UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 20-F





REGISTRATION STATEMENT PURSUANT TO SECTION 12 (b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934




OR




XXX ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For Fiscal Year ended December 31, 2014




OR




______  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




OR




______ 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 .................





For the transition period from   ______  to   ______








Commission file number 0-17729FEC RESOURCES INC.(Exact name of Registrant as specified in its charter)Not Applicable(Translation of Registrant’s Name into English)Canada(Jurisdiction of incorporation or organization)203, 200 Barclay Parade S.W., Calgary, Alberta, T2P 4R5(Address of principal executive offices)Carlo Pablo, (403) 290-1676, Fax (403) 770-8060, 203, 200 Barclay Parade S.W., Calgary, Alberta, T2P 4R5(Name, Telephone, E-mail, and/or Facsimile number and Address of Company Contact Person)


Securities registered or to be registered pursuant to Section 12 (b) of the Act:  None





Securities registered or to be registered pursuant to Section 12 (g) of the Act:Common Stock, without par value(Title of Class)





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


None





Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:  439,143,765 Common Stock.





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


Yes [ ]

No [X]







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





Yes [ ]

No [X]





Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 from their obligations under those Sections.








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





Yes [X]

No [ ]





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








Yes [X]

No [ ]





Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, or a non accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):




Large accelerated filer

Accelerated filer

Non-accelerated filer
XXX


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





U.S. GAAP

International Financial Reporting Standards as issued by the International Accounting Standards Board
XXX
Other





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


Item 17
Item 18
XXX





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





Yes [ ]

No [X]







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





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


Not Applicable


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 2


FEC RESOURCES, INC.


FORM 20-F ANNUAL REPORT FISCAL YEAR 2013





TABLE OF CONTENTS








PagePART IItem 1.
Identity of Directors, Senior Management and Advisers
5Item 2.
Offer Statistics and Expected Timetable
5Item 3.
Key Information
5Item 4.
Information on the Company
13Item 4a.
Unresolved Staff Comments
18Item 5.
Operating and Financial Review and Prospects
18Item 6.
Directors, Senior Management and Employees
22Item 7.
Major Shareholders and Related Party Transactions
27Item 8.
Financial Information
28Item 9.
The Offer and Listing
29Item 10.
Additional Information
30Item 11.
Quantitative and Qualitative Disclosure About Market Risk
32Item 12.
Description of Securities other than Equity Securities
32PART IIItem 13.
Defaults, Dividend Arrearages and Delinquencies
33Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
33Item 15.
Controls and Procedures
33Item 16A.
Audit Committee Financial Expert
34Item 16B.
Code of Ethics
34Item 16C.
Principal Accountant Fees and Services
35Item 16D.
Exemption from the Listing Standards for Audit Committee
35Item 16E.
Purchase of Equity Securities by the Issuer and Affiliated Purchaser
36Item 16F.
Changes in Registrant’s Certifying Accountant
36Item 16G.
Corporate Governance
36Item 16H.
Mine Safety Disclosure
36PART IIIItem 17.
Financial Statements
36Item 18.
Financial Statements
36Item 19.
Exhibits
59Signatures

60





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 3


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS





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





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





-              oil and natural gas price volatility;


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


-
our ability to find and acquire additional reserves;


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


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


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


-
climatic conditions;


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


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


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


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


-
environmental risks;


-
the strength and financial resources of our competitors;


-
general economic conditions; and


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





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





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








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 4


CURRENCY





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





ITEM1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.





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





ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.





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





ITEM 3.  KEY INFORMATION.





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





Currency Exchange Rates





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





Table No. 3(A)(1)


U.S. Dollar/Canadian Dollar


Currency Exchange Table No. 1


U.S. Dollar/Canadian Dollar




Average
High
Low
CloseFiscal Year Ended 12/31/14
1.10
1.16
1.06
1.25Fiscal Year Ended 12/31/13
1.03
1.07
0.98
1.06Fiscal Year Ended 12/31/12
1.00
1.04
0.97
0.99Fiscal Year Ended 12/31/11
0.98
1.05
0.94
1.02Fiscal Year Ended 12/31/10
1.03
1.08
0.99
0.99




The current closing rate of exchange was 1.25 on February 20, 2015.


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 5





Table No. 3(A)(2)


U.S. Dollar/Canadian Dollar






08/14
09/14
10/14
11/14
12/14
01/15High
1.10
1.12
1.13
1.12
1.13
1.27Low
1.09
1.09
1.11
1.14
1.16
1.17








A.  Selected Financial Data





The following financial data summarizes selected financial data for our company prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) for the four fiscal years ended December 31, 2014, 2013, 2012 and 2011.  The information presented below for the four year period ended December 31, 2014, 2013, 2012 and 2011 is derived from our financial statements which were examined by our independent auditors.  Financial data cannot be provided for the fiscal year ended December 31, 2010 on a restated basis without unreasonable effort and expense. The information set forth below should be read in conjunction with our audited annual financial statements and related notes thereto included in this annual report, and with the information appearing under the heading “Item 5 – Operating and Financial Review and Prospects”.











Year

Ended

12/31/14

(‘000) -

except per share data


Year

Ended

12/31/13

(‘000) -

except per share data


Year

Ended

12/31/12

(‘000) -

except per share data


Year

Ended

12/31/11

(‘000) -

except per share dataRevenue

$
-


$
-


$
-


$
-Net (Loss) Income

$
(290
)

$
(367
)

$
(5,138
)

$
435Net (Loss) Income Per Share

$
(0.00
)

$
(0.00
)

$
(0.01
)

$
0.00Diluted  Net (Loss) Income  Per Share

$
(0.00
)

$
(0.00
)

$
(0.01
)

$
0.00Dividends Per Share

$
0.00


$
0.00


$
0.00


$
0.00Weighted  Avg. Shares O/S (‘000)


439,144



439,144



439,144



439,144Working Capital

$
169


$
458


$
824


$
1,242Resource Properties

$
-


$
-


$
-


$
-Long-Term Debt

$
-


$
-


$
-


$
-Shareholders’ Equity

$
170


$
460


$
827


$
5,965Share Capital

$
16,732,397


$
16,732,397


$
16,732,397


$
16,732,397Capital Stock Shares  (‘000)


439,144



439,144



439,144



439,144Total Assets

$
212


$
502


$
902


$
6,356








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 6


B. Capitalization and Indebtedness





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





C. Reason for the Offer and Use of Proceeds





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





D.  Risk Factors





General Business Risks





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





We incurred a loss of $(289,875) for the year ended December 31, 2014 (2013 - $366,756; 2012 – 5,138,333).  We have incurred operating losses in the previous fiscal years with our accumulated deficit totaling $19,620,110 as at December 31, 2014.   We also anticipate sustaining a loss from operations for the fiscal year ended December 31, 2015.  We have no sources of revenue and, historically, have only shown net income as a result of accounting for our equity share of profits in other companies in which we hold equity investments. As a result, we may not be able to sustain operations in the future without additional debt or equity financing.





Unless We Are Able To Discover Economically  Recoverable Reserves in the Future, There is Substantial Doubt We Will Be Able to Continue Operations as a Going Concern in the Long Term.




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




The Financial Statements included herein have been prepared by management on the basis of accounting principles applicable to a “going concern”.  Management believes the “going concern” basis, which presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future, is appropriate.  We have experienced significant operating losses and cash outflows from operations in the years ended December 31, 2014, 2013 and 2012 and have no producing properties.  Our ability to continue as a “going concern” in the long term is dependent on achieving profitable operations and upon obtaining additional financing.  The outcome of these matters cannot be predicted at this time.





Our auditors have included an additional paragraph in their report  to our shareholders on the December 31, 2014 financial statements  indicating that substantial doubt exists as to the Company’s ability to continue as a going concern


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We Do Not Believe We Have Sufficient Working Capital as of February 20, 2015 to Support Our Business in 2015, We Will Need Additional Funds in Order to Implement Our Intended Projects and There is No Assurance that Such Funds Will Be Available As, If, and When, Needed.





Funds used in operations for the fiscal years ended December 31, 2014 and 2013 were $(288,190) and $(397,652), respectively.  We have been dependent upon the proceeds of equity and debt financing in addition to the disposition of assets to fund operations.  No assurances can be given that our actual cash requirements will not exceed our budget, that anticipated revenues will be realized, that, when needed, lines of credit will be available if necessary or that additional capital will be available to us.  There is no assurance that we will be able to obtain such additional funds on terms and conditions we may deem acceptable.  Failure to obtain such additional funds may materially and adversely affect our ability to acquire interests directly or indirectly in producing oil and gas and mineral properties.





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





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





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





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





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





There is only a limited trading market for our shares on the Pink Sheets.  There can be no assurance that (a) we will be able to be admitted for trading again on the OTCQB, due to enhanced requirements that were implemented by OTC Markets in 2014, (b) this market will be sustained, or (c) that we will be able to satisfy any future trading criteria that may be imposed by OTC Markets.





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





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





Future sales of substantial amounts of common shares in the public market, or the perception that such sales could occur, could adversely affect the market price of our common shares.  At February 20, 2015 we had 439,143,765 common shares outstanding.  We currently have 268,207,623 shares eligible to be resold pursuant to Rule 144. We intend to include these common shares in a future Registration Statement to be filed with the United States Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, registering the common shares for sale. No prediction can be made as to the effect, if any, that sales of common shares or the availability of such shares for sale will have on the market prices of our common shares prevailing from time to time.  The possibility that substantial amounts of our common shares may be sold under SEC Rule 144 into the public market may adversely affect prevailing market prices for our common shares and could impair our ability to raise capital in the future through the sale of equity securities.





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 8





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





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





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





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





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





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





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





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





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Operating Risks - Oil and Gas Exploration Activities





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




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





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





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





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





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





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





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


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 10


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





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





Fluctuating Resource Prices May Adversely Impact Our Operations and Activities.





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





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





We may, in the future, be unable to meet our share of costs incurred under joint venture agreements or other option or joint venture agreements to which we are, or may become a party, and we may have our interest in properties, in which we may acquire interests subject to such agreements, reduced as a result. Furthermore, if other parties to such agreements do not meet their share of such costs, we may be unable to finance the cost required to complete recommended programs.  In 2012, our equity interest in Lascogon Mining Corporation was diluted from 40% to 1.08% as we were unable to meet a capital call for a work program.  We could be further diluted in the future should Lascogon issue more capital calls.





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





Although we will attempt to ascertain the status of the title for any projects in which we have or will acquire a material direct or indirect interest, there is no guarantee that title to such concessions will not be challenged or impugned.  In some countries, the system for recording title to the rights to explore, develop, and mine natural resources is such that a title opinion provides only minimal comfort that the holder has title.  Also, in many countries, claims have been made and new claims are being made by aboriginal peoples, and other countries claiming rights that call into question the property rights granted by the governments of those countries.  For instance, the maritime jurisdiction of the Philippines in the West Philippine Sea, including the SC 72 contract area, has been disputed by China.  As a result, all exploration activities in SC 72 has been put on hold until further notice.





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





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





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





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





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 11





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





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





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





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





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





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








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 12


ITEM  4.  INFORMATION ON THE COMPANY





A.  Our Corporate History and Development.







We were incorporated on February 8, 1982 in British Columbia, Canada under the name Tylox Corporation.  Our continuance under the Canada Business Corporation Act resulted in, among other things, our name change, first in December 1991, to Tracer Petroleum Corporation, followed in July 2003, to Forum Energy Corporation.  On May 18, 2005, we changed our name to FEC Resources, Inc.  We have no subsidiaries.  Prior to May 18, 2005, we owned 66 2/3% of Forum Exploration, Inc. (“FEI”) a Philippine-based oil and gas company with rights to develop certain concession areas as more fully described later in this document.  On May 18, 2005, we sold our interest in FEI to Forum Energy Plc (“FEP”) for shares of FEP and cash as more fully described later in this document.  We currently hold 24.05% of the issued and outstanding capital of FEP, and in addition we hold a 35% interest in Metalore Mining Corporation (“MMC”), a Philippine-based company that holds the rights to a 64 hectare license  which has been abandoned.  We also own a 1.08% interest in Mineral Production and Sharing Agreement 148 (“MPSA 148”), a gold exploration project, through Lascogon Mining Corporation in the Philippines.





We are engaged in the acquisition, exploration, and, when warranted, development of natural resource and mineral properties.  Although we currently are not the operator with respect to interests we hold, we are actively seeking projects where our involvement would be more than management and advisory.  We were focused on the development of one mineral license in the Philippines until December 31, 2010, however the project was determined to be not feasible based on our findings and therefore was fully impaired.  The license is held by Lascogon Mining Corporation (“Lascogon Mining”) which was acquired from Philex Gold Philippines Inc., a subsidiary of Philex Mining Corporation, our then largest shareholder.  In 2012, we received a capital call for approximately $2,400,000 for future work programs and as a result of not participating, we were diluted from 40% interest in Lascogon Mining to 1.08% interest.





Our head office is located at 203, 200 Barclay Parade SW, Calgary, Alberta T2P 4R5.  Our phone number is (403) 290-1676.





B.  Business Overview





At this time, we do not have any significant revenue-generating assets, and as a result, rely upon equity and/or debt financing to fund ongoing operations.  MMC had begun producing nominal quantities of iron ore which were expected to provide cash flow to us, but operations were shut down in 2006 for environmental reasons. We have filed for a mineral production and sharing agreement covering the current and surrounding area which we believed would be granted and would have allowed production to resume.  To date the mineral production and sharing agreement has not been granted and the operations of MMC are still dormant and have been abandoned.




Recent Developments





None





The Philippines





We are currently pursuing exploration and development opportunities for oil, natural gas, gold, and  copper in the Philippines through various companies in which we hold interests. FEP, in which we own a 24.05% equity interest, owns the oil and gas rights over a 8,800 square-kilometer block located in the West Philippine Sea. In addition FEP holds interests in various other concessions located in the Philippines.





We are involved in the exploration for gold and copper through our interest in Lascogon Mining Corporation. The current mining exploration phase of the MPSA expired in January 2014 and to date it is uncertain whether a further 2 year extension will be granted.





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Forum Energy Plc.





We currently own 24.05% of FEP. FEP was established through the consolidation in 2005 of the Philippine assets of FEC Resources, Inc. of Canada, and Sterling Energy Plc of the UK, into one corporate entity.  The current holdings of FEP are based mainly in the Philippines and include:





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


·
66.7% interest in Service Contract 40 North Cebu (SC 40), an onshore and offshore license which contains the onshore Libertad Gas Field and Maya discovery and several other prospects;  and
   ·
2.27% interest in Service Contract 14C1 Galoc (SC 14C1 Galoc), an offshore license which contains the producing Galoc Field.
  SC 72 Reed Bank (formerlypreviouslyGeophysical Survey and Exploration Contract No. 101(“GSEC101))





The SC72 Reed Bank concession is located in the West Philippine Sea west of Palawan Island.


The license was awarded to Sterling Energy Plc in June 2002. Exploration in the area began in 1970 and in 1976 gas was discovered following the drilling of a well.  In total, four (4) wells have been drilled to date, all located at the south west end of the license.  Two (2) of the wells tested gas at rates of 3.6 mmcf/d and 3.2 mmcf/d.
  In 2003, Sterling reprocessed 250 km of 2D seismic and completed a feasibility study on a GTL  (gas-to-liquid) development scenario for the gas field.  The seismic work and the GTL study fulfilled the initial work commitments on the concession and Sterling was granted a twelve (12) month extension in June 2004.  In 2005, Forum acquired new 250 square kilometers of new 3D seismic data over the license area fulfilling its work commitments required under the twelve (12) month extension.
  In September 2006, results of the interpretation of the 3D seismic program at the Sampaguita gas discovery indicated a significant gas accumulation.
  In 2008,  FEP finalized farm-out of a 30% interest in the license to a local partner Monte Oro Resources & Energy, Inc. (Monte Oro) in which FEP benefited from an immediate cash payment of $1.7million, securing Monte Oro’s involvement and thereby qualifying the Joint Venture for the Filipino Participation Incentive Allowance (FPIA) which entitles the Company to 7.5% of gross revenues, prior to sharing revenues with the government


On 15 February 2010, SC72 was awarded to Forum Energy in respect


In February 2010, the GSEC101 exploration license was converted into SC 72. The area of the block was reduced from 10,360 Km2 to 8,800 Km2 as part of this conversion.





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





The interpretation of the surveys was carried out by Weatherford Petroleum Consultants (“Weatherford”).  Weatherford’s report identified a number of drilling locations.





FEP was planning the execution of the second sub-phase work program at SC 72 which was expected to involve the drilling of up to two wells before August 14, 2013.  On January 17, 2013, FEP announced that it had applied for an extension to the second-sub phase of SC72 from the Philippine Department of Energy.  On January 25, 2013, FEP announced that it was granted an extension until August 14, 2015 to complete the second sub-phase of SC 72.





The SC 72 block is located in an area which is subject to a maritime dispute between the Chinese and the Philippine governments. On 22 January 2013, an arbitration case under Annex VII to the United Nations Convention on the Law of the Sea was commenced when the Philippines served China with Notification and Statement of Claim "with respect to the dispute with China over the maritime jurisdiction of the Philippines in the West Philippine Sea." Further information about the ongoing case is available on the website of the Permanent Court of Arbitration (www.pca-cpa.org).





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On July 9, 2014, FEP announced that the DOE granted a further one year extension to August 2016 to complete the second sub-phase of SC 72.





On March 4, 2015 the Philippine Department of Energy (“DOE”) granted a force majeure on SC 72 because this contract area falls within the territorial disputed area of the West Philippine Sea which is the subject of an United Nations arbitration process between the Republic of Philippines and the People’s Republic of China.





Under the terms of the force majeure, all exploration work at SC72 is immediately suspended (effective from 15 December 2014) until the DOE notifies the Company that it may commence drilling.  As a result, the second sub-phase of SC 72 was put on hold until further notice.





The terms of the second sub-phase and all subsequent sub-phases will be extended by the term of the force majeure.


SC 40 North Cebu


FEP holds a 66.7% interest in the SC 40 (Cebu) contract area is located in the Visayan Basin in the central part of the Philippines archipelago.  The license area covers the northern area of Cebu Island and the adjacent offshore areas in the Central Tañon Strait and Visayan Sea.  Since 1994, a total of fifteen (15) wells have been drilled offshore in the Visayan Basin, thirteen (13) of these on the acreage covered by SC 40 (Cebu).
  The Libertad Gas Field is situated within SC 40.  The field was discovered in the late 1950's, but was not developed.  In 1993, a testing program was carried out on two (2) wells and during 1994 and 1995, five (5) additional wells were drilled on Libertad.  One of these wells tested gas and subsequently was completed as a gas producer.


In 2004, FEP carried out a feasibility study to determine the most commercially viable option for the development of the Libertad Gas Field.  The results of this work recommended a development plan using three (3) GTE generators, with a maximum of 3.0 MW.
  During December 2005, the Department of Energy formally granted a Declaration of Commerciality for the development of the onshore Libertad Gas Field.  The Declaration of Commerciality allowed the retention of the portion of SC 40 which contains all the currently identified prospects and discoveries.





During 2009 the Department of Energy approved the Gas Sale & Purchase Agreement in respect of the development of the Libertad Gas Field for a 1 MW gas turbine power plant.  In February 2012, commercial production at the Libertad Field commenced and, as at 31 December 2013, the field has produced 144 million cubic feet of gas gross. However these revenues are not material to FEP’s cash flow. Having received a resource assessment from Petroleum Geo-Services Asia Pacific Pte Ltd (PGS), an independent competent person, on 19 February 2013 the investment in SC40 was impaired  in 2012 by US$25.4 million to US$3.25 million. An important factor in this assessment was that third parties had experienced a dry hole while drilling within the Tañon Straits which significantly reduced the likelihood of commercially viable hydrocarbon deposit in the offshore part of SC40. Further technical studies were undertaken in onshore prospects in Cebu and will continue in 2015 to determine whether an exploration well will be drilled.





SC 14C1 Galoc





FEP’s largest producing asset is the Galoc oil fieldlocated offshore northwest Palawan.  Galoc has an area of 163 square kilometers and contains the Galoc oil field which was first put in production in 2008.  Production from the Galoc development reached 2.9 million barrels gross in 2014 (1.72 million barrels gross in 2013) and is expected to produce 2.2 million barrels in 2015.  Forum Energy has a 2.27% interest in the field and received US$4.6 million (US$2.1 million in 2013) after deduction of share of operating costs from crude sales from the field during the year.  The second phase of development was completed in November 2013 with the drilling of two additional production wells.  FEP secured US$2.58 million of financing from BNP Paribas in 2012 to help fund its share of development costs for this phase of the project ,which was repaid in June 2014.





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Basic Petroleum & Minerals Inc. (“BPMI”)





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





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





BPMI assets included interests in nine (9) Philippine offshore blocks, including SC14C1 Galoc (2.27% participating interest) which has been in production since the fourth quarter 2008.  FEP also had nominal production from the SC14 Nido and Matinloc blocks.





Previously, FEP also reported that it farmed down its participating interest in SC14C2 West Linapacan from 7.58% to 2.275% in exchange for a free carry through development.





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





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





In February 2012, FEP announced that the settlement agreement was not completed because not all required third party consents were obtained within the agreed timeframe resulting in the process going into arbitration.





On June 21, 2012 FEP has disclosed that FEP and BEC have agreed to a settlement under which FEP shall pay BEC the amount of $2,400,000, which is the remaining balance of a $10,000,000 payment stipulated in the Sales and Purchase Agreement, plus an additional $2,000,000 with $1,000,000 of the $2,000,000 paid in December 2012 and the balance of the $2,000,000 paid in December 2013.





Metalore Mining Corp.





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





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





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


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





MPSA148





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





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





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





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





We received a technical report in respect of the Lascogon Project in 2010 prepared by Mr. Dexter S. Ferriera (a senior geostatistician and mining engineer at Independent Resource Estimation or IRES) in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects. We evaluated the technical report and determined that the work completed on the Lascogon Project to date did not determine an economically viable gold reserve. Accordingly, we have fully written down our investment in Lascogon.





In May 2012, we received a capital call from Lascogon Mining in the amount of 100 million Philippine Pesos or approximately $2,400,000.  The capital call was made to address Lascogon Mining’s current deficit and to fund the upcoming work program and exploration budget.  We were given until December 21, 2012 to forward the requested funds or have our 40% interest diluted to 1.08%.  We did not forward funds and therefore our interest in Lascogon Mining was diluted to 1.08 percent.





The current mining exploration phase of the MPSA expired in January 2014 and to date it is uncertain whether a further 2 year extension will be granted.  As of the date of this report, the outcome is still uncertain.





C.  Organizational Structure





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


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ITEM  4A.  UNRESOLVED STAFF COMMENTS





N/A





ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.





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





Our audited financial statements were prepared in accordance with IFRS as issued by the IASB, which are  different from US GAAP (refer to the Auditors’ Report dated March 30, 2015).





The Company is exposed to foreign currency fluctuations for general and administrative transactions denominated in Canadian Dollars. The majority of the Company’s cash is kept in U.S. dollars.   Cash held in Canadian dollars  is subject to exchange rate fluctuations between the Canadian dollars and the U.S. dollars.





The following discussion and analysis of financial results should be read in conjunction with our Audited Financial Statements for the year ended December 31, 2014, together with the notes related thereto.  The discussion contains forward-looking statements that involve risks and uncertainties.  Such information, although considered reasonable by our management at the time of preparation, may prove to be inaccurate and actual results may differ materially from those anticipated in the statements made.





Fiscal year ended December 31, 2014 versus December 31, 2013





Our accounts show loss for the year ended December 31, 2014 of $289,875 or $(0.00) per share, versus a loss of $366,756 or $0.00 per share for the year ended December 31, 2013.  General and Administration expense were $289,980 for the year ended December 31, 2014 versus $367,100 for the same period in 2013. We recorded amortization of $522 for the year ended December 31, 2014 versus $745 for the same period in 2013.  For the year ended December 31, 2014 foreign exchange loss was $2,105 versus a loss of $4,342 for the year ended December 31, 2013.





Interest income was $105 for the year ended December 31, 2014 versus $344 for the previous year. The difference was a result of the interest earned on the higher cash balance in 2013.





Fiscal year ended December 31, 2013 versus December 31, 2012





Our accounts show loss for the year ended December 31, 2013 of $366,756 or $(0.00) per share, versus a loss of $5,138,333 or $0.01 per share for the year ended December 31, 2012. General and Administration expense were $367,100 for the year ended December 31, 2013 versus $408,401 for the same period in 2012. We recorded amortization of $745 for the year ended December 31, 2013 versus $1,065 for the same period in 2012. Interest expense for the year ended December 31, 2013 was $Nil versus $10,642 for the same period in the previous year. The difference was because of the interest on the outstanding advance from Philex Mining. Overall expenses were similar to those experienced in the previous year. For the year ended December 31, 2013 foreign exchange loss was $4,342 versus a loss of $2,798 for the year ended December 31, 2012.





Share of profits/(loss) in associates  in Lascogon, MMC and FEP was $Nil for the year ended December 31, 2013 versus $(4,688,441) for the previous year as under the equity method of accounting the Corporation is required to report its share of net income or net loss in its statement of operations and reduce or increase its investment by the same amount. Our share of FEP’s loss was a large part of the share of profits/(loss) of associates.  In 2012, FEP wrote down $25,400,000 of its investment in SC40 as a result of receiving a resource assessment from an independent competent person.  Our equity share of loss related to the write down was $6,394,284, of which we recorded $4,688,441 in order to reduce the carrying value of our investment to $Nil with the remainder of this loss being unrecognized. The large difference in net loss between 2013 and 2012 was attributable to recording our equity share of the loss of FEP .





Interest income was $344 for the year ended December 31, 2013 versus $877 for the previous year. The difference was a result of the interest earned on the higher cash balance in 2012.





Balance Sheet





Our current assets were $210,539 at December 31, 2014 versus $500,255 for the year ended December 31, 2013. The difference is mainly a result of the higher cash balance on December 31, 2013. Our assets reflect the value of FEP on an equity basis. The investment is reflected at a carrying value of $Nil in the financial statements as at December 31, 2014 and December 31, 2013.





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Liquidity and Capital Resources





Our working capital position at December 31, 2014 was $169,133 versus working capital of $458,486 at December 31, 2013 and shareholders’ equity was $170,350 at December 31, 2014 (December 31, 2013 $460,225).





On April 27, 2009 we reached an agreement with Philex Mining whereby our anticipated 2009 operating budget would be covered by way of a loan in the amount of $273,000 from Philex Mining. Interest on the loan is at Libor plus 3%. The loan and accrued interest totaling $312,432 was repaid on December 21, 2012.





If necessary, we are able to sell our FEP shares on the London Stock Exchange Alternative Investment Market to meet our working capital needs. No shares of FEP were sold to fund operations during the year ended December 31, 2014.





Cash used in operating activities for the year ended December 31, 2014 was $(288,190) versus $(397,652) for the same period in 2013 mainly as a result of the differences described in the results of operations above.





Cash used in investing activities was $Nil for the years ended December 31, 2014 and December 31, 2013.


Cash used in financing activities for the year ended December 31, 2014 and December 31, 2013 was $Nil.  On December 21, 2012, we repaid an outstanding loan and accrued interest to Philex Mining.




Capital Resources





In order to fully earn a 40% interest in the joint venture with Philex Gold Philippines Inc. (“PGPI”) on the Lascogon Project, we were required to fund a total of $1 million of the work program by October, 2006 which was completed. To maintain our 40% interest, we were required to pay for 40% of the ongoing work program or our position would be diluted.  In May 2012, we received a capital call from Lascogon Mining in the amount of 100 million Philippine Pesos or approximately $2,400,000.  The capital call was made to address Lascogon Mining’s current deficit and to fund the upcoming work program and exploration budget.  We were given until December 21, 2012 to forward the requested funds or have our 40% interest diluted to 1.08%.  We did not forward funds and therefore our interest in Lascogon Mining was diluted to 1.08 percent.





We currently own 35% of Metalore, 1.08% of Lascogon and 24.05% of FEP. All but FEP require us to fund our share of any work programs in order to maintain our current equity holdings in each company. If FEP is required to raise additional funds through equity issuances then we would have to purchase our proportionate share of these equity issuances to maintain our current equity position.





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





We anticipate that we will require additional funds for working capital for the next twelve months from the date of this filing and we are evaluating options in order to raise the additional funds.  We believe we will be able to sell our FEP shares should the need arise. However, in the event we are unable to sell our FEP shares in quantities sufficient to raise cash to continue our operations, this would cast substantial doubt on our ability to continue as a going concern.





Off-Balance Sheet Arrangements





We have no off-balance sheet arrangements.





Contractual Obligations





None




Critical Accounting Policies and Estimates




Basis of preparation and accounting policies




The Company has prepared its consolidated financial statements in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”). IFRS represents standards and interpretations approved by the IASB and are comprised of IFRS, International Accounting Standards (“IAS’s”), and interpretations issued by the IFRS Interpretations Committee (“IFRIC’s”) and the former Standing Interpretations Committee (“SIC’s”). The Company adopted IFRS in accordance with IFRS 1 – First-time Adoption of International Financial Reporting Standards (“IFRS 1”) with a transition date of January 1, 2010. The consolidated financial statements have been prepared in accordance with IFRS standards and interpretations effective as of December 31, 2014.




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Critical Accounting Estimates





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





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





Determination of natural resource reserves and natural resources estimates





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





Deferred tax assets and liabilities





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




Lascogon Contingent Consideration





There were 30,000,000 common shares of ours issued into escrow which are to be awarded to the vendor of the investment in Lascogon upon the declaration of commerciality as full and final consideration for the investment; these shares are considered contingent consideration. These shares are to be released from escrow if the project is declared commercial and were deemed to have zero value when they were issued. Accordingly no liability has been recognized.  At December 31, 2014 and at the date of this report, it is not considered likely that a declaration of commerciality will take place.





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Functional Currency





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




Share capital and investments were converted from January 1, 2003 as a result of the conversion to IFRS.





Recent  Accounting Related Pronouncements





For the first time in 2014, the Company applied the following IFRSs and amendments which do not materially impact the annual or interim consolidated financial statements of the Company.





·
IFRIC 21  - Levies


·
IFRS 2 - Share-based Payment Amendment


·
IFRS 10 – Consolidated Financial Statements Amendment


·
IFRS 12 – Disclosure of Interests in other Entities Amendment


·
IAS 27 – Separate Financial Statements Amendment


·
IAS 32 – Financial Instruments: Presentation Amendment


·
IAS 36 – Impairment of Assets Amendment


·
IAS 39 – Financial Instruments: Recognition and Measurement Amendment








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





IFRS 9 Financial Instruments (“IFRS 9”)





IFRS 9, Financial Instruments (“IFRS 9”) was issued by the IASB in its final version in July 2014, and will replace IAS 39, "Financial Instruments: Recognition and Measurement" (“IAS 39”). IFRS 9 replaces the multiple rules in IAS 39 with a single approach to determine whether a financial asset is measured at amortized cost or fair value and a new mixed measurement model for debt instruments having only two categories: amortized cost and fair value. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018.  The Company anticipates that this standard will be adopted in the Company’s financial statements for the period beginning November 1, 2018, and has not yet considered the potential impact of the adoption of IFRS 9.





IFRS 3 Business Combinations (Amendment)





IFRS 3 (Amendment) was issued in March 2014 to clarify the accounting for contingent consideration in a business combination. At each reporting period, an entity measures contingent consideration classified as an asset or a financial liability at fair value, with changes in fair value recognized in profit or loss. The amendments are effective for business combinations for which the acquisition date is on or after July 1, 2014. Additional amendments to the section clarify that IFRS 3 does not apply to the accounting for the formation of all types of joint arrangements in the financial statements of the joint arrangement itself. The amendments are effective for annual periods beginning on or after July 1, 2014.








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IFRS 8 Operating Segments (Amendment)





IFRS 8 (Amendment) was issued in March 2014 and requires an entity to disclose the judgments made by management in applying the aggregation criteria for reportable segments. The amendments will only affect disclosure and are effective for annual periods beginning on or after July 1, 2014.





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





ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.




A.  Directors and Senior Management





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





Name
Age
Position/Area of Experience/FunctionPaul Wallace (1) (2)

Carlo Pablo (2) (3)

Riaz Sumar (2) (3)

Claro Ramirez (1)

Lyle Brown (1) (3)
64

52

44

54

61
Director since November 2012

CEO, Director since June 2010

Director, CFO, Secretary since May, 2005

Director since October 2011

Director since October 2013


(1)
Member of Audit Committee in 2014.




(2)
Member of Compensation Committee in 2014




(3)
Member of the Corporate Governance Committee in 2014




Information About our Directors and Officers





Mr. Carlo Pablo, Chairman, President, Chief Executive Officer





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





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





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





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Mr. Paul Wallace





Mr. Paul Frederick Wallace is a Chartered Accountant and member of the Canadian Institute of Chartered Accountants.  He was appointed as the Chief Financial Officer of Hong Kong based First Pacific Company Limited from 1995 to 1997 and between 2003 and 2004 and from February 2014 to the present .  He was appointed Group Finance Director to the Sanctuary Group plc between 2005 and 2008. Mr. Wallace was Chief Executive Officer of Blue Ocean Wireless Limited between May 2009 and March 2012, and was appointed a Non-Executive Director of JPMorgan Global Emerging Markets Income Trust Plc in June 2010 and become a director of Pitkin Petroleum plc in 2013.  He is also the Finance Director of FEP.





Mr. Claro Ramirez





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





Mr. Lyle Brown





Mr. Brown is a resident of Vancouver, British Columbia, Canada.  He is a Chartered Accountant and  Partner of Culver & Co., an accounting firm, since 1991.    Mr. Brown is also a director of Northern Lion Gold Corp and New World Resources Corp which are both listed on the TSX-V and Frankfurt stock exchanges.  In addition Mr. Brown serves on the Board of Nano One Materials Corp. which is listed on the TSX-V.




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





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





Carlo Pablo and Paul Wallace are also directors of FEP.  Carlo Pablo serves as an executive director of FEP and Paul Wallace serves as finance director.





Carlo Pablo is a director of Philex Petroleum Corporation.  Mr. Pablo also serves as President and Chief Operating Officer.


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B.  Compensation.





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




Carlo Pablo;
$3,000Riaz Sumar;
$7,000Lyle Brown;
$2,000Paul Wallace;
$1,000Claro Ramirez;
$1,000
  None of our executive officers or directors received other compensation in excess of the lesser of US $25,000 or 10% of such Executive Officer's or Director’s cash compensation as reported in the compensation table below and all Executive Officers and directors as a group did not receive other compensation which exceeded US $25,000 times the number of persons in the group or 10% of the compensation reported in the compensation table below.





No funds were set aside or accrued by us during the year ending December 31, 2014 to provide pension, retirement or similar benefits for our directors or Executive Officers.  Except for the stock option program discussed below, we have no bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the our directors or Executive Officers.





The following table details the compensation paid during fiscal year ended December 31, 2014 to our directors and members of our administrative, supervisory or management bodies:





Director/Executive Officer Compensation





Director Compensation for Fiscal Year ended December 31, 2014




Directors/Officers
Salary
Option Exercise Net Market Value(1)
Total

CompensationClaro Ramirez
$12,000
$0.00
$12,000Carlo Pablo
$36,000
$0.00
$36,000Lyle Brown
$24,000
$0.00
$24,000Paul Wallace
$12,000
$0.00
$12,000Riaz Sumar
$84,000
$0.00
$84,000Total
$168,000
$0.00
$168,000


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


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





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





Options to Purchase Our Securities.





Options to purchase securities from us are granted to directors, officers and employees on terms and conditions acceptable to the relevant regulatory authorities.  We adopted a formal stock option plan on June 19, 2000.  There were no stock options outstanding on December 31, 2014 and none were issued or exercised in 2014.





C.  Board Practices





We have an Audit Committee, a Compensation Committee and a Corporate Governance Committee.  No committee members receive additional compensation for serving on a committee and all committee members serve for a one year term.  All board members are elected at our Annual General Meeting to serve for one year or until their successor is appointed.





Audit Committee. The Audit Committee oversees the retention, performance and compensation of our independent auditors, and the establishment and oversight of our systems of internal accounting and auditing control.  Members of the Audit Committee in 2014 Lyle Brown, Claro Ramirez, and Paul Wallace.  New members of our Audit Committee for 2015 will  be appointed following our Annual and General Meeting of Shareholders.





Compensation Committee. The Compensation Committee reviews and makes recommendations to our Board concerning the terms of the compensation packages provided to our senior executive officers, including salary, bonus and awards under our stock option plan and any other compensation plans that we may adopt in the future.  Members of the Compensation Committee in 2014 were Paul Wallace, Carlo Pablo, and Riaz Sumar.  Members of our Compensation Committee for 2015 will  be appointed following our Annual and General Meeting of Shareholders.





Corporate Governance Committee. The Corporate Governance Committee meets with and discusses current disclosure issuances with our management personnel, directors, and with both our Canadian and United States counsel, to report to our Board any matters which should be the subject of either public disclosure or remedial action and to assist our Board in establishing reporting and disclosure procedures to ensure that we are in compliance with our disclosure and compliance obligations under applicable laws, rules and obligations.  Members of our Corporate Governance Committee in 2014 were Claro Ramirez, Lyle Brown, and Riaz Sumar. Members of our Corporate Governance Committee for 2015 will  be appointed following our Annual and General Meeting of Shareholders,





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D.Employees





As of December 31, 2014, we had no employees.





E.  Share Ownership





The following table lists as of February 20, 2015, the share ownership of our directors and executive officers.





The following table sets forth certain information as of February 20, 2015 regarding the ownership of our common stock by (i) each of our directors, (ii) each of our named executive officers, and (iii) all of our directors and executive officers as a group.  Except as otherwise indicated, the address of each person identified below is c/o FEC Resources Inc, 203, 200 Barclay Parade S.W., Calgary, Alberta, T2P 4R5.  We believe that ownership of the shares by the persons identified below is both of record and beneficial and that such persons have sole voting and investment power with respect to the shares indicated.  Percentage of class in the following table is calculated individually based on the following formula: (shares directly or indirectly controlled + shares issuable on the exercise or conversion of various securities) / (total shares outstanding + shares issuable on the exercise or conversion of various warrant, debentures and options by the director or officer).  The total shares outstanding on February 20, 2015 was 439,143,765.





Name of Director and/or Officer and number of shares held:
Number of

Shares
Percent

of ClassCarlo Pablo *
-
-Paul Wallace *
-
-Claro Ramirez
-
-Riaz Sumar
10,000
-Lyle Brown
-
-Number of shares held by all Directors and Officers as a group:
10,000
-


* Carlo Pablo and Paul Wallace are nominees from Philex Mining Corporation and Philex Petroleum Corporation.  Philex Mining Corporation is the ultimate parent company which controls 225,000,000 shares of FEC.





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





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


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Warrants Held by Directors and Officers




Name
Number of Share Purchase Warrants
Exercise Price
Expiration DateNone
None





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





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





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





ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS





A.  Major Shareholders





We are a publicly-owned corporation, the shares of which are owned by Canadian residents, U.S. residents, and residents of other countries.  We are controlled by Philex Mining Corporation and its subsidiary Philex Petroleum Corporation.  The following table provides the names and share ownership of those parties that have ownership of 5% or more of each class of our voting securities as of February 20, 2014:





Name
Number of Shares Owned
Percent of ClassPhilex Petroleum Corporation *
225,000,000
51.24CDS&Co**
49,975,191
11.38CEDE & Co**
38,773,155
8.83Asian Coast International
67,740,000
15.42Indexa Corp***
30,000,000
6.83





* These shares are registered to Philex Petroleum Corporation.  Philex Mining purchased 200,000,000 shares in a private placement in December 2007 and 20,000,000 shares were purchased in a private transaction at the same time.  In April 2010, Philex Mining Corporation received a further 5,000,000 shares pursuant to a private placement at $0.50 per share.  In 2014 Philex Mining Corporation transferred the all of their shares to Philex Petroleum Corporation.  No other significant changes in the ownership of our shares by Philex Mining Corporation or Philex Petroleum Corporation has occurred during the past three (3) years.  Carlo Pablo is a director of Philex Petroleum Corporation which is a subsidiary of Philex Mining Corporation.





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





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





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





As at February 20, 2015, management is not aware of any person holding a greater than 5% registered interest in any class of our voting securities other than as set forth above.  The above listed organizations and individuals have no special or separate voting rights than those rights held by our shareholders.





On February 20, 2015, the shareholders’ list showed 587 registered shareholders and 439,143,765 shares outstanding.  The number of shares held by U.S. residents was 44,721,585 representing 10.18% of the total issued and outstanding shares.  The total number of U.S. resident registered shareholders was 524.





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B.  Related Party Transactions





During the year ended December 31, 2014 general and administrative expenses included key management personnel compensation totaling $168,000 (2013: $196,500; 2012: $226,000).





During the year ended December 31, 2014 the Company incurred an interest charge of $Nil (2013: $Nil; 2012: $10,642) on a loan from the parent of the Company.





Included in accounts payable and accrued liabilities at December 31, 2014 is $59 (December 31, 2013; $56 owed to directors, officers and companies controlled by them for unpaid consulting fees and or expenses.





In addition, at December 31, 2014, the Company owed Lascogon Mining Corporation $18,895 (December 31, 2013: $18,895). Amounts owing are unsecured, non interest bearing and due on demand.





The Company’s parent company is Philex Mining Corporation, a company incorporated in the Philippines.





Related party transactions are measured at fair value.





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





ITEM 8.  FINANCIAL INFORMATION





A.  Consolidated Financial Statements and Other Financial Information





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





We know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us, or our subsidiaries, or has a material interest adverse to us. We have not declared any dividends for the last five (5) years, nor do we intend to declare any dividends in the foreseeable future.





B.  Significant Changes/Developments





None


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  ITEM 9.  THE OFFER AND LISTING





A.  Listing Details and Markets





Our shares have traded on the OTC – Bulletin Board (“OTC.BB”) under the symbol “FECOF” since September 22, 1999 but in 2012 our shares were only listed on the OTC Pink as a result of a lack of market makers.





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





OTC.BB/OTC Pink Stock Annual Price History - Common Shares


(US Dollars)


Year Ended
High
Low12/31/14
$0.02
$0.0012/31/13
$0.02
$0.0012/31/12
$0.05
$0.0112/31/11
$0.07
$0.0212/31/10
$0.04
$0.00





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








OTC Bulletin Board/PTC Pink Stock Trading Activity - Common Shares


(US Dollars)


Quarter Ended
Volume
High
Low12/31/14
4,426,200
0.01
0.009/30/14
2,275,000
0.01
0.006/30/14
459,000
0.01
0.013/31/14
3,055,600
0.02
0.0112/31/13
5,193,400
0.02
0.019/30/13
5,103,100
0.01
0.006/30/13
3,670,500
0.01
0.013/31/13
4,449,500
0.02
0.01








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




OTC Pink Stock Monthly Price History - Common Shares


(US Dollars)


Month Ended
High
Low
Volume01/31/15
0.00
0.00
501,10012/31/14
0.00
0.00
2,614,10011/30/14
0.00
0.00
537,20010/31/14
0.01
0.00
1,274,90009/30/14
0.01
0.00
583,50008/31/14
0.01
0.01
287,000





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


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On February 20, 2015, the shareholders’ list showed 587 registered shareholders and 439,143,765 shares outstanding.  The number of shares held by U.S. residents was 44,721,585 representing 10.18% of the total issued and outstanding shares.  The total number of U.S. resident registered shareholders was 524.





Our shares are not registered to trade in the U.S. in the form of American Depository Receipts (ADR's) or similar certificates.





ITEM 10.  ADDITIONAL INFORMATION.





A.  Share Capital





Not applicable





B.  Memorandum and Articles of Association





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





C.  Material Contracts.





See "Item 4. Information About the Company."





D.  Exchange Controls





Investment Canada Act




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





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





E.  Taxation





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





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





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





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





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





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





F.  Dividends and Paying Agents





Not applicable





G.  Summary By Experts





Not applicable




H.  Documents on Display





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





I.  Subsidiary Information





Not applicable





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ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





Currency Exchange Rate Sensitivity





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





Interest Rate Sensitivity





We currently have no significant short-term or long-term debt requiring interest payments.  This does not require us to consider entering into any agreements or purchasing any instruments to hedge against possible interest rate risks at this time.  Our interest-earning investments are short-term.  Thus, any reductions in future income or carrying values due to future interest rate declines are believed to be immaterial.





Commodity Price Sensitivity





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





ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.





Not Applicable.




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PART II





ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.





None.





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





None.




ITEM 15. CONTROLS AND PROCEDURES.





Disclosure Controls and Procedures




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




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




Management’s Annual Report on Internal Control Over Financial Reporting




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




As of December 31, 2014, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls over financial reporting were not effective and that there were material weaknesses in our internal controls over financial reporting. The material weaknesses were an inability to detect the inappropriate application of IFRS guidance, as more fully described below, as the result of deficiencies that existed in the design or operation of our internal control over financial reporting.




The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under COSO and SEC rules were: (1) lack of a majority of independent directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) limited number of staff, not allowing for complete segregation of incompatible duties.; and (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of IFRS and SEC disclosure requirements. The aforementioned material weaknesses were identified by the Company’s Chief Financial Officer in connection with the preparation of our financial statements as of December 31, 2014 and communicated the matters to our management and board of directors.




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




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




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




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




Changes in Internal Control over financial reporting




During the year ended December 31, 2014, and subsequently there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting or that would require corrective action.




ITEM 16 .  (RESERVED)








ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT





The Audit Committee is responsible for reviewing our financial reporting procedures, internal controls, the performance of our auditors.,  The Audit Committee is also responsible for reviewing all disclosure with respect to financial matters prior to filing or release and quarterly and annual Financial Statements prior to their approval by the full Board.  Members of the Audit Committee in 2014 were Lyle Brown, Claro Ramirez, and Paul Wallace.  New members of our Audit Committee for 2015 will  be appointed following our Annual and General Meeting of Shareholders.





Our Board has determined that it has at least one (1) financial expert serving on its Audit Committee.  This individual is Lyle Brown.  Mr. Brown is a Chartered Accountant and  Partner of Culver & Co., an accounting firm. Mr. Brown has significant experience in the review of financial statements and related information.





Mr. Brown would be regarded as independent.





ITEM 16 B:CODE OF ETHICS





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





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


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


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


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


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





The Code of Ethics (in hard copy) is available for inspection in our headquarters during regular business hours and a copy can also be provided at no charge on request.





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 34


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





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





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





ITEM 16 C.  ACCOUNTANTS FEES AND SERVICES





Audit Fees





For the audit of the annual financial statements for the year ended December 31, 2014, an amount of $20,672 was accrued as a best estimate of fees to be billed by our external auditors BDO Canada LLP (“BDO”).  BDO charged total fees of  $25,672 related to the audit of our annual financial statements for the year ended December 31, 2013.  There were no fees associated with the filing of taxes.





Audit Related Fees





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





Tax Fees





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





All other fees





We did not incur any other fees in either of the last two fiscal years for products and services provided by BDO, other than the services reported above under this Item 16C.




Our engagement of BDO was approved by the Audit Committee





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





Not Applicable.





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 35


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





Not Applicable.





ITEM 16 F.  CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT





None.





ITEM 16 G.  Corporate Governance





Not Applicable.


ITEM 16 H.  Mine Safety Disclosure


PART III





Not Applicable.





ITEM17.FINANCIALSTATEMENTS.





We report under Item# 18.





ITEM18.FINANCIALSTATEMENTS.





The Auditors’ Report, financial statements and notes thereto, schedules thereto, as required under Item 18 are found immediately below.





Financial Statements:


Report of Auditors, dated March 30, 2015


Consolidated Balance Sheets at December 31, 2014 and December 31, 2013


Consolidated Statements of Loss and Deficit for the Years ended December 31, 2014 and December 31, 2013


Consolidated Statements of Cash Flows for the Years ended December 31, 2014 and December 31, 2013


Notes to the Consolidated Financial Statements


Table of Contents
 36





FEC RESOURCES INC.


Financial Statements





For the year ended December 31, 2014


(Expressed in United States dollars)





Table of Contents
 37
 Tel: 604  688 5421

Fax: 604  688 5132

www.bdo.ca
BDO Canada LLP

600 Cathedral Place

925 West Georgia Street

Vancouver BC  V6C 3L2  Canada


INDEPENDENT AUDITOR'S REPORT





To the shareholders of FEC Resources Inc.





We have audited the accompanying financial statements of FEC Resources Inc., which comprise the statements of financial position as at December 31, 2014 and 2013 and the statements of comprehensive loss, changes in equity and cash flows for each of the years in the three year period ended December 31, 2014, and a summary of significant accounting policies and other explanatory information.





Management's Responsibility for the Financial Statements


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





Auditor's Responsibility


Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.





An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the presentation of the financial statements.





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





Opinion


In our opinion, the financial statements present fairly, in all material respects, the financial position of FEC Resources Inc. as at December 31, 2014 and 2013 and its financial performance and its cash flows for each of the years in the three year period ended December 31, 2014, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.





Emphasis of Matter


Without qualifying our opinion, we draw attention to Note 2 in the financial statements, which indicates that the Company has incurred a net loss of $289,875 for the year ended December 31, 2014 and has an accumulated deficit of $19,620,110 since inception. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty that casts substantial doubt upon the Company’s ability to continue as a going concern.





(signed) “BDO CANADA LLP”





Chartered Accountants


Vancouver, Canada


March 30, 2015


BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.
 Table of Contents
 38


FEC RESOURCES INC.


Statements of Financial Position


Expressed in United States Dollars











December 31, 2014


December 31, 2013
 ASSETS





Current assets


Cash (Note 6)

$
192,191


$
480,381Receivables


1,444



1,437Prepaid expenses


16,904



18,437210,539



500,255Non-current assetsProperty, plant and equipment (Note 7)


1,217



1,739$
211,756


$
501,994





LIABILITIES AND SHAREHOLDERS’ EQUITY





Current liabilities


Trade and accrued payables (Note 11)

$
41,406


$
41,76941,406



41,769








Shareholders’ Equity


Share capital (Note 10)


16,732,397



16,732,397Contributed surplus (Note 10)


3,058,063



3,058,063Deficit


(19,620,110
)


(19,330,235
)170,350



460,225$
211,756


$
501,994











SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:











“Carlo Pablo”                                          “Riaz Sumar”


Director                                                          Director











The accompanying notes form an integral part of these financial statements


Table of Contents
 39





FEC RESOURCES INC.


STATEMENTS OF COMPREHENSIVE LOSS


Expressed in United States Dollars








Year ended



Year  ended



Year endedDecember 31, 2014



December 31, 2013



December 31, 2012  General and administrative expenses


General and administration (Note 12)

$
289,980


$
367,100


$
408,401Operating loss


(289,980
)


(367,100
)


(408,401
)Share of loss of associates (Note 8)


-



-



(4,688,441
)Loss on dilution of investment in associate (Note 8)


-



-



(31,726
)Finance expense (Notes 9 and 11)


-



-



(10,642
)Interest income


105



344



877Net loss and total comprehensive loss for the year

$
(289,875
)

$
(366,756
)

$
(5,138,333
)Earnings / (loss) per common share-Basic and diluted

$
(0.00
)

$
(0.00
)

$
(0.00
)Weighted average number of shares outstanding


439,143,765



439,143,765



439,143,765













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 40


FEC RESOURCES INC.


STATEMENTS OF CHANGES IN EQUITY


Expressed In United States Dollars


For the years ended December 31, 2014, December 31, 2013, and December 31, 2012





Share capital


Contributed surplus


Deficit


TotalBalance January 1, 2014

$
16,732,397


$
3,058,063


$
(19,330,235
)

$
460,225Total comprehensive loss for the year


-



-



(289,875
)


(289,875
)Balance December 31, 2014

$
16,732,397


$
3,058,063


$
(19,620,110
)

$
170,350





Share capital


Contributed surplus


Deficit


TotalBalance January 1, 2013

$
16,732,397


$
3,058,063


$
(18,963,479
)

$
826,981Total comprehensive loss for the year


-



-



(366,756
)


(366,756
)Balance December 31, 2013

$
16,732,397


$
3,058,063


$
(19,330,235
)

$
460,225Share capital


Contributed surplus


Deficit


TotalBalance January 1, 2012

$
16,732,397


$
3,058,063


$
(13,825,146
)

$
5,965,314Total comprehensive loss for the year


-



-



(5,138,333
)


(5,138,333
)Balance December 31, 2012

$
16,732,397


$
3,058,063


$
(18,963,479
)

$
826,981


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 41








FEC RESOURCES INC.


STATEMENTS OF CASH FLOWS


Expressed In United States Dollars











Year ended



Year ended



Year endedDecember 31, 2014



December 31, 2013



December 31, 2012 Cash used in


OPERATING ACTIVITIES


Net (loss) income for the year

$
(289,875
)

$
(366,756
)

$
(5,138,333
)Non-cash items included in income (loss)Amortization (Note 7)


522



745



1,065Share of loss (profits) of associates (Note 8)


-



-



4,688,441Loss  on dilution of investment in associate (Note 8)


-



-



31,726Accrued finance expense


-



-



-(289,353
)


(366,011
)


(417,101
)


Changes in working capital related to operating activities


Receivables


(7
)


1,054



(923
)Prepaid expenses


1,533



174



(159
)Trade and accrued payables


(363
)


(32,869
)


(14,603
)Net cash used in operating activities


(288,190
)


(397,652
)


(432,786
)





FINANCING ACTIVITIES


Repayment of parent company loan


-



-



(301,790
)Net cash used in financing activities


-



-



(301,790
)Net decrease in cash


(288,190
)


(397,652
)


(734,576
)Cash – beginning of the year


480,381



878,033



1,612,609Cash – end of the year

$
192,191


$
480,381


$
878,033







Table of Contents
 42


FEC RESOURCES INC.


NOTES TO THE FINANCIAL STATEMENTS


December 31, 2014


(Stated in United States Dollars)





Note 1                      Corporate Information





FEC Resources Inc. (“FEC” or the “Company”) was incorporated under the laws of Alberta, Canada and is engaged primarily in the business of exploration and development of oil and gas and other mineral related opportunities, either directly or indirectly through companies in which the Company invests.  The Company is not currently directly involved in any oil and gas or mineral related exploration activities.  The Company is listed in the United States on the Over-The-Counter Bulletin Board (“OTCBB”), having the symbol FECOF.





At December 31, 2014, the Company held investments in Forum Energy plc in the United Kingdom and Metalore Mining Corporation in the Philippines, both of which are accounted for using the equity method. In addition, at December 31, 2014, the Company holds a 1.08% interest in Lascogon Mining Corporation (“Lascogon”) classified as an available-for-sale investment (Note 8).





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





Note 2                      Basis of Preparation and Going Concern





a)      Statement of Compliance





These financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).





The financial statements were authorized for issue by the Board of Directors on March 30, 2015.





b)      Basis of Measurement





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





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





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 43





Note 2                      Basis of Preparation (continued)





c)      Nature of Operations





The exploration and development of oil and gas reserves and the pursuit of other energy and mineral reserves involves significant financial risks. The success of the Company is dependent upon the success of its investments and their ability to discover economically recoverable reserves and to bring such reserves into profitable production, and is subject to a number of risks, including environmental risks, contractual risks, legal risks and political risks, fluctuations in the price of oil and gas and other factors beyond the Company’s control. The Company has not generated revenue from operations. The Company incurred a net loss of $289,875 during the twelve months-ended December 31, 2014 and has an accumulated deficit since inception of $19,620,110. As of December 31, 2014, the Company has cash resources of $192,191 which is considered insufficient to meet its obligations for at least twelve months from the end of the reporting period.





Management considers that the current economic environment is difficult and the outlook for oil and gas exploration companies presents significant challenges in terms of raising funds through issuance of shares. To the extent necessary, the Company has relied on its ability to raise funds via dispositions of quantities of its shareholdings in Forum Energy plc (“FEP”) to Philex under terms that are consistent with the best interests of shareholders, in order to finance its operations. The Company has been successful in disposing quantities of its shareholdings in FEP in previous fiscal years. However, there can be no assurance the Company will continue to be able to dispose of quantities of its shares in FEP under suitable terms. In addition, management has instituted measures to preserve cash through significantly decreasing its corporate costs.





Management has concluded that the combination of these circumstances casts substantial doubt on the ability of the Company to continue as a going concern and, therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business.





Note 3                      Summary of Significant Accounting Policies





The accounting policies set out below have been applied consistently to all years presented in these financial statements.





a)      Investment in associates





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


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 44





Note 3                 Summary of Significant Accounting Policies (continued)





Impairment





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





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





During the years ended December 31, 2014, 2013 and 2012 the Company did not recognize any write-down or impairment reversal of its investments.





b)      Property, plant and equipment





Recognition and Measurement





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





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





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





Gains and Losses





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





Depreciation





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





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


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 45





Note 3                      Summary of Significant Accounting Policies (continued)





Impairment





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





c)      Foreign Currency Translation





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





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





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





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





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





c)      Income Taxes





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





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 46





Note 3                      Summary of Significant Accounting Policies (continued)





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





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





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





d)      Earnings / Loss Per Share





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





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





There were no dilutive instruments (consisting of shares issuable on the exercise of options and warrants) outstanding during the years ended December 31, 2014, December 31, 2013 and December 31, 2012.  Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.





e)      Financial Instruments





Financial Assets





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





Non-derivative financial assets that do not meet the definition of loans and receivables are classified as available-for-sale and comprise principally the Company’s investments in entities not qualifying as subsidiaries or associates. Available-for-sale investments are carried at fair value with changes in fair value recognized in other comprehensive income/loss. If there is no quoted market price in an active market and fair value cannot be readily determined, then available-for sale investments are carried at cost.





The Company has designated cash as loans and receivables, which is measured at amortized cost.





Impairment on Financial Assets





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





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 47





Note 3                      Summary of Significant Accounting Policies (continued)





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





Financial Liabilities





Financial liabilities are classified as other financial liabilities, based on the purpose for which the liability was incurred, and comprise of trade payables and accrued liabilities. These liabilities are initially recognized at fair value net of any transaction costs directly attributable to the issuance of the instrument and subsequently carried at amortized cost using the effective interest rate method.  This ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. Interest expense in this context includes initial transaction costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the period which are unpaid.





f)      Share capital





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





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





g)      Finance income and expenses





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





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





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


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 48


Note 4                    Standards, Amendments and Interpretations





The Company has prepared its consolidated financial statements in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”). IFRS represents standards and interpretations approved by the IASB and are comprised of IFRS, International Accounting Standards (“IAS’s”), and interpretations issued by the IFRS Interpretations Committee (“IFRIC’s”) and the former Standing Interpretations Committee (“SIC’s”). The consolidated financial statements have been prepared in accordance with IFRS standards and interpretations effective as of December 31, 2014.





For the first time in 2014, the Company applied the following IFRSs and amendments which do not materially impact the annual or interim consolidated financial statements of the Company.





·
IFRIC 21  - Levies


·
IFRS 2 - Share-based Payment Amendment


·
IFRS 10 – Consolidated Financial Statements Amendment


·
IFRS 12 – Disclosure of Interests in other Entities Amendment


·
IAS 27 – Separate Financial Statements Amendment


·
IAS 32 – Financial Instruments: Presentation Amendment


·
IAS 36 – Impairment of Assets Amendment


·
IAS 39 – Financial Instruments: Recognition and Measurement Amendment





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





IFRS 9 Financial Instruments





IFRS 9, Financial Instruments (“IFRS 9”) was issued by the IASB in its final version in July 2014, and will replace IAS 39, "Financial Instruments: Recognition and Measurement" (“IAS 39”). IFRS 9 replaces the multiple rules in IAS 39 with a single approach to determine whether a financial asset is measured at amortized cost or fair value and a new mixed measurement model for debt instruments having only two categories: amortized cost and fair value. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018.  The Company anticipates that this standard will be adopted in the Company’s financial statements for the period beginning January 1, 2018, and has not yet considered the potential impact of the adoption of IFRS 9.





IFRS 3 Business Combinations (Amendment)





IFRS 3 (Amendment) was issued in March 2014 to clarify the accounting for contingent consideration in a business combination. At each reporting period, an entity measures contingent consideration classified as an asset or a financial liability at fair value, with changes in fair value recognized in profit or loss. The amendments are effective for business combinations for which the acquisition date is on or after July 1, 2014. Additional amendments to the section clarify that IFRS 3 does not apply to the accounting for the formation of all types of joint arrangements in the financial statements of the joint arrangement itself. The amendments are effective for annual periods beginning on or after July 1, 2014.


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 49





Note 4                      Standards, Amendments and Interpretations (continued)





IFRS 8 Operating Segments (Amendment)





IFRS 8 (Amendment) was issued in March 2014 and requires an entity to disclose the judgments made by management in applying the aggregation criteria for reportable segments. The amendments will only affect disclosure and are effective for annual periods beginning on or after July 1, 2014.





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





Note 5                     Critical Accounting Estimates and Judgments





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





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





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





i)
Lascogon Contingent Consideration – Note 8 (iii)





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





ii)
Investments in Associates





The Company periodically or when circumstances change, reviews its investments in its associates to ascertain whether it has maintained significant influence over these investments and also, reviews whether there exists any evidence that the investments in associates are required to be impaired. During the year ended December 31, 2012, the Company’s investment in Lascogon was diluted such that it was reclassified to Available-for sale investments as the Company determined that it no longer exerted significant influence over this investment. (Note 8)


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 50





Note 5                    Critical Accounting Estimates and Judgments (continued)





iii)
Deferred tax assets and liabilities


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





Note 6                    Cash





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





Note 7                     Property, Plant and Equipment





Computer Equipment

December 31 2014


December 31 2013


December 31 2012CostOpening Cost

$
15,543



15,543



15,543Additions


-



-



-Ending Cost


15,543



15,543



15,543Accumulated DepreciationOpening Accumulated Depreciation

$
(13,804
)


(13,059
)


(11,994
)Charge for the year


(522
)


(745
)


(1,065
)Ending Accumulated Depreciation


(14,326
)


(13,804
)


(13,059
)Carrying Value

$
1,217



1,739



2,484





Note 8                    Investment in associates and available for sale investment





Investments in Associates





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





December 31, 2014


December 31, 2013Forum Energy plc (“FEP”)

$
-


$
-Metalore Mining Corporation


-



-$
-


$
-








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 51





Note 8                Investment in associates and available for sale investment (continued





i)
Investment in FEP





The investment in FEP is summarized as follows:


Number ofshares held


AmountBalance, December 31, 2011


8,550,200



4,720,167Equity share of loss from investment in FEP for the period ended December 31, 2012


-



(4,688,441
)Dilution loss on issuance of FEP shares


-



(31,726
)Balance December  31, 2014, 2013, and 2012


8,550,200


$
-





Unrecognized equity share of losses (income)

December 31, 2014


December 31, 2013


December 31, 2012Current

$
(49,783
)

$
706,589


$
1,742,525Cumulative

$
2,399,330


$
2,449,113


$
1,742,525





As at December 31, 2014 and 2013, the Company’s interest in FEP was 24.05%.





During the year ended December 31, 2012, FEP wrote down $25,400,000 of its investment in Service Contract 40 “SC40” as a result of receiving a resource estimate from an independent consultant.  The Company’s equity share of the losses incurred by FEP was in excess of the carrying value of the investment prior to recording the loss. However, in accordance with the guidance of IFRS, the Company has discontinued recording losses once the carrying value of the equity investment was reduced to zero. As result, the Company’s investment in FEP has been reduced to $nil for the years ended December 31, 2014 and 2013.If FEP subsequently reports profits, the Company will resume recognizing its share of those profits only after its share of the profits exceeds the share of losses not recognized.





At December 31, 2014, the Company held 8,550,200 shares of FEP with a fair value of $3,187,651 based on their quoted market price (December 31, 2013: $11,632,611).  The common shares of FEP are traded on the London Stock Exchange Alternative Investment Market (“AIM”). In addition to holding a 24.05% interest in FEP, the Company has two directors in common and shares a common parent with FEP.





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





The Company holds a 35% interest in Metalore with its cumulative cost being  $789,569 offset by equity share of losses totaling $24,894 and an impairment write-down of $764,675 leaving a carrying value of $Nil. Metalore’s project has been abandoned and it has no other operations.


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 52





Note 8                    Investment in associates and available for sale investment (continued)





Investment in available-for-sale securities





Investment in Lascogon Mining Corporation (“Lascogon”)





30,000,000 common shares of the Company that were issued into escrow, which may be awarded to the vendor of the investment in Lascogon upon the declaration of commerciality as full and final consideration for the assignment of its rights to the Company, are considered contingent consideration and will be recorded as an additional cost of the investment, at fair value, should Lascogon reach commerciality, which, as at December 31, 2014 is not considered likely.





In May 2012, the Company received a capital call from Lascogon in the amount of 100 million Philippine Pesos or approximately $2,400,000.  The capital call was made to address Lascogon’s current deficit and to fund the upcoming work program and exploration budget.  The Company was given until December 21, 2012 to forward the requested funds or have its 40% interest diluted to 1.08%.  The Company did not forward funds and therefore its interest in Lascogon has been diluted to 1.08% with the result being that Lascogon was no longer considered an associate of the Company as the Company no longer exerts significant influence. Upon the dilution of its interest in Lascogon, the investment was reclassified to an available for sale investment having a fair value of $Nil as at December 31, 2014 and 2013. The current exploration phase under the Mineral Production Sharing Agreement (“MPSA”) expired in January 2014 and it is uncertain whether a further 2 year extension will be granted.





The Company’s cumulative cost in its investment in Lascogon is $2,635,254 offset by equity share of losses totaling $27,640 and an impairment write-down of $2,607,614 leaving a carrying value of $Nil.





Note 9                    Due to Parent Company





During the year ended December 31, 2009, the Company was advanced $273,000 by Philex Mining Corporation, the Company’s ultimate controlling entity. The loan was unsecured, and was due on December 31, 2010 and bore interest at LIBOR plus 3 % per annum.  On December 31, 2011 the Company owed a total of $301,790 including accrued interest.  On December 20, 2012, the Company repaid $312,432 representing the full amount of the loan and accrued interest.





Note 10                  Share Capital





a)       Authorized:





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





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





Issued:





Common Shares
Number

AmountBalance, January 1, 2012
439,143,765
$
16,732,397Balance December 31, 2014, 2013 and 2012
439,143,765
$
16,732,397





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 53


Note 10                   Share Capital (continued)





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





b)      Contributed Surplus





Balance December 31, 2014, December 31,2013 and December 31, 2012

$
3,058,063





c)
Nature and Purpose of Equity and Reserves





The reserves recorded in equity on the Company’s statements of financial position include Contributed Surplus and Deficit.





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





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





d)
Share based payments:





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





There were no stock options outstanding on December 31, 2014 and December 31, 2013 and none were issued between January 1, 2012 and December 31, 2014.





Note 11                  Related Party Transactions and Balances





During the year ended December 31, 2014 general and administrative expenses included key management personnel compensation totaling $168,000 (2013: $196,500; 2012: $226,000) (Note 12).





During the year ended December 31, 2014 the Company incurred an interest charge of $Nil (2013: $Nil; 2012: $10,642) on a loan from the parent of the Company (Note 9).





Included in accounts payable and accrued liabilities at December 31, 2014 is $59 (2013; $56; 2012: $61) owed to directors, officers and companies controlled by them for unpaid consulting fees and or expenses.





In addition, at December 31, 2014, the Company owed Lascogon Mining Corporation $18,895 (2013: $18,895; 2012: $18,895). Amounts owing are unsecured, non interest bearing and due on demand.





Related party transactions are measured at fair value.





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 54





Note 12
Nature of Expenses





General and administration expenses include

December 31, 2014


December 31, 2013


December 31, 2012Professional fees

$
38,544


$
74,397


$
83,903Bank charges


2,703



3,844



3,750Listing and filing fees


19,985



27,553



20,024Office and miscellaneous


51,673



54,330



62,673Consulting (Note 11)


168,000



196,500



226,000Engineering and geological expenses


6,448



5,389



8,188Amortization


522



745



1,065Foreign exchange


2,105



4,342



2,798$
289,980


$
367,100


$
408,401





Note 13                      Income Taxes





Reconciliation of accounting and taxable income, for the years ended December 31 are as follows:





December 31, 2014


December 31, 2013


December 31, 2012Loss before income taxes

$
(289,875
)

$
(366,756
)

$
(5,138,333
)Tax expense (recovery) based on statutory rate of 25.0% (2013: 25%, 2012: 25.0%)


(72,000
)


(92,000
)


(1,285,000
)Impact of foreign exchange on tax assets as a difference in functional currency


94,000



114,000



(35,000
)Foreign currency adjustment on non-monetary items


172,000



139,000



(49,000
)Non-deductible expenses


-



-



4,000Non-taxable portion of capital loss (gain)


-



-



586,000Expiry of loss carry forward


270,000



-



-Changes  in unrecognized deferred tax assets


(464,000
)


(161,000
)


779,000Total income tax expense (recovery)


-



-



-





Effective January 1, 2014, the Canadian Federal Corporate tax rate and the Alberta provincial tax rate remained at 15% and 10%, respectively.





The nature and tax effect of the temporary differences giving rise to the deferred tax assets and liabilities at December 31, 2014 and 2013 are summarized as follows:





December 31, 2014


December 31, 2013Non-capital losses

$
1,465,000



1,796,000Capital assets and other


41,000



2,000Investments


1,898,000



2,070,000Unrecognized deferred tax assets


(3,404,000
)


(3,868,000
)$
-



-





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 55


Note 13                      Income Taxes (continued)





As at December 31, 2014, the Company had estimated non-capital losses for Canadian tax purposes of $5,858,000 which may be carried forward to offset future years’ taxable income. These losses will expire as follows:





Year of Expiry

Taxable Losses2015


1,468,0002026


1,433,0002027


33,0002028


519,0002029


429,0002030


547,0002031


384,0002032


357,0002033


399,0002034


289,000$
5,858,000





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





Note 14                   Financial Instruments and Risk Management





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





-
Market Risk


-
Credit Risk


-
Liquidity Risk





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





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





General Objectives, Policies and Procedures





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


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 56





Note 14                   Financial Instruments and Risk Management (continued)





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





a)      Market Risk





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





Foreign currency exchange risk





The Company is exposed to foreign currency fluctuations for general and administrative transactions denominated in Canadian Dollars. The majority of the Company’s cash is kept in U.S. dollars.  As at December 31, 2014, the Company had an insignificant amount of cash denominated in Canadian dollars that was subject to exchange rate fluctuations between the Canadian dollar and the U.S. dollar. As at December 31, 2014, the Company held an insignificant amount of financial liabilities denominated in Canadian dollars that would be subject to exchange rate fluctuations between Canadian dollars and U.S. dollars.





Interest Rate Risk





Interest rate risk is the risk that the fair values and future cash flows of the Company will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its cash. The Company did not have any borrowings outstanding as at December 31, 2014.








Equity and Commodity Price Risk





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





b)      Credit risk





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


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Note 14                   Financial Instruments and Risk Management (continued)





c)      Liquidity risk





Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due.  The Company does not generate cash from operations but rather, the Company will, from time to time, issue shares via equity placements, borrow funds from an affiliated company or undertake to sell a portion of its investment in the shares of FEP should it be necessary to raise funds. The Company manages liquidity by maintaining cash balances available to meet its anticipated operational needs. Liquidity requirements are managed based on expected cash flow to ensure that there is adequate capital to meet short-term and long-term obligations. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis and its growth plans. At December 31, 2014 the Company’s accounts payable and accrued liabilities were $41,406, all of which fall due for payment within twelve months of the balance sheet date.  The Company has minimal long-term commitments.





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





Note 15
Capital Management





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





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





As at December 31, 2014, the company had no externally imposed capital requirements nor were there any changes in the company’s approach to capital management during the year.





Note 16                   Segmental Reporting





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














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ITEM19.  EXHIBITS




1.1
Certificate of Continuance of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form F-1, File No. 33-81290 (the “Registration”)
*1.2
By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registration Statement)
*4.1
Consulting Agreement dated March 1, 2004 between the Company and David Robinson
*4.2
Consulting Agreement dated March 1,2004 between the Company and Barry Stansfield
*4.3
Consulting Agreement dated November 23, 2003 between the Company and Larry Youell
*4.4
Consulting Agreement dated March 1, 2004 between the Company and David Wilson
*4.5
Consulting Agreement dated March 1, 2004 between the Company and David
*4.6
Exchange and Release Agreement between Tracer Petroleum Corporation and Transmeridian Exploration, Inc., dated March 16, 2001
*4.7
Share Purchase Agreement dated March 11, 2003, as amended by agreements dated March 21, and April 2, 2003
*4.8
Amendment dated March 21, 2003 to Share Purchase Agreement dated March 11, 2003 as amended by an agreement dated April 2, 2003
*4.9
Amendment dated April 2, 2003 to Share Purchase Agreement dated March 11, 2003 as amended by agreement dated March 21, 2003
*11.
Code of Ethics
*12.1
Certification by the Chief Executive Officer and Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
(filed herewith)13.1
Certification by the Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith)


* Previously filed




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SIGNATURES














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





FEC Resources Inc.Date:April 2, 2015
By:
/s/Carlo PabloName:
Carlo PabloTitle:
President and Chief Executive Officer











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