own any properties or investments with oil, natural gas or mineral reserves. Our future oil, natural gas, or mineral reserves, production, and therefore, cash flow and income, as well as our success are highly dependent on success in finding or acquiring recoverable reserves by ourselves or through our investments. We cannot assure shareholders that we will be able to develop, exploit, find or acquire reserves to replace future production, if any.

Exploring For and Producing Oil and Natural Gas and Minerals Are High-Risk Activities With Many Uncertainties That Could Adversely Affect Our Business, Financial Condition or Results of Operations.

Exploration and development of oil and gas and mineral resources involve a high degree of risk, and few properties which are explored are ultimately developed into producing properties. There is no assurance that our exploration and development activities or those of companies that we invest in will result in any discoveries of commercial bodies of oil, gas or minerals. The long-term profitability of our operations will be, in part, directly related to the cost and success of our exploration programs or those of companies we invest in which may be affected by a number of factors. Substantial expenditures are required to establish reserves through drilling, to develop processes to extract the resources, and, in the case of new properties, to develop the extraction and processing facilities and infrastructure at any site chosen for extraction. Although substantial benefits may be derived from the discovery of a major deposit of oil, gas or minerals, no assurance can be given that natural resources will be discovered in sufficient quantities to justify commercial operations or that the funds required for development can be obtained on a timely basis.

If We Or Companies We Invest In Are Unable to Continue to Identify, Explore and Develop New Properties, Our Business Operations May Be Adversely Affected.

We expect that to be successful in our oil and gas and mineral exploration activities, we must continually acquire or explore for and develop new oil and gas reserves to replace those, if any, being depleted by production by ourselves or by companies we invest in. Without successful drilling or acquisition ventures, our direct and indirect oil and gas assets, mineral assets and, properties and the revenues derived there from, if any, will decline over time. To the extent we engage in drilling activities directly or indirectly, such activities carry the risk that no commercially viable oil or gas production or mineral extraction will be obtained. The cost of drilling, completing and operating oil and gas wells is often uncertain. Moreover, drilling for oil and gas and minerals may be curtailed, delayed or cancelled as a result of many factors, including shortage of available working capital, title problems, weather conditions, environmental concerns, government prohibitions, shortages of or delays in delivery of equipment, as well as the financial instability of well operators, major working interest owners, and drilling and well servicing companies. The availability of a ready market for oil and gas and minerals will depend on numerous factors beyond our control, including the demand for and supply of oil and gas and minerals, the proximity of natural gas reserves to pipelines, the capacity of such pipelines, the proximity of any smelting facilities in relation to any minerals found, fluctuations in seasonal demand, the effects of inclement weather, and government regulation. New gas wells may be “shut-in” for lack of a market until a gas pipeline or gathering system with available capacity is extended into an area.

The Exploration and Development of Oil and Gas and Mineral Properties are Subject to Operating Hazards and Risks for Which We Will Be Uninsured.

Exploration for natural resources involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Operations in which we expect to acquire an interest will be subject to all the hazards and risks normally incidental to exploration, development and production of resources, any of which could result in work stoppages, damage to persons or property and possible environmental damage. These include the possibility of fires, earthquake activity, coastal erosion, explosions, blowouts, oil spills or seepage, gas leaks, discharge of toxic gas, over-pressurized formations, unusual or unexpected geological conditions and the absence of economically viable reserves. These hazards may result in cost overruns, substantial losses, and/or exposure to substantial environmental and other liabilities.

8

Fluctuating Resource Prices May Adversely Impact Our Operations and Activities.

The price of natural resources has traditionally been subject to wide fluctuations, particularly in recent years, and is affected by numerous factors beyond our control including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of oil and gas and minerals, and therefore, the economic viability of any of our exploration projects or those of our investments, cannot accurately be predicted.

If We Fail to Fulfill Our Obligations Under Our Purchase Option and Joint Venture Agreements, Not Only Will Our Operations Be Adversely Affected, But We May Lose Our Interest In the Property in Question.

We may, in the future, be unable to meet our share of costs incurred under joint venture agreements or other option or joint venture agreements to which we are, or may become a party, and we may have our interest in properties, in which we may acquire interests subject to such agreements, reduced as a result. Furthermore, if other parties to such agreements do not meet their share of such costs, we may be unable to finance the cost required to complete recommended programs.

It Is Possible that Our Title for the Claims in Which We Have a Direct or Indirect Interest in Will Be Challenged By Third Parties.

Although we will attempt to ascertain the status of the title for any projects in which we have or will acquire a material direct or indirect interest, there is no guarantee that title to such concessions will not be challenged or impugned. In some countries, the system for recording title to the rights to explore, develop, and mine natural resources is such that a title opinion provides only minimal comfort that the holder has title. Also, in many countries, claims have been made and new claims are being made by aboriginal peoples that call into question the property rights granted by the governments of those countries.

Reserve Estimates for Resources That May Be Reported By Us Are Dependent On Many Assumptions that May Ultimately Turn Out to Be Inaccurate.

Reserve estimates are imprecise and may be expected to change as additional information becomes available. Furthermore, estimates of reserves of natural resources, of necessity, are projections based on engineering data and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production and the timing of development expenditures. Reserve engineering is a subjective process of estimating underground accumulations of oil, gas and minerals that cannot be measured in an exact way and the accuracy of any reserve estimate is a function of the quality of available data of engineering and geological interpretation and judgment. Accordingly, there can be no assurance that the information regarding reserves of natural resources, if any, set forth herein will ultimately be produced.

Any Resource Production That We May Undertake and Marketing or That of Companies That we Have Invested In May Be Adversely Affected By Factors Beyond Our Control.

The production and marketing of resources are affected by a number of competitive factors which are beyond our control and the effect of which cannot be accurately predicted. These factors include crude oil and mineral imports, actions by foreign oil-producing nations and other mineral producers, the availability of adequate pipeline and other transportation facilities, the availability of equipment and personnel, the marketing of competitive fuels and minerals, the effect of governmental regulations, and other matters affecting the availability of a ready market such as fluctuating supply and demand.

Our Operations Will Be Subject to Numerous Environmental Risks If We Are Successful In Obtaining Properties That Have Proven Resources Or If We Undertake Exploration Activities Ourselves.

Our resource operations and those of companies we invest in, if any will be subject to compliance with applicable federal, state, and local laws and regulations controlling the discharge of materials into the environment, or otherwise relating to the protection of the environment. We believe that there is a trend toward stricter standards of environmental regulation which will in all probability continue. Compliance with such laws and standards may cause substantial delays and require capital outlays in excess of those anticipated, thereby adversely affecting our earnings and competitive position in the future.

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Since We May Acquire Holdings In Properties In Less Developed Countries and Have Indirectly Acquired Holdings in Properties In Less Developed Countries, Our Operations May Be Adversely Affected By Risks Associated With the Political, Economic and Social Climate of the Countries In Which We Will Operate or Have Indirect Holdings .

Since our direct and indirect exploration and development activities will occur primarily in countries other than Canada and the United States, we may be affected by possible political or economic instability in those countries. The risks include, but are not limited to, terrorism, military repression, extreme fluctuations in currency exchange rates, and high rates of inflation. Changes in resource development or investment policies or shifts in political attitude in these countries may adversely affect our business. Operations may be effected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. The effect of these factors cannot be accurately predicted. Exploration and production activities in areas outside of the United States and Canada are also subject to the risks inherent in foreign operations, including loss of revenue, property and equipment as a result of hazards such as expropriation, nationalization, war, insurrection and other political risks.

We Face Competition From Larger and Better Financed Companies Seeking to Acquire Properties In Our Sphere of Operation.

The resource industry is highly competitive, and our business could be harmed by competition from other companies. Because resources are fungible commodities, the principal form of competition is price competition. We will strive to maintain the lowest exploration and production costs possible to maximize profits and insure that any companies in which we invest do the same. In addition, as an independent resource company, we frequently compete for reserve acquisitions, exploration leases, licenses, concessions and marketing agreements against companies with financial and other resources substantially larger than we possess. Many of our competitors have established strategic long term positions and maintain strong governmental relationships in countries in which we may seek entry.

We Currently Do Not Maintain Insurance Against Potential Losses and Unexpected Liabilities.

As previously stated herein, exploration for and production of resources can be hazardous, involving natural disasters and other unforeseen occurrences such as “blowouts”, “cratering”, fires and loss of well control, which can damage or destroy wells or production facilities, injure or kill people, and damage property and the environment. Although we intend to maintain insurance against many potential losses or liabilities arising from our operations in accordance with customary industry practices and in amounts that we believe to be prudent, we do not presently have such insurance coverage; and, even if we were to obtain such insurance coverage, there is no assurance that it will be adequate to protect against all operational risks, or subject to defenses or exclusions against insurance coverage.

We Are Dependent On Retaining Our Senior Management and Key Personnel.

To a large extent, we depend on the services of our senior management personnel. These individuals have critical and unique knowledge of the areas of operations that facilitate the evaluation and acquisition of potential properties in our intended sphere of operations. The loss of these experienced personnel, if that were to occur, could have a material adverse impact on our ability to compete in this region of the world. We do not maintain any insurance against the loss of any management personnel.

Our Directors May Face Conflicts of Interest In Connection With Our Participation In Certain Ventures Because They Are Directors of Other Resource Companies.

Some of our directors participate in other resource companies and to the extent that such other companies may participate in ventures in which we may participate, our directors may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. It is possible that due to our directors’ conflicting interests, we may be precluded from participating in certain projects that we might otherwise have participated in or we may obtain less favorable terms on certain projects than we might have obtained if our directors were not also the directors of other participating mineral resource companies. In their effort to balance their conflicting interests, our directors may approve terms that are equally favorable to all of their companies as opposed to negotiating terms that may be more favorable to us, but adverse to their other companies. Additionally, it is possible that we may not be afforded certain opportunities to participate in particular projects because such projects are assigned to our directors’ other companies for which the directors may deem the projects to have a greater benefit.

Our security holders may not be able to enforce U.S. civil liabilities claims thereby limiting their ability to collect on claims against us.

We are incorporated in Canada and the majority of our directors and officers are nationals and/or residents of countries other than the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the courts of Canada would recognize or enforce judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in these countries against us or such persons predicated upon the securities laws of the United States or any state thereof.

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ITEM  4.  INFORMATION ON THE COMPANY

A.  Our Corporate History and Development.

We were incorporated on February 8, 1982 in British Columbia, Canada under the name Tylox Corporation.  Our continuance under the Canada Business Corporation Act resulted in, among other things, our name change, first in December 1991, to Tracer Petroleum Corporation, followed in July 2003, to Forum Energy Corporation.  On May 18, 2005, we changed our name to FEC Resources, Inc.  We have no subsidiaries.  Prior to May 18, 2005, we owned 66 2/3% of Forum Exploration, Inc. (“FEI”) a Philippine-based oil and gas company with rights to develop certain concession areas as more fully described later in this document.  On May 18, 2005, we sold our interest in FEI to Forum Energy Plc (“FEP”) for shares of FEP and cash as more fully described later in this document.  We currently hold 25.63% of the issued and outstanding capital of FEP, and in addition we hold a 35% interest in Metalore Mining Corporation (“MMC”), a Philippine-based company that holds the rights to a 64 hectare license  which has been abandoned.  We also own a 40% interest in MPSA 148, a gold exploration project, through Lascogon Mining Corporation in the Philippines.

We are engaged in the acquisition, exploration, and, when warranted, development of natural resource and mineral properties.  Although we currently are not the operator with respect to interests we hold, we are actively seeking projects where our involvement would be more than management and advisory.  We were focused on the development MPSA 148 until December 31, 2010, however the project was determined to be not feasible based on our findings and therefore was fully impaired.  The license is held by Lascogon Mining Corporation (“Lascogon Mining”) which was acquired from Philex Gold Philippines Inc., a subsidiary of Philex Mining Corporation, our largest shareholder.

Our head office is located at 46 Royal Ridge Rise NW, Calgary, Alberta T3G 4V2.  Our phone number is (403) 290-1676.

B.  Business Overview

At this time, we do not have any significant revenue-generating assets, and as a result, rely upon equity and/or debt financing to fund ongoing operations.  We have experienced large operating losses and cash outflows and, as such, our ability to continue as a “going concern” is dependant upon achieving profitable operations and upon obtaining additional financing.  The outcome of these matters cannot be predicted at this time.  MMC had begun producing nominal quantities of iron ore which were expected to provide cash flow to us, but operations were shut down in 2006 for environmental and political reasons.  After  elections were completed, we filed for a mineral production and sharing agreement (“MPSA”) covering the current and surrounding area which we believed would be granted and would have allowed production to resume.  To date the MPSA has not been granted and the operations of MMC are still dormant and have been abandoned.

Recent Developments

In April 2009, we signed a loan agreement with our parent company,  Philex Mining Corporation.  The US$273,000  loan bears interest at the Libor rate  plus three percent and was repayable by 31 December 2010, though extendable upon agreement.  Interest is payable every six months.

To date no amount of the loan has been repaid and the balance, including accrued interest as of December 31, 2011 is $302,790. There have been no discussions on the repayment of the outstanding amount and no demand has been made by the parent company for repayment.

In April 2010, we completed a private placement with Philex Mining Corporation of 5,000,000 shares of our common stock at US$0.50 per share.

On December 31, 2010, we determined that the results from the exploration program on MPSA 148 would no longer support its carrying value and therefore we recorded an impairment of $2,301,820 of the entire investment.

The Philippines

We are currently pursuing exploration and development opportunities for oil, natural gas, iron ore, gold, and coal in the Philippines through various companies in which we hold interests. FEP, in which we own a 25.63% equity interest, owns the oil and gas rights over a 8,800 square-kilometer block located in the South China Sea. In addition FEP holds interests in various other concessions located in the Philippines.

In addition, until December 31, 2010, we were involved in the exploration for gold through our interest in Lascogon Mining Corporation.  Based on exploration work to date, the project has been determined to be unfeasible, however it has not been abandoned at this time.

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Forum Energy Plc.

We currently own 25.63% of FEP. FEP was established through the consolidation in 2005 of the Philippine assets of FEC Resources, Inc. of Canada, and Sterling Energy Plc of the UK, into one corporate entity.  The current holdings of FEP are based mainly in the Philippines and include:

·   70% interest in Service Contract 72 (SC 72), an offshore license which contains the Sampaguita Gas Field as well as several additional oil and gas leads;

·   66.7% interest in SC 40 (Cebu), a service contract which contains the onshore Libertad Gas Field and Maya discovery and several other prospects;  and

·   100% interest in Forum Energy Philippines Corporation (formerly known as Basic Petroleum and Minerals Inc.), a company with varying interests in nine (9) offshore fields west of the Philippines including a 2.27% interest in the producing Galoc Field.

SC 72 (Reed Bank) formerly GSEC101

The SC72 concession (Reed Bank), is located in the South China Sea west of Palawan Island.

The license was awarded to Sterling Energy Plc in June 2002. Exploration in the area began in 1970 and in 1976 gas was discovered following the drilling of a well.  In total, four (4) wells have been drilled to date, all located at the south west end of the license.  Two (2) of the wells tested gas at rates of 3.6 mmcf/d and 3.2 mmcf/d.

In 2003, Sterling reprocessed 250 km of 2D seismic and completed a feasibility study on a GTL  (gas-to-liquid) development scenario for the gas field.  The seismic work and the GTL study fulfilled the initial work commitments on the concession and Sterling was granted a twelve (12) month extension in June 2004.  In 2005, Forum acquired new 250 square kilometers of new 3D seismic data over the license area fulfilling its work commitments required under the twelve (12) month extension.

In September 2006, results of the interpretation of the 3D seismic program at the Sampaguita gas discovery indicated a significant gas accumulation.

In 2008,  FEP finalized farm-out of a 30% interest in the license to a local partner Monte Oro Resources & Energy, Inc. (Monte Oro) in which FEP benefited from an immediate cash payment of $1.7million, securing Monte Oro’s involvement and thereby qualifying the Joint Venture for the Filipino Participation Incentive Allowance (FPIA) which entitles the Company to 7.5% of gross revenues, prior to sharing revenues with the government On 15 February 2010, SC72 was awarded to Forum Energy in respect. In February 2010, the GSEC101 exploration license was converted into Service Contract 72. The area of the block was reduced from 10,360 Km2 to 8,800 Km2 as part of this conversion.

The block contains the Sampaguita Gas Discovery with expected mean Gas In Place of 3.4 trillion cubic feet and a number of additional leads.

In the first quarter of 2011, Forum completed 565 Km2 of 3D seismic acquisition over the Sampaguita Gas Field and 2,202 Line-Km of 2D seismic data was also acquired over the block in order to further define additional leads.

Forum is currently planning the execution of the second sub-phase work program at SC72 which is expected to involve the drilling of up to two wells before June 2013.

Forum is also continuing to discuss potential partnerships with regards to SC72 to assist and augment in the successful acceleration of the development of the project.

SC 40 (Cebu)

The SC 40 (Cebu) contract area is located in the Visayan Basin in the central part of the Philippines archipelago.  The license area covers the northern area of Cebu Island and the adjacent offshore areas in the Central Tañon Strait and Visayan Sea.  Since 1994, a total of fifteen (15) wells have been drilled offshore in the Visayan Basin, thirteen (13) of these on the acreage covered by SC 40 (Cebu).  Forum Pacific International (“FPI”) acquired an interest in GSEC 69, covering the acreage, in 1994.  The concession was subsequently converted to a service contract, SC 40 (Cebu) in 1995.

In September 1997, FPI transferred its interest in SC 40 (Cebu) to Forum Energy International (“FEI”), at that time a wholly owned subsidiary of FPI.  SC 40 (Cebu) is now held 100% by FEI.  The original term of the service contract was for seven (7) years from 1995.  In September 2003, FEI extended the contract for an additional three (3) years, with the following work program commitments:

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·   Drill one (1) well and acquire a minimum of 250 kilometers of seismic in year 8;

·   Drill two (2) wells in year 9; and

·   Drill two (2) wells in year 10.

FEI has the option to declare a field within the contract area commercial, and thus, relinquish 87.5% of the license area and convert the license into a development contract for a minimum twenty-five (25) year period.  There are also two (2) production bonuses to pay to the DOE as follows:

·   $1,000,000 upon production reaching 25,000 bopd;

·   $2,000,000 upon production reaching 50,000 bopd; and

·   $3,000,000 upon production reaching 75,000 bopd.

In any year, FEI can recover all recoverable costs from the gross income received under SC 40 (Cebu), provided that the amount does not exceed 70% of total gross income in any year.  Operating expenses exceeding 70% of gross income, including years with no income, can be recovered in subsequent years.

In years where operating expenses are below 70%, it is possible to allocate the difference between the actual operating expenses and 70% against the recoverable costs. Filipino participation incentive allowance is required to remit to the DOE an amount equal to 60% of the remaining gross income less FPIA of 7.5%.  The remaining net income is subject to Philippine income tax, which is to be paid by the DOE out of its receipt of funds as detailed above.

SC 40 contains a number of prospects and leads including Libertad and Maya.  Other prospects and leads within the SC 40 (Cebu) acreage include West Malapascua, South Guintacan, West Toledo, Agojo and North Bantayan.

2D Seismic Survey

FEP completed an offshore 2D seismic acquisition program in the Tañon Straits, west of Cebu Island, Philippines in June 2005.  The survey acquired 310 kilometers of new 2D data in license Service Contract 40 (“SC40”), where FEP holds a 66.7% interest.

The survey was conducted to improve the mapping of the central Tañon and Jibitnil Island prospects.  The new lines acquired between Jibitnil and Cebu Islands will help define more precisely the Jibitnil Island structure, which is cut by several faults.  In addition to seismic data, the survey included the acquisition of marine gravity and magnetic data.

Libertad Gas-To-Electricity (“GTE”) Project

The Libertad Gas Field is situated in northern Cebu, north of Cebu City.  The field was discovered in the late 1950's, but was not developed.  In 1993, a testing program was carried out on two (2) wells and during 1994 and 1995, five (5) additional wells were drilled on Libertad.  One of these wells tested gas and subsequently was completed as a gas producer.

In 2004, Forum Energy carried out a feasibility study to determine the most commercially viable option for the development of the Libertad Gas Field.  The results of this work recommended a development plan using three (3) GTE generators, with a maximum of 3.0 MW.

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During December 2005, the DOE formally granted a Declaration of Commerciality for the development of the onshore Libertad Gas Field within SC40.  This represents the first Declaration of Commerciality within the Philippines since Shell’s Malampaya offshore gas field development, which came onstream in 2001.  The Declaration of Commerciality also allowed the retention of the portion of SC40 which contains all the currently identified prospects and discoveries.

The Libertad Gas Field will be developed as a GTE project and is expected to generate 1.7 mW of power. The field is progressing towards development, with commercial negotiation of the electricity contract underway.  Once completed and equipment requirements are known, full scale development will commence.

During 2009 the Department of Energy approved the Gas Sale & Purchase Agreement in respect of the development of the Libertad Gas Field, thus enabling DESCO to proceed with plans for power generation.  Although not material to Forum’s revenues, first production commenced in February 2012. Further ventures to produce across this significant acreage are underway and Forum is planning to drill onshore wells in 2013.

Forum’s Hycalog drilling rig is located in the Central Maya Bulge “CMB” area located in the Northern area onshore SC40 and can be transported via land and utilized for further drilling activities contingent on the results of Forum’s on-going exploration program.

Maya

The Maya area is located on the north eastern tip of Cebu Island.  In October 2000, exploration well MST 11A was drilled.

Although the well encountered oil shows, it was terminated due to mechanical problems.  A further three (3) wells were drilled in 2003, one of which, Forum 2-X (“F2X”), encountered multiple oil and gas bearing zones, but due to mechanical problems was suspended without proper testing.

FEP is considering further options in respect to Maya.

Coal Operating Contracts (“COCs”)

FEI, which is owned by FEP, was awarded two (2) coal operating contracts on Cebu Island by the DOE on February 23, 2005, located at Balamban-Naga (Central Cebu) and Dalaguete (South Cebu).

During 2008 and 2009 the COCs were divested for a combined gross consideration of $4.5m in two independent transactions

Basic Petroleum & Minerals Inc. (“BPMI”)

In May 2005, FEP entered into an agreement with Philippines-based Basic Consolidated Inc. (“BCI”), whereby the parties agreed to work under an exclusivity period towards finalizing the purchase by FEP of BCI’s petroleum interests in the Philippines, held through a wholly-owned subsidiary, BPMI. This culminated in February 2006 with the signing of a Share Purchase Agreement whereby FEP agreed to acquire 100% of BPMI in exchange for 933,759 shares of FEP and deferred consideration.

The acquisition was approved by BCI shareholders at the company’s Annual General Meeting on March 29, 2006.

BPMI assets included interests in nine (9) Philippine offshore fields, specifically the Galoc Field (2.27% participating interest) which commenced production in the fourth quarter 2008 and is currently in full production with 2.5 million barrels gross produced in 2009, and 2.69 million barrels gross in 2010. FEP received net revenues of $0.8 million in 2010 and 2009.

FEP also had nominal production from the SC6/14 Nido/Matinloc fields, which are contained within this block.

Previously, FEP also reported that its interest in the West Linepacan oil discovery was farmed-out for a 2.275% interest carried through development.

On May 10 2011, Forum announced that it had come to a settlement with Basic Energy Corporation ("BEC") in relation to certain of its service contracts in the NW Palawan area, offshore Philippines.

In the course of an arbitration process, on 10 May 2011, BEC and Forum signed a settlement agreement (the "Agreement") in relation to disputes relating to BEC's share in the historical cost recoveries arising from Service Contract 14 A and B (Nido-Matinloc Blocks), Service Contract 14-C (Galoc Block), and other blocks of Service Contract 14 and Service Contract 6, pursuant to the Sale and Purchase Agreement executed by BEC and Forum on 3 April 2006 (the "SPA").

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If the terms and conditions of the Agreement are met, Forum will make a cash payment to BEC of $650,000, and cause the conveyance of (i) 50% of Forum Energy Philippines Corporation's (a wholly owned subsidiary of FEP) ("FEPC") participating interests in the foregoing service contracts, and (ii) 50% of the related recoverable costs, subject to the approval of the Department of Energy.

Upon fulfillment of certain pre-conditions, the parties will submit the Agreement to an arbitration tribunal for the rendition of a final consent award and accordingly FEPC's minority participating interests in its producing fields will be reduced, and consequently Forum 's group revenues and its gross profits will be reduced accordingly, as follows:

Galoc (SC14C-1): participating interest will fall by 50% to 1.137875%.  Galoc produced 2.69 million barrels in 2010 (gross) with an estimated 1.76 million barrels expected to be produced in 2011 (gross)

Nido (SC14A): participating interest will fall by 50% to 4.234%. Nido produced 86,626 barrels in 2010 (gross) with an estimated 65,000 barrels expected to be produced in 2011 (gross)

Matinloc (SC14B) and North Matinloc (SC14B-1): participating interests will fall by 50% to 6.203% and 9.7315%, respectively.  Matinloc and North Matinloc had a combined production of 88,237 barrels in 2010 (gross) with an estimated 91,680 barrels expected to be produced in 2011 (gross)

If the terms and conditions of the Agreement are met, Forum will no longer be liable to pay potential additional consideration of up to $ 9.03 million on the acquisition of FEPC (formerly Basic Petroleum & Minerals Inc), as was disclosed in the audited results for the year ended 31 December 2010, as announced on 8 March 2011; and the Directors believe that no further liabilities in respect of BEC's arbitration claims and other issues arising from the SPA will exist in relation to the service contracts included in the Agreement.

Metalore Mining Corp.

MMC commenced preliminary mining operations at the beginning of October 2005, with iron ore extraction mainly being recovered as strewn boulders and debris recovered from routing of the mine access roads leading to the main iron ore body.  As of March, 2006, Metalore had successfully completed and shipped its first iron ore contract.  Difficulties were encountered prior to this with overburdens of pyrites, where iron ore had been anticipated, and with environmental compliance.

Mining operations were suspended in September 2006 because of problems caused by six (6) typhoons which hit the area in a three (3) month period and due to intervention by the local government of the Province of Bulacan who are in dispute with the central government (DENR) about who has jurisdiction over the mining operations.

Metalore also decided to suspend mining operations under the Small Scale Mining Permits because of the limitations on equipment, namely the maximum of two (2) heavy excavators/bulldozers per 20 hectares.

Metalore has filed an application for an Exploration Permit over a total of 841 hectares which includes the small scale mining areas in which we were previously operating.  Metalore management  believed this would be approved after the May 2007 political elections and an MPSA would be granted, which is the relevant permit for large scale mining.  To date there has been no further developments and Metalore operations continue to be abandoned.

MPSA148 (Philex Gold Joint Venture)

The surface investigation and limited diamond drilling that started in mid-2005 have identified gold-bearing jasperoid horizons in two (2) prospects, Lascogon and Danao, Philippines.

Starting in July 2006, some 3,000 meters of reverse circulation (RC) drilling over a 30 hectare (approx. 75 acres) area was done covering four (4) prospects.  To date, we have spent in excess of $1,000,000 evaluating the property.  Most of the effort has focused on the southern portion of the holding and has encountered numerous positive shows of gold and copper, but not in sufficient quantities to warrant entering commercial production.

In 2007, further trenching, drilling, sampling and assays were conducted  on MPSA 148. These were done initially on the Lascogan and Danua areas, then later, surveying, drilling and sampling on the Nabago prospective area.

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Exploration during fiscal 2009 on the Lascogon Project was limited to trenching activities as recommended by project consultant IRES to provide additional basis for resource estimation. Limited work was completed on the property during fiscal 2010.

We received a technical report in respect of the Lascogon Project prepared by Mr. Dexter S. Ferriera (a senior geostatistician and mining engineer at Independent Resource Estimation or IRES) in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects. We evaluated the technical report and determined that the work completed on the Lascogon Project to date did not determine an economically viable gold reserve. Accordingly, we fully written down our investment in Lascogon.

We still have unfunded cash calls which remain outstanding and to date, our stake in Lascogon has not yet been diluted by PGPI and this still remains an open item.

C.  Organizational Structure

We are part of a group of companies with our parent company being Philex Petroleum Corporation and the ultimate parent company of our group of companies is Philex Mining Corporation. We have no subsidiaries.

ITEM  4A.  UNRESOLVED STAFF COMMENTS

N/A

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

We have experienced significant operating losses over the last few years, and as a result, our ability to continue as a going concern is dependent on achieving profitable operations and/or upon obtaining additional financing.

Our audited financial statements were prepared in accordance with IFRS, which are  different from US GAAP (refer to the Auditors’ Report dated April 25, 2012).

The Company is exposed to foreign currency fluctuations for general and administrative transactions denominated in Canadian Dollars. The majority of the Company’s cash is kept in U.S. dollars.  As at December 31, 2011, the Company held  $1,612,609 (2010 - $2,061,119) of cash denominated in U.S. dollars subject to exchange rate fluctuations between the Canadian dollars and the U.S. dollars.

The following discussion and analysis of financial results should be read in conjunction with our Audited Financial Statements for the year ended December 31, 2011, together with the notes related thereto.  The discussion contains forward-looking statements that involve risks and uncertainties.  Such information, although considered reasonable by our management at the time of preparation, may prove to be inaccurate and actual results may differ materially from those anticipated in the statements made.

Fiscal Year Ended December 31, 2011 versus Fiscal Year Ended December 31, 2010 (IFRS 000’s)

We hold 8,550,200 shares (25.63%) of the capital of Forum Energy, an AIM listed company which has a participating interest in 11 service contracts in the Philippines, three of which are in  production, one of which is in the development stage and seven of which are in the exploration and appraisal stage. Forum Energy and ourselves are both subsidiaries of Philex Petroleum Corporation and are therefore affiliates of each other. We advise that: (i) the sole nature of our oil and gas activities is as a holder of 25.63% of the shares of Forum Energy; and (ii) outside of information publicly made available by Forum Energy, we are not privy to information of the status of Forum Energy’s oil and gas activities on any of its projects.

Forum Energy’s principal asset is the recently converted Service Contract 72 (“SC72”) (previously referred to as GSEC101), a petroleum license located offshore West of Palawan Island, Philippines. Forum Energy has completed a work program for the first sub-phase of SC72. The work program was designed to provide a more comprehensive valuation of the contract area and identify potential sites for appraisal wells.  The work program included 3D seismic work over an area of up to 550 km2 over and around the Sampaguita gas discovery, and 2,200 km of high resolution 2D over existing leads within the 8,800 km2 contract area. The seismic data is now under technical analysis. Forum Energy’s share of the first sub-phase work program is estimated to cost up to approximately $7.4 million, and was funded through a $10 million facility agreement with Forum Energy’s principal shareholder, Philex Mining Corporation (“Philex Mining”) on November 24, 2010.

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Lascogon Mining Corporation (“Lascogon”)

We  hold a 40% interest in Lascogon, which is a party to Mineral Production Sharing Agreement No. 148 with the Government of the Philippines (“MPSA 148”) which covers an area of 2,306 hectares (the “Lascogon Project”).  The Lascogon Project has not been a core project of either us or our joint venture partner and the operator of the Lascogon Project, Philex Gold Philippines Inc. (“PGPI”), an affiliate of the ours, and therefore very little activity was undertaken on the project from December 31, 2009 to December 31, 2011.

Exploration during fiscal 2009 on the Lascogon Project was limited to trenching activities as recommended by project consultant IRES to provide additional basis for resource estimation. Limited work was completed on the property during fiscal 2010 and 2011. We received a technical report in respect of the Lascogon Project in 2011 prepared by Mr. Dexter S. Ferriera (a senior geostatistician and mining engineer at Independent Resource Estimation or IRES) in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects. Our board of directors  evaluated the technical report and determined that the work completed on the Lascogon Project to date did not determine an economically viable gold reserve. Accordingly, we have fully written down our investment in Lascogon as at December 31, 2011.

We still have unfunded cash calls which remain outstanding and to date, our stake in Lascogon has not yet been diluted by PGPI and this still remains an open item.

Metalore Mining Corporation (“Metalore”)

We continue to hold shares of the project joint venture company, MMC, but we have effectively abandoned the property that was previously held by the joint venture company.

Our consolidated accounts show income for the year ended December 31, 2011 of $435 or $0.00 per share, versus a loss of $2,925 or $(0.01) per share for the year ended December 31, 2010. Improvement of investments in 2011 was nil compared to $2,307 from the previous year due to the experiment of Lascogon. General and Administration expense were $441 for the year ended December 31, 2011 versus $517for the same period in 2010. We recorded amortization of $1.6 for the year ended December 31, 2011 versus $1.5 for the same period in 2010. Interest expense for the year ended December 31, 2011 was $10.5 versus $11.0 for the same period in the previous year. The difference was because of the interest on the outstanding advance from Philex Mining. Overall expenses were similar to those experienced in the previous year. For the year ended December 31, 2011 foreign exchange loss was $1.98 versus a loss of $3.32 for the year ended December 31, 2010.

Share of profits/(loss) in associates  in Lascogon, Metalore and Forum Energy was $886 for the year ended December 31, 2011 versus $(100.8) for the previous year as under the equity method of accounting. The Corporation is required to report its share of net income or net loss in its statement of operations and reduce or increase its investment by the same amount. Our share of Forum Energy’s income was a large part of the share of profits/(loss) of associates.

No shares of Forum Energy were sold to fund operations during the year.

Interest income was $0.99 for the year ended December 31, 2011 versus $2.12 for the previous year. The difference was a result of the interest earned on the higher cash balance in 2010.

Balance Sheet

Our current assets were $1,633 at December 31, 2011 versus $2,081 for the year ended December 31, 2010. The difference is mainly a result of the higher cash balance on December 31, 2010. Our assets reflect the value of Forum Energy and Lascogon on an equity basis.

Liquidity and Capital Resources (IFRS in ‘000)

Our working capital position at December 31, 2011 was $1,242 versus working capital of $1,692 at December 31, 2010 and shareholders’ equity was $5,965 at December 31, 2011 (December 31, 2010 $5,530).

On April 27, 2009 we reached an agreement with Philex Mining whereby our anticipated 2009 operating budget would be covered by way of a loan from Philex Mining. Interest on the loan is at Libor plus 3%. The loan was still outstanding on December 31, 2011.

On January 7, 2010 we  raised $2.5 million through a private placement to Philex Mining. The private placement was for a total of 5 million shares at $0.50 per share. The shares were issued on April 26, 2010.

If necessary, we are able to sell our Forum Energy shares to meet our working capital needs.

Cash used in operating activities for the year ended December 31, 2011 was $(447) versus $(476) for the same period in 2010 mainly as a result of the differences described in the results of operations above.

Cash used in investing activities was $(1.79) for the year ended December 31, 2011 versus $Nil for the previous year. The difference was not material.

Cash provided by financing activities for the year ended December 31, 2011 was $Nil versus $2,500 for the previous year.

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Capital Resources

In order to fully earn a 40% interest in the joint venture with PGPI on the Lascogon Project, we were required to fund a total of $1 million of the work program by October, 2006 which was completed. To maintain our 40% interest, we are required to pay for 40% of the ongoing work program or our position could be diluted. At December 31, 2011 we would have had to pay $1,007 (December 31, 2010 - $985) and have not contributed any funds to the 2012 work program. We currently have no plans to make these payments.

We own 35% of Metalore, 40% of Lascogon and 25.63% of Forum Energy. All but Forum Energy require us to fund our share of any work programs in order to maintain our current equity holdings in each company. If Forum Energy is required to raise additional funds through equity issuances then we would have to purchase our proportionate share of these equity issuances to maintain our current equity position.

Should we be unable to meet our share of the work programs then our holdings would be diluted down accordingly.  In 2007, we wrote off our investment in Metalore and in 2010, we wrote off our investment in Lascogon.

We  will need to continue to raise funds through either debt, equity or the sale of assets in order to increase our operations until such time as we can find economically produce able reserves. We don’t anticipate that we will require any additional funds for working capital for the fiscal year ended December 31, 2012, as we completed a private placement of 5,000,000 shares at $0.50 per share in January 2010 which is sufficient to cover operating costs for the foreseeable future.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Contractual Obligations

We have no employment contracts with any officers, directors, or consultants.

We may still need to raise additional funds if the results of our exploration programs demonstrate that either further exploration or development of the properties we invest in is warranted.  No assurance can be given that such financing will be available to us when required, or on commercially viable terms.  Currently, in order to raise capital, we have undertaken private placements and loans however we may also be forced to sell our shares of FEP.  See “RISK FACTORS.”

The following table provides information, as of the latest fiscal year, with respect to our known contractual obligations, including amounts, aggregated by contractual obligation.

			Payments Due By Period
Contractual Obligations	Total		< 1 year		1-3 years		3-5 years		> 5 years
Long-Term Debt Obligations		-		-		-		-		-
Capital (Finance) Lease Obligations		-		-		-		-		-
Operating Lease Obligations		-		-		-		-		-
Purchase Obligations		-		-		-		-		-
Other Long-Term Liabilities		-		-		-		-		-
Total		-		-		-		-		-

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Critical Accounting Policies and Estimates

Basis of preparation and accounting policies

The Company has prepared its consolidated financial statements in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”). IFRS represents standards and interpretations approved by the IASB and are comprised of IFRS, International Accounting Standards (“IAS’s”), and interpretations issued by the IFRS Interpretations Committee (“IFRIC’s”) and the former Standing Interpretations Committee (“SIC’s”). The Company adopted IFRS in accordance with IFRS 1 – First-time Adoption of International Financial Reporting Standards (“IFRS 1”) with a transition date of January 1, 2010. The consolidated financial statements have been prepared in accordance with IFRS standards and interpretations effective as of December 31, 2011. Note 3 to the consolidated financial statements for the year ended December 31, 2011 provides details of significant accounting policies and accounting policy decisions as a result of IFRS 1 optional exemptions, for significant or potentially significant areas that have had an impact on the Company’s financial statements on transition to IFRS or may have an impact in future periods.

There were no changes to the accounting policies applied by the Company to each of the 2011 quarterly unaudited interim consolidated financial statements, to those applied to the consolidated financial statements for the year ended December 31, 2011.

Critical Accounting Estimates

The preparation of financial statements requires management to make certain judgments and estimates.  Changes in these judgments and estimates could have a material impact on our reported financial result and financial condition.

The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

Determination of natural resource reserves and natural resources estimates

The required process of estimating reserves of natural resources is critical to several accounting estimates that appear in our financial disclosures.  It requires significant judgments based on available geological, geophysical, engineering and economic data.  These estimates may change substantially as data from ongoing development and production activities becomes available, and as economic conditions impacting oil and natural gas prices, operating costs, and royalty burdens change.  Reserve estimates impact net income through depletion and the application of an impairment test.  Revisions or changes in the reserve estimates can have either a positive or negative impact on net income.

Deferred tax assets and liabilities

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. We recognize liabilities and contingencies for anticipated tax audit issues based on our current understanding of the tax law. For matters where it is probable that an adjustment will be made, we record our best estimate of the tax liability including the related interest and penalties in the current tax provision. We believe we have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

Determination of the fair value of share-based compensation

We measure the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them.

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Transition to International Financial Reporting Standards

On January 1, 2011 the Canadian Accounting Standards Board replaced Canadian GAAP with IFRS for publically accountable enterprises, with a transition date of January 1, 2010, due to requirement to present comparative financial information. IFRS represents standards and interpretations approved by the IASB and are comprised of IFRS’s, IAS’s, IFRIC’s and the former SIC’s.

Note 19 to the financial statements for the year ended December 31, 2011 provides details of key Canadian GAAP to IFRS differences, accounting policy decisions and IFRS 1, optional exemptions for significant or potentially significant areas that have had an impact on the Company’s financial statements on transition to IFRS or may have an impact in future periods.

The Company completed its conversion from Canadian GAAP to IFRS through a transition plan that involved scoping and planning, an assessment of differences, implementation and post-implementation. The post-implementation phase involves the maintenance of IFRS-compliant financial data and processes for 2011 and the future.

The conversion from Canadian GAAP to IFRS has resulted in changes to the Company’s accounting policies, financial reporting processes, incremental controls relating to the conversion process and additional training requirements. The conversion did not have any impact on the Company’s key internal performance ratios or compensation plans.

Post-Implementation

The post-implementation phase will involve continuous monitoring of changes in IFRS in future periods. It has been noted that the standard-setting bodies that determine IFRS have significant ongoing projects that could impact the IFRS accounting policies that the Company has selected. In particular, there may be additional new or revised IFRSs or IFRICs in relation to consolidation, financial instruments, leases, revenue recognition and stripping costs in the production phase of a surface mine. The IASB is also currently working on an extractive industries project, which could significantly impact the financial statements of the Company primarily in the areas of capitalization of exploration costs and disclosures. Processes are in place to ensure that potential changes are monitored and evaluated. The impact of any new IFRSs and IFRIC Interpretations will be evaluated as they are drafted and published.

Recent  Accounting Related Pronouncements

Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatory for accounting years beginning after January 1, 2011 or later years. None of these is expected to have a significant effect on the consolidated financial statements, except for the following:

We have early adopted the amendments to IFRS 1 which replaces references to a fixed date of ‘1 January 2004’ with ‘the date of transition to IFRSs’. This eliminates the need for us to restate derecognition transactions that occurred before the date of transition to IFRSs. The amendment is effective for year-ends beginning on or after July 1, 2011; however, we have early adopted the amendment. The impact of the amendment and early adoption is that we only apply IAS 39 derecognition requirements to transactions that occurred after the date of transition.

Future Accounting Changes

IFRS 9, Financial Instruments (“IFRS 9”) was issued in November 2009 and contained requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces mulitiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement model having only two categories: amortized cost and FVTPL. IFRS 9 also replaces the models for measuring equity instruments, and such investments are either recognised at FVTPL or at fair value through other comprehensive income. Where such equity instruments are measured at fair value through other comprehensive income, dividends are recognised in profit or loss to the extent not clearly representing a return of investment; however, other gains and losses (including impairments) associated with such instruments remain in accumulated comprehensive income indefinitely.

Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS39, Financial Instruments – Recognition and Measurement, except that fair value changes due to credit risk for liabilities designated at fair value through profit and loss would generally be recorded in other comprehensive income.

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This standard is required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

On May 12, 2011 the IASB issued the following statements:

i.	IFRS 10, Consolidation (“IFRS 10”) (see further details below)
ii.	IFRS 11, Joint Arrangements (“IFRS 11”) ( see further details below)
iii.	IFRS 12, Disclosures of Interests with Other Entities (“IFRS 12”) (see further details below)
iv.	IAS 27, Separate Financial Statements (revised 2011) (“IAS 27”), has been amended for issuance of IFRS 10 while maintaining the current guidance for separate financial statements
v.	IAS 28, Investments in Associates and Joint Ventures (revised 2011) (“IAS 28”), has been amended for conforming changes based on the issuance of IFRS 10 and IFRS 11.

Each of these standards has an effective date for annual periods beginning on or after January 1, 2013, early adoption of any of these standards is permitted only if the other standards are also adopted early.

i.	IFRS 10 establishes control as the single basis for consolidation of entities, regardless of the nature of the investee. An entity has control over an investee when it has power over it; it is exposed, or has the rights, to variable returns from its involvement with the investee; and has the ability to use its power over the investee to affect those returns. IFRS 10 replaces IAS 27’s guidance that addresses when and how an investor should prepare consolidated financial statements and replaces all of Standing Interpretation Committee (“SIC”) 12. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.
ii.	IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and the obligations for the liabilities. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The determination whether a joint arrangement constitutes a joint operation or a joint venture is based on the parties’ rights and responsibilities under the arrangement and thus the existence of a separate legal vehicle is no longer the main factor in making such determination. Joint ventures will be accounted for using the equity method of accounting thereby eliminating the option available under existing IFRS to use either the proportionate consolidation method or the equity method. Joint operations are accounted for by a venturer by recognizing its share of the assets, liabilities, revenues and expenses of the joint operation. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.
iii.	IFRS 12 sets out the required disclosures relating to an entity’s interest in subsidiaries, joint arrangements, associates and unconsolidated structured entities. An entity is required to disclose information that enable users of its financial statements to assess the nature of, and risks associated with, its interests in other entities and the effects of those interests on its financial statements. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 13 Fair Value Measurement (“IFRS 13”) was issued on May 12, 2011 and establishes a single framework for measuring fair value where it is required by other standards. IFRS 13 applies to all transactions (whether financial or non-financial) for which IFRS requires or permits fair value measurements, with the exception of share-based payment transactions accounted for under IFRS 2 Share-based Payment and leasing transactions within the scope of IAS 12 Leases, and measurements that have some similarities to fair value but are not fair value such as net realisable value under IAS 2 Inventories or value in use under IAS 36 Impairment of assets. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price).

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This standard is required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

On June 16, 2011 the IASB issued Presentation of Items of Other Comprehensive Income (amendments to IAS 1, Presentation of Financial statements). The amendments require the grouping of items presented in other comprehensive income into items that might be reclassified to profit or loss in subsequent periods and items that will not be reclassified to profit or loss in subsequent periods. The amendments are effective for annual periods beginning on or after July 1, 2012, with full retrospective application. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

In October 2011 the IASB issued IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (“IFRIC 20”). This interpretation provides guidance on the accounting for the costs of stripping activity in the production phase when two benefits accrue to the entity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. IFRIC 20 is applicable for annual periods beginning on or after January 1, 2013 with early adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

A.  Directors and Senior Management

The following table lists, as of the date of this report, the names, ages, functions and areas of experience in our operations of all our directors and Senior Management.  Each Director will serve until the next Annual General Meeting or until his/her successor is duly elected, unless his/her office is vacated in accordance with our charter documents.  Our executive officers serve at the pleasure of the Board of Directors.

Name	Age	Position/Area of Experience/Function
Jose Ernesto Villaluna (2)(3) Andrew Mullins (1) Edward Tortorici (2) Carlo Pablo (1) (3) Barry Stansfield Riaz Sumar (3) Renato Migrino (1) (2) Claro Ramirez	72 31 72 49 62 42 62 51	Director since February 2009, President and CEO since August 2009. Director since August 2009 Director since June 1, 2010 Director since June 1, 2010 Director since April 2003 Director, CFO, Secretary since May, 2005 Director, Treasurer since August 2009 Director since October 11, 2011

(1)   Member of Audit Committee in 2010.

(2)   Member of Compensation Committee in 2010

(3)   Member of the Corporate Governance Committee in 2010

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Information About our Directors and Officers

Mr. Jose Ernesto Villaluna, President, Chief Executive Officer and Director

A resident of Manila, Philippines, Mr. Villaluna has extensive experience with resource companies, and is currently director of Philex Mining Corporation; ISM Corporation;  President of Brixton Energy and Mining Corporation, Lascogon Mining Corporation; formerly President and COO of Philex Mining Corporation and Philex Petroleum Corporation.

Mr. Barry Stansfield, Director and Chairman

Barry Stansfield is an independent Director with broad business experience spanning over thirty (30) years.  He was co-owner and CEO of Stansfield Lake, a London-based marketing company until that company was acquired by Communicator Plc.  He is also a partner in a private property investment company based in southern England.

Mr. Riaz Sumar, Director, Secretary, and Chief Financial Officer

A resident of Calgary, Canada, Mr. Sumar has extensive financial experience with public companies.  Mr. Sumar was previously Financial Controller of Forum Energy Corporation from 1996 to 2003.  Mr. Sumar was previously the CFO of TransAKT Corp. and previously CFO of TSX-listed, North American Gem Inc.  He received the designation of Certified General Accountant in 1997.

Mr. Andrew Mullins, Director

Mr. Mullins was previously Vice President of NASDAQ-listed Tracer Petroleum Corporation and subsequently Forum Energy Corporation. He was a key figure in the reorganisation of shares of Forum and admission of the Company to AIM in 2005. In 2006 Andrew was appointed Company Secretary of Forum Energy and in 2008 as an Executive Director of the Company.

He holds a B.Eng (Hons) in Mechanical Engineering from University College London and is also a Director and Chief Executive Officer of PhiGold Plc and PhiGold Mining Limited.

Mr. Renato Migrino

A resident of the Philippines, Mr. Migrino is the Treasurer, Chief Financial Officer and Senior Vice President of Finance of Philex Mining Corporation, Director and CFO of Philex Gold Inc. Director and Treasurer of Brixton Energy and Mining Corporation, Lascogon Mining Corporation, Fidelity Stock Transfers Inc., Philex Insurance Agency Director of Mabuhay Vinyl Corporation, Philippines Gold Mining Company, Northern Luzon Exploration and Mining Co,, Silangan Mindanao Exploration Co. Inc., Silangan Mindanao Mining Co. Inc,

Mr. Edward Tortorici

Age 72, born in the United States. Mr. Tortorici received a Bachelor of Science from New York University and a Master of Science from Fairfield University.

Mr. Tortorici has served in a variety of senior and executive management positions, including Corporate Vice President for Crocker Bank and Managing Director positions at Olivetti Corporation of America and Fairchild Semiconductor Corporation.

Mr. Tortorici subsequently founded EA Edwards Associates, an international management and consulting firm specializing in strategy formulation and productivity improvement with offices in USA, Europe and Middle East.

In 1987 Mr. Tortorici joined First Pacific as an Executive Director for strategic planning and corporate restructuring, and launched the Group's entry into the  telecommunications and technology sectors. Presently, he oversees corporate strategy for First Pacific and guides the Group's strategic planning and corporate  development activities. Mr. Tortorici serves as a Commissioner of PT Indofood Sukses Makmur Tbk and as Director of Metro Pacific Investments Corporation,  Philex Mining Corporation, Maynilad Water Services, Inc., Medical Doctors, Inc., Landco Pacific Corporation, FEC Resources Inc. of Canada and AIM-listed Forum Energy Plc.

Mr. Tortorici serves as a Trustee of the Asia Society Philippines, is on the Board of Advisors of the Southeast Asia Division of the Center for Strategic and International Studies,  a Washington D. C. non partisan  think tank.  He also serves as a Commissioner of the U.S. ASEAN Strategy Commission. 

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Mr. Carlo Pablo

Mr. Pablo has 24 years of oil and gas experience with Shell in the Philippines, Indonesia and Malaysia.  His experience covers commercial and engineering roles in the downstream and upstream business.  He has specialized in negotiation of petroleum contracts, gas commercialization, strategy and portfolio management, international business development, exploration and production economics, oil and gas marketing, and project management.  From May 2010 to present Mr. Pablo has served as Chief Operating Officer of Philex Petroleum Corporation.  From October 2005 to March 2010 he was Joint Venture Liaison and Commercial Economics Advisor for Shell Philippines Exploration BV and prior to that Team Leader Business Development for Indonesia, Shell International Gas and Power

Mr. Claro Ramirez

Mr. Ramirez is a resident of Richmond, British Columbia, Canada and has served as Senior Vice President of Philippine Long Distance Telephone Company (“PLDT”) for the last eleven years.

None of our directors and/or executive officers, or those persons to be appointed, have been the subject of any order, judgment, or decree of any governmental agency or administrator, or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he or she is a director and/or executive officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he or she is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security, or any aspect of the securities business, or of theft, or of any felony.

Andrew Mullins is the son in Law of Barry Stansfield.

There are no other arrangements or understandings between any two (2) or more directors or executive officers, pursuant to which he or she was selected as a Director or Executive Officer.  Except as disclosed above, there are no family relationships between any two (2) or more of our directors or executive officers.

Carlo Pablo, Edward Tortorici and Barry Stansfield are also directors of Forum Energy.  Andrew Mullins serves as Corporate Secretary for Forum Energy.

Jose Villaluna, Renato Migrino and Riaz Sumar serve as directors of Lascogon.

B.  Compensation.

We have agreed to pay our directors the following consulting fees or directors’ fees on a monthly basis:

Jose Ernesto Villaluna	$	3,000
Riaz Sumar	$	7,000
Barry Stansfield	$	1,000
Andrew Mullins	$	1,000
Renato Migrino	$	2,000
Edward Tortorici	$	1,000
Carlo Pablo	$	3,000
Claro Ramirez	$	1,000

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In addition, our Board may award special remuneration to any Director undertaking any special services on our behalf, other than services ordinarily required of a Director.  Other than as indicated below, no Director received any compensation for his or her services as a Director, including committee participation and/or special assignments.

None of our executive officers or directors received other compensation in excess of the lesser of US $25,000 or 10% of such Executive Officer's or Director’s cash compensation as reported in the compensation table above and all Executive Officers and directors as a group did not receive other compensation which exceeded US $25,000 times the number of persons in the group or 10% of the compensation reported in the compensation table above.

No funds were set aside or accrued by us during the year ending December 31, 2011 to provide pension, retirement or similar benefits for our directors or Executive Officers.  Except for the stock option program discussed below, we have no bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the our directors or Executive Officers.

The following tables detail the compensation paid during fiscal year ended December 31, 2011 and 2010 to our directors and members of our administrative, supervisory or management bodies:

Director/Executive Officer Compensation

Director Compensation for Fiscal Year ended December 31, 2011

Directors/Officers	Salary		Option Exercise Net Market Value(1)		Total Compensation
Barry Stansfield	$	12,000	$	0.00	$	12,000
Riaz Sumar	$	84,000	$	0.00	$	84,000
Edward Tortorici	$	12,000	$	0.00	$	12,000
Jose Ernesto Villaluna	$	36,000	$	0.00	$	36,000
Andrew Mullins	$	12,000	$	0.00	$	12,000
Renato Migrino	$	24,000	$	0.00	$	24,000
Claro Ramirez	$	2,645	$	0.00	$	2,645
Carlo Pablo	$	36,000	$	0.00	$	36,000
Total	$	218,645	$	0.00	$	218,645

(1). “Option Exercise Net Market Value” is defined as the aggregate difference between the exercise price and the market value of the common stock on the date of exercise.

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Director Compensation for Fiscal Year ended December 31, 2010

Directors/Officers	Salary		Option Exercise Net Market Value(1)		Total Compensation
Barry Stansfield	$	39,500	$	0.00	$	39,500
Edward Tortorici	$	7,000	$	0.00	$	7,000
Riaz Sumar	$	60,000	$	0.00	$	60,000
Jose Ernesto Villaluna	$	58,000	$	0.00	$	58,000
Andrew Mullins	$	39,500	$	0.00	$	39,500
Franklin Cu	$	5,000	$	0.00	$	5,000
Renato Migrino	$	24,000	$	0.00	$	24,000
Carlo Pablo	$	9,000	$	0.00	$	9,000
Total $	$	242,000	$	0.00	$	242,000

                      (1). “Option Exercise Net Market Value” is defined as the aggregate difference between the exercise price and the market value of the common stock on the date of exercise.

Our Board may award special remuneration to any Director undertaking any special services on our behalf other than services ordinarily required of a Director.  Other than indicated below no Director received any compensation for his or her services as a Director, including committee participation and/or special assignments.

Except for the stock option program discussed below, we have no bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the our directors or Executive Officers.

Options to Purchase Our or Our Subsidiaries’ Securities.

We have no options issued to purchase any of our subsidiaries securities.  Options to purchase securities from us are granted to directors, officers and employees on terms and conditions acceptable to the relevant regulatory authorities.  We adopted a formal stock option plan on June 19, 2000.  There were no stock options outstanding on December 31, 2011.

On January 31, 2010, 10,520,000 stock options expired unexercised; August 2, 2010, 1,000,000 stock options expired unexercised and on October 25, 2010, 6,000,000 stock options expired unexercised.

C.  Board Practices

We have an Audit Committee, a Compensation Committee and a Corporate Governance Committee.  No committee members receive compensation for serving on a committee.

Audit Committee. The Audit Committee oversees the retention, performance and compensation of our independent auditors, and the establishment and oversight of our systems of internal accounting and auditing control.  Members of the Audit Committee are Renato Migrino, Andrew Mullins, and Carlo Pablo.  New members of our Audit Committee for 2012 will  be appointed following our Annual and General Meeting of Shareholders.

Compensation Committee. The Compensation Committee reviews and makes recommendations to our Board concerning the terms of the compensation packages provided to our senior executive officers, including salary, bonus and awards under our stock option plan and any other compensation plans that we may adopt in the future.  Members of the Compensation Committee in 2011 were Jose Ernesto Villaluna, Renato Migrino, and Edward Tortorici.  Members of our Compensation Committee for 2012 will  be appointed following our Annual and General Meeting of Shareholders.

Corporate Governance Committee. The Corporate Governance Committee meets with and discusses current disclosure issuances with our management personnel, directors, and with both our Canadian and United States counsel, to report to our Board any matters which should be the subject of either public disclosure or remedial action and to assist our Board in establishing reporting and disclosure procedures to ensure that we are in compliance with our disclosure and compliance obligations under applicable laws, rules and obligations.  Members of the Corporate Governance Committee were Jose Ernesto Villaluna, Carlo Pablo and Riaz Sumar. Members of our Corporate Governance Committee for 2012 will  be appointed following our Annual and General Meeting of Shareholders,

D. Employees

As of December 31, 2011, we had no employees.

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E.  Share Ownership

The following table sets forth certain information as of April 25, 2012 regarding the ownership of our common stock by (i) each beneficial owner more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all of our directors and executive officers as a group.  Except as otherwise indicated, the address of each person identified below is c/o FEC Resources Inc, 46 Royal Ridge Rise NW, Calgary, AB, T3G 4V2.  We believe that ownership of the shares by the persons identified below is both of record and beneficial and that such persons have sole voting and investment power with respect to the shares indicated.  Percentage of class in the following table is calculated individually based on the following formula: (shares directly or indirectly controlled + shares issuable on the exercise or conversion of various securities) / (total shares outstanding + shares issuable on the exercise or conversion of various warrant, debentures and options by the director or officer).  The total shares outstanding on April 25, 2012 was 439,143,765.

Name of Registered Shareholder owning 5% or more of the outstanding shares:	Number of Shares	Percent of Class
Philex Mining Corporation *	225,000,000	51.24
CDS&Co***	49,173,047	11.20
CEDE & Co***	38,404,810	8.75
Asian Coast International	67,740,000	15.42
Indexa Corp****	30,000,000	6.83
Name of Director and/or Officer and number of shares held:
Jose Ernesto Villaluna *	-	-
Barry Stansfield	216,539	-
Renato Migrino *	-	-
Andrew Mullins	-	-
Edward Tortorici *	-	-
Carlo Pablo **	-	-
Riaz Sumar	10,000	-
Number of shares held by all Directors and Officers as a group:	226,539	-

* Officers and Directors of  Philex Mining Corporation and which owns 225,000,000 shares.

** Officer of Philex Petroleum Corporation, subsidiary of Philex Mining Corporation

***  Cede& Co. and CDS and Co. are clearing houses in Canada and the United States and represent the interest of multiple shareholders and there is no way of knowing if any one in particular beneficially holds over 10% of the voting rights attached to our shares.

****  These shares are held in escrow and will only be released on declaration of commerciality of MPSA148.

The particulars of the stock options granted to officers and directors are set forth in the preceding section entitled “DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.”  The particulars regarding convertible debentures and warrants acquired by certain officers and directors are as follows:

The following table lists the current directors, executive officers and employees to whom warrants to purchase our shares were sold and the number of share purchase warrants so sold as of the date of this report, as well as the number of share purchase warrants sold to directors and all employees as a group.

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Warrants Held by Directors and Officers

Name	Number of Share Purchase Warrants	Exercise Price	Expiration Date
None	None

We are a publicly-owned corporation, the shares of which are owned by Canadian residents, U.S. residents, and residents of other countries.  Currently, we are not controlled directly or indirectly by any foreign government but are controlled by Philex Mining Corporation.

There are no arrangements, known to us, the operation of which may at a subsequent date result in a change in our control other than as noted above.

The above listed organizations and individuals have no special or separate voting rights than those rights held by our shareholders.

On April 21, 2012, the shareholders’ list showed 587 registered shareholders and 439,143,765 shares outstanding.  The number of shares held by U.S. residents was 45,480,950 representing 10.36% of the total issued and outstanding shares.  The total number of U.S. resident registered shareholders was 524.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.  Major Shareholders

We are a publicly-owned corporation, the shares of which are owned by Canadian residents, U.S. residents, and residents of other countries.  We are  controlled by Philex Mining Corporation.  The following table provides the names and share ownership of those parties that have ownership of 5% or more of each class of our voting securities as of April 21, 2012:

Name	Number of Shares Owned	Percent of Class
Philex Mining Corporation *	225,000,000	51.24
CDS&Co**	49,173,047	11.20
CEDE & Co**	38,404,810	8.75
Asian Coast International	67,740,000	15.42
Indexa Corp***	30,000,000	6.83

* Jose Ernesto Villaluna, Edward Tortorici, and Renato Migrino,  all Directors of FEC Resources Inc.,  are officers or directors of Philex Mining Corporation.  Philex Mining purchased 200,000,000 shares in a private placement in December 2007 and 20,000,000 shares were purchased in a private transaction at the same time.  In April 2010, Philex Mining Corporation received a further 5,000,000 shares pursuant to a private placement at $0.50 per share.  Carlo Pablo is a director of Philex Petroleum Corporation which is a subsidiary of Philex Mining Corporation.

**  Cede& Co. and CDS and Co. are clearing houses in Canada and the United States and represent the interest of multiple shareholders and there is no way of knowing if any one in particular beneficially holds over 10% of the voting rights attached to our shares.

***  These shares were issued in 2006 and are held in escrow to be released upon the proving of the commerciality of MPSA148.   On December 31, 2006 Index Corp was the registered shareholder of 50,000,000 shares and on December 31, 2007 Indexa was the registered holder of 30,000,000 shares held in escrow as noted above.  .

There are no arrangements, known to us, the effect of which may at a subsequent date result in a change in our control other than as noted in Item 5 Operating and Financial Review and Prospects.

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As at April 21, 2012, management is not aware of any person holding a greater than 5% registered interest in any class of our voting securities other than as set forth above.  The above listed organizations and individuals have no special or separate voting rights than those rights held by our shareholders.

On April 21, 2012, the shareholders’ list showed 587 registered shareholders and 439,143,765 shares outstanding.  The number of shares held by U.S. residents was 45,480,950 representing 10.36% of the total issued and outstanding shares.  The total number of U.S. resident registered shareholders was 524

Our major shareholder has the same voting rights as all other shareholders.

B.  Related Party Transactions

During the year ended December 31, 2011 general and administrative expenses included key management personnel compensation totaling $218,645 (2010: $242,000).

During the year ended December 31, 2011 the Company incurred an interest charge of $10,467 (2010: $10,975) on a loan from the parent of the Company.

Included in accounts payable and accrued liabilities at December 31, 2011 is $332 (2010; $16,542) owed to directors, officers and companies controlled by them for unpaid consulting fees and or expenses.

In addition, on December 31, 2011, the Company owed Lascogon Mining Corporation $18,895 for audit fees paid on behalf of the Company for preparation of an annual report to be filed in the United States.

Related party transactions are measured at fair value.

* Note Item 7.C not required for this Annual Report.

ITEM 8.  FINANCIAL INFORMATION

A.  Consolidated Financial Statements and Other Financial Information

We know of no pending legal or arbitration proceedings, including those relating to bankruptcy, governmental receivership or similar proceeding and those involving any third party against it, nor are we involved as a plaintiff in any material pending litigation.

We know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us, or our subsidiaries, or has a material interest adverse to us or our subsidiaries.

We have not declared any dividends for the last five (5) years, nor do we intend to declare any dividends in the foreseeable future.

B.  Significant Changes/Developments

None

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ITEM 9.  THE OFFER AND LISTING

A.  Listing Details and Markets

Our shares have traded on the OTC – Bulletin Board (“OTC.BB”) under the symbol “FECOF” since September 22, 1999.

The table below lists the high/low bid/ask prices on NASD/OTC.BB for our shares for each year within the five (5) most recent fiscal years.

NASDAQ Small Cap/OTC.BB Stock Annual Price History - Common Shares

(US Dollars)

Year Ended	High	Low
12/31/11	$0.07	$0.02
12/31/10	$0.04	$0.00
12/31/09	$0.01	$0.00
12/31/08	$0.03	$0.00
12/31/07	$0.01	$0.05

The table below lists the volume of trading and high/low bid/ask prices on NASD/OTC-Bulletin Board for our shares for each full quarterly period within the two most recent fiscal years and any subsequent periods.

OTC Bulletin Board Stock Trading Activity - Common Shares

(US Dollars)

Quarter Ended	Volume	High	Low
3/31/12	3,311,307	0.04	0.02
12/31/11	9,478,982	0.03	0.02
9/30/11	6,149,806	0.04	0.02
6/30/11	5,212,210	0.04	0.02
3/31/11	38,146,676	0.07	0.02
12/31/10	15,560,944	0.03	0.01
9/30/10	16,426,881	0.01	0.00
6/30/10	2,668,558	0.02	0.01
3/31/10	10,324,680	0.04	0.01

30

The table below highlights for the most recent six (6) months the high and low market prices for each month of our common shares on the OTC.BB.

OTC.BB Stock Monthly Price History - Common Shares

(US Dollars)

Month Ended	High	Low	Volume
3/31/12	0.03	0.02	423,290
02/29/12	0.04	0.03	1,196,048
01/31/12	0.03	0.02	1,691,969
12/31/11	0.03	0.02	1,231,671
11/30/11	0.03	0.02	1,962,065
10/31/11	0.02	0.02	2,651,714

Our shares are issued in registered form and the following information is taken from the records of Computershare Investor Services (located in Vancouver, British Columbia), the lead registrar and transfer agent for our common shares.

On April 21, 2012, the shareholders’ list showed 587 registered shareholders and 439,143,765 shares outstanding.  The number of shares held by U.S. residents was 45,480,950 representing 10.36% of the total issued and outstanding shares.  The total number of U.S. resident registered shareholders was 524.  The total number of U.S. resident registered shareholders was 528.  Our shares are not registered to trade in the U.S. in the form of American Depository Receipts (ADR's) or similar certificates.

ITEM 10.  ADDITIONAL INFORMATION.

A.  Share Capital

Not applicable

B.  Memorandum and Articles of Association

Reference is hereby made to our Certificate of Continuance, and to our Bylaws, each of which is incorporated herein by reference to, respectively, Exhibit 3.1 and 3.2 to our Registration Statement on Form F-1, file number 33-81290.

C.  Material Contracts.

See "Item 4. Information About the Company."

D.  Exchange Controls

Investment Canada Act

The Investment Canada Act (the “ICA”) prohibits the acquisition of control of a Canadian business enterprise in Canada by non-Canadians without the prior consent of Investment Canada, the agency that administers the ICA, unless such acquisition is exempt under the provisions of the ICA.  Investment Canada must be notified of such exempt acquisitions.  The ICA covers acquisitions of control of corporate enterprises, whether by purchase of assets, shares or “voting interests” of an entity that controls, directly or indirectly, another entity carrying on a Canadian business.

Apart from the ICA, there are no other limitations on the right of non-resident or foreign owners to hold or vote securities imposed by Canadian law or our Certificate of Continuance.  There are no other decrees or regulations in Canada which restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-resident holders of our securities except as discussed in “Taxation”, below.

31

E.  Taxation

The following is a summary of the principal Canadian federal income tax considerations generally applicable in respect of our common stock.  The tax consequences to any particular holder of common stock will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holder's particular circumstances.  This summary is applicable only to holders who are resident in the United States; have never been resident in Canada; deal at arm's length with us; hold their common stock as capital property; and who will not use or hold the common stock in carrying on a business in Canada.

This summary does not take into account provincial income tax consequences.  This summary assumes that the publicly announced proposals will be enacted as proposed with the effective dates set out therein; otherwise, this summary assumes that there will be no other changes in law whether by judicial or legislative action.

If a non-resident were to dispose of common stock to another Canadian corporation which deals (or is deemed to deal) on a non-arm's length basis with the non-resident, and which, immediately after the disposition, is connected with us (i.e. which holds shares representing more than 10% of the voting power and more than 10% of the market value of all of our issued and outstanding shares), the excess of the proceeds over the paid-up capital of the common stock sold will be deemed to be taxable as a dividend either immediately, or eventually, by means of a deduction in computing the paid-up capital of the purchasing corporation.

Under the Canadian Tax Act, a gain from the sale of common stock by a non-resident will not be subject to Canadian tax, provided the stockholder (and/or persons who do not deal at arm's length with the stockholder) has not held a “substantial interest” in our shares (25% or more of the shares of any class of our equity securities) at any time in the five (5) years preceding the disposition.  Generally, the Canadian-United States Tax Convention (the “Tax Convention”) will exempt from Canadian taxation any capital gain realized by a resident of the United States, provided that the value of the common stock is not derived principally from real property situated in Canada.

In the case of any dividends paid to non-residents of Canada, the Canadian tax is withheld by us, which remits only the net amount to the stockholder. By virtue of Article X of the Tax Convention, the rate of tax on dividends paid to residents of the United States is generally limited to 15% of the gross dividend (or 10% in the case of certain corporate stockholders owning at least 10% of our voting shares).  In the absence of the treaty provisions, the rate of Canadian withholding tax imposed on non-residents is 25% of the gross dividend.  Stock dividends received by non-residents of Canada from us are taxable by Canada as ordinary dividends.

This summary is of a general nature only and is not exhaustive of all possible income tax consequences.  It is not intended as legal or tax advice to any particular holder of common stock, and should not be so construed.  Each holder should consult his/her own tax advisor with respect to the income tax consequences applicable to him/her in his/her own particular circumstances.

F.  Dividends and Paying Agents

Not applicable

G.  Summary By Experts

Not applicable

32

H.  Documents on Display

The documents concerning us which are referred to in this Annual Report are either annexed hereto as exhibits (see Item 19) or may be inspected at our principal executive offices in Calgary, Alberta, Canada.

I.  Subsidiary Information

Not applicable

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Currency Exchange Rate Sensitivity

The results of our operations are subject to currency translational risk, and currency transactional risk. Regarding currency translational risk, the operating results and financial position of our subsidiaries are reported in local currencies and then translated into Canadian dollars at the applicable exchange rate for preparation of our consolidated financial statements.  The fluctuation of the U.S. dollar and Peso in relation to Canadian dollar will therefore have an impact upon profitability of our operations and may also affect the value of our assets and the amount of shareholders’ equity.

In regards to transactional risk, our functional currency is the United States dollar and our activities are predominantly executed using both the U.S. and Canadian dollars.  We have done a limited number of financings, and we are not subject to significant operational exposures due to fluctuations in these currencies.  Our common shares are listed on the OTC.BB and are bought and sold in US dollars.  We have not entered into any agreements, or purchased any instruments, to hedge any possible currency risks at this time.

Interest Rate Sensitivity

We currently have no significant short-term or long-term debt requiring interest payments except for the loan from our parent company.  This does not require us to consider entering into any agreements or purchasing any instruments to hedge against possible interest rate risks at this time.  Our interest-earning investments are short-term.  Thus, any reductions in future income or carrying values due to future interest rate declines are believed to be immaterial. Every one percent change in interest rates results in an increase or decrease in the interest payable of $2,730 per year.

Commodity Price Sensitivity

Our future revenue and profitability will be dependant, to a significant extent, upon prevailing spot market prices for gold, oil and gas.  In the past, gold, oil and gas prices have been volatile.  Prices are subject to wide fluctuations in response to changes in supply of, and demand for, gold, oil and gas, market uncertainty, and a variety of additional factors that are beyond our control.  We currently have no significant operating revenue.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

Not Applicable.

33

PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

None.

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.  

None.

ITEM 15. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Board has overall responsibility for reviewing our disclosure to ensure we provide full and plain disclosure to shareholders and other stakeholders.  The Board discharges its responsibilities through its committees, specifically with respect to financial disclosure.  The Audit Committee is responsible for reviewing our financial reporting procedures and internal controls to ensure full and accurate disclosure of our financial position.

Our Chief Executive Officer and Chief Financial Officer are responsible for designing internal controls over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Annual Report (the "Evaluation Date") are not  effective as discussed below.

Management’s Annual Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with International Financial Reporting Standards.

As of December 31, 2011, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls over financial reporting were not effective and that there were material weaknesses in our internal controls over financial reporting. The material weaknesses were an inability to detect the inappropriate application of IFRS guidance, as more fully described below, as the result of deficiencies that existed in the design or operation of our internal control over financial reporting.

34

The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under COSO and SEC rules were: (1) lack of a majority of independent directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) limited number of staff, not allowing for complete segregation of incompatible duties; and (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of IFRS and SEC disclosure requirements. The aforementioned material weaknesses were identified by the Company’s Chief Financial Officer in connection with the preparation of our financial statements as of December 31, 2011 and communicated the matters to our management and board of directors.

Management believes that the appointment of one or more independent directors, will remedy the lack of a majority of outside directors on the Company’s Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of IFRS and SEC disclosure requirements. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result in proper segregation of duties.

Any effort to increase the size of the Board of Directors, appoint independent directors or personnel is conditional upon the Company to raise additional capital.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only the management’s report in this annual report.

Changes in Internal Control over financial reporting

During the year ended December 31, 2011, and subsequently there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting or that would require corrective action.

35

ITEM 16 .  (RESERVED)

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Audit Committee is responsible for reviewing our financial reporting procedures, internal controls, the performance of our auditors, and the reserve evaluations prepared by our independent reserves evaluation engineering consultants.  The Audit Committee is also responsible for reviewing all disclosure with respect to financial matters prior to filing or release and quarterly and annual Financial Statements prior to their approval by the full Board.  Members of the Audit Committee during 2011 were Andrew Mullins, Carlo Pablo and Renato Migrino.  New Audit Committee members will be appointed following our meeting of shareholders in 2012.

Our Board has determined that it has at least one (1) financial expert serving on its Audit Committee.  This individual is Renato Migrino.  Mr. Migrino is the Treasurer, Chief Financial Officer, Vice President Finance, and Compliance Officer for Philex Mining Corporation.  Mr. Migrino has significant experience in the review of financial statements and related information.

Mr. Migrino is our Treasurer and therefore would not be regarded as an “independent director” as such term is defined by the rules and regulations of the Nasdaq Stock Market LLC.

ITEM 16 B:CODE OF ETHICS.

We have adopted a formal “Code of Ethics” applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  We believe that the Code of Ethics is reasonably designed to deter wrongdoing and to promote:

1. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

2. Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, regulatory agencies and in other public communications made by the registrant;

3. Compliance with applicable governmental laws, rules and regulations;

4. The prompt internal reporting of violations of the standards to an appropriate person or persons identified in the standards; and

5. Accountability for adherence to the standards of the Code of Ethics.

The Code of Ethics (in hard copy) is available for inspection in our headquarters during regular business hours and a copy can also be provided at no charge on request by sending a written request to the Company’s headqurters at 46 Royal Ridge Rise, N.W., Calgary, AB T3G 4V2.

In addition, we practice corporate governance in accordance with rules and regulations in Canada.

Corporate Governance relates to the activities of the Board who are elected by and accountable to the shareholders, and takes into account the role of management who are appointed by the Board and who are charged with our on-going management.  Our Board encourages sound corporate governance practices designed to promote our well being and on-going development, having always as its ultimate objective our best long-term interests and the enhancement of value for all shareholders.  The Board also believes that sound corporate governance benefits our employees and the communities in which we operate.  The Board believes that our corporate governance policies and practices, outlined below, are appropriate and substantially consistent with the guidelines for improved corporate governance in Canada as adopted by the Toronto Stock Exchange.

To better fulfill and implement the Board’s corporate governance policies, we have established a Corporate Governance Committee.  The Corporate Governance Committee meets with and discusses current disclosure issuances with our management personnel, directors, and with both our Canadian and United States counsel, in order to not only report to the Board any matters which should be the subject of either public disclosure or remedial action, but also to assist the Board in establishing reporting and disclosure procedures to ensure that we are in compliance with our disclosure and compliance obligations under applicable laws, rules and obligations.  The members of the Corporate Governance Committee are Barry Stansfield, Andrew Mullins and Riaz Sumar

36

ITEM 16 C.  ACCOUNTANTS FEES AND SERVICES

Audit Fees

Our external auditors, BDO, charged total fees of  $62,068 related to the audit of our annual financial statements for the year ended December 31, 2010 and for the audit of the annual financial statements for the year ended December 31, 2011, an amount of $60,000 was accrued as a best estimate of fees to be billed by BDO.  There were no fees associated with the filing of taxes.

Audit Related Fees

We did not incur any audit related fees in either of the two fiscal years for assurance and related services by BDO Canada LLP (“BDO”) that are related to the performance of their audit or review of our financial statements.

 Tax Fees

We did not incur any fees in either of the last two fiscal years for professional services rendered by BDO for tax compliance, tax advise and tax planning.

ITEM 16 D.  EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITEE

 Not Applicable.

ITEM 16 E.  PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 Not Applicable.

ITEM 16 F.  CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT

None.

ITEM 16 G.  Corporate Governance

 Not Applicable.

37

PART III

ITEM 16 H.  Mine Safety Disclosure

 Not Applicable.

ITEM17.FINANCIALSTATEMENTS.

The Auditors’ Report, financial statements and notes thereto, schedules thereto, as required under Item 17 are found immediately below.

     Financial Statements:

Report of Auditors, dated April 25, 2012

Consolidated Balance Sheets at December 31, 2011 and December 31, 2010

Consolidated Statements of Loss and Deficit for the Years ended December 31, 2011 and December 31, 2010

Consolidated Statements of Cash Flows for the Years ended December 31, 2011 and December 31, 2010

Notes to the Consolidated Financial Statements

Financial Statements of Forum Energy Plc (FEP)

38

FEC RESOURCES INC.

Financial Statements

For the year ended December 31, 2011

(Expressed in United States dollars)

39

INDEPENDENT AUDITOR'S REPORT

To the shareholders of FEC Resources Inc.

We have audited the accompanying financial statements of FEC Resources Inc., which comprise the statements of financial position as at December 31, 2011, December 31, 2010 and January 1, 2010, and the statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2011 and December 31, 2010, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with 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 auditor's judgment, 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 auditor due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the presentation of the financial statements.

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

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of FEC Resources Inc. as at December 31, 2011, December 31, 2010 and January 1, 2010 and its financial performance and its cash flows for the years ended December 31, 2011 and December 31, 2010, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

(signed) “BDO CANADA LLP” Chartered Accountants April 25, 2012

40

FEC RESOURCES INC.

STATMENTS OF FINANCIAL POSITION

Expressed in United States Dollars

	December 31,			December 31,			January 1,
	2011			2010			2010
ASSETS
Current assets
Cash and cash equivalents (Note 6)		1,612,609		$	2,061,119			37,176
Receivables		1,568			1,248			928
Prepaid expenses		18,452			18,868			18,704
		1,632,629			2,081,235			56,808.00
Non-current assets
Property, plant and equipment (Note 7)		3,549			3,374			4,863
Investment in associates (Note 8)		4,720,167			3,834,255			6,234,089
		6,356,345			5,918,864			6,295,760
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade and accrued payables (Note 11)		89,241			97,517			60,131
Due to parent company (Note 9 and 11)		301,790			291,323			280,348
		391,031			388,840			340,479
Shareholders’ Equity
Share capital (Note 10)		16,732,397			16,732,397			14,232,397
Warrants (Note 10)		-			-			225,397
Contributed surplus (Note 10)		3,058,063			3,058,063			2,832,666
Deficit		(13,825,146	)		(14,260,436	)		(11,335,179	)
		5,965,314			5,530,024			5,955,281
	$	6,356,345			5,918,864			6,295,760
SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:
	“Riaz Sumar”				“Jose Ernesto Villaluna”
	Director				Director

The accompanying notes form an integral part of these financial statements

41

FEC RESOURCES INC.

STATEMENTS OF COMPREHENSIVE INCOME

Expressed in United States Dollars

	Year ended			Year ended
	December 31			December 31
	2011			2010
General and administrative expenses
General and administration (Note 12)		441,146			516,563
Operating loss		(441,146	)		(516,563	)
Share of profits (loss) of associates (Note 8)		885,912			(100,843	)
Gain on dilution of investment in FEP		-			2,829
Finance expense (Note 3, 9 and Note 11)		(10,467	)		(10,975	)
Impairment of investments (Note 8)		-			(2,301,820	)
Interest income		991			2,115
Income (loss) before taxes		435,290			(2,925,257	)
Income Taxes (Note 13)		-			-
Net income (loss) and total comprehensive income (loss) for the year		435,290			(2,925,257	)
Earnings / loss per common share
- Basic and diluted		0.00			(0.01	)
Weighted average number of shares outstanding		439,143,765			437,554,724
The accompanying notes form an integral part of these financial statements

42

FEC RESOURCES INC.

STATMENTS OF CHANGES IN EQUITY

Expressed in United States Dollars

For the years ended December 31, 2011 and December 31, 2010

	Share		Contributed
	capital		surplus		Warrants			Deficit			Total
Balance January 1, 2011	$	16,732,397	$	3,058,063	$	-		$	(14,260,436	)	$	5,530,024
Total comprehensive income for the period		-		-		-			435,290			435,290
Balance December 31, 2011	$	16,732,397	$	3,058,063		-		$	(13,825,146	)	$	5,965,314
	Share		Contributed
	capital		surplus		Warrants			Deficit			Total
Balance January 1, 2010	$	14,232,397	$	2,832,666	$	225,397		$	(11,335,179	)	$	5,955,281
Total comprehensive income for the period		-		-		-			(2,925,257	)		(2,925,257	)
Warrants expired		-		225,397		(225,397	)		-			-
Shares issued (Note 10)		2,500,000		-		-			-			2,500,000
Balance December 31, 2010	$	16,732,397	$	3,058,063	$	-		$	(14,260,436	)	$	5,530,024
The accompanying notes form an integral part of these financial statements

43

FEC RESOURCES INC.

STATEMENTS OF CASH FLOWS

Expressed in United States Dollars

For the year ended	December 31 2011			December 31 2010
Cash provided by (used in) Operation Activities
Net Income (loss) for the year	$	435,290		$	(2,925,257	)
Non-cash items included in loss
Amortization (Note 7)		1,617			1,489
Share of profits ( loss) of associates (Note 8)		(885,912	)		100,843
Gain on dilution of investment in FEP		-			(2,829	)
Accrued finance expense		10,467			10,975
Impairment of investments		-			2,301,820
		(438,538	)		(512,959	)
Changes in working capital related to operating activities
Receivables		(320	)		(320	)
Prepaid expenses		416			(164	)
Trade and accrued payable		(8,276	)		37,386
Net cash used by operating activities		(446,718	)		(476,057	)
Investing Activities
Additions to properties, plant and equipment, net (Note 7)		(1,792	)		-
Net cash used in investing activities		(1,792	)		-
Financing Activities
Shares issued		-			2,500,000
Net cash provided by financing activities		-			2,500,000
Net increase (decrease) in cash		(448,510	)		2,023,943
Cash - beginning of  the year		2,061,119			37,176
Cash - end of the year	$	1,612,609		$	2,061,119

The accompanying notes form an integral part of these financial statements

44

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

Note 1             Corporate Information

FEC Resources Inc. (“FEC” or the “Company”) was incorporated under the laws of Alberta, Canada and is engaged primarily in the business of exploration and development of oil and gas and other mineral related opportunities, either directly or indirectly through companies in which the Company invests.  The Company is not currently directly involved in any oil and gas or mineral related exploration activities. The exploration and development of oil and gas reserves and the pursuit of other energy and mineral reserves involves significant financial risks. The success of the Company  is  dependent  upon  the  success  of  its  investments  and  their  ability  to discover economically recoverable reserves and to bring such reserves into profitable production, and is subject to a number of risks, including environmental risks, contractual risks, legal risks and political risks, fluctuations in the price of oil and gas and other factors beyond the Company’s control. The Company is listed in the United Sttaes  on  the  Over-The-Counter  Bulletin  Board  (“OTCBB”),  having  the  symbol FECOF.

The principal address of the Company is 203, 200 Barclay Parade S.W. Calgary, Alberta T2P 4R5. The Company’s parent company is Philex Mining Corporation.

 Note 2            Basis of Preparation

a)   Statement of Compliance

These financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). This is the first time that the Company has prepared its financial statements in accordance with IFRS, having previously prepared its financial statements in accordance with pre-changeover Canadian Generally Accepted Accounting Principles (pre-changeover Canadian GAAP).

An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Company is provided in Note 18.

The financial statements were authorized for issue by the Board of Directors on April 25, 2012.

b)   Basis of Measurement

The financial statements have been prepared on a historical cost basis and are presented in United States dollars, which is also the Company’s functional currency.

The preparation of financial statements in compliance with IFRS requires management to make certain critical accounting estimates.   It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment of complexity, or areas where assumption and estimates are significant to the financial statements are disclosed in Note 5.

45

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 2            Basis of Preparation (continued)

c)   Going Concern of Operations

The Company has not generated revenue from operations. The Company earned net income of $435,290 during the twelve months-ended December 31, 2011 including its equity share of investment in Forum Energy Plc of $885,912 and, as of that date the Company’s deficit was $13,825,146. The Company has sufficient cash resources to meet its obligations for at least twelve months from the end of the reporting period. Since the companies in which FEC holds an interest in are in the  exploration  stage,  the  recoverability  of  the  costs  incurred  to  date  on exploration properties by those companies is dependent upon the existence of economically recoverable reserves, the ability of those companies to obtain the necessary financing to complete the exploration and development of its properties and upon future profitable production or proceeds from the disposition of the properties and deferred exploration expenditures. The Company will periodically have to raise funds to continue operations and, although it has been successful in doing so in the past, there is no assurance it will be able to do so in the future.

Note 3            Summary of Significant Accounting Policies

The accounting policies set out below have been applied consistently to all years presented in these financial statements and in preparing the opening IFRS Statement of Financial Position at January 1, 2010 for the purposes of transition to IFRS, unless otherwise indicated.

a)   Investment inassociates

Investments in companies over which the Company has the power to exercise significant influence (but not control) are accounted for using the equity method. The equity method is a basis of accounting whereby the investment is initially recorded at cost and the carrying value is adjusted thereafter to include the Company’s pro-rata share of post-acquisition income or loss.  The amount of the adjustment is included in the determination of net income (loss) by the Company and the investment account of the Company is also increased or decreased to reflect the Company’s share of capital transactions and changes in accounting policies and corrections of errors.  Profit distributions received or receivable from the investments will reduce the carrying value of the investment.   Any premium paid  for  an  associate  above  the  fair  value  of  the  Company's  share  of  the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate.

46

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 3            Summary of Significant Accounting Policies (continued)

a)   Investment inassociates (continued)

Impairment

Investments accounted for on the equity basis are assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset, with the result that they have a loss in value that is other than a temporary decline.

An impairment loss is calculated as the difference between the investment’s carrying  amount  and  the  present  value  of  the  estimated  future  cash  flows expected to be generated by the investment. All impairment losses are recognized in profit or loss. In the event the recoverable amount subsequently increases to a value greater than the carrying amount, an impairment gain is recognized up to the original pre-impaired value.

During the year ended December 31, 2011 the Company did not recognize any write-down or impairment reversal of its investments (2010 – $ 2,301,820 impairment).

b)   Property, plant and equipment

Recognition and Measurement

On initial recognition, property, plant, and equipment are valued at cost, being the purchase price and directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company. This includes the appropriate borrowing costs and the estimated present value of any future unavoidable costs of  dismantling  and  removing  items.    The corresponding  liability is recognized within provisions.

Property plant and equipment is subsequently measured at cost less accumulated depreciation less any impairment losses.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and Losses

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount, and are recognized net within other income in profit or loss.

47

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

           Note 3             Summary of Significant Accounting Policies (continued)

b)   Property, plant and equipment (continued) Depreciation

Property, plant and equipment is carried at cost less accumulated amortization. The Company depreciates its computer equipment at the rate of 30% per annum utilizing the declining balance method.

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

Impairment

The carrying amounts of the Company’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

      c)   Foreign Currency Translation

The functional currency of the Company is the United States dollar. The Company and its investments accounted for by the equity method operate in Canada, the United Kingdom and the Philippines.

For the Company and any of its investee companies with a United States dollar functional currency, at the transaction date, each asset, liability, revenue and expense denominated in a foreign currency is translated into United States dollars by the use of the exchange rate in effect at that date. At the year-end date, unsettled monetary assets and liabilities are translated into United States dollars by  using  the  exchange  rate  in  effect  at  the  year-end  date  and  the  related translation differences are recognized in net income.

Exchange gains and losses arising on the retranslation of monetary available-for- sale financial assets are treated as a separate component of the change in fair value and recognized in net income. Exchange gains and losses on non-monetary available-for-sale financial assets form part of the overall gain or loss recognized in respect of that financial instrument.

Non-monetary assets and liabilities that are measured at historical cost are translated into United States dollars by using the exchange rate in effect at the date of the initial transaction and are not subsequently restated. Non-monetary assets and liabilities that are measured at fair value or a revalued amount are translated into United States dollars by using the exchange rate in effect at the date the value is determined and the related translation differences are recognized in net income or other comprehensive loss consistent with where the gain or loss on the underlying non-monetary asset or liability has been recognized.

48

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 3            Summary of Significant Accounting Policies (continued)

c)   Foreign Currency Translation (continued)

For the Company’s investee companies with a functional currency other than Unites States Dollars, any cumulative translation adjustments would be included in Accumulated other comprehensive income (‘‘AOCI’’) if material and would represent  unrealized  translation  gains  and  losses  on  the  Company’s  net investment in equity-accounted investees that are translated using the current rate method. The exchange gains and losses would become realized in earnings upon the disposition, liquidation or dilution of the investment that gave rise to such amounts.

 d)   Share-based Payments

Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive loss/income over the vesting period.   Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting is based on the number of options that eventually vest.  Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted.  As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied.   The cumulative  expense  is  not  adjusted  for  failure  to  achieve  a  market  vesting condition or where a non-vesting condition is not satisfied.

Where terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification is also charged to the statement of comprehensive loss/income over the remaining vesting period.

Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the statement of comprehensive loss/income, unless they are related to the issuance of shares. Amounts related to share issue costs are recorded as a reduction of share capital.

When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioral considerations.

All equity-settled share-based payments are reflected in contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital, adjusted for any consideration paid.

49

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 3           Summary of Significant Accounting Policies (continued)

d)   Share-based Payments (continued)

Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.

      e)   Income Taxes

Income tax expense comprises of current and deferred tax. Current tax and deferred tax are recognized in net income except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss/income.

Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.

Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax basis, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.

Recognition  of  deferred  tax  assets  for  unused  tax  losses,  tax  credits  and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting year the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

f)      Earnings / Loss Per Share

Basic earnings/loss per share is computed by dividing the net income or loss applicable to common shares of the Company by the weighted average number of common shares outstanding for the relevant year.

Diluted earnings/loss per common share is computed by dividing the net income or loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were converted.

There were no dilutive instruments (consisting of shares issuable on the exercise of options and warrants) outstanding on December 31, 2011 or December 31, 2010. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.

50

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

Note 3             Summary of Significant Accounting Policies (continued)

                          g)   Financial Instruments

Financial Assets

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.

Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

The Company’s financial instruments consist of cash, trade and other receivables, trade and accrued payables and due to parent company.

The Company has designated cash and trade receivables as loans and receivables, which are measured at amortized cost. Trade and accrued payables and due to parent company are designated as other liabilities which are measured at amortized cost.Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the period which are unpaid.

Impairment on Financial Assets

At each reporting date the Company assesses whether there is any objective evidence  that  a  financial  asset  or  a  group  of  financial  assets  is  impaired.  A financial asset or group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or the group of financial assets.

With the exception of equity instruments classified as available for sale, if, in a subsequent  period,  the  amount  of  the  impairment  loss  decreases  and  the decrease relates to an event occurring after the impairment was recognized; the previously recognized impairment loss is reversed through profit or loss. On the date of impairment reversal, the carrying amount of the financial asset cannot exceed its amortized cost had impairment not been recognized.

51

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 3            Summary of Significant Accounting Policies (continued)

      h)   Provisions

Provisions are recognized for liabilities of uncertain timing or amounts that have arisen as a result of past transactions, including legal or constructive obligations. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date.

       i)      Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, demand deposits with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value. For cash flow statement presentation purposes, cash and cash equivalents includes bank overdrafts.

       j)      Sharecapital

Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares and share warrants are classified as equity instruments.

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.

       k)   Finance income and expenses:

Finance  expense  comprises  interest  expense  on  borrowings, accretion  of the discount on provisions and impairment losses recognized on financial assets.

Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Foreign currency gains and losses, reported under finance income and expenses, are reported on a net basis.

 Note 4            Standards, Amendments and InterpretationsNot Yet Effective

Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatory for accounting years beginning after January 1, 2011 or later years. None of these is expected to have a significant effect on the consolidated financial statements, except for the following:

52

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 4            Standards, Amendments and InterpretationsNot Yet Effective (continued)

The  Company  has  early  adopted  the  amendments  to  IFRS  1  which  replaces references to a fixed date of ‘1 January 2004’ with ‘the date of transition to IFRSs’. This eliminates the need for the Company to restate derecognition transactions that occurred before the date of transition to IFRSs. The amendment is effective for year- ends beginning on or after July 1, 2011; however, the Company has early adopted the amendment. The impact of the amendment and early adoption is that the Company only applies International Accounting Standard (“IAS”) 39 derecognition requirements to transactions that occurred after the date of transition.

The following new standards, amendments and interpretations, which have not been early adopted in these financial statements, will or may have an effect on the Company’s future results and financial position:

IAS 12 Income Taxes (“IAS 12”)

IAS 12 was amended in December 2010 to remove subjectivity in determining on which basis an entity measures the deferred tax relating to an asset. The amendment introduces a presumption that an entity will assess whether the carrying value of an asset will be recovered through the sale of the asset. The amendment to IAS 12 is effective for reporting periods beginning on or after January 1, 2012. The company is currently  evaluating  the  impact  of  this  amendment  to  IAS  12  on  its  financial statements.

IAS 27 Separate Financial Statements (“IAS 27”)

IAS   27   replaced   the   existing   IAS   27   “Consolidated   and  Separate   Financial Statements”. IAS 27 contains accounting and disclosure requirements for investments in  subsidiaries,  joint  ventures  and  associates  when  an  entity  prepares  separate financial statements. IAS 27 requires an entity preparing separate financial statements to account for those investments at cost or in accordance with IFRS 9 Financial Instruments. IAS 27 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The company is currently evaluating the impact of this standard on its financial statements.

IAS 28 Investments in Associates and Joint Ventures (“IAS 28”)

IAS 28 was amended in 2011 and now includes the required accounting for joint ventures  as  well  as  the  definition  and  required  accounting  for  investments  in associates. The standard sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. Proportional consolidation is no longer an option for joint ventures. IAS 28 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The company  is  currently  evaluating  the  impact  of  this  amendment  to  IAS  28  on  its financial statements.

53

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 4            Standards, Amendments and InterpretationsNot Yet Effective (continued)

IFRS 9 Financial Instruments (“IFRS 9”)

IFRS 9 was issued in November 2009 and is the first step to replace current IAS 39, “Financial Instruments: Recognition and Measurement”. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. The company is currently evaluating the impact of IFRS 9 on its financial statements.

IFRS 10 Consolidated Financial Statements (“IFRS 10”)

IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 supersedes IAS 27 “Consolidated and Separate Financial Statements” and Standing Interpretations Committee (“SIC”)12 “Consolidation—Special Purpose Entities” and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The company is currently evaluating the impact of this standard on its financial statements.

IFRS 11 Joint Arrangements (“IFRS 11”)

IFRS 11 establishes principles for financial reporting by parties to a joint arrangement. IFRS 11 supersedes current IAS 31 “Interests in Joint Ventures and SIC 13 Jointly Controlled Entities-Non-Monetary Contributions by Venturers” and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The company is currently evaluating the impact of this standard on its financial statements.

IFRS 12 Disclosure of Interests in Other Entities (“IFRS 12”)

IFRS 12 applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The company is currently evaluating the impact of this standard on its financial statements.

IFRS 13 Fair Value Measurements (“IFRS 13”)

IFRS 13 defines fair value, sets out in a single IFRS framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies to IFRSs that require or permit fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements), except in specified circumstances. IFRS 13 is to be applied for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The company is currently evaluating the impact of this standard on its financial statements.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.

54

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

Note 5 Critical Accounting Estimates and Judgments

The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.

Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial statements within the next financial year are discussed below:

i) Income Taxes

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company’s current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

ii) Lascogon Contingent Consideration

There were 30,000,000 common shares of the Company issued into escrow which are to be awarded to the vendor of the investment in Lascogon upon the declaration of commerciality as full and final consideration for the investment; these shares are considered contingent consideration. These shares are to be released from escrow if the project was declared commercial were deemed to have zero value when they were issued and accordingly no liability has been recognized.

iii) Functional Currency

The Company evaluated its functional currency and determined that the United States Dollar was the functional currency of the Company. All accounts and transactions were converted into US dollars from the transition date. The Company determined that the effective date of the change in functional currency under IFRS was March 11, 2003.

Share capital and investments were converted from January 1, 2003.

55

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

       Note 5             Critical Accounting Estimates and Judgments (continued)

iv)  Impairment

The Company has determined that its investment in Lascogon is not impaired as at January 1, 2010. However, the Company’s previously recorded impairment of its investment in Lascogon at December 31, 2010 in accordance with pre- changeover Canadian GAAP is still appropriate under IFRS IAS 36.

           Note 6            Cash and Cash Equivalents

Cash at banks and on hand earns interest at floating rates based on daily bank deposit rates.

Note 7            Property, Plant and Equipment

Computer Equipment	December 31			December 31			January 1
	2011			2010			2010
Cost
Opening Cost	$	13,751			13,751			13,751
Additions		1,792			-			-
Ending Cost		15,543			13,751			13,751
Accumulated Depreciation
Opening Accumulated Depreciation	$	(10,377	)		(8,888	)		(8,888	)
Change for the year		(1,617	)		(1,489	)		-
Ending Accumulated Depreciation		(11,994	)		(10,377	)		(8,888	)
Carrying Value	$	3,549			3,374			4,863

56

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

Note 8                     Investment inassociates

The Company has the following investments accounted for using the equity method:

	December 31,		December 31,
	2011		2010
Forum Energy plc (“FEP”)	$	4,720,167	$	3,834,255
Lascogon Mining Corporation		-		-
	$	4,720,167	$	3,834,255

 As at January 1, 2010, the Company’s interest in FEP was 25.84% and on December 31, 2011 and December 31, 2010 it was 25.63%.

 At December 31, 2011, the Company held 8,550,200 shares of FEP with a fair value of $7,002,736 (December 31, 2010: $7,373,140).

 FEP  is  related  to  the  Company  by  virtue  of  three  common  directors  and  a common parent.

At December 31, 2011 FEP disclosed a contingent liability as the company remains  in  an  arbitration  process  with  Basic  Energy  Corporation  ("BEC")  in relation to certain assets acquired from BEC. Out of the $12 million of potential additional consideration, the FEP directors have assessed that $10 million would be payable; of this amount, $6.7 million has been paid up December 31, 2011, and the balance of $3.3 million is accrued within FEP’s current liabilities (December 31, 2010: $1.2 million). The FEP directors consider that a potential additional liability of $2 million is dependent upon net future field production levels from the acquired assets and will not become payable due to the current and forecast levels of production of these assets. FEC’s share of this contingent liability would amount to $512,000.

57

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 8    Investmentinassociates(continued)

i)       Investment in FEP (continued)

Summarized Financial Information for FEP is as follows:

	December 31		December 31
	2011		2010
Assets	$	61,322,000	$	50,355,000
Liabilities	$	13,893,000	$	6,346,000
Equity	$	47,429,000	$	44,009,000
Revenue	$	12,734,000	$	6,068,000
Net income (loss) for the year ended December 31	$	3,420,000	$	(558,000	)

ii) Investment in Lascogon Mining Corporation (“Lascogon”)

The investment in Lascogon is summarized as follows:
Balance at January 1, 2010	$	2,290,038
Equity income in investment in Lascogon		11,782
Impairment of investment in Lascogon		(2,301,820	)
Balance at December 31, 2011 and December 31, 2010	$	-

30,000,000 common shares of the Company that were issued into escrow, to be awarded to the vendor of the investment in Lascogon upon the declaration of commerciality as full and final consideration for the assignment of its rights to the Company, are considered contingent consideration which has been assessed as having $Nil value  and will be recorded as additional cost of the investment at fair value once it is likely that they will be issued.

As at December 31, 2011, in order for the Company to maintain its 40% interest without dilution, the Company would be required to pay cash calls totaling approximately $1,007,334.  The Company currently has no plans to make these payments and is not required to.  In December 2010, the Company wrote down its investment in Lascogon. Such a write-down was determined as a result of Lascogon determining that further development would not provide an acceptable return on investment. As at December 31, 2011 Lascogon had an immaterial amount of total assets and an immaterial loss for the year. The only significant balance that it holds is a due to parent liability.

The Company is related to Lascogon by virtue of a common ultimate parent and three common directors.

iii)       Investment in Metalore Mining Corporation (“Metalore”)

The Company still holds 35% of Metalore Mining Corporation however the project has been abandoned and the company has no operations and accordingly the investment cost has been fully impaired.

58

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 9            Due to ParentCompany

During the year ended December 31, 2009, the Company was advanced $273,000 by Philex Mining Corporation, the parent company of the group including the Company. The loan is unsecured, and was due on December 31, 2010 and bears interest at LIBOR plus 3 % per annum.  The interest rates on the loan as at December 31, 2011 and December 31, 2010 were 3.76% and 4.08% respectively.

To date no amount of the loan has been repaid and the balance, including accrued interest as of December 31, 2011 is $301,790 (December 31, 2010: $291,323). There have  been  no  discussions  on  the  repayment  of  the  outstanding  amount  and  no demand has been made by the parent company for repayment.

    Note 10          ShareCapital

a)   Authorized:

The Company is authorized to issue an unlimited number of common shares without par value; and

The Company is authorized to issue an unlimited number of Class A and Class B preferred convertible redeemable voting shares without par value.

Issued:

Common Shares	Number		Amount
Balance, January 1, 2010		434,143,765	$	14,232,397
Shares issued via private placement in 2010		5,000,000		2,500,000
Balance December 31, 2011 and December 31, 2010		439,143,765	$	16,732,397

 On January 7, 2010 Philex Mining Corporation subscribed for 5,000,000 shares at US$0.50 per share. The shares were issued on April 26, 2010.

 No preferred shares have been issued since the Company’s inception.

 b) Contributed Surplus:

Balance, January 1, 2010	$	2,832,666
Unexercised warrants transferred to contributed surplus in 2010		225,397
Balance, December 31, 2011 and December 31, 2010	$	3,058,063

59

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 10         ShareCapital(continued)

 c)    Warrants:

	Number			Amount
Balance, January 1, 2010		3,533,333		$	225,397
Expired and allocated to contributed surplus		(3,533,333	)		(225,397	)
Balance, December 31, 2011 and December 31, 2010		-		$	-

The warrants were exercisable until January 31, 2010 and allowed the holder to purchase one common share of the Company for every warrant held at US$0.0723 per share. The warrants expired unexercised on January 31, 2010 and the value of the unexercised warrants was transferred to contributed surplus.

                                          d) Nature and Purpose of Equity and Reserves

The reserves recorded in equity on the Company’s balance sheet include Contributed Surplus and Deficit.

Contributed Surplus is used to recognize the value of stock option grants prior to exercise.

Warrants is used to recognize the value of warrant grants prior to exercise.

Deficit is used to record the Company’s change in deficit from earnings and losses from period to period.

      e) Share based payments:

The Company has established a stock option plan whereby options may be granted to its directors, officers, consultants, and employees. The exercise price of each option equals the market price of the Company’s stock on the date of the grant and an option’s maximum term is five years. The options vest immediately.

	Number of Options			Weighted Average Exercise Price/Share
Outstanding and exercisable January 1 ,2010		17,520,000		$	0.07
Expired		(17,520,000	)		0.07
Outstanding and exercisable December 31, 2011 and December 31, 2010		-		$	-

There were no stock options outstanding on December 31, 2011 and December 31, 2010 and none were issued between January 1, 2010 and December 31, 2011.

60

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 11          Related Party Transactions and Balances

During the year ended December 31, 2011 general and administrative expenses included key management personnel compensation totaling $218,645 (2010: $242,000) (Note 12).

During the year ended December 31, 2011 the Company incurred an interest charge of $10,467 (2010: $10,975) on a loan from the parent of the Company (Note 9).

Included in accounts payable and accrued liabilities at December 31, 2011 is $332 (December 31, 2010; $16,542) owed to directors, officers and companies controlled by them for unpaid consulting fees and or expenses.

In addition, at December 31, 2011, the Company owed Lascogon Mining Corporation $18,895 for audit fees paid on behalf of the Company for preparation of an annual report to be filed in the United States.

Related party transactions are measured at fair value.

 Note 12         Nature of Expenses

General and administrative expenses include	December 31,		December 31,
	2011		2010
Professional fees	$	128,786	$	169,849
Bank charges		3,799		4,027
Listing and filing fees		20,983		19,904
Office and miscellaneous		59,470		64,045
Consulting (Note 11)		218,645		242,000
Engineering and geological expenses		5,863		11,926
Amortization		1,617		1,489
Foreign exchange		1,983		3,323
	$	441,146	$	516,563

 Note 13         Income Taxes

	December 31,			December 31,
	2011			2010
Income (loss) before income taxes	$	435,290		$	(2,925,257	)
Tax expense (recovery) based on statutory rate of 26.5% (2010:28.5%)		115,000			(819,000	)
Change in tax rates on deferred tax		(7,000	)		103,000
Impact of foreign exchange as a result of a change in functional currency		20,000			-
Foreign currency adjustment on nonmonetary items		54,000			(118,000	)
Non-deductible expenses		1,000			-
Non-taxable portion of capital loss (gain)		(111,000	)		300,000
Changes in unrecognized deferred tax assets		(72,000	)		549,000
Total income tax expense (recovery)	$	-		$	-

61

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 13         Income Taxes (Continued)

Changes to the federal and provincial tax rates were announced in 2011 which resulted in an adjustment to the opening carrying value of temporary differences.

The nature and tax effect of the temporary differences giving rise to the deferred tax assets and liabilities at December 31, 2011 and 2010 are summarized as follows:

	December 31, 2011			December 31, 2010
Non-capital losses	$	1,680,000		$	1,588,000
Investments		1,570,000			1,734,000
Unrecognized deferred tax assets		(3,250,000	)		(3,322,000	)
	$	-		$	-

As at December 31, 2011, the Company had estimated non-capital losses for Canadian tax purposes of $6,722,000 which may be carried forward to offset future years’ taxable income. These losses will expire as follows:

Year of Expiry	Taxable Losses
2014	$	1,231,000
2015		1,670,000
2026		1,630,000
2027		38,000
2028		591,000
2029		489,000
2030		622,000
2031		451,000
		6,722,000

The potential benefit of these carry-forward non-capital losses has not been recognized in these financial statements as it is not considered probable that sufficient future taxable profit will allow the deferred tax asset to be recovered.

62

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

Note 14          Financial Instruments and Risk Management

The Company is exposed through its operations to the following financial risks:

- Market Risk

- Credit Risk

- Liquidity Risk

In common with all other businesses, the company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Company’s exposure to financial instrument risks, its objectives, polices and processes for managing those risks or the methods used to measure them from previous years unless otherwise stated in the note.

General Objectives, Policies and Procedures

The Board of Directors has overall responsibility for the determination of the Company’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s finance function. The Board of Directors receive quarterly reports from the Company’s Chief Financial Officer through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.

a) Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised of: foreign currency risk, interest rate risk and commodity price risk.

Foreign currency exchange risk

The Company is exposed to foreign currency fluctuations for general and administrative transactions denominated in Canadian Dollars. The majority of the Company’s cash is kept in U.S. dollars. As at December 31, 2011, the Company held an insignificant amount of cash denominated in Canadian dollars that would e subject to exchange rate fluctuations between Canadian dollars and U.S. dollars. As at December 31, 2011, the Company held an insignificant amount of financial liabilities denominated in Canadian dollars that would be subject to exchange rate fluctuations between Canadian dollars and U.S. dollars.

63

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 14         Financial Instruments and Risk Management

Interest Rate Risk

Interest rate risk is the risk that the fair values and future cash flows of the Company will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its cash and cash equivalents. The Company did not have any borrowings outstanding as at December 31, 2011 except the loan from its parent company. The loan from the parent company has terms that include interest at LIBOR plus 3% thus exposing the Company to a potential cash flow interest rate risk due to this borrowing having a variable interest rate. Every one percent change in interest rates results in an increase or decrease in the interest payable of $2,730 per year.

Commodity Price Risk:

Equity risk is the uncertainty associated with the valuation of assets arising from changes in equity markets. The Company is exposed to this risk through its equity holdings. The investment in FEP is monitored by Management with decisions on sale taken at Board level. The Company is exposed to Commodity Price Risk as FEP is actively involved in exploration for oil and gas. A significant increase or decrease in commodity prices will likely have a resultant effect on the Company’s share price.

b) Credit risk

The Company maintains cash deposits in one chartered Canadian bank which, from time to time, exceed the amount of depositors insurance available in each respective account. Management assesses the financial condition of this bank and believes that the possibility of any credit loss is minimal.

c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company manages liquidity by maintaining cash balances available to meet its anticipated operational needs. Liquidity requirements are managed based on expected cash flow to ensure that there is adequate capital to meet short-term and long-term obligations. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis and its growth plans. At December 31, 2011 the Company’s accounts payable and accrued liabilities were $89,241, all of which fall due for payment within twelve months of the balance sheet date. In addition, the Company’s short term loans were $301,790 which is due on demand. The Company has minimal long-term commitments.

The carrying values of accounts payable, due to parent company and accrued liabilities approximate their fair values due to the relatively short periods to maturity of the instruments.

64

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 15         Capital Management

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern, to provide an adequate return to shareholders, to meet external capital requirements on credit facilities and to support any growth plans.

The capital of the Company consists of the items included in shareholders’ equity and cash net of debt obligations. The Company monitors capital based on the debt to debtplus-equity ratio. Debt is total debt shown on the balance sheet, less cash. Debt-plusequity is calculated as debt shown on the balance sheet, plus total shareholders’ equity which includes share capital, warrants, contributed surplus and deficit. Currently the Company has no debt except for a short-term loan due to its parent company. The Company’s Board of Directors approves management’s annual capital expenditures plans and reviews and approves any material debt borrowing plans proposed by the Company’s

management.

 Note 16         Earnings (Loss) Per Share

Weighted Average Number of Common Shares

	December 31, 2011		December 31, 2010
Issued at January 1		439,143,765		434,143,765
Effect of shares issued on April 26, 2010		-		1,670,000
Weighted average number of common shares (basic and diluted)		439,143,765		437,554,724

 Note 17         Segmental Reporting

The Company has one reportable operating segment which is primarily the business of exploration and development of oil and gas and other mineral related opportunities, through companies in which the Company invests.

	Number			Amount
Balance, January 1, 2010		3,533,333		$	225,397
Expired and allocated to contributed surplus		(3,533,333	)		(225,397	)
Balance, December 31, 2011 and December 31, 2010		-		$	-

 Note 18         First Time Adoption of International Financial Reporting Standards

The Company’s financial statements for the year-ending December 31, 2011 are the first annual financial statements prepared in accordance with IFRS. IFRS 1, First Time Adoption of International Financial Reporting Standards (“IFRS 1”), requires that comparative financial information be provided. As a result, the first date at which the Company has applied IFRS was January 1, 2010 (the “Transition Date”). IFRS 1 requires first-time adopters to retrospectively apply all effective IFRS standards as of the reporting date, which for the Company is December 31, 2011. Therefore, the financial statements for the year-ended December 31, 2011, the comparative information presented in these financial statements for the year-ended December 31, 2010 and the opening IFRS statement of financial position at January 1, 2010 are prepared in accordance with IFRS standards effective at the reporting date. However, IFRS 1 also provides for certain optional exemptions and certain mandatory exceptions for first time IFRS adopters. Prior to transition to IFRS, the Company prepared its financial statements in accordance with pre-changeover Canadian Generally Accepted Accounting Principles (“pre-changeover Canadian GAAP”).

65

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 18         First Time Adoption of International Financial Reporting Standards (Continued)

In preparing the Company’s opening IFRS financial statements, the Company has adjusted amounts reported previously in the financial statements prepared in accordance with pre-changeover Canadian GAAP.

An explanation of how the transition from pre-changeover Canadian GAAP to IFRS has affected the Company’s financial position, financial performance and cash flows is set out in the following notes and tables:

Optional Exemptions

The IFRS 1 applicable exemptions and exceptions applied in the conversion from prechangeover Canadian GAAP to IFRS are as follows:

Business Combinations / Investments in associates

IFRS 1 allows the first-time adopter to restate only those business combinations occurring on or after the date of transition to IFRS to comply with IFRS 3. This same exemption is also available in respect of investments in associates under IAS 28. For investments in associates that occurred prior to the date of transition to IFRS, IFRS 1 allows the first-time adopter to elect not to restate those prior investments in associates to comply with IAS 28. The Company has elected not to restate any prior business combinations or investments in associates under this exemption.

Share-based Payment Transactions

The Company has elected not to retrospectively apply IFRS 2 “Share Based Payment” to equity instruments that were granted and had vested before the Transition Date. As a result of applying this exemption, the Company will apply the provisions of IFRS 2 only to all outstanding equity instruments that are unvested as at the Transition Date to IFRS.

Compound Financial Instruments

The Company has elected not to retrospectively separate the liability and equity components of compound instruments for which the liability component is no longer outstanding at the date of transition to IFRS.

66

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 18          First Time Adoption of International Financial Reporting Standards (Continued)

Optional Exemptions (Continued)

 Foreign Currency

In accordance with IFRS 1, the company has elected to deem all foreign currency translation differences that arose prior to the transition date in respect of foreign operations and the company’s share of associate’s translation differences to be nil and reclassified amounts recorded in other comprehensive loss as determined in accordance with pre-changeover Canadian GAAP to retained earnings.

Derecognition of Financial Assets and Liabilities

The Company has applied the derecognition requirements in IAS 39 Financial Instruments: Recognition and Measurement prospectively from the Transition Date. As a result any non-derivative financial assets or non-derivative financial liabilities derecognized prior to the Transition Date in accordance with pre-changeover Canadian GAAP have not been reviewed for compliance with IAS 39.

Estimates

The estimates previously made by the Company under pre-changeover Canadian GAAP were not revised for the application of IFRS except where necessary to reflect any difference in accounting policy or where there was objective evidence that those estimates were in error. As a result the Company has not used hindsight to revise estimates.

Reconciliations of pre-changeover Canadian GAAP Equity and Comprehensive Income to IFRS

IFRS 1 requires an entity to reconcile equity, comprehensive income and cash flows for prior periods. The changes made to the statements of financial position and statements of comprehensive income as shown below have resulted in reclassifications of various amounts on the statements of cash flows; however, as there have been no material adjustments to the net cash flows, no reconciliation of the statement of cash flows has been prepared.

67

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 18          First Time Adoption of International Financial Reporting Standards (Continued)

Reconciliation of Statement of Financial Position as at January 1, 2010 – Transition Date

	Note		Canadian GAAP Canadian$			Canadian GAAP US$			Effect of transfer to IFRS		IFRS USD$
ASSETS
Current
Cash		a	$	39,072		$	37,176		$		$	37,176
Receivable		a		975			928					928
Prepaid expenses		a		19,658			18,704					18,704
				59,705			56,808					56,808
Equipment		a		5,111			4,683					4,683
Investment in Associated		a,b,c,d		3,667,286			4,619,377			1,614,712		6,234,089
			$	3,732,102		$	4,681,048		$	1,614,712	$	6,295,760
LIABILITIES
Current
Trade and accrued payables		a	$	63,198		$	60,131		$		$	60,131
Due to parent company		a		294,646			280,348					280,348
				357,844			340,479					340,479
SHAREHOLDERS’ EQUITY
Share capital		a		17,339,665			14,232,397					14,232,397
Warrants		a		267,501			225,397					225,397
Contributed surplus		a		3,794,939			2,832,666					2,832,666
Accumulated other comprehensive loss		a,c		(1,979,909	)		-					-
Deficit		d		(16,047,938	)		(12,949,891	)		1,614,712		(11,335,179	)
				3,374,258			4,340,569			1,614,712		5,955,281
			$	3,732,102		$	4,681,048		$	1,614,712	$	6,295,760

68

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 18         First Time Adoption of International Financial Reporting Standards (Continued)

Reconciliation of Statement of Financial Position as at December 31, 2010

	Note		Canadian GAAP Canadian$			Canadian GAAP US$			Effect of transfer to IFRS		IFRS USD$
ASSETS
Current
Cash		a	$	2,049,989		$	2,061,119		$		$	2,061,119
Receivable		a		1,241			1,248					1,248
Prepaid expenses		a		18,766			18,868					18,868
				2,069,996			2,081,235					2,081,235
Equipment		a		3,578			3,374					3,374
Investment in Associated		a,b,c,d		514,754			2,219,543			1,614,712		3,834,255
			$	2,588,328		$	4,304,152		$	1,614,712	$	5,918,864
LIABILITIES
Current
Trade and accrued payables		a	$	96,990		$	97,517		$		$	97,517
Due to parent company		a		289,750			291,323					291,323
				386,740			388,840					388,840
SHAREHOLDERS’ EQUITY
Share capital		a		19,916,915			16,732,397					16,732,397
Contributed surplus		a		4,062,440			3,058,063					3,058,063
Accumulated other comprehensive loss		a,b,c		(2,481,046	)		-					-
Deficit		d		(19,296,721	)		(15,875,148	)		1,614,712		(14,260,436	)
				2,201,588			3,915,312			1,614,712		5,530,024
			$	2,588,328		$	4,304,152		$	1,614,712	$	5,918,864

69

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 18         First Time Adoption of International Financial Reporting Standards (Continued)

Reconciliation of the Statement of Comprehensive Loss for the Year Ended December 31, 2010

	Note		Canadian GAAP Canadian$			Canadian GAAP US$			Effect of transfer to IFRS	IFRS USD$
General and administrative expenses
Amortization		a	$	1,533		$	1,489			$	1,489
General and administration		a		586,719			515,074				515,074
				(588,252	)		(516,563	)			(516,563	)
Other items:
Equity loss in investments		a,b		(56,031	)		(100,843	)			(100,843	)
Gain (loss) on dilution of investment in FEP		a,b		12,250			2,829				2,829
Interest expense		a		(11,315	)		(10,975	)			(10,975	)
Interest income		a		2,179			2,115				2,115
Write-down of investments		a,b		(2,607,614	)		(2,301,820	)			(2,301,820	)
Net loss and comprehensive loss for the year			$	(3,248,783	)	$	(2,925,257	)		$	(2,925,257	)
Basic and diluted loss per common share			$	(0.01	)	$	(0.01	)		$	(0.01	)
Weighted average number of shares outstanding				437,554,724			437,554,724				437,554,724

a)   Upon conversion to IFRS in accordance with IFRS 1, the Company evaluated its functional currency and determined that the United States Dollar was the functional currency of the Company under IFRS whereas under Previous GAAP it was Canadian Dollars. All accounts and transactions (other than stated below) were converted into US dollars from the transition date. Share capital and investments were converted from January 1, 2003.

b)    As a result of re-evaluation of the functional currency on the transition to IFRS to United States Dollars, investments were translated into United States dollars from inception and equity share of investments and dilution gains and losses were recalculated. In addition the impairment of FEP’s carrying value under Prechangeover Canadian GAAP in the amount of $1,614,712 was reversed under IFRS as permitted by IAS 28 and foreign currency translation adjustments were also set to zero because FEP’s functional currency is the United States dollar.

70

FEC RESOURCES INC.

NOTES TO THE FINANCIAL STATEMENTS December 31, 2011

(Stated in United States Dollars)

 Note 18         First Time Adoption of International Financial Reporting Standards (Continued)

c)   d)   In accordance with IFRS 1, the company has elected to deem all foreign currency translation differences that arose prior to the transition date in respect of foreign operations and the company’s share of associate’s translation differences to be nil and reclassified amounts recorded in other comprehensive loss as determined in accordance with pre-changeover Canadian GAAP to retained earnings. In addition, as a result of the change in functional currency to United States Dollars which is the same as FEP, translation differences on conversion of FEP accounts to Canadian dollars were reversed. Translation differences on Lascogon were immaterial and therefore were excluded from Other Comprehensive Income calculations.   As a further adjustment to the IFRS transition previously presented in the Company’s 2011 interim financial statements, management has adjusted the carrying value of its investment in associate (FEP) at transition for the cumulative effect of its share in the losses attributable to the non-controlling interest in FEP’s consolidated statements, which had been offset against the impairment reversal noted above. This has resulted

71

Report of Independent Registered Public Accounting Firm

Board of Directors

Forum Energy Plc

Chertsey, United Kingdom

We have audited the accompanying consolidated statement of financial position of Forum Energy Plc as of 31 December 2011 and 2010 and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the two years in the period ended 31 December 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audits includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Forum Energy Plc at 31 December 2011 and 2010, and the results of its operations and its cash flows for each of the two years in the period ended 31 December 2011, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

BDO LLP

London, United Kingdom

[Date]

72

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31DECEMBER 2011

			Year ended			Year ended
			31-Dec			31-Dec
			2011			2010
	Note		US$’000			US$’000
Revenue				12,734			6,068
Cost of sales				(6,913	)		(4,009	)
Gross profit				5,821			2,059
Administrative expenses		3		(1,987	)		(2,397	)
Profit/(loss) from operations				3,834			(338	)
Finance income		5		7			15
Finance expenses		6		(421	)		(235	)
Profit/(loss) before tax				3,420			(558	)
Taxation		7		–			–
Profit/(loss) for the year				3,420			(558	)
Total comprehensive profit/(loss) for the year				3,420			(558	)
Profit/(loss) and total comprehensive profit/(loss) attributable to:
Owners of the Parent				3,457			(438	)
Non-controlling interest				(37	)		(120	)
				3,420			(558	)
Earnings/(loss) per Ordinary Share (US cents) attributable to equity holders of the Parent			US Cents			US Cents
Basic and diluted		8		10.4			(1.3	)
All of the results of the Group during the years relate to continuing activities.
The Notes form an integral part of the financial statements

73

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31DECEMBER 2011

					Share									Non-			Total
	Share		Share		option			Retained						controlling			capital and
	capital		premium		reserve			deficit			Total			interest			reserves
Group	US$’000		US$’000		US$’000			US$’000			US$’000			US$’000			US$’000
Balance as at 1 January 2010		5,941		50,869		493			(14,326	)		42,977			1,454			44,431
Total comprehensive loss for the year		–		–		–			(438	)		(438	)		(120	)		(558	)
Transfer to retained deficit		–		–		(55	)		55			–			–			–
Issue of shares (net of issue costs)		41		95		–			–			136			–			136
Balance as at 31 December 2010		5,982		50,964		438			(14,709	)		42,675			1,334			44,009
Total comprehensive income/(loss) for the year				-		-			3,457			3,457			(37	)		3,420
Balance as at 31 December 2011		5,982		50,964		438			(11,252	)		46,132			1,297			47,429
Share capital represents the nominal value of shares issued. The share premium account holds the balance of consideration received in excess of the par value of the shares. The share premium account can be used to pay any unpaid subscriptions.
The share option reserve relates to the cumulative fair value of options charged to the statement of comprehensive income adjusted for transfer on exercise, cancellation or expiry.
The deficit reserve is the cumulative net gains and losses recognised in the statement of comprehensive income adjusted for transfer on exercise, cancellation or expiry of options from the share option reserve.

The Notes form an integral part of the financial statements

74

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31DECEMBER 2011

			2011			2010
	Note		US$’000			US$’000
Assets:
Non-current assets
Property, plant and equipment		9		5,888			3,673
Intangible assets		10		50,730			42,630
Investments		11		24			18
Total non-current assets				56,642			46,321
Current assets
Inventories		12		57			419
Trade and other receivables		13		1,862			1,151
Cash and cash equivalents		18		2,761			2,464
Total current assets				4,680			4,034
Total assets				61,322			50,355
Liabilities:
Non-current liabilities
Loans		14		6,000			–
Other liabilities and provisions		14		3,929			3,994
Total non-current liabilities		14		9,929			3,994
Current liabilities
Trade payable and other payables		14		3,964			2,352
Total current liabilities				3,964			2,352
Total liabilities				13,893			6,346
Total net assets				47,429			44,009
Capital and reserves attributable to equity holders of the Company
Share capital		15		5,982			5,982
Share premium		15		50,964			50,964
Share option reserve				438			438
Retained deficit				(11,252	)		(14,709	)
				46,132			42,675
Non-controlling interest				1,297			1,334
Total equity				47,429			44,009

The financial statements were approved and authorised for issue by the Board on XXXXXXX 2012.

Paul Wallace

Finance Director

75

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31DECEMBER 2011

			Year ended			Year ended
			31-Dec			31-Dec
			2011			2010
	Note		US$’000			US$’000
Cash flows from operating activities
Profit/(loss) before tax for the year				3,420			(558	)
Adjustments for:
Depreciation		9		4,718			2,454
Gain on financial assets		5		(6	)		(13	)
Finance income		5		(1	)		(2	)
Foreign exchange losses		6		160			35
Interest paid on loan facility		6		261			-
				8,552			1,916
Increase in trade and other receivables				(711	)		(512	)
Decrease/(increase) in inventories				362			(354	)
Increase in trade and other payables				1,547			843
Increase in provisions and employee benefits				-			26
Net cash flows from operating activities				9,750			1,919
Investing activities:
Purchase of property, plant and equipment				(6,934	)		(2,001	)
Disposal of property, plant and equipment		1		42
Purchase of intangible assets		10		(8,100	)		(1,771	)
Finance income		5		1			2
Finance expense		6		(261	)		-
Net cash from investing activities				(15,293	)		(3,728	)
Financing activities:
Issue of ordinary share capital (net of issue costs)		15		-			136
Loan facility drawn down				6,000			-
Net cash from financing activities				6,000			136
Net increase/(decrease) in cash and cash equivalents				457			(1,673	)
Cash and cash equivalents at beginning of the year				2,464			4,172
Exchange losses on cash and cash equivalents				(160	)		(35	)
Cash and cash equivalents at end of the year		18		2,761			2,464

76

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31DECEMBER 2011

1 ACCOUNTING POLICIES

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards IFRSs and IFRIC interpretations, issued by the International Accounting Standards Board (IASB).

i) Standards, amendments and interpretations effective in 2011:

The following new standards and amendments to standards are mandatory for the first time for the Group for the financial year beginning 1 January 2011. Except as noted, the implementation of these standards did not have a material effect on the Group:

Standard		Impact on initial application	Effective date
IAS 24 (Revised)	Related party disclosures	The revised standard responds to concerns that the previous disclosure requirements and the definition of a related party were too complex and difficult to apply in practice, especially in environments where government control is pervasive. The group applied the revised standard from 1 January 2011.	1 January 2011
Improvements to IFRSs (2010)		The improvements in this amendment clarify the requirements of IFRSs and eliminate inconsistencies within and between standards. The group applied the amendments from 1 January 2011.	11 January 2011

ii) Standards, amendments and interpretations effective in 2011 but not relevant for the Group:

Standard		Impact on initial application		EEffective date
IAS 32 (Amendment)	Classification of rights issues	The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuers. The amendment requires for rights issues to be accounted for as equity provided the rights are offered pro-rata to all existing owners of the entity. The amendment is not relevant to the group as it had no rights, options or warrants issues.	1 February 2010
IFRIC 19	Extinguishing financial liability with equity instruments	This interpretation addresses transactions in which an entity issues equity instruments to a creditor in return for the extinguishment of all or part of a financial liability. The group applied this interpretation from 1 January 2011.	1 July 2010
IFRS 1 (Amendment)	First-time adoption of IFRS	The amendment permits first-time adopters to use the same transitional provisions as are available to existing preparers of IFRS. This amendment is not relevant to the group as it is existing IFRS preparer.	1 July 2010

77

IFRIC 14 / IAS 19 (Amendment) Limit on a defined benefit asset, minimum funding requirements and their interaction The amendment applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements.   The amendment is not relevant to the group as it is not subject to minimum funding requirement.   11 January 2011

iii. Standards, amendments and interpretations that are not yet effective and have not been early adopted:

Standard			Impact on initial application	Effective date
IFRS 7 (Amendments)	Disclosures – transfers of financial assets	The amendment requires the disclosure of information in respect of all transferred financial assets that are not derecognised and for any continuing involvement in a transferred asset, existing at the reporting date. The Group will apply the amendments from 1 January 2012.		1 July 2011
IFRS 1 (Amendments)	Severe Hyperinflation and removal of fixed dates for first-time adopters	Management do not expect this amendment to be relevant to the group.		1 July 2011
IAS 12 (Amendment)	Deferred tax: recovery of underlying assets	The amendment introduces the presumption, when measuring the deferred tax relating to an asset, that the entity will normally recover its carrying amount through sale. Management do not expect this amendment to be relevant to the Group.		1 January 2012
IAS 1 (Amendment)	Presentation of items of other comprehensive income	The amendment requires companies to group together items within other comprehensive income (OCI) that may be reclassified to the profit or loss section of the income statement. The group will apply the amendment from 1 January 2013.		1 July 2012
IFRS 10	Consolidated financial statements	The new standard replaces the consolidation requirements in SIC-12 “Consolidation – special purpose entities” and IAS 27 “Consolidated and separate financial statements”. The group will apply the standard from 1 January 2013.		1 January 2013
IFRS 11	Joint arrangements	The new standard requires that a party to a joint arrangement recognises its rights and obligations arising from the arrangements rather than focusing on the legal form. The group will apply the standard from 1 January 2013.		1 January 2013

78

IFRS 12	Disclosure of interest in other entities	The standard includes the disclosure requirements for all forms of interest in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. The group will apply the standard from 1 January 2013.	1 January 2013
IFRS 13	Fair value measurement	The standard defines fair value, sets out a framework for measuring fair value and requires disclosures about fair value measurements. The group will apply the standard from 1 January 2013.	1 January 2013
IAS 27 (Amendment 2011)	Separate financial statements	The amendment contains accounting and disclosure requirements for investment in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. The group will apply the amendment from 1 January 2013.	1 January 2013
IAS 28 (Amendment 2011)	Investments in associates and joint ventures	The amendment includes the required accounting for joint ventures as well as the definition and required accounting for associates.  Effect not relevant.	1 January 2013
IAS 19 (Amendment 2011)	Employee benefits	The main changes introduced by the amendment revolve around the accounting for defined benefit pension schemes. Management do not expect this amendment to be relevant to the group as it has no defined benefit pension scheme in place.	1 January 2013
IFRIC 20	Stripping costs in the production phase of a surface mine	This interpretation applies to waste removal (stripping) costs that are incurred in surface mining activity, during the production phase of the mine. Effect not relevant. .	1 January 2013
IFRS 7 (Amendment 2011)	Disclosures – offsetting financial assets and financial liabilities	The amendment introduces disclosures to enable users of financial statements to evaluate the effect or potential effect of netting arrangements on entity’s financial position. The group will apply the amendment from 1 January 2013.	1 January 2013
IFRS 1 (Amendment 2012)	Government Loans	The Amendments add an exception to the retrospective application of IFRSs to require that first-time adopters apply the requirements in IFRS 9 Financial Instruments (or IAS 39, if IFRS 9 has not yet been adopted) and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance prospectively to government loans existing at the date of transition to IFRSs. Effect not relevant.	1 January 2013

79

IAS 32 (Amendment 2011)	Offsetting financial assets and financial liabilities	The amendment seeks to clarify rather than change the off-setting requirements previously set out in IAS 32. The group will apply the amendment from 1 January 2014.	1 January 2014
IFRS 9	Financial instruments	The standard will eventually replace IAS 39 in its entirety.  However, the process has been divided into three main components: classification and measurement, impairment and hedge accounting. The Group will apply the standard from 1 January 2013.	1 January 2015

The Group is evaluating the impact of the above pronouncements but they are not expected to have a material impact on the Group’s earnings or shareholders’ funds.

Going concern

On 15 February 2010, the Company was awarded the Service Contract over the SC72 licence area. The first sub phase Work Programme was completed in March 2011. The second sub phase Work Programme requires a minimum spend commitment of US$6 million by 30 June 2013.

There is also $3.3 million of additional consideration payable to Basic Petroleum the Galoc oil field, after paying US$6.7 million.

The Group will be able to meet the requirements of these commitments through the remaining US$4 million facility agreement entered into between the Group and Philex Mining Corporation, the 30% farm-out to Monte Oro Resources and from revenues generated from the Galoc oil field.

On this basis and after making enquiries, the Directors have a reasonable expectation that the Company and the Group as a whole have adequate resources to continue in operational existence for a period of not less than twelve months from the date of signing of these financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Basis of consolidation

The consolidated financial statements present the results of the Company and its subsidiaries (the Group) as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.

Business combinations

The consolidated financial statements incorporate the results of business combinations using the acquisition method of accounting. In the consolidated statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained.

Joint ventures and other interests

The Group enters into arrangements with third parties for the joint exploration and development activities under contractual arrangement. It classifies these arrangements as jointly controlled operations for the purposes of IAS 31. The Group also enters into arrangements with third parties for development and production activities under contractual agreement where the Group has an interest in the assets. Accordingly, the Group only accounts for its share of assets, liabilities, revenues and expenses, classified in the appropriate Statement of Financial Position and Statement of Comprehensive Income headings.

The Group’s interest in the Galoc, Nido and Matinloc fields are accounted for by the Group using proportionate consolidation which brings into account the Group’s share of assets, liabilities, revenue and operating costs related to their fields.

Foreign currency

The functional and presentation currency of all the Group companies  is the US$. Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates (the ‘functional currency’) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the statement of financial position date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the statement of comprehensive income.

80

Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual right to the cash flow expires or when substantially all the risk and rewards of ownership are transferred. Financial liabilities are de-recognised when the obligations specified in the contract are either discharged or cancelled.

Revenue

Revenue is derived from sales of oil to third party customers. Sales of oil are recognised at the time of delivery of the product to the purchaser. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and other sales tax or duty

Financial assets

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group’s accounting policy for each category is as follows:

Trade and other receivables and other financial assets – These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers, but also incorporate other types of contractual monetary asset such as advances made to affiliated entities. They are initially recognised at fair value plus transaction costs and subsequently carried at amortised cost, using the effective interest method, less any provision for impairment. If the need for impairment of a receivable arises, the value of the provision, representing the expected loss from not being able to recover such receivables, is recognised as a cost of sale.

Cash and cash equivalents – Cash comprises bank and cash deposits at variable interest rates. Any interest earned is accrued monthly and classified as interest income. Cash equivalents comprise short-term, highly liquid investments with original maturities of three months or less at the date acquired, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of IAS 39 these amounts are classified as loans and receivables where appropriate.

Financial liabilities

Trade payables and other short-term monetary liabilities – These are initially measured at fair value and subsequently recognised at amortised cost using effective interest rate method.

There are long-term loans with related parties which bear interest at a rate lower than that which the Directors consider the Group would bear if the facility had been granted by a third party. Such borrowings are recognised initially at fair value and are subsequently stated at amortised cost.

Share-based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income over the vesting period.

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the statement of comprehensive income is charged with the fair value of goods and services received.

Tax

Tax on the profit or loss from ordinary activities includes current and deferred tax.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowed and is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date. Income tax is charged or credited to profit or loss, except when the tax relates to items credited or charged directly to equity, in which case the tax is also dealt with in equity.

81

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base, except for differences arising on the initial recognition of goodwill for which amortisation is not tax deductible, the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit and on investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either the same taxable Group Company or different Group entities, which intend either to settle current tax assets and liabilities on a net basis or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Unevaluated oil and gas properties

The Group applies the full cost method of accounting, having regard to the requirements of IFRS 6 ‘Exploration for and Evaluation of Mineral Resources’. Under the full cost method of accounting, all costs associated with exploration for and evaluation of mining and oil and gas properties are capitalised in geographical pools pending determination of the feasibility of each project. Such cost pools are based on geographic areas and are not larger than a segment. The Group currently has one pool, the Philippines.

Costs which are capitalised include costs of licence acquisition, technical services and studies, exploration drilling and testing and appropriate technical and administrative expenses but do not include general overheads or costs incurred prior to having obtained the legal rights to explore an area, which are expensed directly to the statement of comprehensive income as they occur.

When the technical and commercial feasibility of a mining or oil or gas project has been determined, the related expenditures will be transferred to property, plant and equipment as proved properties. Where a licence is relinquished, or a project is abandoned, or is considered to be of no further commercial value to the Company, the related costs will be written-off to the statement of comprehensive income.

Unevaluated oil, gas and mining costs are assessed at each period end and where there are indications of impairment. Any amount by which carrying costs exceed recoverable amounts will be written-off. The recoverability of unevaluated oil, gas and mining costs is dependent upon the discovery of economically recoverable reserves, the ability of the Group to obtain necessary financing to complete the development of reserves and future profitable production or proceeds from the disposition of recoverable reserves.

At the completion of the exploration phase, if technical feasibility is demonstrated and commercial reserves are discovered, then, following the decision to continue into the development phase, the carrying value of the relevant asset will be reclassified as an oil and gas asset within property, plant and equipment, but only after the carrying value of the asset has been assessed for impairment in accordance with the impairment of property, plant and equipment assets policy. Unevaluated oil and gas properties are not amortised prior to reclassification to the property, plant and equipment phase.

Property, plant and equipment

Depletion and amortisation of proved oil and gas mining properties is provided over the estimated commercial life of each property and computed using the units of production method based on proved reserves as determined annually by management. Depletion is included with cost of sales within the statement of comprehensive income. Depreciation is included within administrative expenses within the statement of comprehensive income.

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. The corresponding liability is recognised within provisions.

Depreciation is provided on all items of property and equipment to write-off the carrying value of items over their expected useful economic lives. It is applied at the following rates:

Drilling equipment	– 20% per annum straight line
Transport and motor equipment	– 20% per annum straight line
Furniture, fixtures and fittings	– 20% per annum straight line
Tools and other equipment	– 33% per annum straight line

82

Impairment of property, plant and equipment

Property, plant and equipment are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash-generating unit (i.e. the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows).

Any impairment charge is included in the administrative expenses line item in the statement of comprehensive income, except to the extent they reverse gains previously recognised in the statement of recognised income and expense.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

Provision for abandonment costs

Provision for abandonment costs is recognised at the commencement of production. The amount recognised is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. A corresponding tangible fixed asset of an amount equivalent to the provision is also created. This is subsequently depreciated as part of the capital costs of production. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the fixed assets.

Leased assets

Where assets are financed by leasing agreements that do not give rights approximating ownership, these are treated as operating leases. The annual rentals are charged to the statement of comprehensive income on a straight line basis over the term of the lease.

Listed investments

Listed investments are held at current market value with any gains or losses recognised in other comprehensive income.

Critical accounting judgements and key sources of estimation uncertainty

In the process of applying the Group’s accounting policies, which are described in Note 1, Management has made the following judgements which may be key sources of estimation uncertainty and  have the most significant effect on the amounts recognised in the financial statements:

Recoverability of exploration and evaluation costs – Under the full cost accounting method of accounting for exploration costs, such costs are capitalised as intangible assets and assessed for impairment on a cost pool basis when circumstances suggest that the carrying amount off the costs pool may exceed its recoverable value and, therefore, there is a potential risk of an impairment adjustment. This assessment involves judgement as to;the likely future commerciality of the asset and when such commerciality should be determined: future revenue and costs pertaining to any concession based on proved plus probable, prospective and contingent resources and the discount rate to be applied to such revenues and cost for the purpose of deriving a recoverable value. Management have reviewed the recoverability of the assets and consider this to be greater than the current net book value. Further information is included in Note 10.

Depreciation – Percentages are applied by the Management to the Group’s net book value of depletable assets based on future levels of production for producing assets.

Fair value of exploration and appraisal assets – The fair value of exploration and appraisal assets is based on internal and third-party reports, further discounted to reflect future risks such as higher interest rates, smaller than expected reserves and variation to other critical assumptions.

Impairment review

While conducting an impairment review of its assets, the Group makes certain judgements in making assumptions about the likelihood of licence conversion, the future prices, reserve levels and future development and production costs. Changes in the estimates used can result in significant charges to the statement of comprehensive income. This is performed solely for the purposes of considering the carrying value of the Group’s assets.

83

Legal proceedings and commercial disputes

In accordance with IFRS, the Group only recognises a provision where there is a present obligation from a past event, a transfer of economic benefit is probable and the amount of cost of the transfer can be estimated reliably. In instances where the criteria are not met, a contingent liability may be disclosed in the notes to the financial statements. Realisation of any contingent liabilities not currently recognised or disclosed in the financial statements could have a material effect on the Group’s financial position. Application of this accounting principle requires the Management to make determinations about various factual and legal matters beyond their control. Among the factors considered in making decisions on provisions are the nature of the disputes and litigations, the progress of the cases, the opinions of legal advisers, experience of similar cases and any decision of the Group’s Management as to how it will respond to any such claim or litigation.

2 SEGMENT ANALYSIS

The Group has three reportable segments:

- Producing assets

- Exploration assets

- Head office costs

The operating results of each of these segments are regularly reviewed by the board of Directors in order to make decisions about the allocation of resources and assess their performance:

The segmental results for the year ended 31 December 2011 are as follows:
	Producing			Exploration			Head Office
	Assets			Assets			Costs			Total
	US$’000			US$’000			US$’000			US$’000
Revenue		12,734			-			-			12,734
Cost of sales		(6,913	)		-			–			(6,913	)
Gross profit		5,821			-			-			5,821
Administrative expenses		(135	)		-			(1,852	)		(1,987	)
Profit/(loss) from operations		5,686			-			(1,852	)		3,834
Finance income		-			-			7			7
Finance expenses		-			(261	)		(160	)		(421	)
Profit for the year		5,686			(261	)		(2,005	)		3,420
The segmental results for the year ended 31 December 2010 are as follows:
	Producing			Exploration			Head Office
	Assets			Assets			Costs			Total
	US$’000			US$’000			US$’000			US$’000
Revenue		6,068			-			-			6,068
Cost of sales		(4,009	)		-			–			(4,009	)
Gross profit		2,059			-			-			2,059
Administrative expenses		(120	)		-			(2,277	)		(2,397	)
Profit/(loss) from operations		1,939			-			(2,277	)		(338	)
Finance income		-			-			15			15
Finance expenses		-			-			(235	)		(235	)
Profit for the year		1,939			-			(2,497	)		(558	)
The segmented assets and liabilities at 31 December 2011 are as follows:
	Producing			Exploration			Head Office
	Assets			Assets			Costs			Total
	US$’000			US$’000			US$’000			US$’000
Total non-current assets		5,811			50,730			101			56,642
Total current assets		3,173			418			1,089			4,680
Total assets		8,984			51,148			1,190			61,322
Total non-current liabilities		(15	)		(9,914	)		-			(9,929	)
Total current liabilities		(3,685	)		(213	)		(66	)		(3,964	)
Total liabilities		(3,700	)		(10,127	)		(66	)		(13,893	)
Net assets		5,284			41,021			1,124			47,429

84

The segmented assets and liabilities at 31 December 2010 are as follows:
	Producing			Exploration			Head Office
	Assets			Assets			Costs			Total
	US$’000			US$’000			US$’000			US$’000
Total non-current assets		3,580			42,630			111			46,321
Total current assets		2,253			508			1,273			4,034
Total assets		5,833			43,138			1,384			50,355
Total non-current liabilities		(79	)		(3,915	)		-			(3,994	)
Total current liabilities		(1,861	)		(275	)		(216	)		(2,352	)
Total liabilities		(1,940	)		(4,190	)		(216	)		(6,346	)
Net assets		3,893			38,948			1,168			44,009
Other segmented items 31 December 2011 are as follows:
	Producing			Exploration			Head Office
	Assets			Assets			Costs			Total
	US$’000			US$’000			US$’000			US$’000
Capital expenditure		6,923			8,100			11			15,034
Depreciation		4,692			-			26			4,718
Other segmented items 31 December 2010 are as follows:
	Producing			Exploration			Head Office
	Assets			Assets			Costs			Total
	US$’000			US$’000			US$’000			US$’000
Capital expenditure		1,896			1,771			105			3,772
Depreciation		2,415			-			39			2,454
Revenue
All of the 2011 revenues (2010 – 100%) were generated from Philippine based assets the Galoc, Nido & Matinloc fields.

3 EXPENSES BY NATURE

	Year ended		Year ended
	31-Dec		31-Dec
		2011		2010
	US$’000		US$’000
Fees payable to the Company’s Auditor for the audit of the Company’s annual accounts		45		50
Fees payable to the Company’s Auditor’s overseas member firm for the audit of the Company’s
subsidiaries, pursuant to legislation		18		18
Directors’ emoluments		568		826
Employee salaries and other benefits		326		286
Depreciation and amortisation		27		23
Operating lease rentals		78		91

85

4 SALARIES

Group
					Year ended		Year ended
					31-Dec		31-Dec
					2011		2010
					US$’000		US$’000
Average number of employees (including Directors) are as follows:
Administration and finance						18		16
Technical						4		4
						22		20
Group
					Year ended		Year ended
					31-Dec		31-Dec
						2011		2010
					US$’000		US$’000
Gross salaries (including Directors)						778		733
Fees (including Directors)						321		559
Employee benefits and social security costs						50		46
						1,149		1,338
Directors’ and senior management emoluments
							Year ended		Year ended
							31-Dec		31-Dec
			Social					2011		2010
	Salary		Security		Fees		Total		Total
	US$’000		US$’000		US$’000		US$’000		US$’000
Total Key Management Personnel compensation		386		27		321		734		980
All Directors’ remuneration is paid in cash in accordance with their contracts. The highest paid Director was paid US$191,000 (2010: US$360,000) in the year.
There are no share-based payment charge during 2011, (2010: US$Nil).

5 FINANCE INCOME

Group
	Year ended		Year ended
	31-Dec		31-Dec
		2011		2010
	US$’000		US$’000
Interest from bank deposit		1		2
Gain on Investments		6		13
		7		15

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6	FINANCE EXPENSES
Group
		Year ended			Year ended
		31-Dec			31-Dec
			2011			2010
		US$’000			US$’000
Foreign exchange losses			160			235
Interest paid on loan facility			261			–
			421			235
7             TAXATION ON LOSS FROM ORDINARY ACTIVITIES
Group
		Year ended			Year ended
		31-Dec			31-Dec
			2011			2010
		US$’000			US$’000
Current tax			–			–
Deferred tax credit			–			–
The charge for the year can be reconciled to the profit/(loss) per the statement of comprehensive income as follows:
Profit/(loss) on ordinary activities			3,420			(558	)
Taxation on profit/(loss) on ordinary activities at the standard rate
of corporation tax in the UK of 26.5%			906			(156	)
Tax effect of income taxed at source			(2,689	)		(1,289	)
Tax effect of expenses disallowed for tax			862			121
Tax losses carried forward			1,012			1,538
Different tax rates applied to overseas jurisdictions			(91	)		(214	)
Tax credit for the year			–			–

Factors that may affect future tax charges

At 31 December 2011, the Group had UK tax losses of approximately US$5,948,000 (2010: US$4,936,000) carried forward. These losses are subject to agreement by HRMC. At 31 December 2011 the Group had Philippines tax losses US$7,189,000 (2010: US$1,029,000) which can be carried forward and applied against future profits when they are realised. Philippines’ basic corporation tax rate is 30%.

Philippine tax losses can only be carried forward for a maximum of three years. Tax losses currently carried forward are as follows:

2009 – US$1,754,000

2010 – US$3,540,000

2011 – US$1,895,000

A deferred tax asset of US$2,214,000 (2010: US$1,673,000) in respect of the Philippines tax losses carried forward and US$1,487,000 (2010: US$1,480,000) in respect of the UK tax losses has not been recognised due to the uncertainty that these tax losses will be utilisable against future taxable income.

8 EARNINGS/(LOSS) PER SHARE

Earnings/(loss) per Ordinary Share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The weighted average number of equity shares in issue for the period is 33,364,533 (2010: 33,256,478).

Profits for the Group attributable to the equity holders of the Company for the year are US$3,457,000 (2010: Loss -US$438,000).

The effect of the share options in issue under the Share Option Plan is anti-dilutive. See Note 15 for further details of share options in issue.

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9   PROPERTY, PLANT AND EQUIPMENT

			Transport			Furniture,		Tools
	Oil and gas		and motor			fixtures		and other		Group
	costs		equipment			and fittings		equipment		Total
	US$’000		US$’000			US$’000		US$’000		US$’000
Cost
At 1 January 2011		7,907		98			206		116		8,327
Additions		6,923		2			9		–		6,934
Disposals		–		(11	)		–		–		(11	)
At 31 December 2011		14,830		89			215		116		15,250
Depreciation
At 1 January 2011		4,327		20			191		116		4,654
Charge for the year		4,692		19			7		–		4,718
Disposals		–		(10	)		–		–		(10	)
At 31 December 2011		9,019		29			198		116		9,362
Cost
At 1 January 2010		6,011		74			196		116		6,397
Additions		1,896		95			10		–		2,001
Disposals		–		(71	)		–		–		(71	)
At 31 December 2010		7,907		98			206		116		8,327
Depreciation
At 1 January 2010		1,912		28			177		112		2,229
Charge for the year		2,415		21			14		4		2,454
Disposals		–		(29	)		–		–		(29	)
At 31 December 2010		4,327		20			191		116		4,654
Net book value
At 31 December 2011		5,811		60			17		–		5,888
At 31 December 2010		3,580		78			15		–		3,673
At 31 December 2009		4,099		46			19		4		4,168

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 10        INTANGIBLE ASSETS

	Unevaluated		Unevaluated
	oil, gas		oil, gas
	and mining		and mining
	costs		costs
	US$’000		US$’000
Group	2011		2010
Cost and Net book value
At 1 January		42,630		40,859
Additions		8,100		1,771
At 31 December		50,730		42,630

The unevaluated oil, gas and mining costs relate to the acquisition of the Group’s assets in the Philippines.

The net book value of assets included within intangible fixed assets are as follows:

SC40   – US$29,024,000 (2010: US$28,689,000)

SC72   – US$21,474,000 (2010: US$13,720,000)

Others – US$232,000 (2010: US$221,000).

The Group have considered the intangible assets for indications of impairment and have concluded that the recoverable amount of assets is considered higher than the current book values therefore, an impairment provision is not required

11   INVESTMENTS

Group
	2011	2010
	US$’000	US$’000
Cost
At 1 January	18	5
Revaluation	6	13
At 31 December	24	18
Group investments are shares held in FEC Resources Inc., a listed company, held at respective fair values on 31 December 2011 and 31 December 2010.
The principal subsidiaries of the Group, all of which have been included in these consolidated financial statements and are engaged in the exploration for and development of oil and gas assets, are as follows:

			Proportion of ownership
			interest and ordinary
		Country of	share capital held
Name		incorporation	2011	2010
Forum Philippine Holdings Limited		Jersey	100%	100%
Forum (FEI) Limited		Jersey	100%	100%
Forum (GSEC101) Limited(1)		Jersey	100%	100%
Forum (Nido Matinloc) Limited		Jersey	100%	100%
Forum Exploration Inc		Philippines	66.67%	66.67%
Forum Energy Philippines Corporation		Philippines	100%	100%
(1)	Forum (GSEC101) Limited has established a registered branch office in the Philippines.

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12       INVENTORIES

Group
	2011	2010
	US$’000	US$’000
Oil inventories	–	362
Materials and supplies	57	57
	57	419

Inventory write off US$Nil (2010: US$8,000) during the year. Cost of inventory expensed in the year totalled US$Nil (2010: US$8,000).

There is no material difference between the carrying values of inventories and their fair value less costs to sell.

13       RECEIVABLES

Group
	2011	2010
	US$’000	US$’000
Trade receivables	1,546	496
Prepayments	198	252
Other receivables	118	403
	1,862	1,151
Included within other receivables are amounts relating to recoverable VAT and amounts in respect of expenditure on future projects.

14 LIABILITIES

Group
	2011	2010
Current	US$’000	US$’000
Trade payables	388	109
Other payables	3,445	2,099
Employee benefits	118	118
Tax payable	13	26
	3,964	2,352
Included in other payables is an amount of US$3,297,357 (2010: US$1,176,684) relating to additional costs on the acquisition of Basic Petroleum & Mineral Inc. (now Forum Energy Philippines Corporation) payable out of future Galoc oil field revenues (Note 21).
All amounts fall due for payment within one year.
Non-current liabilities
Loan facility	6,000	–
Other payables	3,915	3,915
Decommissioning liabilities	14	79
	9,929	3,994

The loan facility of U$10 million was entered into on 24 November 2010 and is available for a three year period with an interest charge of US LIBOR + 4.5% on funds borrowed. As at 31 December 2011 US$6 million has been drawn down under the facility (Note 20).

Included in other payables is the following:

Under the share purchase agreement for Forum Exploration Inc. dated 11 March 2003, amounts of up to US$3.915 million (2010: US$3.915 million) are due to the vendor out of the Group’s share of future net revenues generated from licence SC40. The liability is in Philippine Peso and any movement during the year is due to changes in exchange rate only. The timing and extent of such payments is dependent upon future field production performance and cannot be accurately determined at this stage.

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15 SHARE CAPITAL

Allotted, called up and fully paid
	2011		2011		2010		2010
Company	Number		US$’000		Number		US$’000
At 1 January		33,364,533		5,982		33,092,533		5,941
Additions		–		–		272,000		41
At 31 December		33,364,533		5,982		33,364,533		5,982

					Allotted,
	Authorised				share called up
	number				and fully paid		Premium
Company	of 10p each		Number		US$		US$
At 1 January 2010		100,000,000		33,092,533		5,940,576		50,868,837
26 May 2010(1)		–		272,000		40,802		94,903
At 31 December 2010		100,000,000		33,364,533		5,981,378		50,963,740
At 31 December 2011		100,000,000		33,364,533		5,981,378		50,963,740

 (1) On 26 May 2010 the Company issued 272,000 Ordinary Shares of 10p each under the share option plan for 31p per share.

All of the shares in issue have equal voting rights.

Share-based payments

On 1 August 2005, the Company implemented a Share Option Plan (the Plan) with three sub-plans (the sub-plan). Under the terms of the Plan the Company can issue up to 16% of the outstanding issued stock of the Company.

At 31 December 2011, the following share options were outstanding in respect of the Ordinary Shares:

		Number of	Number of	Number of
	Outstanding	options	options	options		Outstanding
	as at	Granted	surrendered	cancelled	Exercised	as at
	1-Jan	during	during	during	during	31-Dec	Final
Exercise price	2011	the year	the year	the year	the year	2011	expiry dates
£0.31 (US$0.48)	2,195,000	–	–	–	–	2,195,000	December 2018

All of the 2,195,000 outstanding options are exercisable at a price higher than the current share price.

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At 31 December 2010, the following share options were outstanding in respect of the Ordinary Shares:

		Number of	Number of	Number of
	Outstanding	options	options	options		Outstanding
	as at	Granted	surrendered	cancelled	Exercised	as at
	1-Jan	during	during	during	during	31-Dec	Final
Exercise price	2011	the year	the year	the year	the year	2011	expiry dates
£0.31 (US$0.48)	2,195,000	–	–	–	–	2,195,000	December 2018

The weighted average exercise price of share options was US$0.48 at 31 December 2011 and US$0.48 at 31 December 2010. The weighted average remaining contractual life of options outstanding at the end of the year was seven years (2010: eight years).

During the year no options were exercised.

As at 31 December 2011, there are 2,195,000 options in issue representing 41% of the total permissible options in issue per the terms of the option plan.

All of the 2,195,000 outstanding options are exercisable at a price higher than the current share price.

Fair value of options

Inputs to the valuation model

The fair values of awards granted under the Share Option Plan have been calculated using the Black Scholes pricing model that takes into account factors specific to share incentive plans such as the vesting periods of the Plan, the expected dividend yield on the Company’s shares and expected early exercise of share options

Grant date
	19-Dec-08
Share price at date of grant	£0.25(US$0.38)
Exercise price	£0.31 (US$0.46)
Volatility	40%
Option life	10 years
Dividend yield	–
Risk-free investment rate	4%
Employee turnover	–

Expense arising from share-based payments

Based on the above fair values and prior year awards and the Company’s expectations of employee turnover, the 2011 expense arising from equity-settled share options and share awards made to employees was US$Nil (2010: US$Nil). There were no other share-based payment transactions.

16 COMMITMENTS

At 31 December 2011, the Group had commitments totalling US$6 million in operational and exploration expenditure, for the second sub-phase programme over Service Contract SC72 (“SC72”) (31 December 2010: US$3 million).

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17       FINANCIAL COMMITMENTS

Group
Future commitments under non-cancellable operating leases are as follows:
	Land and	Land and
	buildings	buildings
	2011	2010
	US$’000	US$’000
Operating leases with an option to terminate within 1 year	23	21

18      CASH FLOW NOTES
Group
	2011	2010
	US$’000	US$’000
Cash and cash equivalents comprise:
Cash available on demand	2	13
Short-term deposits	2,759	2,451
	2,761	2,464

19 FINANCIAL INSTRUMENTS

Financial Assets
	Loans and Receivables
		Group
	2011	2010
	US$’000	US$’000
Cash and cash equivalents	2,761	2,464
Trade and other receivables	1,862	1,151
Total financial assets	4,623	3,615
Financial Liabilities
	Financial liabilities at amortised cost
		Group
	2011	2010
	US$’000	US$’000
Trade and other payables	3,964	2,352
Loans and borrowings	6,000	-
Total financial liabilities	9,964	2,352

Significant accounting policies

Details of the significant accounting policies in respect of financial instruments are disclosed in Note 1 to the financial statements.

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Financial risk management

The Board seeks to minimise its exposure to financial risk by reviewing and agreeing policies for managing each financial risk and monitoring them on a regular basis. No formal policies have been put in place in order to hedge the Group activities to the exposure to currency risk or interest risk, however as the Group enters commercial production this may be considered. No derivatives or hedges were entered into during the year.

The Group is exposed through its operations to the following financial risks:

·   cash flow interest rate risk

·   foreign currency risk

·   liquidity risk

·   credit risk

·   price risk

The policy for each of the above risks is described in more detail below.

The principal instruments used by the Group, from which financial instruments risk arises are as follow:

·   trade and other receivables

·   cash and cash equivalents

·   trade and other payables

·   long term borrowings

The fair value of all the Group financial assets and liabilities is approximate to their carrying values.

Cash flow interest rate risk

The Group manage the interest rate risk associated with the Group’s cash assets by ensuring that interest rates are as favourable as possible, through the use of bank treasury deposits, whilst managing the access the Group requires to the funds for working capital purposes.

At the year end the Group had a cash balance of US$2,761,000 (2010: US$2,464,000) which was made up as follows:

	2011	2010
	US$’000	US$’000
British Pounds Sterling	42	867
US Dollars	2,694	1,574
Philippine Peso	25	23
Included above are amounts of US$812,000 (2010: US$863,000) held within variable rate deposit accounts. Interest rates are 0% to 0.1% based on bank interest rates.
The Group received interest for the year as follows:
	2011	2010
	US$’000	US$’000
Interest from bank deposits	1	2
The Group paid interest for the year as follows:
	2011	2010
	US$’000	US$’000
Interest paid on loan facility	261	–
The interest rate risk to the Group is minimal as the interest bearing debts are fixed to US LIBOR + 4.5% and interest income on bank deposits is negligible.

94

Foreign currency risk

The Group has six overseas subsidiaries, two of which operate in the Philippines and whose expenses are mainly denominated in US Dollars. The other overseas subsidiaries transactions are also mainly denominated in US Dollars. Foreign exchange risk is inherent in the Group’s activities and is accepted as such. The Group keeps small balances in Philippine Peso to operate the local payroll and office expenses.

At 31 December 2011 and 2010, the currency exposure of the Group was as follows:

							Philippine
	US Dollar			UK Sterling			Peso			Total
	US$’000			US$’000			US$’000			US$’000
At 31 December 2011
Cash and cash equivalents		2,694			43			24			2,761
Trade and other receivables		1,764			84			14			1,862
Trade and other payables		(3,606	)		(66	)		(292	)		(3,964	)
Long term borrowings		(6,000	)		-			-			(6,000	)
Net assets/(liabilities)		(5,148	)		61			(254	)		(5,341	)
At 31 December 2010
Cash and cash equivalents		1,574			867			23			2,464
Trade and other receivables		861			246			44			1,151
Trade and other payables		(2,007	)		(215	)		(130	)		(2,352	)
Net assets/(liabilities)		428			898			(63	)		1,263

The effect of a 10% strengthening of the US Dollar against Sterling at the reporting date on the Sterling denominated balances would, all other variables held constant, have resulted in a loss, decreasing post tax profits by US$6,100 (2010: US$89,800). Conversely the effect of a 10% weakening of the US Dollar against Sterling at the reporting date would, on the same basis, have resulted in a gain increasing post tax profits by US$6,100 (2010: US$89,800).

The effect of a 10% strengthening of the US Dollar against the Philippine Peso at the reporting date on the Philippine Peso denominated balances would, all other variables held constant, have resulted in a gain increasing post tax profits by US$25,400 (2010: US$6,300). Conversely the effect of a 10% weakening of the US Dollar against Philippine Peso at the reporting date would, on the same basis, have resulted in a loss decreasing post tax profits by US$24,400 (2010: US$6,300).

Liquidity risk

Liquidity risk arises from the Group’s management of working capital.

The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due to achieve this, the Group has arranged a US$10 million facility to continue to achieve this policy, as at the end of the year US$6 million has been drawn down to meet the Group’s commitments, the remaining US$4 million is available on request.

It seeks to maintain readily available cash balances to meet expected requirements, all bank balances are currently held on an instant access basis.

The liquidity risk of each Group entity is managed centrally by the Group treasury function. The investment budgets and work plans are set locally and agreed by the Board annually in advance, enabling the Group’s cash requirements to be anticipated.

95

The contractual undiscounted amounts of financial liabilities are repayable as follows:
	Group		Group
	2011		2010
	US$’000		US$’000
1 month		1,295		1,162
2–3 months		45		1,072
4–6 months		–		–
6–12 months		2,624		118
		3,964		2,352

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or a counter-party of a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales.

The Group currently has only two customers which are both Philippine based oil Companies, costs of production are deducted prior to payment of the Groups share, therefore any losses would be limited to the net share of revenues. The two customers which account for 100% of the Company’s revenues are Galoc Production Company and The Philodrill Corporation.

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. The majority of the Group’s deposits are held with two different International banks in the UK and in the Philippines. The Group’s deposits are held with an international bank, in which the UK government holds a majority shareholding, which the Board considers gives a high level of security.

The Group’s maximum exposure to credit risk by class of financial instrument is shown in the table below:
	2011		2011		2010		2010
	Carrying		Maximum		Carrying		Maximum
	value		exposure		value		exposure
	US$’000		US$’000		US$’000		US$’000
Cash and cash equivalents		2,761		2,761		2,464		2,464
Trade and other receivables		1,862		1,862		1,151		1,151
		4,623		4,623		3,615		3,615

Price risk

The Group’s oil and gas sale revenue is subject to energy market price risk. The Group does not intend to hedge the oil price risk in the short-term.

Capital

The overall objective of the Directors is to maximise shareholder returns and minimise risks by keeping a reasonable balance between debt and equity.

On a regular basis, the Board of Directors receive financial and operational performance reports that enable continuous management of assets, liabilities and liquidity.

Up to 2010 the Group had minimised risk by being purely equity financed, or by agreeing partnerships for the development of its portfolio of hydrocarbon assets. In 2011 the Group borrowed US$6 million of its US$10 million loan facility (Note 20) to redress the reasonable balance between debt and equity.

96

20 RELATED PARTY TRANSACTIONS

During the year the following related party transactions occurred within the Group:

Philex Mining Corporation is the majority shareholder and ultimate controlling party of the Group.

Forum Philippines Holdings Ltd, a wholly-owned subsidiary of the Company, entered into a US$10 million Facility Agreement (“the Facility”) with Philex Mining Corporation on 24 November 2010.

The Facility will be available for a three year period from the 24 November 2010 and funds can be borrowed at an interest rate of US LIBOR + 4.5%. During 2011 US$6 million was drawdown to enable the Company to fund its 70% share of a first sub-phase work programme over Service Contract 72 (“SC72”) which has now been completed. Obligations arising from funds drawn under this Facility are not convertible into the Company’s or Forum Philippines’ Ordinary Shares.

Amounts due to Philex Mining Corporation in respect of this facility agreement as at 31 December 2011 amounted to US$6,000,000 (2010: US$Nil). Arrangement fees paid to Philex Mining Corporation during the year for the facility were US$Nil (2010: US$200,000). Interest charged for use of the facility during the year was US$261,952 (2010: US$Nil).

21 CONTINGENT LIABILITIES

Further to the announcement of 10 May 2011, the Group remains in an arbitration process with Basic Energy Corporation ("BEC") in relation to certain assets acquired from BEC.

Although the Group had signed a conditional settlement agreement with BEC which would have concluded the arbitration process this settlement agreement was not completed because certain third party consents could not be obtained.

Out of the US$12 million of potential additional consideration, the Directors have assessed that US$10 million would be payable (approximately US$9 million net of the US$650,000 payment made, as announced on 10 May 2011).

However, of this total US$10 million, US$6.7 million has been paid up to the end of 2011, and the balance of U$3.3 million is accrued within current liabilities (2010: US$1.2 million).

The Directors consider that a potential additional liability of US$2 million is dependent upon net future field production levels from the acquired assets and will not become payable due to the current and forecast levels of production of these assets.

22       POST BALANCE SHEET EVENTS

The Company has received a report by Weatherford Petroleum Consultants ("Weatherford") on the interpretation of new 3D and 2D data acquired over the Service Contract 72 licence area ("SC72") in 2011.

During 2011, 2,202 Line-Km of 2D seismic data were acquired over SC72 in order to further define additional leads already identified, and 565 Km2 of 3D seismic data were acquired over the Sampaguita Gas Field in SC72.

The interpretation of these surveys has now been carried out by Weatherford. Their report has given the directors a better understanding of the Sampaguita Gas Field and identified a prospect in the North Bank which is located to the north of Sampaguita within SC72. In addition, the report has identified a number of potential drilling locations. Full details of the report can be found on the Company’s website at www.forumenergy.com

The Company has announced plans to fund its drilling commitments under the second sub phase of the SC72 work programme and the options for this fundraising are currently being assessed by the Directors.

97

GLOSSARY

AGM Annual General Meeting

APB’s Auditing Practices Board’s

Board the Board of Directors of Forum Energy plc

CMB Central Maya Bulge

Company           Forum Energy plc

DOE Philippine Department of Energy

FEI Forum Exploration Inc.

Forum the Company and/or its subsidiaries as appropriate

FPIA Filipino Participation Incentive Allowance

GIP gas-in-place

Group the Company and/or its subsidiaries as appropriate

IASB International Accounting Standards Board

IFRS International Financial Reporting Standards

JV Joint Venture

MORE Monte Oro Resources and Energy Inc.

TCF                    trillion cubic feet of gas

98

UK Office

120 Bridge Road, Chertsey KT16 8LA

T: +44 (0) 1932 445 344

F: +44 (0) 1932 445 345

Manila Office

14F Pearlbank Centre, 14 6 Valero Street, Salcedo Village,

Makati City, Metro Manila, the Philippines

T: +632 893 7019/7020/7021

F: +632 893 8828

WWW.FORUMENERGY.COM

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ITEM18.FINANCIALSTATEMENTS.

We have elected to report under Item #17.

ITEM19.  EXHIBITS

1.1   Certificate of Continuance of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form F-1, File No. 33-81290 (the “Registration”); *

1.2   By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registration Statement); *

4.1 Consulting Agreement dated March 1, 2004 between the Company and David Robinson *;

4.2 Consulting Agreement dated March 1, 2004 between the Company and Barry Stansfield *;

4.3 Consulting Agreement dated November 23, 2003 between the Company and Larry Youell *;

4.4 Consulting Agreement dated March 1, 2004 between the Company and David Wilson *

4.5 Consulting Agreement dated March 1, 2004 between the Company and David *;

4.6   Exchange and Release Agreement between Tracer Petroleum Corporation and Transmeridian Exploration, Inc., dated March 16, 2001; *

4.7   Share Purchase Agreement dated March 11, 2003, as amended by agreements dated March 21, and April 2, 2003; *

4.8   Amendment dated March 21, 2003 to Share Purchase Agreement dated March 11, 2003 as amended by an agreement dated April 2, 2003; *

4.9   Amendment dated April 2, 2003 to Share Purchase Agreement dated March 11, 2003 as amended by agreement dated March 21, 2003; *

11.   Code of Ethics *;

12.1 Certification by the Chief Executive Officer and Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith);

13.1 Certification by the Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith);

* Previously filed

100

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

	FEC Resources Inc.
	("Registrant")
Date: May 15, 2012	By:	/s/Jose Ernesto Villaluna
		Name: Jose Ernesto Villaluna
		Title: President and Chief Executive Officer

101