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| OMB APPROVAL                                                                                   |
|------------------------------------------------------------------------------------------------|
| OMB Number: 3235-0288Expires: May 31, 2014Estimated average burdenhours per response.. 2645.00 |

| (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 valueCommon Stock Purchase Warrants             |

----

| Securities for which there is a reporting obligation pursuant to Section 15(d) of the Exchange Act:  |
|-----------------------------------------------------------------------------------------------------------|
| Title of  class                                                                                 |
| None                                                                                                      |

| 439,143,765 Common Stock |   |
|--------------------------|--------|

|   | Yes | [   ] | No | [X] |
|--------|-----|----------------------|----|-----|

|   | Yes | [   ] | No | [X] |
|--------|-----|----------------------|----|-----|

|   | Yes | [X] | No | [   ] |
|--------|-----|-----|----|----------------------|

|   | Yes | [ ] | No | [  ] |
|--------|-----|-----|----|----------------|

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

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

|   | Item 17 | [   ] | Item 18 | [  ] |
|--------|---------|----------------------|---------|----------------|

|   | Yes | [  ] | No | [X] |
|--------|-----|----------------|----|-----|

----

| 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 |

----

|   | - | 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”. |
|--------|---|-----------------------------------------------------------|

----

----

|                       | 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  |

|   | 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  |

|                                             |   | YearEnded12/31/11(‘000) |    |   | YearEnded12/31/10(‘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 |   |

----

| 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 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 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. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 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. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 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. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| ·   | 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. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | 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. |
|--------------------|---------------------------------|

| ·   | $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. |
|--------------------|--------------------------------------------------|

----

----

----

----

----

|                                |   |   |   |   | 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                               |   |   | -      |   |                   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |

----

----

----

|   | 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.              |

|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

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| Name                                                                                                                                                          | Age              | Position/Area of Experience/Function                                                                                                                                                                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Jose Ernesto Villaluna (2) (3)Andrew Mullins (1)Edward Tortorici (2)Carlo Pablo (1) (3)Barry StansfieldRiaz Sumar (3)Renato Migrino (1) (2)Claro Ramirez | 7231724962426251 | Director since February 2009, President and CEO since August 2009.Director since August 2009Director since June 1, 2010Director since June 1, 2010Director since April 2003Director, CFO, Secretary since May, 2005Director, Treasurer since August 2009Director 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 |
|-----------------|------------------------------------------------------|

----

----

| 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 |   |

----

|  Directors/Officers |   | Salary |    |   | Option Exercise Net Market Value(1) |   |   | TotalCompensation |   |
|--------------------------|--------|--------|---------|--------|-------------------------------------|--------|--------|-------------------|--------|
| 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 |   |

----

|  Directors/Officers |   | Salary |    |   | Option Exercise Net Market Value(1) |   |   | TotalCompensation |   |
|--------------------------|--------|--------|---------|--------|-------------------------------------|--------|--------|-------------------|--------|
| 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 |   |

----

| Name of Registered Shareholder owning 5% or more of the outstanding shares: | Number ofShares | Percentof 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         | -               |

----

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

| 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             |

----

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

----

| 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 |

| 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 |

----

| 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 |

----

----

----

----

----

|   | 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. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

| 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 |

----

| 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 |   |        |        |   |        |

----

| FEC RESOURCES INC. STATMENTS OF CHANGES IN EQUITY                                             |
|-----------------------------------------------------------------------------------------------|
| Expressed in United States DollarsFor 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 |   |    |

----

| For the year ended                                    |   | December 312011 |      |   | December 312010 |   |
|------------------------------------------------------------|--------|-----------------|-----------|--------|-----------------|--------|
|                                                       |   |            |      |   |            |   |
| 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 |   |
|                                                       |   |            |      |   |            |   |   |   |
|                                                       |   |            |      |   |            |   |   |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|   | a)   Investment in associates (continued) |
|--------|---------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|   | b)   Property, plant and equipment (continued) Depreciation |
|--------|----------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

| 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 |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|                                 |   | 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 |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|                                             |   | 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                                                                                                                                                                                                                                                                                             |   | $      | -          |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

| a)   | Authorized: |
|----------------|-------------|

| 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 |   |

|                                                            |   |   |      |
|-----------------------------------------------------------------|--------|--------|-----------|
| 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 |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|                                             |   | 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 |   |   | -          |   |   | $      | - |   |

|                                                                |   | 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 |   |              | -           |   |                                  | $      | - |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

| 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 |   |

|                                                                      |   | 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)                                       |   | $            | -        |   |         | $      | - |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|                             |   | 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 | ) |
|                             |   | $                 | -          |   |              | $      | - |   |

| 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 |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|   | a) | Market Risk |
|--------|----|-------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|   | b) | Credit risk |
|--------|----|-------------|

|   | c) | Liquidity risk |
|--------|----|----------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|                                                         |   | 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 |   |

|                                             |   | 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 |   |   | -          |   |   | $      | - |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|                                 |   | Note   |    |   | CanadianGAAPCanadian$ |   |        | CanadianGAAPUS$ |   |   | Effect oftransfer toIFRS |   |   | IFRSUSD$ |      |
|--------------------------------------|--------|--------|---------|--------|-----------------------|--------|-------------|-----------------|--------|--------|--------------------------|--------|--------|----------|-----------|
| 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 |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|                                 |   | Note   |    |   | CanadianGAAPCanadian$ |   |        | CanadianGAAPUS$ |   |   | Effect oftransfer toIFRS |   |   | IFRSUSD$ |      |
|--------------------------------------|--------|--------|---------|--------|-----------------------|--------|-------------|-----------------|--------|--------|--------------------------|--------|--------|----------|-----------|
| 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 |   |

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

|                                          |   | Note   |   |   | CanadianGAAPCanadian$ |   |        | CanadianGAAPUS$ |   | Effect oftransfer toIFRS |        | IFRSUSD$ |   |
|-----------------------------------------------|--------|--------|--------|--------|-----------------------|--------|-------------|-----------------|--------|--------------------------|-------------|----------|--------|
|                                          |   |   |   |   |                  |   |        |            |   |                     |        |     |   |
| 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. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| FEC RESOURCES INC.NOTES TO THE FINANCIAL STATEMENTS December 31, 2011(Stated in United States Dollars) |
|--------------------------------------------------------------------------------------------------------|

| 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 |
|-------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                       |   |   |     |   |          |     |    |          |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|---------------|----------|---------|---------------|--------|
|                                                                                       |   |   |     |   | 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                           |   |   |     |   |          |     |    |          |   |

----

|                                                                                                                                                                                                                                                |   |          |    |   |          |   |    | 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.                                  |   |
|                                                                                                                                                                                                                                                |   |          |    |   |          |   |    |          |   |   |          |   |   |          |    |   |          |   |    |          |   |   |   |   |   |   |   |   |

----

|                                                               |   |   |   |   |          |   |    |          |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|---------------|--------|---------|---------------|--------|
|                                                               |   |   |   |   | 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. |
|-----------------------------------------------------------------------------------------------|

| Finance Director |
|------------------|

----

|                                                 |   |   |   |   | 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 |   |

----

| 1 | ACCOUNTING POLICIES |
|---|---------------------|

| 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 from1 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 from1 January 2011.                                                                                                                        | 11 January 2011 |

| 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 from1 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 |

----

| 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 |
|-------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|

| 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 from1 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 |

----

| 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 |

----

| 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 from1 January 2013. | 1 January 2015 |

----

----

|  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 |   |

----

----

| 2 | SEGMENT ANALYSIS |
|---|------------------|

|   | - | Producing assets |
|--------|---|------------------|

|   | - | Exploration assets |
|--------|---|--------------------|

|   | - | Head office costs |
|--------|---|-------------------|

| 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 |   |

----

| 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            |   |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |          |   |   |   |

----

| 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     |   |   |   |   |   |
|                       |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |          |   |   |   |   |   |   |   |

----

|  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                                                                                              |             |   |   | – |          |   |   | –       |   |

| 8 | EARNINGS/(LOSS) PER SHARE |
|---|---------------------------|

----

| 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 |   |
|                |   |          |    |   |          |   |   |          |   |   |          |   |   |          |    |   |   |   |   |   |

----

|  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 |   |

| 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. |        |        |   |

----

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

| 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 |   |   |   |

----

| 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------|

|                 |                                                                                                                                                                   | 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 |

----

|                       |                                                                              | 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 |

|   | Inputs to the valuation model |
|--------|-------------------------------|

| 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            |   |   |                      | –              |

| 16 | COMMITMENTS |
|----|-------------|

----

| 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 |

----

| ·   | cash flow interest rate risk |
|--------------------|------------------------------|

| ·   | foreign currency risk |
|--------------------|-----------------------|

| ·   | liquidity risk |
|--------------------|----------------|

| ·   | credit risk |
|--------------------|-------------|

| ·   | price risk |
|--------------------|------------|

| ·   | trade and other receivables |
|--------------------|-----------------------------|

| ·   | cash and cash equivalents |
|--------------------|---------------------------|

| ·   | trade and other payables |
|--------------------|--------------------------|

| ·   | long term borrowings |
|--------------------|----------------------|

|                                                                                                                                                                |   |   |                                                                      |                                                                      | 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.       |
|                                                                                                                                                                |   |   |                                                                      |                                                                      |                                                           |                                      |   |   |   |   |   |   |   |   |

----

|                        |   |          |   |   |          |   |   | 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 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 |   |

| 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 |   |

----

| 20 | RELATED PARTY TRANSACTIONS |
|----|----------------------------|

| 21 | CONTINGENT LIABILITIES |
|----|------------------------|

----

| 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. |
|------|-------------------------------------|

----

----

| 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); |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

----