FEC Resources (FECOF) 20-F 2007 FY Annual report (foreign)

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 endedDecember 31, 2007

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 number0-17729

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

(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant’s Name into English)

British Columbia, Canada
(Jurisdiction of incorporation or organization)

46 Royal Ridge Rise NW, Calgary, AB, T3G 4V2
(Address of principal executive offices)

Lawler & Associates

29377 Rancho California Road, Suite 204, Temecula, California, 92592 Telephone: 951-676-4900 Fax: 951-676-4988

(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
(Title of Class)

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

Common Stock, without par value
(Title of Class)

Common Stock Purchase Warrants
(Title of Class)

FEC Resources form 20F-Dec.31, 2007

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

None
(Title of Class)

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: 434,143,765 shares of Common Stock and 3,533,333 Common Stock Purchase Warrants and 25,549,545 Common Stock Purchase Options.

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

Yes __________ No ___________

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 xxx             

  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 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 xxx      No  ___________

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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 [X ]

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

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

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 xxx   Item 18

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

Yes _________  No xxx

(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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     FEC RESOURCES, INC. (formerly “FORUM ENERGY CORPORATION”) FORM 20-F ANNUAL REPORT FISCAL YEAR 2007, ENDED DECEMBER 31, 2007

	TABLE OF CONTENTS
	PART I	Page
Item 1.	Identity of Directors, Senior Management and Advisers	5
Item 2.	Offer Statistics and Expected Timetable	5
Item 3.	Key Information	5
Item 4.	Information on the Company	13
Item 4A.	Unresolved Staff Comments	21
Item 5.	Operating and Financial Review and Prospects	21
Item 6.	Directors, Senior Management and Employees	33
Item 7.	Major Shareholders and Related Party Transactions	39
Item 8.	Financial Information	40
Item 9.	The Offer and Listing	41
Item 10.	Additional Information	42
Item 11.	Quantitative and Qualitative Disclosure About Market Risk	44
Item 12.	Description of Securities Other than Equity Securities	44
	PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	44
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	45
Item 15.	Controls and Procedures	45
Item 15T	Controls and Procedures	45
Item 16A.	Audit Committee Financial Expert	46
Item 16B.	Code of Ethics	46
Item 16C.	Principal Accountant Fees and Services	47
Item 16D.	Exemption from the Listing Standards for Audit Committees	48
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	48
	PART III
Item 17.	Financial Statements	48
Item 18.	Financial Statements	161
Item 19.	Exhibits	161
Signatures		162

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

• oil and natural gas price volatility;
• uncertainties in the estimates of proved reserves, and in the projection of future rates ofproduction 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, includingchanges in energy policies, foreign exchange restrictions and currency fluctuations;
• adverse regulatory or legal decisions, including those under environmental laws andregulations;
• 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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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

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

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

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

ITEM 3. KEY INFORMATION

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

A. Selected Financial Data

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. For the years 2003 to 2005, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. For the years 2006 and 2007, 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	Close
Fiscal Year Ended 12/31/07	1.08	1.19	0.92	0.99
Fiscal Year Ended 12/31/06	1.13	1.17	1.10	1.17
Fiscal Year Ended 12/31/05	1.21	1.27	1.15	1.16
Fiscal Year Ended 12/31/04	1.30	1.40	1.18	1.20
Fiscal Year Ended 12/31/03	1.40	1.54	1.31	1.30

The current rate of exchange was 1.0107 on June 25, 2008.
	Table No. 3(A)(2)
U.S. Dollar/Canadian Dollar
	12/07	01/08	02/08	03/08	04/08	05/08
High	1.02	1.03	1.02	1.03	1.02	1.02
Low	0.98	0.99	0.98	0.98	1.00	0.98

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A. Selected Financial Data

The tables below present selected financial information. Our financial statements are stated in Canadian Dollars and were prepared in accordance with Canadian Generally Accepted Accounting Principles (“Canadian GAAP”). Table 3(A)(3) presents selected financial information under Canadian GAAP and Table 3(A)(4) presents the same information assuming we had reported under United States Generally Accepted Accounting Principles (“US GAAP”) (see below). These tables should be read in conjunction with the financial statements and notes thereto and Management’s Discussion and Analysis included elsewhere in this annual report.All dollar amounts in this report are expressed in Canadian dollars unless otherwise stated.

		Table No. 3(A)(3)
		Selected Financial Data Canadian GAAP
		(CDN $ in thousands, except Earnings Per Share)
		Year	Year	Year	Year	Year
		Ended	Ended	Ended	Ended	Ended
		12/31/07	12/31/06	12/31/05	12/31/04	12/31/03
	Revenue	$ -	$ -	$ -	$ -	$ -
	Gain (loss) Before Non-controlling	$(5,947)	$(3,264)	$10,371	$(7,228)	$(1,397)
	Interest
	Net Income (loss)	$(5,947)	$(3,264)	$10,371	$(7,219)	$(1,356)
	Net Income (loss) Per Share	$(0.02)	$(0.02)	$0.06	$(0.05)	$(0.01)
	Diluted Net Income (loss) Per Share	$(0.02)	$(0.02)	$0.05	$(0.05)	$(0.01)
	Dividends Per Share	$0.00	$0.00	$0.00	$0.00	$0.00
	Weighted Avg. Shares O/S	239,623	195,610	175,620	149,900	113,700
	Working Capital	$706	$(3,153)	$1,271	$(998)	$(283)
	Resource Properties (1)	$ -	$ -	$ -	$6,217	$8,951
	Long-Term Debt	$ -	$ -	$2,710	$7,921	$6,882
	Shareholders’ Equity/ (deficiency)	$8,624	$9,616	$11,022	$(2,153)	$1,809
	Capital Stock Shares	434,144	234,144	178,161	174,584	135,821
	Total Assets	$12,168	$13,309	$13,906	$7,271	$9,109
(1)	Resource properties comprise all costs of acquisition of, exploration for, and development of petroleum and natural gas reserves (net of government incentives) less depletion and write downs.
		Table No. 3(A)(4)
		Selected Financial Data US GAAP
		(CDN $ in thousands, except Earnings Per Share)
		Year	Year	Year		Year
		Ended	Ended	Ended	Year Ended	Ended
		12/31/07	12/31/06	12/31/05	12/31/04	12/31/03
			RESTATED
	Revenue	$ -	$ -	$ -	$ -	$ -
	Income (Loss) Before Non-controlling	$(6,412)	$(3,919)	$10,287	$(6,973)	$(2,832)
	Net Income (loss)	$(6,412)	$(3,919)	$10,287	$(6,965)	$(2,791)
	Net Income (loss) Per Share	$(0.03)	$(0.02)	$0.06	$(0.05)	$(0.02)
	Fully Diluted Net Income (loss) Per	$(0.03)	$(0.02)	$0.05	$(0.05)	$(0.02)
	Share
	Dividends Per Share	$0.00	$0.00	$0.00	$0.00	$0.00
	Wgt. Avg. Shares O/S	239,623	195,610	175,620	149,900	113,700
	Working Capital	$706	$(3,153)	$1,271	$(998)	$(283)
	Resource Properties	$ -	$ -	$ -	$6,217	$8,951
	Long-Term Debt	$ -	$ -	$2,995	$8,105	$6,882
	Shareholders’ Equity/(deficiency)	$8,230	$9,749	$23,630	$(2,462)	$1,809
	Capital Stock Shares	434,144	234,144	178,161	174,584	135,821
	Total Assets	$11,775	$13,057	$27,030	$7,405	$9,109

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B. Capitalization and Indebtedness

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

C. Reasons for the Offer and Use of Proceeds

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

D. Risk Factors

GENERALBUSINESSRISKS

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

We sustained net losses for each of the fiscal years ended December 31, 2007 and 2006 of $5,946,541 and $3,263,966, respectively. In 2005, our net income was $10,371,394, but it was not due to revenues generated from oil and gas sales. The income was a result of the gain on dilution of $10,476,786 in Forum Energy Plc (“FEP”) from our original holding of 71.40% to our year-end holding of 36.72% of FEP shares and also the recovery of impairment charges of our interest in Forum Exploration Inc. (“FEI”) of $4,695,228. We also anticipate sustaining a loss from operations for the fiscal year ended December 31, 2008.

We Have Incurred Operating Losses to Date, and Thus, There is Doubt as to Our Ability to Continue Operations as a Going Concern in the Future.

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

The consolidated Financial Statements included herein have been prepared by management on the basis of accounting principles applicable to a “going concern”. Management believes the “going concern” basis, which presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future, is appropriate. We have experienced significant operating losses and cash outflows from operations in the years ended December 31, 2007, 2006 and 2005, and have no producing properties. Our ability to continue as a “going concern” is dependent on achieving profitable operations and upon obtaining additional financing. The outcome of these matters cannot be predicted at this time.

In the United States, reporting standards for auditors require the addition of an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on the company's ability to continue as a going concern (see Comments by Auditors for US Readers on Canada-US Reporting Differences).

Although We Believe We Have the Working Capital to Support Our Business in 2008, 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 Which May Affect Our Ability to Continue Operations.

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Funds used in operations for the fiscal years ended December 31, 2007, 2006, and 2005 were $(417,405), $(1,658,921), and $(2,085,860), 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 , and thus, You May Lose All of Your Investment.

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, and thus, You May Not Be Able to Sell Your Shares.

There is only a limited trading market for our shares on the Over-the-Counter Bulletin Board Exchange (“OTCBB”). There can be no assurance that this market will be sustained, or that we will be able to satisfy any future trading criteria that may be imposed by the National Association of Securities Dealers (“NASD”).

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 (“SEC”) 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 June 25, 2008, we had 434,143,765 common shares outstanding. On that date, we also had reserved 19,520,000 common

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shares for issuance under our stock plan at per-share exercise prices ranging from US$0.055 to US$0.079, and also had reserved 3,533,333 common shares for issuance under the warrants pursuant to the acquisition of FEI. We intend to include these common shares in a future Registration Statement to be filed with the SEC pursuant to the Securities Act of 1933, registering the common shares for sale.

See "Item 6. Directors, Senior Management and Employees--Options to Purchase Securities from the Company or Subsidiaries."

No prediction can be made as to the effect, if any, that sales of shares of common shares or the availability of such shares for sale will have on the market prices of our common shares prevailing from time to time. The possibility that substantial amounts of our common shares may be sold under SEC Rule 144 into the public market may adversely affect prevailing market prices for our common shares and could impair our ability to raise capital in the future through the sale of equity securities.

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.

OPERATINGRISKS- OIL ANDGASEXPLORATIONACTIVITIES

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

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

Exploration and development of oil and gas and mineral resources involve a high degree of risk, and few properties which are explored are ultimately developed into producing properties. There is no assurance that our exploration and development activities or those of companies that we invest in will result in any discoveries of commercial bodies of oil, gas or minerals. The long-term profitability of our operations will be, in part, directly related to the cost and success of our exploration programs or those of companies we invest in which may be affected by a number of factors. Substantial expenditures are required to establish reserves through drilling, to develop processes to extract the resources, and, in the case of new

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properties, to develop the extraction and processing facilities and infrastructure at any site chosen for extraction. Although substantial benefits may be derived from the discovery of a major deposit of oil, gas or minerals, no assurance can be given that natural resources will be discovered in sufficient quantities to justify commercial operations or that the funds required for development can be obtained on a timely basis.

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

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

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

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

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.

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

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

It Is Possible that Our Title for the Claims in Which We Have an Interest 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 interest, there is no guarantee that title to such concessions will not be challenged or impugned. In some countries, the system for recording title to the rights to explore, develop, and mine natural resources is such that a title opinion provides only minimal comfort that the holder has title. Also, in many countries, claims have been made and new claims are being made by aboriginal peoples that call into question the property rights granted by the governments of those countries.

Reserve Estimates for Resources 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.

Our Resource Production 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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Our Operations Will Be Subject to Numerous Environmental Risks Which May Adversely Affect Our Earnings and Competitive Position.

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

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 Which Could Adversely Affect Our Business.

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, and thus, Our Business Is Not Currently Protected Against All Operational Risks.

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

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coverage; and, even if we were to obtain such insurance coverage, there is no assurance that it will be adequate to protect against all operational risks, or subject to defenses or exclusions against insurance coverage.

We Are Dependent On Retaining Our Senior Management and Key Personnel, and thus, Any One of Their Departures May Adversely Affect Our Business.

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 currently 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 and Such Conflicts May Adversely Affect Our Business Operations.

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 ce rtain 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.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

We were incorporated on February 8, 1982 in British Columbia, Canada under the name Tylox Corporation. Our continuance under theCanada Business Corporation Actresulted 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 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. We are currently focused on the development of one (1) mineral license in the Philippines. The license is held by Lascogon Mining Corporation (“Lascogon Mining”) which was transferred from PGI.

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

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In September 2007, we wrote off our investment in Metalore Mining Corporation due to a concern over its viability and also due to lack of progress.

On December 21, 2007, we completed a private placement of 200,000,000 shares at US$0.025 per share for gross proceeds of US$5,000,000 ($4,991,500). We incurred cash issuance costs of $9,741. As a result of the private placement, our issued shares increased from 234,143,765 to 434,143,765.

Prior to the end of the year, we paid off debentures of US$485,000 and total accrued interest of US$66,581.

On January 2, 2008, we repaid the balance of another debenture offering which amounted to₤1,275,000plus accrued interest and an accrued bonus of₤127,500and₤318,750respectively.

As a result of the debenture repayments, we have no more long term debt.

B. Business Overview

Operations and Principal Activities

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

We are currently pursuing other exploration and development opportunities for resources in different regions of the world.

Principal Markets

We are mainly pursuing opportunities in the Philippines, but have no revenues and have had none for the last several years. More specifically, we are currently pursuing exploration and development opportunities for oil, natural gas, iron ore, gold, and coal in the Philippines through various companies that we own interests in. FEP, who we sold our interest in FEI to and who we own 29.8% of, continues to pursue the opportunities available in Service Contract 40, a petroleum license based onshore and offshore Cebu Island, Philippines. FEP also has several other projects underway as described below. In addition, we are involved in the exploration for gold through our interest in Lascogon Mining.

Seasonality

The companies in which we hold an interest in operate in the Philippines and their exploration activities are affected by climate. Typically, in the rainy season from June through November, the level of exploration activities decrease.

Sources and Availability of Raw Materials

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Raw materials are available locally in the Philippines for exploration activities by the companies which we hold interests in. Prices are relatively stable for most materials other than fuel required to run the exploration programs.

Marketing Channels

We currently have no sales and neither do any companies in which we hold interests in.

Patents or Licenses

We are not dependent on any patents or licenses, industrial, commercial or financial contracts.

Government Regulations

Although government regulations are relatively favorable for operations in the Philippines, there is a possibility that they may change in a way that could affect the operations of companies that we hold an interest in or any future company that we may hold an interest in.

C. Organizational Structure

We have two wholly-owned subsidiaries which are dormant. Our wholly owned subsidiaries are FEC Resources (BVI) Limited and Pacific Geothermal Energy, Inc. (“PACGEO”). 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 FEP for shares and cash as more fully described later in this document. We currently own 29.8% of FEP, and in addition we hold a 35% interest in Metalore Mining Corporation (“MMC”), a Philippine-based company that owns a 64 hectare license where iron ore production has begun. We also own a 40% interest in a mining project with Philex Gold Inc. (“PGI”).

D. Property, Plants and Equipment

None.

E. Current Exploration/Development

Forum Energy Plc.

Forum Energy Plc. (“Forum”) was established through the consolidation 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 Forum are:

• 100% interest in GSEC 101 (Reed Bank), an offshore license which contains the Sampaguita GasField as well as several oil and gas leads;
• 66.7% interest in SC 40 (Cebu), a service contract which contains the onshore Libertad Gas Fieldand Maya discovery and several other prospects including onshore Jibitnil Island and offshoreCentral Tañon;
• An effective interest of 66.7% in two (2) Coal Operating Contracts on Cebu Island containing anumber of coal seams; and

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• 100% interest in Forum Energy Philippines Corporation (Formerly Basic Petroleum and MineralsInc.), a company with varying interests in nine (9) offshore fields west of the Philippines.

GSEC101 (Reed Bank)

The Reed Bank concession, GSEC 101 (Reed Bank), is located in the South China Sea west of Palawan Island. The license is located to the southwest of the Malampaya Gas Field operated by Shell Oil.

GSEC 101 (Reed Bank) was awarded to Sterling in June 2002 and covered an initial two-year term. 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 southwest end of the structure. 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 the gas-to-liquid options for the gas field. The seismic work and the gas-to-liquid 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 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 gas accumulation with the possibility of having reserves of up to 20 trillion cubic feet (“TCF”).

Results from Forum’s 3D seismic program and its interpretation performed by independent consultants, Count Geophysics Limited, confirmed a minimum of 3.4 TCF proven gas in place from sands tested in the three (3) wells drilled to date and the extension of the structure to a possible closure of 290 sq. km giving it the possibility of having reserves in these sands of 10 TCF. Forum, who we hold an equity interest in, is currently in the process of converting the license to a service contract.

SC 40 (Cebu)

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

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

• Drill one (1) well and acquire a minimum of 250 kilometers of seismic in year 8;
• Drill two (2) wells in year 9; and
• Drill two (2) wells in year 10.

The requirement to acquire the seismic data was deferred by one (1) year by the Philippines Department of Energy (“DOE”) to not later than the end of September 2005, the end of year 9. FEI has the option to declare a field within the contract area commercial, and thus, relinquish 87.5% of the license area and

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convert the license into a development contract for a minimum twenty-five (25) year period. There are also two (2) production bonuses to pay to the DOE as follows:

• US$1,000,000 upon production reaching 25,000 bopd;
• US$2,000,000 upon production reaching 50,000 bopd; and
• US$3,000,000 upon production reaching 75,000 bopd.

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

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

According to the 2007 annual report of FEP, they continue to keep SC 40 under review for a potential farm-out of the offshore portion where a number of prospects have been identified. The recent drilling on an adjacent block, with negative results, has however downgraded this opportunity. In addition, FEP continues to review the onshore portion of the SC40 license including the Maya oil discovery for further potential, and is evaluating a number of opportunities to realize value from both its rig and ancillary equipment, which are in demand given the state of the service market, to bolster its cash position.

2D Seismic Survey

FEP completed an offshore 2D seismic acquisition program in the Tañon Straits, west of Cebu Island, Philippines in June 2005. The survey, acquired 310 kilometers of new 2D data in license Service Contract 40 (“SC40”), where FEP holds a 66.7% interest. Independent consultants, PGS Reservoir Ltd., estimate that structures already identified within the survey area could have combined reserves of 350 million of barrels of oil equivalent.

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

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

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

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

During December 2005, the DOE formally granted a Declaration of Commerciality for the development of the onshore Libertad Gas Field within SC40. This represents the first Declaration of Commerciality

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within the Philippines since Shell’s Malampaya offshore gas field development, which came onstream in 2001. The Declaration of Commerciality also allowed the retention of the portion of SC40 which contains all the currently identified prospects and discoveries.

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

According to information on their website, discussions continue with interested parties on the Libertad Field development and potential offtake of gas and capitalization of the resource. Until a satisfactory conclusion is reached, we project any further investment will be deferred.

Maya

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

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

Workover and testing of one of the original wells, (F2X), commenced in early 2007 and results are pending.

Coal Operating Contracts (“COCs”)

FEI which is owned by Forum Energy Plc was awarded two (2) coal operating contracts on Cebu Island by the DOE on February 23, 2005, located at Balamban-Naga (Central Cebu) and Dalaguete (South Cebu), which have estimated proven and probable coal reserves of 4.9 million tons of coal.

CENTRAL CEBU COC

The Central Cebu COC consists of two (2) sets of two (2) Coal Blocks covering an area of 4,000 hectares. The two (2) sets of Coal Blocks consist of CB 33-I-193, CB 33-I-194, CB 34-I-68 and CB 34-I-69.

SOUTH CEBU COC

The South Cebu COC consists of two (2) sets of two (2) Coal Blocks covering an area of almost 2,720 hectares. The two (2) sets of Coal Blocks consist of CB-179, CB-180, CB-219 and CB-259.

COAL OPERATING CONTRACTS

The COCs were awarded for one (1) year to allow FEP to undertake exploration within the acreage. FEP has the option to extend the coal exploration phase by one year or declare coal reserves in commercial quantity and begin the coal development phase, which is for a period of ten (10) years. This phase can be extended for a further period of ten (10) years and thereafter by three (3) year extensions up to a maximum of twelve (12) years. FEP is only able to retain the Coal Blocks within the COCs for which it enters into

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the coal development phase. All remaining Coal Blocks within the COCs must be relinquished prior to the start of this phase or approved for further exploration. Each COC has the following commitments:

Philippine Pesos 600,000 signature bonus;
Within the first year, the group must secure a Certificate of Non-Coverage and an Environmental Compliance Certificate from Department of the Environment and Natural Resources (“DENR”) and a Precondition Certificate from the NCIP;
Implement the work program detailed in the COC, with a minimum spend of Philippine Pesos 1,000,000 per block; and
In any year, the group is be able to recover the following from the gross income received under the COC:
o	All associated operating expenses provided that the amount does not exceed 90% of the total gross income in any year. Operating expenses exceeding 90% of gross income, including years when there was no income, can be recovered in subsequent years;
o	Receive a combined fee plus a special allowance of up to 70% of the net operating income; and
o	The balance of the gross income generated within the COCs is due to the DOE.

The Government of the Philippines has granted exemption from all national taxes except income tax to the group as operator of the contract.

In November 2007, FEP announced that it had entered into a Sale & Purchase Agreement to sell its interest in the Central Cebu Coal Operating Contract 132 (“COC132”), for US$3,500,000, in cash, to First Asian Resources and Mining Corporation, a private Philippine Company.

The sale is subject to agreement by relevant regulatory authorities, including the Department of Energy of the Republic of the Philippines ("DOE").

According to FEP’s annual report, FEP is in the process of exiting the coal business with the sale of its remaining property in Southern Cebu and is in discussion with interested parties. This is anticipated to be concluded in 2008.

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.

The acquisition was approved by BCI shareholders at the company’s Annual General Meeting on March 29, 2006. It provides FEP with initial and immediate net production of approximately 40 barrels of oil per day and varying interests in nine (9) oil fields that offer additional production and reserve potential.

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The BPMI assets include interests in nine (9) Philippine offshore fields as follows: Nido (8.47%), Matinloc and Pandan (12.41%), North Matinloc (19.46%), Libro (28.6%), Tara (10%), Bonita (7.03%), West Linapacan (9.1%) and Galoc (2.28%) .

According to the annual report of FEP, it is expected that production from the Galoc Field will commence in the second quarter of 2008. The operator is studying the potential for a second phase of development which would provide substantial upside and could be funded from projected cash flow.

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

Metalore Mining Corp.

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

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

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

Metalore recently 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 a 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 shut down. In 2007, we wrote off our entire investment in Metalore.

MPSA148 (Philex Gold Joint Venture)

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

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

In 2007, further trenching, drilling, sampling and assays were conducted on MPSA 148. These were done initially on the Lascogan and Danua areas, then later, surveying, drilling and sampling on the Nabago prospective area. Results continue to be encouraging and are being further analyzed as the 2008 work program continues.

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ITEM 4A. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 5. OPERATING AND FINANCIAL OVERVIEW AND PROSPECTS

We have experienced significant operating losses and fund outflows from operations 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 Canadian GAAP, which are different from US GAAP (refer to the Auditors’ Report dated May 23, 2008 and Note 14 to the Consolidated Financial Statements).

The following discussion and analysis of financial results should be read in conjunction with our Audited Financial Statements for the year-ended December 31, 2007, 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.

A. Operating Results(in thousands, except Earnings Per Share)

Fiscal Year Ended December 31, 2007 versus Fiscal Year Ended December 31, 2006

In 2007, Lascogan Mining Corporation, of which we own forty percent (40%), continued its’ disciplined exploration of MPSA 148 in the Philippines A number of interesting results were discovered, and these will be reported publicly once a formal evaluation is completed by an independent outside consultant.

We also retired all outstanding convertible debentures and debt through a private placement of shares in December of 2007.

To date, FEP has not obtained a service contract from the Philippine government for further exploration of its’ gas block – GSEC 101. We continue to hold almost thirty percent (30%) of the shares in FEP, and thus, with the recent expiry of an agreement between China, Vietnam and the Philippines covering the GSEC 101 block, we are hopeful that FEP will be able to negotiate and enter into a service contract in the near future.

The consolidated accounts show a loss for the year-ended December 31, 2007 of $5,947 or $(0.02) per share, after extraordinary items versus $3,264 for the previous year.

General and Administration expenses were $666 for the year-ended December 31, 2007 versus $842 for the same period in 2007. We recorded amortization of $1.9 for the year which was the same as in 2006. Interest expense for the year was $355 versus $650 for the previous year. The difference was mainly due to the charge to interest of the balance of the equity portion of the Pacific Geo debenture in 2006 related to its conversion. Amortization of transaction costs for convertible debentures was $Nil for the year versus $87 for last year. The adoption of Section 3855 of the CICA Handbook “Accounting for Financial Instruments” resulted in a charge of the balance of deferred transaction costs to opening deficit. Overall expenses were lower due to a stronger Canadian Dollar which provided a foreign exchange gain of $479 versus a foreign exchange loss of $284 in the same period in the previous year.

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Accretion on long-term debt was $998 for the year versus $453 for the previous year. The difference was mainly a result of the accretion of the gain on the fair value of the derivative liability offset by a slightly lower accretion of the equity portion of convertible debentures.

Redemption premium on convertible debentures for the year-ended December 31, 2007 was $631 versus $nil for the year-ended December 31, 2006 as a result of the bonus payable for not converting into shares on maturity of an outstanding debenture in 2007.

Loss on disposition of investments was $10 for the year-ended December 31, 2007 versus a gain of $118 for 2006. The difference was due to the decrease in the share price of FEP during the year slightly offset by a reduced carrying value as a result of the equity loss recorded.

The gain on the change in the fair value of the derivative liability was $735 versus $nil for the previous year. The accretion of the discount calculated from bifurcating the derivative liability from the debenture liability amounted to $998.

Loss in dilution of FEP was $19 as compared to a gain of $337 for the year-ended December 31, 2006.

Equity in loss of investments in Lascogon, Metalore, and FEP was $1,302 for the year versus $1,368 for the previous year as under the equity method of accounting, we are required to report our share of net income or net loss in our statement of operations and reduce or increase our investment by the same amount. The recording of our share of FEP’s loss was the primary contributing factor of our increased equity in loss of investments.

Loss on write-down of trading securities was $nil for the year versus $63 for the same period in 2006. This reflected the write-down of the Langley Investment Trust Plc shares to recoverable value on September 30, 2006.

Write-down of investment in FEP was $2,341 for the year-ended December 31, 2007 versus $nil for the previous year. The write-down was a result of a determination made that the decline in market price of FEP was other than temporary.

Loss on write-down of Metalore was $765 in 2007 versus $nil for 2006. The 2007 write-down was due to the uncertainty surrounding Metalore’s ability to continue as a viable business and the lack of progress to date.

Our current assets were $4,250 versus $540 for the year-ended December 31, 2006. The difference is mainly a result of the cash on hand from the closing of a private placement just prior to year=end. Our assets reflect the value of FEP and Lascogon on an equity basis. Our investment in Metalore was written down to $nil.

Fiscal Year Ended December 31, 2006 versus Fiscal Year Ended December 31, 2005

Our investment portfolio remained essentially the same in 2006. We continued to hold forty percent (40%) of Lascogan Mining Corporation, approximately thirty-one percent (31%) of FEP and thirty-five percent (35%) of Metalore Mining Corporation.

Our consolidated accounts showed a loss for the year-ended December 31, 2006 of $3,264 or $(0.02) per share, after other items.

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General and Administration expenses were $843 for the year-ended December 31, 2006 versus $3,335 for the same period in 2005. The difference is mainly due to compensation expense in 2005 of $2,189. We recorded amortization of $2 for the year versus $1 for the previous year. Accretion on long-term debt was $453 versus $58 for the previous year. Interest expense for the year was $649 versus $507 for the previous year. The difference was mainly a result of the interest on the increase in debentures outstanding.

Gain on disposition of investments was $118 for 2006 versus $nil for 2005. The change was a result of the sale of FEP shares in 2006 compared to none in 2005.

Recovery of impairment charges in the amount of $4,695 was recorded in 2005 versus $nil for 2006 as a result of the sale of FEI in 2005.

Loss on write-down of investments was $63 for the year versus $52 for the previous year. This reflected a change in market value of the Langley Investment Trust Plc shares held by us prior to the exercise of the price protection clause by Langley Investment Trust Plc.

Gain on dilution of investment in FEP was $337 versus $10,477 for the previous year. The gain in 2005 was recorded as our position in FEP was diluted from our original position in an initial public offering by FEP which is treated as an effective disposition in the applicable year. FEP issued more shares which resulted in a further gain. Equity in loss of investments in Lascogon, Metalore and FEP was $(1,368) for the year versus $(714) for the previous year as under the equity method of accounting we are required to report our share of net income or net loss in our statement of operations and reduce or increase our investment by the same amount.

Our current assets now reflect the value of the FEP transaction on an equity basis. Lascogon and Metalore are reflected on an equity basis as well.

Fiscal Year Ended December 31, 2005 versus Fiscal Year Ended December 31, 2004

We started the year as Forum Energy Corporation (“FEC”) with relatively few assets or prospects. On May 18, 2005, our shareholders formally approved changing our corporate name to FEC Resources Inc., and the vending of our assets with the Philippine assets of Sterling Energy Plc. into a new company called Forum Energy Plc. Forum Energy Plc. (“FEP”) subsequently obtained a listing on the Alternative Investment Market (“AIM”) of the London Stock Exchange and raised funding through a pre-initial public offering (”IPO”) and then later a full IPO. We owned 36.7% of FEP on December 31, 2005, recorded at $11,526 as at that date. In the disposition of our assets, the transaction was valued for accounting purposes at the carrying value of our interest in FEI for the 9,996 shares we received. The result was that no gain on disposition was recorded.

Our consolidated accounts show our income for the year-ended December 31, 2005 of $10,371or $0.06 per share, after extraordinary items.

Our General and Administration Expenses were $3,335for the year-ended December 31, 2005 versus $3,070 for the same period in 2004. We recorded an amortization expense of $1 for 2005 versus $268 for 2004. The difference was due to the amortization on our Philippine assets held until May 18, 2005. Accretion on long-term debt was $58 versus $328 for the previous year. This was also due to the sale of the Philippine assets on May 18, 2005 which resulted in a partial year’s accretion being recorded in 2005.

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Interest expense for the year was $507 versus $13 for the previous year. The difference of $494 was mainly a result of the interest paid on outstanding fees and accrued or paid on debentures.

Gain on disposition of investments was $19 for 2005 versus a loss of $46 for 2004.

Loss on write-down of investments was $52 for 2005 versus $951 for 2004. This reflected a change in market value of our Langley Investment Trust Plc. shares.

Gain on dilution of investment in FEP was $10,477 in 2005 versus $nil for 2004. This gain was recorded as our position in FEP was diluted from its original position in an IPO by FEP which is treated as if we sold the shares. Equity in loss of investment in FEP was $(714) for the year versus $nil for the previous year, as we are required to report our share of net income or net loss in our Statement of Operations and reduce or increase our investment by the same amount under the equity method of accounting.

Impairment of property, plant, and equipment was $nil in 2005 versus $2,618 in 2004 when the investment in FEI’s Manila Bay project was written-off due to the license expiration.

There are no governmental economic, fiscal, monetary or political policies or factors that have materially affected, or could materially affect, directly or indirectly, our operations or investments.

B. Liquidity and Capital Resources

Our working capital at December 31, 2007 was $706 versus a deficit at December 31, 2006 of $3,153 and shareholders’ equity was $8,623 compared to $9,617 at December 31, 2006. During 2006, we raised 1.4 million pounds through the issue of convertible debentures to fund our ongoing operations and development. These debentures matured on December 20, 2007 and interest was calculated at ten percent (10%) per annum. The debentures are secured by FEP shares. The first year’s interest was payable in advance on the closing date and the second year’s interest was payable in arrears on the maturity date. We paid the first year’s interest.

At any time after August 2, 2006 and before or on the maturity date, and provided the debt had not been fully repaid, the holder has the right to convert all or any portion of the convertible indebtedness owing to it as at the date of election into our common shares, the number of such shares to be based on the 10-day average closing bid price of our shares prior to the date of the debenture being issued. The holder will also receive a cash bonus of our common shares for conversion for the amount calculated as one-half of the difference between the FEP share price on the date of the debenture being issued and the FEP share price on the date of maturity or conversion, i.e. the FEP share price at the date of conversion or maturity minus the FEP share price on issuance of debenture multiplied by fifty percent (50%).

The debenture is secured by way of a charge over the shares of FEP held by us totaling two hundred percent (200%) of the principal amount invested.

The holder could choose one of the following in lieu of conversion into our common shares:

i)	On maturity, a cash repayment of the outstanding principal and interest plus twenty- five percent (25%) of the outstanding principal as a bonus for not converting into shares; or
ii)	On or before maturity, a cash repayment of the principal and interest, plus a cash bonus for not converting into shares, calculated as one-half of the difference between the FEP

24

share price on the date of the debenture being issued, and the FEP share price on the date of maturity, i.e. the FEP share price at the date of maturity minus the FEP share price on issuance of debenture multiplied by fifty percent (50%).

On maturity, all of the debenture holders chose the cash repayment of principal and interest plus twenty-five percent (25%) of the outstanding principal as a bonus for not converting into shares. We completed a private placement prior to year-end and paid the entire amount outstanding on January 2, 2008.

In May 2005, we issued convertible debentures totaling $1,223 (US$970). Each debenture bears simple interest at the rate of ten percent (10%) per annum and matures at the earliest of full repayment or April 30, 2010. The debentures were sold in units of US$10 with US$5 warrants. Each debenture was convertible into our common shares at US$0.05 per share or shares of FEP at US$1.923 per share. Each warrant was convertible into common shares of FEP at US$1.923 per share. During the year-ended December 31, 2006, upon agreement with the various debenture holders, the debenture was amended whereby the holder could choose to either receive a payment of principal, interest and a twenty-four percent (24%) premium to the face value of the debenture or the holder could convert the debenture, interest, and warrants into shares at US$0.05 per share. In the event the holder chose the option to receive payment and we could not pay by October 31, 2006, 12.5% per annum interest would be added to the amounts outstanding until paid. The debenture holders chose to receive payment rather than convert into our shares, and on November 24, 2006, we paid the outstanding interest and premium plus one half of the outstanding principal of the debenture leaving US$485 outstanding, accruing further interest at 12.5% per annum. In late December 2007, we paid the full balance including outstanding interest of US$67.

In our opinion, working capital is insufficient to meet our present requirements, however, if necessary, we are able to sell FEP shares to meet our working capital needs since they are a publicly traded company.

Cash used in operating activities for the year was $417 versus $1,658 for the same period in 2006 mainly as a result of the differences described in the results of operations above.

Cash provided by investing activities was $426 for the year ended December 31, 2007 versus cash used in investing activities of $6 in the same period in 2006. The increase was mainly a result of the proceeds from the sale of investments of $623 being offset by funding for the Lascogon exploration work program in the amount of $208 in 2007 versus proceeds from the sale of investments of $1,359 being used for acquisition of investments in the amount of $1,380 in 2006.

Cash provided by financing activities was $3,788 for the year versus cash provided of $1,024 for the year ending December 31, 2006. The cash raised during 2006 was from the balance of the₤1.4 million British Pound debenture funds received subsequent to December 31, 2005 whereas in 2007, a repayment was made on part of the $1.4 million British Pound Debentures outstanding and the US$485 balance of a previous debenture plus outstanding interest was also paid off from funds raised by way of a private placement of $4,982 completed just prior to year-end.

In order to fully earn a forty percent (40%) interest in the joint venture with PGI, we were required to fund a total of US$1,000,000 of the work program by October, 2006 which was completed. In order to maintain the forty percent (40%) interest we are required to pay for forty percent (40%) of the 2007 work program or our position could be diluted. At December 31, 2007, we owed US$134 and have not contributed any funds to the 2008 work program. In an attempt to conserve cash resources, we are in discussions on ways to continue to hold our interest without being diluted however this matter has not been resolved at this time.

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We own thirty-five percent (35%) of Metalore Mining Corporation, forty percent (40%) of Lascogon Mining Corporation and 29.8% of FEP, an AIM listed company. All but FEP requires us to fund our share of any work programs in order to maintain our current equity holdings in each company. 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 as noted above.

We will need to continue to raise funds through either debt, equity or the sale of assets in order to sustain operations and retire outstanding debentures until such time as we can find economically produce able reserves.

Critical Accounting Policies

Our Financial Statements have been prepared in accordance with Canadian GAAP. A summary of significant accounting policies is presented in Note 2 to our Financial Statements. Most accounting policies are mandated under Canadian GAAP, and therefore, we do not have the ability to select alternatives.

Investments

Our investments are accounted for by the equity method. The equity method is a basis of accounting for investments whereby the investment is initially recorded at cost and the carrying value is adjusted thereafter to include the our pro-rata share of post acquisition income (loss). The amount of the adjustment is included in the determination of net income by us and the our investment account is also increased or decreased to reflect our share of capital transactions and changes in accounting policies and corrections of errors relating to prior period financial statements applicable to post acquisition periods. Profit distributions received or receivable from the investments will reduce the carrying value of the investment. Investments accounted for on the equity basis are written down to their fair value when they have a loss in value that is other than a temporary decline. If management has the intention and ability to dispose of the investment within the next fiscal year, then the existing investment is reflected as a current asset.

Trading Securities

Trading securities held prior to January 1, 2007 consisted of equity securities held for trading and were accounted for at cost unless there had been a loss in value, at which time the securities were written down to market value.

Property, plant and equipment

We follow the full cost method of accounting for oil and natural gas operations, whereby all costs of exploring for and development of oil and natural gas reserves are capitalized and accumulated in country-by-country cost centres. Such costs include land acquisition costs, geological and geophysical costs, costs of drilling both productive and non-productive wells, interest costs on major development projects and overhead charges directly related to acquisition, exploration and development activities.

The costs (including exploratory dry holes) in cost centres from which there has been no commercial production are not subject to depletion until commercial production commences. The capitalized costs are periodically assessed to determine whether it is likely such costs will be recovered in the future. To the extent there are costs, which are not likely to be recovered in the future, they are written-off.

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The costs in cost centres from which there will be production will be depleted and depreciated on the unit of production method based on the estimated proved reserves. Oil and natural gas reserves and production will be converted into equivalent units based upon their estimated relative energy content. Costs of acquiring and evaluating significant unproved properties are excluded from the depletion calculations. These unproved properties are assessed periodically to ascertain whether impairment in value has occurred.

Petroleum and natural gas assets are evaluated at least annually to determine that the costs are recoverable and do not exceed the fair value of the properties. The costs are assessed to be recoverable if the sum of the undiscounted cash flows expected from the production of proved reserves and the lower of cost and market of unproved properties exceed the carrying value of the petroleum and natural gas assets. If the carrying value of the petroleum and natural gas assets is not assessed to be recoverable, an impairment loss is recognized to the extent that the carrying value exceeds the sum of the discounted cash flows expected from the production of proved and probable reserves and the lower of cost and market of unproved properties. The cash flows are estimated using the future product prices and costs and are discounted using the risk-free rate.

Proceeds from the sale of oil and natural gas properties are applied against capitalized costs, with no gain or loss recognized unless such a sale would alter the depletion rate by more than 20%.

Substantially all of the our exploration, development and production activities are conducted through investments in other companies and accordingly these financial statements reflect only the our interest in such investments.

We depreciate our computer equipment at the rate of 30% per annum utilizing the declining balance method.

Impairment of Long-Lived Assets

Long-lived assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of these assets and their eventual disposition is less than their carrying amount. Impairment, if any, is assessed using discounted cash flows.

Estimates of undiscounted future cash flows used for conducting impairment tests are subject to significant judgment decisions based on assumptions of highly uncertain future factors such as, crude oil and natural gas prices, production quantities, estimates of recoverable reserves, and production and transportation costs. During the years ended December 31, 2007, 2006 and 2005, no write-downs of long-lived assets were recognized.

Critical Accounting Estimates

The preparation of financial statements in accordance with Canadian GAAP 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 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,

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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. Management is also required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates made.

Recent Canadian Accounting Related Pronouncements

a)	Adoption of New Accounting Standards
	Effective January 1, 2007, we adopted five (5) new Canadian Institute of Chartered Accountants (“CICA”) accounting standards: (a) Handbook Section 1530,Comprehensive Income; (b) Handbook Section 3855,Financial Instruments – Recognition and Measurement; (c) Handbook Section 3861,Financial Instruments – Disclosure and Presentation; (d) Handbook Section 3865,Hedges; and (e) Handbook Section 1506,Accounting Changes. The main requirements of these new standards and the resulting financial statement impact are described below.
	i)	Comprehensive Income, Section 1530:
		This standard requires the presentation of a statement of comprehensive income and its components. Comprehensive income includes both net earnings and other comprehensive income. Other comprehensive income (loss) includes holding gains and losses on available for sale investments, gains and losses on certain derivative financial instruments and foreign currency gains and losses relating to self-sustaining foreign operations, all of which are not included in the calculation of net loss until realized. The adoption of this section had no impact upon our consolidated financial statements.
	ii)	Financial Instruments – Recognition and Measurement, Section 3855:
		This standard sets out criteria for the recognition and measurement of financial instruments for our fiscal year commenced on January 1, 2007. This standard requires all financial instruments within its scope, including derivatives, to be included on the balance sheet and measured either at fair value or, in certain circumstances when fair value may not be considered most relevant, at cost or amortized cost. Changes in fair value are to be recognized in either the consolidated statements of operations or the consolidated statement of comprehensive income (loss).
		In accordance with this new standard, we have classified our financial instruments as follows:
			Loans receivable are classified as loans and receivables. They are recorded at cost, which on initial recognition represents their fair value. Subsequent valuations are recorded at amortized cost using the effective interest rate method.
			Accounts payable and accrued liabilities, short-term loans and convertible debentures are classified as other liabilities. They are initially measured at fair

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value. Subsequent valuations are recorded at amortized cost using the effective interest rate method.

The adoption of this standard resulted in an aggregate decrease of $342,024 at the opening deficit at January 1, 2007. The aggregate amount consisted of a net credit of $430,759 due to the fair value measurement on the derivative financial instruments on convertible debentures and a debit of $88,735 on expensing the transaction costs in respect of the deferred financing charges on the debentures. These amounts have been recorded in the consolidated financial statements for the year-ended December 31, 2007.

iii)	Accounting Policy for Transaction Costs, EIC-166:
	On June 1, 2007, the Emerging Issues Committee of the CICA (“EIC”) issued abstract No. 166, Accounting Policy Choice for Transaction Costs. EIC 166 addresses the accounting policy choice of expensing or adding transaction costs related to the acquisition of financial liabilities that are classified as other than held-for-trading to its initial carrying cost measured upon the adoption of CICA Handbook Section 3855, Financial Instruments – Recognition and Measurement (“Section 3855”). Specifically, it requires that the same accounting policy choice be applied to all similar financial instruments classified as other than held-for-trading, but permits a different policy choice for financial instruments that are not similar. We adopted EIC 166 effective for the year-ended December 31, 2007 and applied it retroactively to expense all transaction costs related to acquisition of financial liabilities that are cl assified as other than held-for-trading in accordance with Section 3855.
	The adoption of this standard resulted in an increase in the opening deficit at January 1, 2007 of $88,735 which was previously recorded as deferred financing charges with respect to convertible debentures issued during the year-ended December 31, 2006.
iv)	Financial Instruments – Disclosure and Presentation, Section 3861:
	This standard sets out standards which address the presentation of financial instruments and non-financial derivatives, and identifies the related information that should be disclosed. These standards also revise the requirements for entities to provide accounting policy disclosures, including disclosure of the criteria for designating as held-for-trading those financial assets or liabilities that are not required to be classified as held-for-trading; whether categories of normal purchases and sales of financial assets are accounted for at trade date or settlement date; the accounting policy for transaction costs on financial assets and financial liabilities classified as other than held-for- trading; and provides several new requirements for disclosure about fair value.
v)	Hedging, Section 3865:

This standard specifies the circumstances under which hedge accounting is permissible and how hedge accounting may be performed. We currently do not hold any financial instruments designated for hedge accounting.

b) Recent Accounting Pronouncements

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i)	Accounting Changes, Section 1506:
	Section 1506 revised the standards on changes in accounting policy, estimates or errors to require a change in accounting policy to be applied retrospectively (unless doing so is impracticable or is specified otherwise by an new accounting standard), changes in estimates to be recorded prospectively, and prior period errors to be corrected retrospectively. Voluntary changes in accounting policy are allowed only when they result in financial statements that provide reliable and more relevant information. In addition, these revised standards call for enhanced disclosures about the effects of changes in accounting policies, estimates and errors on the financial statements. The impact of this new standard cannot be determined until such time as we make a change in accounting policy, other than the changes resulting from the implementation of the new CICA Handbook standards discussed in this note.
ii)	Goodwill and Intangible Assets
	The Canadian Accountability Standards Board (“AcSB”) issued CICA Handbook Section 3064 which replaced Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs. This new section establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets. Standards concerning goodwill remain unchanged from the standards included in the previous Section 3062. The section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008. Accordingly, we will adopt the new standards for our fiscal year beginning January 1, 2009. It establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to our initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. We are currently evaluating the impact of the adoption of this new Section on our financial statements.
iii)	Capital Disclosures
	The AcSB issued CICA Handbook Section 1535 “Capital Disclosures”. The section specifies the disclosure of (i) an entity’s objectives, policies, and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with capital requirements; and (iv) if it has not complied, the consequences of such non-compliance. We are currently evaluating the impact of the adoption of this new Section on our financial statements. This new section relates to disclosures which did not have an impact on our financial results. This section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. We are currently evaluating the impact of the adoption of the section on our financial statements.
iv)	Assessing Going Concern:

The AcSB amended CICA Handbook Section 1400, to include requirements for management to assess and disclose an entity’s ability to continue as a going concern. This section applies to interim and annual financial statements relating to fiscal years

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	beginning on or after January 1, 2008. We are currently evaluating the impact of the adoption of the section on our financial statements.
v)	Cash Distributions:
	CICA Handbook Section 1540, “Cash Flow Statements”, has been amended to require additional disclosures where cash distributions are made in accordance with a contractual obligation for cash distributions. The revised requirements are effective for interim and annual financial statements for fiscal years ending on or after March 31, 2007. The adoption of this section did not result in any changes in the disclosure within the financial statements.
vi)	International financial reporting standards (“IFRS”):
	In 2006, AcSB published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five (5) year transitional period. In February 2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canada’s own GAAP. The date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The transition date of January 1, 2011 will require the restatement for comparative purposes of amounts reported by us for the year-ended December 31, 2010. While we have begun assessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be reasonably estimated at this time.

Recent US Accounting Pronouncements

i)	Newly Adopted Accounting Pronouncements
	On January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”. The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”. This interpretation provides guidance on recognition and measurement of uncertainties in income taxes and is effective for the Company’s 2007 fiscal year end. The adoption of FIN 48 is not expected to have a significant impact on the Company’s results of operations or financial position.
ii)	New Accounting Pronouncements
	The FASB has issued SFAS 157, “Fair Value Measurements”, which defines fair value, establishes a framework for consistently measuring fair value under GAAP and expands disclosures about fair value measurements. SFAS 157 is effective as of the first fiscal year that begins after November 15, 2007 (i.e. for the Company’s fiscal year beginning January 1, 2008). The adoption of SFAS 157 is not expected to have an effect on the Company’s financial position.

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In February, 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits all entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. If an entity elects the fair value option for a held-to-maturity or available-for sale- security in conjunction with the adoption of this Statement, that security shall be reported as a trading security under Statement 115, but the accounting for a transfer to the trading ca tegory under paragraph 15 (b) of Statement 115 does not apply. Electing the fair value option for an existing held-to-maturity security will not call into question the intent of an entity to hold other debt securities to maturity in the future. This statement is effective as of the first fiscal year that begins after November 15, 2007 (i.e. for the Company’s fiscal year beginning January 1, 2008). The Company is currently analyzing the effects of SFAS 159 but does not expect its implementation will have a significant impact on the Company’s financial condition or results of operations.

In December 2007, the SEC issued Staff Accounting Bulletin (“SAB”) No. 110 which amends SAB 107 to allow for the continued use, under certain circumstances, of the “simplified” method in developing an estimate of the expected term of so-called “plain vanilla” stock options accounted for under FAS 123R, “Share-Based Payment.” When SAB 107 was published, the staff believed that more information about employee exercise behavior (e.g., employee exercise patterns by industry or other categories of companies) would become available. Therefore, the staff stated in SAB 107 that it would not expect the simplified method to be used for stock option grants after December 31, 2007. The staff now understands that such information will not be widely available by December 31, 2007. Accordingly, the SEC staff will accept, under certain circumstances, the use of the simplified method beyond December 31, 2007 for & #147;plain vanilla” options (as described in SAB 110). The Company does not believe that SAB 110 will have a significant impact on its financial statements.

In December 2007, the FASB issued SFAS No 160, “Noncontrolling Interests in Consolidated Financial Statements”. The standard requires all entities to report noncontrolling (minority) interests as equity in consolidated financial statements. SFAS No. 160 eliminates the diversity that concurrently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The Company is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.

In March 2008, the FASB issued SFAS No 161 “Disclosures about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No 133” (“SFAS 161”). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contigent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15,

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2008. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements.

C. Research and Development, Patents and Licenses, Etc.

We have not had any significant research and development activities during the past three (3) years.

D. Trend Information

We are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

E. Off-balance Sheet Arrangements

None.

F. Tabular Disclosure of Contractual Obligations

Pursuant to our Agreement with PGI, we were required to fund a total of US$1,000,000 for the planned exploration work program by October 2006, which we met.

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

We may still need to raise additional funds if the results of our exploration programs demonstrate that either further exploration or development of the properties we invest in is warranted. No assurance can be given such financing will be available to us when required, or on commercially viable terms. Currently, in order to raise capital, we are selling our shares in FEP, as necessary. See Item 2 “RISK FACTORS.”

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

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

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G. Safe Harbor
See“CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS”
at the beginning of this report.
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 (the “Board”).

Name	Age	Position/Area of Experience/Function
Larry W. Youell(3)	66	Director since June 1998, Chairman April 2003, CEO
effective May 2005
Barry Stansfield(1)(2)(3)	57	Director since April 2003, Chairman effective May 2005
Riaz Sumar	38	Director, CFO since May, 2005
Dr. Walter Brown(2)(3)	75	Director since May 2005
Mark Crandall(1)	49	Director since June 2006
Michael Whiting(1)	43	Director since September 2006

(1) Member of Audit Committee in 2007.

(2) Member of Compensation Committee in 2007

(3) Member of the Corporate Governance Committee in 2007

Resignations

Following the Extraordinary Shareholders Meeting of May 18, 2005, Messrs. Robinson and Thompson resigned to join the Board of FEP, and Mr. Larry Youell was appointed as our Chief Executive Officer (“CEO”) and Mr. Riaz Sumar was appointed Chief Financial Officer (“CFO”). Mr. Robert Lynch and Dr. Walter Brown joined our Board to fill the vacancies.

Mr. Robert Lynch did not stand for re-election as a director or officer at our June 26, 2006 Annual General Meeting and Special Meeting of Shareholders, and was replaced by Mr. Mark Crandall. Mr. Michael Whiting was appointed to the Board in September 2006.

Mr. Riaz Sumar resigned as our director, CFO, Secretary, and Treasurer on October 2, 2007. On February 1, 2008, Mr. Sumar was re-appointed as CFO, Treasurer and a director.

The following details the business experience of our directors.

Mr. Larry Youell, President -Chief Executive Officer and Director

Mr. Youell was born and raised in Calgary, Alberta. He received his Honours degree in Business from the University of Western Ontario in 1963 and a Masters in Business Administration from that university in 1968. Prior to joining us, Mr. Youell spent twenty-one (21) years with Consumers Gas Company Limited

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and its subsidiaries ("Consumers"), in a variety of roles with increasing responsibility, including Senior Vice President of Operations and Senior Vice President of Business Support. He was also President of Rose Technology and General Manager of Consumers' largest division. Prior to joining Consumers, Mr. Youell was a Management Consultant with an international base of clients.. Mr. Youell has been active in charitable causes, including serving as Chair of the Arthritis Society in Ontario, and has led roles in fundraising for United Way and Skylight Theatre. He is also past Chair of the Ontario Natural Gas Association and International Approvals Services Inc.

Mr. Barry Stansfield -Director and Chairman

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

Mr. Riaz Sumar -Director and Chief Financial Officer

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

Dr. Walter Brown -Director

A resident of Manila, Philippines, Dr. Walter Brown has extensive experience with resource and public companies, and is also currently Chairman and CEO of TSX-listed Philex Gold Corporation.

Mr. Mark Crandall -Director

From 1993 to 2005, Mr. Crandall was a founding partner of Trafigura Baheer BV. Currently, Mr. Crandall is a director of Postscriptum Ltd., an investment advisory company.

Mr. Michael Whiting -Director

Michael Whiting ACII was a founder of and is currently Managing Director of Sinclair James International Corporation, an Asian focused expatriate wealth management business. Sinclair James International Corporation is incorporated in Hong Kong. Mr. Whiting is a permanent resident of the Philippines. For the last two (2) years, he has sat on the board of the British Chamber of Commerce of the Philippines. He has recently been elected to the position of vice chairman.

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

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B. Compensation

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

Larry Youell	US$10,500
Barry Stansfield	US$3,500
Riaz Sumar	CDN$10,800
Mark Crandall	US$1,000
Dr. Walter Brown	US$1,000
Michael Whiting	US$1,000

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

We grant stock options to directors, executive officers and employees; as described below under, “Options to Purchase Securities from Company or Subsidiaries”.

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

No funds were set aside or accrued by us during the year ending December 31, 2007 to provide pension, retirement or similar benefits for our directors or executive officers. Except for the stock option program discussed below, we have no bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the our directors or executive officers.

The following tables detail the compensation paid during fiscal year-ended December 31, 2007 and 2006 to our directors and members of our administrative, supervisory or management bodies:

Director/Executive Officer Compensation

Director Compensation for Fiscal Year-ended December 31, 2007

		Option Exercise	Total
Directors/Officers	Salary	Net Market	Compensation
		Value(1)
Barry Stansfield	$45,112	$0.00	$45,112
Larry W. Youell	$151,200	$0.00	$151,200
Riaz Sumar	$135,526	$0.00	$135,526
Mark Crandall	$12,889	$0.00	$12,889
Walter Brown	$12,889	$0.00	$12,889
Michael Whiting	$12,889	$0.00	$12,889
TotalCDN$	$370,505	$0.00	$370,505

(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.

Director Compensation for Fiscal Year ended December 31, 2006

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		Option Exercise	Total
Directors/Officers	Salary	Net Market	Compensation
		Value(1)
Barry Stansfield	$59,205	$0.00	$59,205
Larry W. Youell	$120,929	$0.00	$120,929
Riaz Sumar	$162,941	$0.00	$162,941
Mark Crandall	$5,628	$0.00	$5,628
Walter Brown	$15,956	$0.00	$15,956
Michael Whiting	$4,050	$0.00	$4,050
Robert Lynch	$7,143	$0.00	$7,143
TotalCDN$	$375,852	$0.00	$375,852

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

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

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

Options to Purchase Our or Our Subsidiaries’ Securities

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.

Stock Options Granted and Outstanding

Name	Expiry Date	Exercise Price US$	Number
Larry Youell	26-Apr-08	$ 0.08	1,036,932
	26-Apr-08	$ 0.31	170,455
	31-Jan-10	$ 0.0723	220,000
	25-Oct-10	$ 0.0550	2,000,000
Riaz Sumar	26-Apr-08	$ 0.08	200,000
	02-Aug-10	$ 0.079	1,000,000
	25-Oct-10	$ 0.055	2,000,000
David Robinson	26-Apr-08	$ 0.08	414,773
	26-Apr-08	$ 0.43	1,000,000
	26-Apr-08	$ 0.31	68,182
Timothy Strong	31-Jan-10	$ 0.0723	80,000
Barry Stansfield	26-Apr-08	$ 0.08	1,659,090
	26-Apr-08	$ 0.31	272,726
	31-Jan-10	$ 0.0723	80,000
	25-Oct-10	$ 0.0550	2,000,000
David Thompson	26-Apr-08	$ 0.08	1,036,932
	26-Apr-08	$ 0.31	170,455
AMS Limited	31-Jan-10	$ 0.0723	1,000,000
Energy Services Group	09-Dec-09	$ 0.10	1,000,000
Eastmark Limited	31-Jan-10	$ 0.0723	3,975,000
International Asian
Investment Holdings	31-Jan-10	$ 0.0723	1,855,000

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Saranova Limited	31-Jan-10	$ 0.0723	1,855,000
Laval Capital Limited	31-Jan-10	$ 0.0723	1,455,000
Walter Brown Dr.	02-Aug-10	$ 0.079	1,000,000
			25,549,545

C. Board Practices

We have an Audit Committee, a Compensation Committee and a Corporate Governance Committee.

Audit Committee. The Audit Committee oversees the retention, performance and compensation of our independent auditors, and the establishment and oversight of our systems of internal accounting and auditing control. Members of the Audit Committee are Michael Whiting, Barry Stansfield and Mark Crandall. Previously, Mr. Robert Lynch was also on the Audit Committee, but he did not stand for reelection at our Annual Meeting on June 26, 2006. Members of our Audit Committee for 2008 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 2006 were Barry Stansfield, Mark Crandall and Walter Brown. The members of our Compensation Committee are Barry Stansfield, Mark Crandall and Walter Brown. Members of our Compensation Committee for 2008 will be appointed following our Annual and General Meeting of Shareholders.

Corporate Governance CommitteeThe Corporate Governance Committee meets with and discusses current disclosure issuances with our management personnel, directors, and with both our Canadian and United States counsel, to report to our Board any matters which should be the subject of either public disclosure or remedial action and to assist our Board in establishing reporting and disclosure procedures to ensure that we are in compliance with our disclosure and compliance obligations under applicable laws, rules and obligations. Members of the Corporate Governance Committee are Larry Youell, Walter Brown and Barry Stansfield. Members of our Corporate Governance Committee for 2008 will be appointed following our Annual and General Meeting of Shareholders.

D. Employees

As of December 31, 2007, we had no employees.

E. Share Ownership

The following table lists as of June 25, 2008, the share ownership of our directors and executive officers.

The following table sets forth certain information as of June 25, 2008 regarding the ownership of our common stock by (i) each beneficial owner more than five percent (5%) of our outstanding common stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all of our directors and executive officers as a group. Except as otherwise indicated, the address of each person identified below is c/o FEC Resources Inc., 46 Royal Ridge Rise NW, Calgary, AB, T3G 4V2. We believe that ownership of the shares by the persons identified below is both of record and beneficial and that such persons have sole voting and investment power with respect to the shares indicated. Percentage of class in the following table is calculated individually based on the following formula: (shares directly or indirectly controlled + shares issuable on the exercise or conversion of various securities) / (total shares outstanding

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+ shares issuable on the exercise or conversion of various warrants, debentures and options by the director or officer). The total shares outstanding on June 25, 2008 was 434,143,765.

Name of Registered Shareholder owning 5% or	Number of	Percent
more of the outstanding shares:	Shares	of Class
Philex Mining Corporation *	220,000,000	50.67
Indexa Corp**	30,000,000	6.91
Asian Coast International Limited	67,740,000	15.60
Name of Director and/or Officer and number of
shares held:
Larry Youell***	190,780	-
Barry Stansfield	216,539	-
Walter Brown *	-	-
Mark Crandall ***	8,655,091	1.99
Michael Whiting	-	-
Riaz Sumar	10,000	-
Number of shares held by all Directors and Officers
as a group:	9,072,410	2.09

*	Dr. Walter Brown is the CEO and a major shareholder of Philex Mining Corporation and one of our directors
**	These shares are held in escrow and will only be released on commerciality of MPSA148 being declared.
***	Of the 8,655,091 shares reported by Mr. Crandall, 5,140,091 are held by PostScriptum Ventures Limited and

of the 190,780 shares reported by Mr. Youell, 85,273 are held by Cindy Youell. Unless otherwise indicated, such shares are held directly.

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.

Warrants Held by Directors and Officers
Name	Number of Share	��	Exercise Price	Expiration
	Purchase Warrants			Date
None	None

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

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

On June 24, 2008, the shareholders’ list showed 607 registered shareholders and 434,143,765 shares outstanding. The number of shares held by U.S. residents was 44,563,275 , representing 10.26% of our total issued and outstanding shares.

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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 not controlled, directly or indirectly, by another corporation or any foreign government. The following table provides the names and share ownership of those parties that have ownership of five percent (5%) or more of each class of our voting securities as of June 25, 2008:

Name	Number of Shares Owned	Percent of Class
Philex Mining Corporation*	220,000,000	50.67
Indexa Corp.**	30,000,000	6.91
Asian Coast International Limited	67,740,000	15.60

* Dr. Walter Brown is the CEO and a major shareholder of Philex Mining Corporation, a Director of FEC Resources Inc.

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

There have been no significant change in the percentage ownership held by any major shareholders during the past three (3) years except for Philex Mining Corporation which purchased approximately fifty one percent (51%) of our common shares in December 2007. 200,000,000 was purchase by a private placement in December 2007 and the balance was purchased from Indexa Corp in a private transaction. In addition Strong Built Townhomes purchased 27,000,000 from Langley Park Investment Trust Plc. representing approximately six percent (6%) of our issued and outstanding shares.

As at June 25, 2008, management is not aware of any person holding a greater than five percent (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 June 24, 2008, the shareholders’ list showed 607 registered shareholders and 434,143,765 shares outstanding. The number of shares held by U.S. residents was 44,563,275 , representing 10.26% of our total issued and outstanding shares.

We are controlled by Philex Mining Corporation, a Philippine company which owns approximately fifty one percent (51%) of our issued and outstanding common shares. We are not controlled directly or indirectly by any foreign government or by any other natural or legal person(s) severally or jointly.

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 inItem 5 Operating and Financial Overview and Prospects.

B. Related Party Transactions

During the year-ended December 31, 2007, general and administrative expenses included fees charged by directors, officers and companies controlled by our directors and officers totaling $370,505 (2006: $375,851; 2005: $337,867). At December 31, 2007, prepaid expenses included $Nil (2006: $13,985) in respect of management fees paid in advance to one of our directors and officers. Included in accounts payable and accrued liabilities at December 31, 2007 was $31,668 (2006: $21,081) owed to directors, officers and companies controlled by them.

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C. Interests of Experts and Counsel

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

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

See “Item 17. Financial Statements."

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

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

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

B. Significant Changes

By a memorandum of an agreement dated January 2, 2006 and a settlement and release agreement dated May 11, 2006, we agreed to acquire a forty percent (40%) interest in a mining project (Lascogan Mining Corporation) in the Philippines in partnership with Philex Gold, Inc. (“PGI”).

As at December 31, 2007, in order for us to maintain our 40% interest without dilution, we would be required to pay cash calls totaling approximately US$134,000. From January to March 2008 an additional US$194,230 was also due. We are in discussions on how to maintain our interest without contributing to any of the cash calls so that we can conserve our cash on hand.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

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

NASDAQ Small Cap/OTC.BB Stock Annual Price History - Common Shares(US Dollars)

Year Ended	High	Low
12/31/07	$0.012	$0.045
12/31/06	$0.08	$0.026
12/31/05	$0.15	$0.03
12/31/04	$0.62	$0.07
12/31/03	$0.66	$0.08

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The table below lists the volume of trading and high/low market prices on NASD/OTC.BB for our shares for each full quarterly period within the two (2) most recent fiscal years and any subsequent periods.

OTC.BB Stock Trading Activity - Common Shares
(US Dollars)

Quarter Ended	Volume	High	Low
3/31/08	5,046,503	0.03	0.015
12/31/07	4,510,133	0.025	0.012
9/30/07	2,114,499	0.035	0.016
6/30/07	6,793,790	0.04	0.019
3/31/07	9,361,281	0.045	0.022
12/31/06	9,602,834	0.06	0.037
9/30/06	12,907,554	0.067	0.036
6/30/06	4,237,095	0.06	0.026
3/31/06	5,639,627	0.08	0.05

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

OTC.BB Stock Monthly Price History - Common Shares
(US Dollars)
Month Ended	High	Low	Volume
05/31/08	0.02	0.014	2,076,541
04/30/08	0.027	0.011	528,565
03/31/08	0.02	0.015	1,339,242
02/28/08	0.03	0.018	2,487,814
01/31/08	0.03	0.027	1,219,447
12/31/07	0.025	0.017	1,401,681

B. Plan of Distribution

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

C. Markets

Our common shares originally traded on the Vancouver Stock Exchange (“VSE”) in British Columbia, Canada under the symbol “TPC”. Trading on the VSE commenced on May 25, 1983. We voluntarily de-listed from the VSE on August 6, 1999. Our common shares are traded on the NASDAQ SMALL CAP BOARD under the symbol “TCXXF”. Trading commenced on NASDAQ on October 30, 1989. Our shares were de-listed from the NASDAQ SMALL CAP Board on September 22, 1999. Our shares now trade on the Over-the-Counter Bulletin Board (“OTC.BB”) under the symbol “FECOF”.

D. Selling Shareholders

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

E. Dilution

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

F. Expenses of the Issue

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

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ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

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

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

TheInvestment 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 ten percent (10%) of the voting power and more than ten percent (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 theCanadian 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 (twenty-five percent (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 fifteen percent (15%) of the gross dividend (or ten percent (10%) in the case of certain corporate stockholders owning at least ten percent (10%) of our voting shares). In the absence of the treaty provisions, the rate of Canadian withholding tax imposed on non-residents is twenty-five percent (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 to Form 20-F filed as annual report.

G. Statement by Experts

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

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

None.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Not applicable to small business issuers.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

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

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

See Item 15T below.

ITEM 15T. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

An evaluation of the effectiveness of our "disclosure controls and procedures" (as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) was carried out by us under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"). During the fiscal period ending December 31, 2007, our CEO was Larry W. Youell and our CFO was Riaz Sumar.

Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are ineffective to ensure that (i) information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission rules and forms and (ii) that such information is accumulated and communicated to our management, including our CEO and CFO in order to allow timely decisions regarding required disclosure.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

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

45

reviewing our financial reporting procedures and internal controls to ensure full and accurate disclosure of our financial position.

Our CEO and CFO 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 US GAAP. Our CEO and CFO have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this Annual Report (the "Evaluation Date") are ineffective.

Based on such evaluation, they have concluded that as of the Evaluation Date, certain weaknesses exist in our disclosure controls and procedures, however, our CEO and CFO believe that these weaknesses would not prevent them from becoming aware, on a timely basis, of material information relating to us required to be included in our reports filed or submitted under theExchange Act of 1933due to their involvement in all of our operations. Such weaknesses are:

     a) Due to our limited number of staff, it is not feasible to achieve complete segregation of incompatible duties.

     b) Due to our limited number of staff, we do not have a sufficient number of finance personnel with all the technical accounting knowledge to address all complex and non-routine accounting transactions that may arise.

     c) Although a Whistleblower Policy and a Code of Conduct are being created and will subsequently be approved and adopted, we did not have a Whistle Blower Policy or Code of Conduct in place during the period.

These weaknesses in our internal controls over financial reporting result in a remote likelihood that a material misstatement would not be prevented or detected. Management and our Board work to mitigate the risk of a material misstatement in financial reporting; however, there can be no assurance that this risk can be reduced to less than a remote likelihood of a material misstatement.

(c) Changes in Internal Control Over Financial Reporting

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our Audit Committee is responsible for reviewing our financial reporting procedures, internal controls, the performance of our auditors, and the reserve evaluations prepared by our independent reserves evaluation engineering consultants. Our Audit Committee is also responsible for reviewing all disclosure with respect to financial matters prior to filing or release and quarterly and annual Financial Statements prior to their approval by the full Board. Members of the Audit Committee during 2007 were Micheal Whiting, Barry Stansfield, and Mark Crandall. New Audit Committee members will be appointed following our meeting of shareholders in 2008.

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Our Board has determined that it has at least one (1) independent financial expert serving on its Audit Committee. This individual is Michael Whiting. Mr. Whiting is Founder of and Managing Director of Sinclair James International Corporation, an Asian focused expatriate wealth management business incorporated in Hong Kong. For the last two (2) years, he was a Board Member of the British Chamber of Commerce in the Philippines. Mr. Whiting has significant experience in the review of financial statements and related information.

ITEM 16B. 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 our 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 Code of Ethics 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.

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 Larry Youell, Barry Stansfield and Walter Brown.

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ITEM 16C. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

Our external auditors, Amisano Hanson, charged total fees of $64,691 related to the audit of our annual Financial Statements for the year-ended December 31, 2006 and for the audit of our annual Financial Statements for the year-ended December 31, 2007, an amount of $40,000 was accrued . There were no fees associated with the filing of taxes.

Our previous auditors, KPMG LLP, charged $13,208 for work done on responding to SEC comments in conncection with our 2004 Form 20-F and our 2006 Form 20-F.

Mahmud Khalfan Professional Corporation charged $14,700 for the preparation and filing of our tax returns for the years ended December 31, 2002 through 2006.

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

Not Applicable.

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

Not Applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

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

TABLE OF CONTENTS	Page No.
Financial Statements:
Report of Auditors, dated May 23, 2008	F - 2
Consolidated Balance Sheets at December 31, 2007 and	F - 3
December 31, 2006
Consolidated Statements of Operations and Comprehensive	F - 4
Loss and Deficit for the Years ended December 31, 2007,
December 31, 2006, and December 31, 2005
Consolidated Statements of Cash Flows for the Years ended	F - 5
December 31, 2007, December 31, 2006, and December 31, 2005
Notes to the Consolidated Financial Statements	F - 7
Financial Statements of Forum Energy Plc (FEP)

48

FEC RESOURCES INC.

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007 and 2006

(Stated in Canadian Dollars)

F-1

BDO DunwoodyLLP Chartered Accountants and Advisors 604 – 750 West Pender Street Vancouver, BC, Canada V6C 2T7 Telephone: (604) 689-0188 Telefax: (604) 689-9773

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors,
FEC Resources Inc.

We have audited the consolidated balance sheets of FEC Resources Inc. as at December 31, 2007 and 2006 and the consolidated statements of operations and comprehensive loss and deficit and cash flows for each of the years in the three year period ended December 31, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2007 in accordance with Canadian generally accepted accounting principles.

(signed) “BDO Dunwoody LLP”

Chartered Accountants

Vancouver, Canada

May 23, 2008, except as to Note 14, which is as of June 25, 2008

Comments by Auditors for U.S. Readers on Canada-United States Reporting Difference

The reporting standards of the Public Company Accounting Oversight Board (United States) for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the financial statements. Public Company Accounting Oversight Board (United States) reporting standards also require the addition of an explanatory paragraph when changes in an accounting policy, such as those described in Note 3, have a material effect on the consolidated financial statements. Although we conducted our audit in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the directors on the Consolidated Financial Statements dated May 2 3, 2008, except as to Note 14, which is as of June 25, 2008, is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the auditors’ report when these are adequately disclosed in the financial statements.

(signed) “BDO Dunwoody LLP”

Chartered Accountants

Vancouver, Canada

May 23, 2008, except as to Note 14, which is as of June 25, 2008

F-2

FEC RESOURCES INC.
CONSOLIDATED BALANCE SHEETS
	December 31, 2007 and 2006
(Stated in Canadian Dollars)
ASSETS	2007	2006
Current
Cash	$ 4,170,080	$ 373,012
GST receivable	53,788	31,224
Loans receivable	-	13,044
Prepaid expenses – Note 9	26,335	33,655
Deferred financing charge – Note 3(a)(iii)	-	88,735
	4,250,203	539,670
Equipment – Note 5	4,382	4,419
Investments – Notes 6 and 7	7,913,319	12,764,947
	$ 12,167,904	$ 13,309,036
LIABILITIES
Current
Accounts payable and accrued liabilities – Note 9	$ 970,349	$ 127,316
Short-term loans – Note 7(b)	-	572,094
Convertible debentures – Note 7	2,499,000	2,993,057
Withholding taxes payable – Note 12	75,015	-
	3,544,364	3,692,467
SHAREHOLDERS’ EQUITY
Share capital – Note 8	17,339,665	12,357,906
Warrants – Note 8	267,501	267,501
Contributed surplus – Note 8	3,794,939	3,794,939
Equity portion of convertible debentures payable – Note 8	-	370,271
Deficit	(12,778,565)	(7,174,048)
	8,623,540	9,616,569
	$ 12,167,904	$ 13,309,036

Nature of Operations and Ability to Continue as a Going Concern – Note 1
Commitments – Notes 6 and 8
Subsequent Event – Note 7
APPROVED ON BEHALF OF THE BOARD OF DIRECTORS:
“Riaz Sumar”	Director	“Larry Youell”	Director
Riaz Sumar		Larry Youell

F-3

FEC RESOURCES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS AND DEFICIT
for the years ended December 31, 2007, 2006 and 2005
(Stated in Canadian Dollars)

	2007	2006	2005
General and administrative expenses
Amortization	$ 1,878	$ 1,894	$ 1,047
Amortization of deferred financing charge	-	86,730	-
Accretion on long-term debt – Notes 3(a) and 7(c)	998,072	452,993	57,927
General and administration – Note 9	666,293	842,556	3,335,133
Interest expense	355,368	649,727	507,326
Redemption premium on convertible debenture –
Note 7(c)	630,678	-	-
Withholding taxes – Note 12	75,015	-	-
	(2,727,304)	(2,033,900)	(3,901,433)
Other items:
Equity loss in investments – Note 6	(1,302,174)	(1,368,436)	(713,843)
Foreign exchange gain (loss)	479,604	(283,693)	(152,525)
Gain (loss) on disposition of investments – Notes 4 and 6	(9,778)	118,232	-
Gain (loss) on dilution of investment in FEP – Note 6	(19,415)	337,456	10,476,786
Gain on disposition of trading securities – Note 4	-	-	19,414
Gain on change in fair value of derivative liability
– Note 7(c)	735,281	-	-
Interest income	2,556	29,050	-
Recovery of impairment charges	-	-	4,695,228
Write-down of trading securities – Note 4	-	(62,675)	(52,233)
Write-down of investments – Note 6	(3,105,311)	-	-
Net income (loss) and comprehensive income (loss)
for the year	(5,946,541)	(3,263,966)	10,371,394
Deficit, beginning of the year, as previously reported	(7,174,048)	(3,910,082)	(14,281,476)
Adoption of new accounting policy – Note 3(a)(ii)	342,024	-	-
Deficit, beginning of the year (restated)	(6,832,024)	(3,910,082)	(14,281,476)
Deficit, end of the year	$(12,778,565)	$ (7,174,048)	$ (3,910,082)
Basic loss (earnings) per common share	$ (0.02)	$ (0.02)	$ 0.06
Diluted loss (earnings) per common share	$ (0.02)	$ (0.02)	$ 0.05
Weighted average number of shares outstanding	239,623,217	195,609,707	175,619,805

F-4

FEC RESOURCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2007, 2006 and 2005
(Stated in Canadian Dollars)
	2007	2006	2005
Operating Activities
Net income (loss) for the year	$ (5,946,541)	$ (3,263,966)	$ 10,371,394
Non-cash items included in loss:
Amortization	1,878	1,894	1,047
Amortization of deferred financing charges	-	86,730	-
Accretion on long-term debt	998,072	452,993	57,927
Accrued interest on convertible debentures	249,900	-	-
Compensation expense for warrants	-	-	267,502
Equity loss in investments	1,302,174	1,368,438	713,843
Gain on change in fair value of derivative liability	(735,281)	-	-
Gain on disposition of trading securities	-	-	(19,414)
Loss (gain) on disposition of investments	9,778	(118,232)	-
Loss (gain) on dilution of investment in FEP	19,415	(337,456)	(10,476,786)
Redemption premium on convertible debentures	630,678	-	-
Recovery of impairment charges	-	-	(4,695,228)
Stock-based compensation	-	-	1,921,577
Shares issued as bonuses	-	-	268,541
Shares issued for services	-	88,165	23,382
Unrealized foreign exchange	-	-	119,129
Write-down of trading securities	-	62,675	52,233
Write-down of investments	3,105,311	-	-
	(364,616)	(1,658,759)	(1,394,853)
Net changes in non-cash operating working capital
items related to operations:
GST receivable	(22,564)	(10,124)	(21,100)
Accounts receivable	-	-	76,697
Prepaid expenses	7,320	(24,832)	(3,837)
Accounts payable and accrued liabilities	(37,545)	34,794	(742,767)
	(417,405)	(1,658,921)	(2,085,860)
Investing Activities
Acquisitions of equipment	(1,841)	(3,870)	(3,489)
Increase in investments	(207,873)	(1,380,294)	-
Advance on investments	-	-	(873,700)
Funds received from FEP	-	-	1,378,526
Proceeds (advances) of loans receivable	13,044	(13,044)	(58,280)
Proceeds from sale of investments	622,823	1,358,598	416,885
Proceeds from the sale of trading securities	-	32,268	-
	426,153	(6,342)	859,942
			…/cont’d

F-5

FEC RESOURCES INC. Continued CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 2007, 2006 and 2005 (Stated in Canadian Dollars)

	2007	2006	2005
Financing Activities
Deferred financing charges	-	(175,465)	-
Issuance of share capital, net of costs	4,981,759	-	-
Proceeds (repayment) of convertible
debentures	(290,137)	1,511,402	2,533,246
Repayment of short-term loans	(572,094)	(651,269)	(317,922)
Unrealized foreign exchange	(406,223)	339,125	-
Withholding taxes payable	75,015	-	-
	3,788,320	1,023,793	2,215,324
Increase (decrease) in cash during the year	3,797,068	(641,470)	989,406
Cash, beginning of the year	373,012	1,014,482	25,076
Cash, end of the year	$ 4,170,080	$ 373,012	$ 1,014,482
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$ 66,728	$ 643,163	$ -
Income taxes	$ -	$ -	$ -

F-6

FEC RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2007 and 2006 (Stated in Canadian Dollars)

Note 1Nature of Operations and Ability to Continue as a Going Concern

FEC Resources Inc. (the “Company”) is incorporated under the laws of Alberta, Canada and is engaged primarily in the business of exploration and development of oil and gas and other mineral related opportunities, either directly or indirectly through companies in which the Company invests. The Company is not currently directly involved in any oil and gas or mineral related exploration activities. The exploration and development of oil and gas reserves and the pursuit of other energy and mineral reserves involves significant financial risks. The success of the Company is dependent upon the success of its investments and their ability to discover economically recoverable reserves and to bring such reserves into profitable production, and is subject to a number of risks, including environmental risks, contractual risks, legal and political risks, fluctuations in the price of oil and gas and other factors beyond the Company’s control. On August 17, 2005, the Company changed its name from Forum Energy Corporation to FEC Resources Inc.

Note 2Significant Accounting Policies

These consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and except as described in Note 14, conform in all material respects with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with Canadian GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While it is the opinion of management that these consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below, actual results could differ fro m the estimates made.

a)	Basis of Preparation
	These financial statements include the accounts of the Company and its wholly-owned subsidiaries, FEC Resources (BVI) Limited and Pacific Geothermal Energy, Inc. (“PACGEO”). All inter-company transactions were eliminated upon consolidation.

F-5

Note 2Significant Accounting Policies– (cont’d)

b)	Investments
	i)	Investments
		The Company’s investments are accounted for by the equity method. The equity method is a basis of accounting for investments 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 (loss). The amount of the adjustment is included in the determination of net income 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 relating to prior period financial statements applicable to post acquisition periods. Profit distributions received or receivable from the investments will reduce the carrying value of the investment. Investments accounted for on the equity basis are written down to their fair value when they have a loss in value that is other than a temporary de cline. If management has the intention and ability to dispose of the investment within the next fiscal year, then the existing investment is reflected as a current asset.
	ii)	Trading Securities
		Trading securities held prior to January 1, 2007 consisted of equity securities held for trading and were accounted for at cost unless there had been a loss in value, at which time the securities were written down to market value.
c)	Property, plant and equipment
	The Company follows the full cost method of accounting for oil and natural gas operations, whereby all costs of exploring for and development of oil and natural gas reserves are capitalized and accumulated in country-by-country cost centres. Such costs include land acquisition costs, geological and geophysical costs, costs of drilling both productive and non-productive wells, interest costs on major development projects and overhead charges directly related to acquisition, exploration and development activities.
	The costs (including exploratory dry holes) in cost centres from which there has been no commercial production are not subject to depletion until commercial production commences. The capitalized costs are periodically assessed to determine whether it is likely such costs will be recovered in the future. To the extent there are costs, which are not likely to be recovered in the future, they are written-off.

F-6

Note 2Significant Accounting Policies– (cont’d)

c)	Property, plant and equipment– (cont’d)
	The costs in cost centres from which there will be production will be depleted and depreciated on the unit of production method based on the estimated proved reserves. Oil and natural gas reserves and production will be converted into equivalent units based upon their estimated relative energy content. Costs of acquiring and evaluating significant unproved properties are excluded from the depletion calculations. These unproved properties are assessed periodically to ascertain whether impairment in value has occurred.
	Petroleum and natural gas assets are evaluated at least annually to determine that the costs are recoverable and do not exceed the fair value of the properties. The costs are assessed to be recoverable if the sum of the undiscounted cash flows expected from the production of proved reserves and the lower of cost and market of unproved properties exceed the carrying value of the petroleum and natural gas assets. If the carrying value of the petroleum and natural gas assets is not assessed to be recoverable, an impairment loss is recognized to the extent that the carrying value exceeds the sum of the discounted cash flows expected from the production of proved and probable reserves and the lower of cost and market of unproved properties. The cash flows are estimated using the future product prices and costs and are discounted using the risk-free rate.
	Proceeds from the sale of oil and natural gas properties are applied against capitalized costs, with no gain or loss recognized unless such a sale would alter the depletion rate by more than 20%.
	Substantially all of the Company’s exploration, development and production activities are conducted through investments in other companies and accordingly these financial statements reflect only the Company’s interest in such investments.
	The Company depreciates its computer equipment at the rate of 30% per annum utilizing the declining balance method.
d)	Impairment of Long-Lived Assets
	Long-lived assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of these assets and their eventual disposition is less than their carrying amount. Impairment, if any, is assessed using discounted cash flows.

F-7

Note 2Significant Accounting Policies– (cont’d)

d)	Impairment of Long-Lived Assets– (cont’d)
	Estimates of undiscounted future cash flows used for conducting impairment tests are subject to significant judgment decisions based on assumptions of highly uncertain future factors such as, crude oil and natural gas prices, production quantities, estimates of recoverable reserves, and production and transportation costs. During the years ended December 31, 2007, 2006 and 2005, no write-downs of long- lived assets were recognized.
e)	Asset Retirement Obligation (“ARO”)
	The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred and records a corresponding increase in the carrying value of the related long-lived asset. The fair value is determined through a review of engineering studies, industry guidelines and management’s estimate on a site-by-site basis. The liability is subsequently adjusted for the passage of time and is recognized as an accretion expense in the consolidated statements of operations and comprehension income. The liability is also adjusted due to revisions in either the timing or the amount of the original estimated cash flows associated with the liability. The increase in the carrying value of the asset is amortized using the unit of production method based on estimated gross proved reserves as determined by independent engineers. Actual costs incurred upon settlement of the asset retirement obligations are charged against the asset retirement obligation to the extent of the liability recorded. As at December 31, 2007 and 2006 the Company did not have any asset retirement obligations.
f)	Foreign Currency Translation
	Assets and liabilities of foreign equity investments that are self-sustaining have been translated into Canadian dollars at the rate prevailing at the end of the fiscal period. Monetary items denominated in foreign currency are translated at the year-end exchange rate. The resulting exchange gains or losses are included in the operations.

F-8

Note 2Significant Accounting Policies– (cont’d)

g)	Stock-based Compensation
	The Corporation follows the recommendations of CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments", which provides standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. In accordance with these recommendations, stock options are measured at their fair value on the date of grant as compensation expense. Compensation expense is recognized in the consolidated statements of operations and comprehensive loss over the vesting period. On the exercise of stock options, share capital is credited for consideration received and for fair value amounts previously credited to contributed surplus. The Corporation uses the Black-Scholes option valuation model to estimate the fair value of stock-based compensation.
	The Black-Scholes option valuation model requires the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s share purchase options.
h)	Income Taxes
	The Corporation follows the asset and liability method of accounting for income taxes in accordance with the recommendations of the Canadian Institute of Chartered Accountants. Under this method, future income taxes are recognized for the future income tax consequences attributable to differences between the financial statement carrying values and their respective income tax bases (temporary differences). Future income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in tax rates is included in income in the period in which the change occurs. The amount of future income tax assets recognized is limited to the amount, in the opinion of management, that is more likely-than-not to be realized.

F-9

Note 2Significant Accounting Policies– (cont’d)

i)	Loss Per Share
	Basic earning (loss) per share is computed by dividing the income (loss) for the year by the weighted average number of common shares outstanding during the year. Diluted earning (loss) per share reflects the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method. Diluted amounts are not presented when the effect of the computations are anti-dilutive due to losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.
	Common equivalent shares (consisting of shares issuable on the exercise of options, warrants and convertible debts) totaling 29,082,878 (2006 – 72,417,077; 2005 – 35,882,878) have been excluded from the calculation of diluted loss per share because the effect is anti-dilutive.
j)	Environmental Costs
	Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of:
		Completion of a feasibility study; or
		The Company’s commitment to a plan of action based on the then known facts.

The Company has investments in companies that hold oil and gas and mineral assets that may be subject to environmental costs. As at December 31, 2007 and 2006, the Company is not aware of any such environmental costs.

Note 3Adoption of New Accounting Standards and Recent Accounting Pronouncements

a)	Adoption of New Accounting Standards
	Effective January 1, 2007, the Company adopted five new Canadian Institute of Chartered Accountants (“CICA”) accounting standards: (a) Handbook Section 1530,
	Comprehensive Income; (b) Handbook Section 3855,Financial Instruments – Recognition and Measurement; (c) Handbook Section 3861,Financial Instruments – Disclosure and Presentation; (d) Handbook Section 3865,Hedges; and (e) Handbook Section 1506,Accounting Changes. The main requirements of these new standards and the resulting financial statement impact are described below.

F-10

Note 3 Adoption of New Accounting Standards and Recent Accounting Pronouncements– (cont’d)

a)	Adoption of New Accounting Standards– (cont’d)
	i)	Comprehensive Income, Section 1530:
		This standard requires the presentation of a statement of comprehensive income and its components. Comprehensive income includes both net earnings and other comprehensive income. Other comprehensive income (loss) includes holding gains and losses on available for sale investments, gains and losses on certain derivative financial instruments and foreign currency gains and losses relating to self-sustaining foreign operations, all of which are not included in the calculation of net loss until realized. The adoption of this section had no impact upon the Company’s consolidated financial statements.
	ii)	Financial Instruments – Recognition and Measurement, Section 3855:
		This standard sets out criteria for the recognition and measurement of financial instruments for the Company’s fiscal year commenced on January 1, 2007. This standard requires all financial instruments within its scope, including derivatives, to be included on the balance sheet and measured either at fair value or, in certain circumstances when fair value may not be considered most relevant, at cost or amortized cost. Changes in fair value are to be recognized in either the consolidated statements of operations or the consolidated statement of comprehensive income (loss).
		In accordance with this new standard, the Company has classified its financial instruments as follows:
			Loans receivable are classified as loans and receivables. They are recorded at cost, which on initial recognition represents their fair value. Subsequent valuations are recorded at amortized cost using the effective interest rate method.
			Accounts payable and accrued liabilities, short-term loans and convertible debentures are classified as other liabilities. They are initially measured at fair value. Subsequent valuations are recorded at amortized cost using the effective interest rate method.
		The adoption of this standard resulted in an aggregate decrease of $342,024 at the opening deficit at January 1, 2007. The aggregate amount consisted of a net credit of $430,759 due to the fair value measurement on the derivative financial instruments on convertible debentures (Note 7(c)) and a debit of $88,735 (Note 3(a)(iii)) on expensing the transaction costs in respect of the deferred financing charges on the debentures. These amounts have been recorded in the consolidated financial statements for the year ended December 31, 2007.

F-11

Note 3 Adoption of New Accounting Standards and Recent Accounting Pronouncements– (cont’d)

a)	Adoption of New Accounting Standards– (cont’d)
	iii)	Accounting Policy for Transaction Costs, EIC-166:
		On June 1, 2007, the Emerging Issues Committee of the CICA issued abstract No. 166, Accounting Policy Choice for Transaction Costs (“EIC-166”). This EIC addresses the accounting policy choice of expensing or adding transaction costs related to the acquisition of financial liabilities that are classified as other than held-for-trading to its initial carrying cost measured upon the adoption of CICA Handbook Section 3855, Financial Instruments – Recognition and Measurement (“Section 3855”). Specifically, it requires that the same accounting policy choice be applied to all similar financial instruments classified as other than held-for-trading, but permits a different policy choice for financial instruments that are not similar. The Company has adopted EIC-166 effective for the year ended December 31, 2007 and applied retroactively to expense all transaction costs related to acquisition of financial liabilit ies that are classified as other than held-for-trading in accordance with Section 3855.
		The adoption of this standard resulted in an increase in the opening deficit at January 1, 2007 of $88,735 (Note 3(a)(ii)) which was previously recorded as deferred financing charges with respect to convertible debentures issued during the year ended December 31, 2006.
	iv)	Financial Instruments – Disclosure and Presentation, Section 3861:
		This standard sets out standards which address the presentation of financial instruments and non-financial derivatives, and identifies the related information that should be disclosed. These standards also revise the requirements for entities to provide accounting policy disclosures, including disclosure of the criteria for designating as held-for-trading those financial assets or liabilities that are not required to be classified as held-for-trading; whether categories of normal purchases and sales of financial assets are accounted for at trade date or settlement date; the accounting policy for transaction costs on financial assets and financial liabilities classified as other than held-for-trading; and provides several new requirements for disclosure about fair value.
	v)	Hedging, Section 3865:
		This standard specifies the circumstances under which hedge accounting is permissible and how hedge accounting may be performed. The Company currently does not hold any financial instruments designated for hedge accounting.

F-12

Note 3 Adoption of New Accounting Standards and Recent Accounting Pronouncements– (cont’d)

b)	Recent Accounting Pronouncements
	i)	Accounting Changes, Section 1506:
		Section 1506 revised the standards on changes in accounting policy, estimates or errors to require a change in accounting policy to be applied retrospectively (unless doing so is impracticable or is specified otherwise by an new accounting standard), changes in estimates to be recorded prospectively, and prior period errors to be corrected retrospectively. Voluntary changes in accounting policy are allowed only when they result in financial statements that provide reliable and more relevant information. In addition, these revised standards call for enhanced disclosures about the effects of changes in accounting policies, estimates and errors on the financial statements. The impact of this new standard cannot be determined until such time as the Company makes a change in accounting policy, other than the changes resulting from the implementation of the new CICA Handbook standards discussed in this note.
	ii)	Goodwill and Intangible Assets
		The Canadian Accountability Standards Board (“AcSB”) issued CICA Handbook Section 3064 which replaces Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs. This new section establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets. Standards concerning goodwill remain unchanged from the standards included in the previous Section 3062. The section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008. Accordingly, the Company will adopt the new standards for its fiscal year beginning January 1, 2009. It establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning goo dwill are unchanged from the standards included in the previous Section 3062. The Company is currently evaluating the impact of the adoption of this new Section on its financial statements.

F-13

Note 3 Adoption of New Accounting Standards and Recent Accounting Pronouncements– (cont’d)

b)	Recent Accounting Pronouncements
	iii)	Capital Disclosures
		The AcSB issued CICA Handbook Section 1535 “Capital Disclosures” The section specifies the disclosure of (i) an entity’s objectives, policies, and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with capital requirements; and (iv) if it has not complied, the consequences of such non-compliance. The Company is currently evaluating the impact of the adoption of this new Section on its financial statements. This new Section relates to disclosures which did not have an impact on the Company’s financial results. This section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. The Company is currently evaluating the impact of the adoption of the section on its financial statements.
	iv)	Assessing Going Concern:
		The AcSB amended CICA Handbook Section 1400, to include requirements for management to assess and disclose an entity’s ability to continue as a going concern. This section applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2008. The Company is currently evaluating the impact of the adoption of the section on its financial statements.
	v)	Cash Distributions:
		CICA Handbook Section 1540, Cash Flow Statements, has been amended to require additional disclosures where cash distributions are made in accordance with a contractual obligation for cash distributions. The revised requirements are effective for interim and annual financial statements for fiscal years ending on or after March 31, 2007. The adoption of this Section did not result in any changes in the disclosure within the financial statements.

F-14

Note 3 Adoption of New Accounting Standards and Recent Accounting Pronouncements– (cont’d)

b)      Recent Accounting Pronouncements vi) International financial reporting standards (“IFRS”):

In 2006, AcSB published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February 2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canada’s own GAAP. The date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The transition date of January 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended December 31, 2010. While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be reasonably estimated at this time.

Note 4

Trading Securities

On July 21, 2004 the Company entered into a Stock Purchase Agreement with Langley Park Investments LLC (“Langley”) in which the Company could issue and sell 27,000,000 common shares of the Company in exchange for the purchase of Langley stock based on the total purchase price divided by the conversion rate of the British Pound Sterling determined on July 31, 2004 (the “Langley transaction”). Under the agreement, the exchange rate on that day was $1.8060 to £1 resulting in the issue of 3,018,172 shares of Langley. The shares are subject to a price protection in favour of Langley. The Company shares issued were valued based on the assets received as consideration, being Langley shares as they were deemed to be a more reliable indicator of the fair value of the transaction. The opening Langley share price was 0.31 pence or $0.70 per Langley share which valued the 27,000,000 issued shares at $2,112,720 based on the value of Langley shares received. Following the listing of Langley on the London Stock Exchange, 50% of these shares were sold by the Company and the balance was to be held for a two-year period.

In connection with the Langley transaction the Company paid a third party commission of 150,509 Langley shares.

During the year ended December 31, 2005, the Company sold 1,157,577 (2004: 201,000) of the Langley shares for proceeds of $416,885, which resulted in a gain on sale of $19,414.

F-15

Note 4Trading Securities– (cont’d)

At December 31, 2005, the Company had also recorded a write-down of $52,233. The wrote-down was recognized as management viewed the decline in market value of Langley to be other than temporary. This determination was based on the extent of the decline in value below cost and the fact that the intent of management to dispose of this investment in an expeditious manner would likely result in disposal prior to a recovery in the market value of the investment.

During the year ended December 31, 2006, Langley purchased the 1,509,086 Langley shares back from the Company at 0.01 pence per share totalling₤15,091($32,268)basedon the price protection clause. This resulted in a loss on sale of $306,362. Also during the year ended December 31, 2006, the Company had recorded a write-down of $62,675 to reflect the decline in value of the Langley shares to realizable value based on the price protection clause in the Stock Purchase Agreement. The impairment was recognized as the Company’s share price was well below the required level that would have allowed it to retain some or all of the Langley shares.

Note 5	Equipment
				Accumulated		Net book
			Cost	Amortization		value
	Computer equipment
	December 31, 2007	$ 9,201		$ 4,819		$ 4,382
	December 31, 2006	$ 7,360		$ 2,941		$ 4,419
Note 6	Investments
	The Company has the following investments:
				2007		2006
	Forum Energy PLC (“FEP”)		$ 5,278,065		$ 9,572,609
	Lascogan Mining Corporation			2,635,254		2,416,145
	Metalore Mining Corporation			-		776,193
			$ 7,913,319		$ 12,764,947

i)	Investment in FEP
	On May 18, 2005, the Company disposed of its interest in FEI to FEP for 9,996,000 common shares of FEP, a 71.4% interest in FEC and recorded the initial investment in FEP at an amount equivalent to its carrying value of its interest in FEI. FEP is a United Kingdom-based oil, gas and coal company with assets in the Philippines.

F-16

Note 6	Investments– (cont’d)
	i)Investment in FEP– (cont’d)
	The investment in FEP is summarized as follows:
	Acquisition of investment in FEP	$ 3,141,882
	Less: funds received from FEP	(1,378,526)
		1,763,356
	Gain on dilution of investment in FEP as a result of additional
	FEP share issuances	10,476,786
	Equity loss in investment of FEP for the year	(713,843)
	Balance, December 31, 2005	11,526,299
	Disposition of 810,000 common shares of FEP	(934,004)
	Gain on dilution of investment in FEP as a result of additional
	FEP share issuances	337,456
	Equity loss in investment of FEP	(1,357,142)
	Balance, December 31, 2006	9,572,609
	Disposition of 635,800 common shares of FEP	(632,601)
	Loss on dilution of investment in FEP as a result of additional
	FEP share issuances	(19,415)
	Equity loss in investment of FEP	(1,301,892)
	Write-down of investment in FEP to market value	(2,340,636)
	Balance, December 31, 2007	$ 5,278,065

During the year ended December 31, 2007, the Company disposed 635,800 common shares of FEP for total proceeds of $622,823 which resulted in a loss of $9,778.

During the year ended December 31, 2006, the Company disposed 810,000 common shares of FEP for total proceeds of $1,358,598 which resulted in a gain of $424,594.

As FEP offers its shares to outside investors, the resulting dilution of the investor’s shareholdings constitutes an effective disposition necessitating recognition of a dilution gain or loss.

The Company’s interest in FEP was diluted during the year ended December 31, 2005 from a high on May 18, 2005 of 71.40% to 36.72%, resulting in the use of the equity method of accounting for its investment. As at December 31, 2007, the Company’s interest in FEP had been diluted to 29.78% (2006-32.08%) . The dilution is a result of the sale of FEP common shares and equity offerings by FEP in which the Company did not participate.

F-17

Note 6

Investments– (cont’d)

i)	Investment in FEP– (cont’d)
	At December 31, 2007, the Company held 8,550,200 (2006 - 9,186,000) common shares of FEP with a market value of $5,278,069 (2006 – $15,848,151). During the year ended December 31, 2007, the Company recorded a write-down of $2,340,636 as a result of the determination that the decline in market value of the FEP shares was other than temporary.

The financial position and results of operations of FEP as at December 31, 2007 and 2006 are summarized as follows:

	2007	2006
Assets	$ 52,937,458	$ 65,770,963
Liabilities	$ 4,601,582	$ 5,291,957
Equity	$ 48,335,876	$ 60,479,006
Net loss for the year ended December 31	$ (4,179,416)	$ (3,906,462)
FEP is a related company by virtue of a common director.

ii)	Investment in Lascogan Mining Corporation “Lascogan”
	By a memorandum of an agreement dated January 2, 2006 and a settlement and release agreement dated May 11, 2006, the Company agreed to acquire a 40% interest in a mining project (Lascogan Mining Corporation) in Philippines in partnership with Philex Gold, Inc. (“PGI”).
	The project concerned is the Mining and Production Sharing Agreement (“MPSA”) between PGI and the Government of Philippines, which comprises 2,306 hectares. The Company agreed to acquire the interest in the project by way of assignment from Indexa Corp. (“Indexa”) to the Company of an Agreement between Indexa and PGI. Indexa is a Philippine Company who had entered into a sole Agreement with PGI for the rights to a joint exploration program. Indexa assigned its rights and obligations in their entirety to the Company, pursuant to which a new Philippine Joint Venture Company was formed, of which the Company would ultimately own 40% and PGI would own 60% equity interests respectively. For this assignment, Indexa was entitled to receive a fee which was to be determined by an independent valuation.

F-18

Note 6

Investments– (cont’d)

ii)	Investment in Lascogan Mining Corporation “Lascogan”) – (cont’d)
	The commitments of the Company in this regard were to provide an initial US$250,000 ($290,900) signature bonus to PGI (paid during the year ended December 31, 2005), pay a fee of US$100,000 ($110,551) (paid) and then for the Company to contribute to the Joint Venture Company a total of US$1,000,000 ($1,105,514) from January 1, 2006 through to October 31, 2006 being estimated as sufficient funding to complete the planned exploration and prospect work program. On October 2, 2006, the Company had met all its funding obligations and fully earned its 40% interest in the Joint Venture Company. Also, as a result of the independent valuation and negotiations, the Company issued 20,000,000 common shares of the Company with a fair value of $891,360 to Indexa and a further 30,000,000 common shares of the Company into escrow, to be awarded to Indexa upon the decision to proceed with commercial production as full and final consideration for the assignment of its rights to the Company. The 30,000,000 shares are considered contingent consideration and will be recorded as additional cost of the investment at fair value once it is likely that they will be issued.
	The Company has the option to increase its equity interest in the Joint Venture Company to 60% by arranging or contributing by way of repayable loan up to US$10,000,000 as the initial contribution to mine development and production by the Joint Venture Company.
	The investment in Lascogan is summarized as follows:

Signature bonus paid to PGI	$ 290,900
Fee paid to Indexa	110,551
Funding for exploration work program	1,105,514
Costs incurred in respect of investment in Lascogan	15,740
	1,522,705
Common shares issued to Indexa	891,360
Equity income in investment in Lascogan	2,080
Balance at December 31, 2006	2,416,145
Funding for exploration work program	207,873
Equity income in investment in Lascogon	11,236
Balance at December 31, 2007	$ 2,635,254

F-19

Note 6	Investments– (cont’d)
	ii)Investment in Lascogan Mining Corporation “Lascogan”) – (cont’d)
	The financial position and results of Lascogan as at December 31, 2007 and 2006 are
	summarized as follows:
		2007		2006
	Assets	$ 2,248,979	$ 1,592,181
	Liabilities	$ 1,855,050	$ 1,498,918
	Equity	$ 393,929	$ 93,263
	Net income for the year ended December 31	$ 28,090	$ 31,188

	At December 31, 2007, Lascogon is related to the Company by virtue of a common director.
	As at December 31, 2007, in order for the Company to maintain its 40% interest without dilution, the Company would be required to pay cash calls totaling approximately $134,000.
iii)	Investment in Metalore Mining Corporation
	During the year ended December 31, 2006, the Company acquired a 35% equity interest in Metalore Mining Corporation (“Metalore”) for consideration in the amount of $582,800 (US$500,000). Metalore is a Philippine company with iron ore mineral interests. In addition, due to debt conversions by other shareholders of Metalore, in order to maintain the 35% interest, a loan outstanding in the amount of $58,280 (US$50,000) was converted into equity by Metalore. The Company further advanced $17,035 in respect of its investment in Metalore.
	The Company increased its investment in Metalore during the year ended December 31, 2006 by agreeing to purchase a 35% interest in an overriding royalty (“ORR”) for $131,484 (US$113,500). The terms of the ORR include Metalore paying a royalty of US$2 per ton of iron ore invoiced and sold with a guaranteed minimum of 3,500 tons per month. At the end of each fiscal year, the Company may elect to have the principal amount of the ORR repaid, convert the principal into shares of Metalore at par or continue with the ORR for another year. At December 31, 2006, the Company had elected to continue with the ORR for the following year. During the year ended December 31, 2007, the Company decided to write down its investment to $NIL in Metalore due to the uncertainty surrounding their ability to continue as a viable business and lack of progress to date.

F-20

Note 6	Investments– (cont’d)
	iii)Investment in Metalore Mining Corporation– (cont’d)
	The investment in Metalore is summarized as follows:
	Acquisition of investment in Metalore	$ 582,800
	Conversion of loan outstanding equity of Metalore	58,280
		641,080
	Advances	17,005
	Purchase of 35% interest in an overriding royalty	131,484
	Equity loss in investment in Metalore	(13,376)
	Balance at December 31, 2006	776,193
	Equity loss in investment in Metalore	(11,518)
	Write-down of investment in Metalore	(764,675)
	Balance at December 31, 2007	$ -

The financial position and results of operations for Metalore have not been presented as at December 31, 2007 because the investment has been written down to $Nil.

Note 7

Convertible Debentures

a)	In October 2004, PACGEO, a Delaware Company, signed a debenture purchase agreement with HEM Mutual Assurance LLC (“HEM”) and Highgate House LLC
	(“Highgate”) to permit PACGEO to issue 5-year 1.5% convertible notes totaling US$1,000,000. This convertible debt was sold in six different notes of which $441,000 was issued under First Debenture A with HEM, First Debenture B for $49,000 with Highgate, Second debenture for $9,000 and $1,000 with HEM and Highgate, respectively. First debenture A and B are convertible at the lesser of $0.10 and 125% of the average of the closing bid price per share of PACGEO stock during 5 trading days immediately preceding the conversion, or 100% of the average of the three lowest closing bid prices during the 40 trading day immediately prior to conversion date (in whole or part). The second debenture has a fixed conversion price of $0.01 per share.
	First debenture C for $450,000 and First debenture D for $50,000 in favour of Highgate were not drawn down as the trading price for the shares needed to be above 10 cents for a continuous 30 trading days. In order to facilitate the conversion process PACGEO lodged 10,000,000 common shares with the Escrow agent for HEM from treasury against future conversion.

F-21

Note 7Convertible Debentures– (cont’d)

a)	– (cont’d)
	The Company incorporated a Delaware, USA subsidiary company in September 2004 called Forum Acquisition Corp. Under an Agreement and Plan of Merger PACGEO and Forum Acquisition Corp, merged and the surviving entity was PACGEO which now became a subsidiary of the Company. In turn the Company assumed the convertible debentures noted above against the assets of PACGEO, being the balance of the bank account and in turn issued 10,000,000 common shares of the Company in favour of HEM and Highgate House LLC to replace the shares issued by PACGEO. The 10,000,000 shares issued by PACGEO were then returned for cancellation.
	On October 22, 2004, the Second debenture was partially converted for $10,000 and the debenture holder received 900,000 common shares for their $9,000 conversion. The conversion price on the second debenture was set at $0.01 per share. The remaining debentures are convertible at the formula stated above. During the year ended December 31, 2005, an additional $133,000 was converted for a total of 2,300,000 common shares.
	During the year ended December 31, 2006, the outstanding balance of the debentures of US$358,000 plus interest was converted and 9,872,979 shares, of which 5,900,000 were previously issued and placed in escrow, were delivered in settlement. The remaining 900,000 shares held in escrow were returned to the Company and cancelled.

F-22

b)

In May 2005, the Company issued convertible debentures totaling $1,223,364 (US$970,000). Each debenture bears simple interest at the rate of 10% per annum and matures at the earliest of full repayment or April 30, 2010. The debentures were sold in units of US$10,000 with US$5,000 warrants. Each debenture was convertible into common shares of the Company at US$0.05 per share or shares of FEP at US$1.923 per share. Each warrant was convertible into common shares of FEP at US$1.923 per share. During the year ended December 31, 2006, upon agreement with the various debenture holders, the debenture was amended whereby the holder could choose to either receive a payment of principal, interest and a 24% premium to the face value of the debenture or the holder could convert the debenture, interest, and warrants into shares at US$0.05 per share. In the event the holder chose the option to receive payment and the Company could not pay by October 31, 2006, 12.5% per annum interest would be added to the amounts outstanding until paid.

The debenture holders chose to receive payment rather than convert into shares of the Company, and on November 24, 2006, the Company paid the outstanding interest and premium plus one half of the outstanding principal of the debenture leaving US$485,000 (CDN$572,095) outstanding at December 31, 2006, which was overdue, accruing interest at 12.5% per annum. The debentures of US$485,000 and total accrued interest of US$66,581 were paid off during the year ended December 31, 2007. US$85,300 was paid to a director of the Company who was a debenture holder.

F-23

Note 7Convertible Debentures– (cont’d)

c)	On January 19, 2006, the Company closed an offering of debentures amounting to
	₤1,400,000. These debentures matured on December20, 2007 and interest wascalculated at 10% per annum. The first year’s interest was payable in advance on the closing date and the second year’s interest was payable on in arrears on the maturity date. As at December 31, 2005, the Company had received $1,309,882 (₤650,000)and during the year ended December 31, 2006, received $1,570,618 (₤750,000).
	Pursuant to the terms and conditions of the debenture agreements, at any time after August 2, 2006 and before or on the maturity date, and provided that the debt has not been fully repaid, the holder shall have the right to convert all or any portion of the convertible indebtedness owing to it as at the date of election into Company common shares, the number of such shares to be based on the 10 day average closing bid price of the Company’s shares prior to the date of the debenture being issued. The holder is also entitled to receive a cash bonus which is based on 50% of the appreciation on FEP shares and the appreciation amount is calculated using a pre-determined formula. As of December 31, 2007 and 2006, no cash bonus was being accrued as the FEP shares have been traded below the shares price at the issuance date of the debentures.
	Under the terms and conditions of the debenture agreements, the holder may also choose one of the following in lieu of conversion into common shares of the Company:
	i)	At any time after December 20, 2006 and before or on the maturity date, a repayment of the outstanding principal and interest plus a cash bonus equivalent to a 50% of the appreciation on FEP shares and the appreciation amount is calculated using a pre-determined formula; or
	ii)	On maturity, a cash repayment of the principal and interest plus a bonus equivalent to a 25% of the outstanding principal.
	In addition to the conversion feature, the debenture agreements also allow the Company to redeem the debentures at any time before the maturity date. If the Company elects to redeem any or all of the convertible debentures, it will pay the outstanding principal and interest plus a 5% cash bonus on the principal amounts.
	As collateral to the convertible debentures, the Company granted to the lenders a general security interest over the shares of FEP held by the Company totalling 200% of the principal amounts invested.
	Upon the adoption of the CICA Handbook Section 3855 on January 1, 2007, the standard was retroactively applied to the convertible debenture as if it has been effective since the inception of the debt. The Company calculated the fair value of the derivative liability and recorded a debt discount at January 19, 2006 (the issuance

F-24

of the debentures) to be $1,650,334 using the Black-Scholes option pricing model using the following assumptions:

F-25

Note 7	Convertible Debentures – (cont’d)
	c) – (cont’d)
	Risk free interest rate	3.85%
	Expected remaining life	2 years
	Dividend rate	Nil
	Expected volatility	135%
	The debt discount was accreted from the inception of the debt using the effective
	interest rate method. As a result of adopting the provisions of the CICA Handbook
	Section 3855, the difference between the carrying amount and the amortized balance
	at January 1, 2007 of $430,759 was credited to the opening deficit on that date.
	Subsequent to the issuance date, the Company is required to re-measure the fair
	value of the derivative liability and record the change in fair value in its statements
	of operations and comprehensive loss. As at January 1, 2007, the Company re-
	measured the fair value of the derivative liability and calculated it to be $735,281,
	which was estimated using the Black-Scholes option pricing model with the
	following assumptions:
	Risk free interest rate	4.14%
	Expected remaining life	1 year
	Dividend rate	Nil
	Expected volatility	126%
	These debentures included₤100,000 ($197,860) due to a directorof the Company.
	On January 19, 2007 one of the holders elected to exercise the option to be paid out
	and as a result the Company paid out the amount of₤125,000 ($278,875). In
	January 2008, the Company repaid the remaining convertible debentures of
	₤1,275,000 ($2,499,000), accrued interest of ₤127,500 ($249,900), and the bonus
	payable of₤318,750 ($630,678). As of December 31, 2007, the Companyrecorded
	the bonus payable as a redemption premium on the consolidated statements of
	operations and comprehensive loss.
Note 8	Share Capital

a)	Authorized:
	Unlimited number of common shares without par value; and
	Unlimited number of Class A and Class B preferred convertible redeemable voting shares without par value

F-26

Note 8	Share Capital– (cont’d)
	b) Issued:
			Number	Amount
	Balance, December 31, 2004		174,583,646	$ 10,225,131
	Shares issued on settlement of debts	– at $0.07	333,333	23,382
	Shares issued in respect of bonuses	– at $0.083	3,243,957	268,541
	Shares issued for conversion of debentures		2,300,000	163,933
	Shares issued from escrow		(2,300,000)	-
	Allocation of equity portion of debenture for
	conversion		-	51,177
	Balance December 31, 2005		178,160,936	10,732,164
	Shares issued for conversion of debentures		9,872,929	426,604
	Shares delivered from escrow		(5,900,000)	-
	Allocation of equity portion of convertible
	Debenture upon conversion of debenture
	– Note 8(b)(i)		-	137,574
	Escrow shares returned to treasury		(900,000)	-
	Shares issued for settlement of debt – Note 8(b)(ii)		2,909,900	170,204
	Shares issued as a finder’s fee on an investment
	– Note 8(b)(iii)		20,000,000	891,360
	Shares issued and held in escrow pursuant to an
	agreement – Note 8(b)(iii)		30,000,000	-
	Balance, December 31, 2006		234,143,765	12,357,906
	Shares issued pursuant to private placement
	– Note 8(b)(iv)		200,000,000	4,981,759
	Balance, December 31, 2007		434,143,765	$ 17,339,665

i)      The PACGEO debentures (Note 7) were purchased by third parties and converted into common shares in the capital of the Company. As a result the debentures were retired. A total of US$358,000 plus interest was converted into 9,872,929 common shares, including 5,900,000 common shares previously issued and lodged with an escrow agent for purposes of facilitating the conversion process. Due to a decline in its share price, the Company issued an additional 3,972,929 common shares for this debenture conversion in accordance with the conversion price formula. The escrow agent subsequently returned 900,000 shares to treasury.

F-27

Note 8

Share Capital– (cont’d)

b)	Issued Common Shares: – (cont’d)
	i)	– (cont’d)
		The amount allocated to the PACGEO convertible debenture of $644,419 has been segregated into debt and equity components based on their respective fair values. The equity component represents the holder conversion right. It will continue to be disclosed separately in shareholders’ equity until the loan is either converted or repaid at which time it will be transferred to share capital. The amount allocated to equity on issuance was $192,394 and as at December 31, 2005, the amount had been reduced to $137,574 as a result of credits to share capital totaling $54,820 reflecting conversions of a portion of the debentures. During the year ended December 31, 2006, the balance of $137,574 was credited to share capital as a result of the conversion and retirement of the remaining debenture.
		The difference between the recorded value of the debt component and the face value of the debenture is being accreted to the consolidated balance sheets over the term of the debenture. During the year ended December 31, 2006, $145,899 (2005: $38,479) was amortized.
		The amount allocated to the US$970,000 convertible debenture (Note 7) of $1,223,364 was segregated into debt and equity components based on their respective fair values. The equity component represents the holders’ conversion right. At inception, the balance allocated to the equity component was $158,574. It was disclosed separately in shareholders’ equity until the loan was due, at which time it was renegotiated without conversion features. Consequently, the amount allocated to equity was reclassified as contributed surplus.
		The difference between the recorded value of the debt component and the face value of the debenture is amortized to income over the term of the debenture. During the year ended December 31, 2006, $139,125 (2005: $19,448) was amortized.
		The amount allocated to the₤1,400,000 convertible debenture (Note 7) of$2,880,500 was allocated into its debt and equity components based on the residual valuation approach whereby the amount allocated to equity at inception was $370,271.
		The difference between the recorded value of the debt component and face value of the debenture is accreted to income over the term of the debenture. During the year ended December 31, 2006, the amount accreted was $167,969.

F-28

Note 8

Share Capital– (cont’d)

b)	Issued Common Shares: – (cont’d)
	ii)	The Company issued 509,900 common shares at $0.05 per share pursuant to an agreement to settle accounts payable outstanding totalling US$25,495 ($29,825).
		The Company also issued 2,400,000 common shares at $0.05 per share pursuant to an agreement to issue shares for consulting services totalling US$120,000 ($140,379).
	iii)	As a result of the independent valuation and negotiations, the Company issued 20,000,000 common shares, with total fair value of $891,360, to Indexa and a further 30,000,000 common shares of the Company into escrow, to be awarded to Indexa upon the decision to proceed with commercial production as full and final consideration for the assignment of its rights to the Company to acquire 40% interest (Note 6).
	iv)	On December 21, 2007, the Company completed a private placement of 200,000,000 shares at US$0.025 per share for gross proceeds of US$5,000,000 ($4,991,500). The Company incurred cash issuance costs of $9,741.
c)	Warrants:

	Number	Amount
Balance December 31, 2004	8,239,000	$ 467,902
Issued to Sterling North Africa Ltd. (i)	3,533,333	267,502
Expired	(2,539,000)	-
Balance December 31, 2005	9,233,333	$ 735,404
Expired	(5,700,000)	(467,903)
Balance, December 31, 2006 and 2007	3,533,333	$ 267,501

The Company issued 3,533,333 warrants to Sterling North Africa Ltd. for the assistance in the sale of the Company’s interest in FEI to FEP (Note 6). The warrants are exercisable until January 31, 2010 and allow the holder to purchase one common share of the Company for every warrant held at US$0.0723 per share.

The fair value of the outstanding warrants issued in 2005 was calculated using the Black-Scholes valuation model with the following assumptions

Risk free interest rate	2.5%
Expected life of warrants	2 years
Dividend yield	Nil
Expected stock price volatility	208%

F-29

Note 8	Share Capital– (cont’d)
	d) Options:
	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. At December
	31, 2007 there were 25,549,545 stock options outstanding to purchase common
	shares at prices ranging from US$0.055 to US$0.43 per share.
			Weighted
		Number of	Average
		Options	Exercise
		Exercisable	Price/Shares
	Outstanding and exercisable December 31, 2004	7,667,500	US$0.18
	Granted	19,600,000	US$0.07
	Cancelled	(567,955)	US$0.1125
	Expired	(50,000)	US$0.15
	Outstanding and exercisable December 31, 2005	26,649,545	US$0.11
	Cancelled	(1,000,000)	US$0.079
	Outstanding and exercisable December 31, 2006	25,649,545	US$0.092
	Cancelled	(100,000)	US$0.079
	Outstanding and exercisable December 31, 2007	25,549,545	US$0.092

The following table summarizes stock options outstanding and exercisable at December 31, 2007:

Number of	Exercise Price		Contractual
Options	Per Option	Expiry Date	Remaining life
			(in year)
4,347,727*	US$0.08	April 26, 2008	0.32
681,818*	US$0.31	April 26, 2008	0.32
1,000,000*	US$0.43	April 26, 2008	0.32
1,000,000	US$0.10	December 9, 2009	1.94
10,520,000	US$0.0723	January 31, 2010	2.09
2,000,000	US$0.079	August 2, 2010	2.59
6,000,000	US$0.055	October 25, 2010	2.82
25,549,545

* The options expired unexercised after December 31, 2007.

F-30

Note 8	Share Capital– (cont’d)
	d)	Options: – (cont’d)
		The fair value of the options was estimated using the Black Scholes valuation model
		with on the following weighted average assumptions:
		2007		2006	2005
		Risk free interest rate	-	-	2.5%
		Expected life of options	-	-	2 years
		Dividend yield	-	-	Nil
		Expected stock price volatility	-	-	202-208%
	e)	Contributed Surplus:
		Balance, December 31, 2004			$ 1,246,885
		Stock-based compensation			1,921,579
		Balance, December 31, 2005			3,168,464
		Transfer of amount upon expiry of warrants			467,902
		Reclassification of equity portion of convertible debenture			158,573
		Balance, December 31, 2006 and 2007			$ 3,794,939
Note 9	Related Party Transactions and Balances– Notes 5, 6 and 7

During the year ended December 31, 2007 general and administrative expenses included fees charged by directors, officers and companies controlled by directors and officers of the Company totaling $370,505 (2006: $375,851; 2005: $337,867). At December 31, 2007, prepaid expenses include $Nil (2006: $13,985) in respect of management fees paid in advance to a director and officer of the Company. Included in accounts payable and accrued liabilities at December 31, 2007 is $31,668 (2006: $21,081) owed to directors, officers and companies controlled by them.

Note 10

Income Taxes

The Company has incurred non-capital losses for Canadian income tax purposes of $6,496,000, which, together with resource and equipment cost pools of $794,000, may be carried forward to offset future taxable income. The Company also has capital losses carried forward for Canadian income tax purposes of $14,000,000 which may be applied to offset future capital gains indefinitely. The benefit, if any, of these non-capital losses, capital losses, and resource pool and equipment cost pool balances have not been reflected in the consolidated financial statements.

F-31

Note 10

Income Taxes– (cont’d)

As at December 31, 2007, the Canadian non-capital losses carried forward expire as follows:

2008	$ 854,000
2009	849,000
2010	440,000
2014	544,000
2015	1,274,000
2026	1,703,000
2027	832,000
	$ 6,496,000

The Company has incurred expenditures in various other jurisdictions, which are subject to tax authority approval. No provision for taxes in these other jurisdictions has been recorded. The Company is unable to accurately determine the amount of its loss carryforwards and other tax attributes at this time. The Company expects to have non-capital operating loss carry-forwards available to offset any taxable income for the years ended December 31, 2007 and 2006 and any future tax benefits which may arise as a result of these losses have not been recognized in these financial statements and would be offset by a valuation allowance.

As at December 31, 2007, the significant components of the Company’s future tax assets and liabilities are as follows:

	2007	2006
Non capital losses carried forward	$ 1,624,000	$ 2,203,000
Capital losses carried forward	3,498,000	4,631,000
Investments	(376,000)	(1,290,000)
Foreign exchange	(102,000)	-
Mineral, oil and gas properties and deferred exploration cost	168,000	218,000
Financing costs	35,000	45,000
Equipment	30,000	38,000
Valuation Allowance	(4,877,000)	(5,845,000)
	$ -	$ -

No income tax benefits to the future tax assets have been recognized in the accounts as their realization does not meet the requirements of “more likely than not” under the liability method of tax allocation.

F-32

Note 10

Income Taxes– (cont’d)

The reconciliation of income taxes at Canadian statutory rates to the reported income tax provision is as follows:

		2007	2006
	Statutory tax rate	32.12%	32.50%
	Income tax recovery at statutory rates	$ (1,910,000)	$ (1,060,000)
	Effect of reduction in statutory rates	1,693,000	-
	Permanent differences	356,000	55,000
	Change in valuation allowance	(139,000)	1,005,000
		$ -	$ -
Note 11	Financial Instruments

a)	Foreign currency exchange risk:
	The Company is exposed to foreign currency fluctuations in cash balances denominated in U.S. dollars as a significant amount of the Company’s expenditures are in U.S. dollars, however this risk is partially mitigated as the majority of the cash is also in U.S. dollars. As at December 31, 2007, the Company held $4,136,979 (2006 - $323,553) of cash denominated in U.S. dollars subject to exchange rate fluctuations between the Canadian dollars and the U.S. dollars and the Company had $5,278,065 (2006 - $9,572,608) of assets denominated in British pounds that are subject to exchange rate fluctuations.
b)	Concentration of 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.

Note 12Withholding Taxes Payable

The Company is responsible for withholding taxes on its interest payments to nonresident of Canada. For the year ended December 31, 2007, the Company has accrued $75,015 (2006: $Nil) as withholding taxes payable.

F-33

Note 13

Comparative Figures

Certain of the prior year’s comparative figures have been reclassified to conform with the presentation used in the current year.

Note 14	Differences	Between	Canadian	and	United	States	Generally	Accepted	Accounting
	Principles

These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) which differ in certain material respects from accounting principles generally accepted in the United States (“US GAAP”). Material differences between Canadian and US GAAP and their effect on the Company’s financial statements are summarized below:

a)	Balance Sheets
	Total assets under Canadian GAAP Investment in Metalore (d) Investment in Lascogan (d)
	Total assets under US GAAP
	Total liabilities under Canadian GAAP Convertible debenture (c)
	Total liabilities under US GAAP
	Total equity under Canadian GAAP Share capital Deficit (c) Additional paid-in capital (c) Contributed surplus (c) Equity portion of convertible debentures (c)
	Total equity under US GAAP
	Total liabilities and equity under US GAAP

	(Restated
	- Note 14(g))
2007	2006
$ 12,167,904	$ 13,309,036
-	(167,990)
(393,190)	(84,417)
$ 11,774,714	$ 13,056,629
$ 3,544,364	$ 3,692,467
-	(384,966)
3,544,364	3,307,501
8,623,540	9,616,569
(703,466)	(703,466)
(1,986,920)	(1,090,900)
2,455,769	2,455,769
(158,573)	(158,573)
-	(370,271)
8,230,350	9,749,128
$ 11,774,714	$ 13,056,629

F-34

Note 14	Differences Between Canadian and United States Generally Accepted Accounting
	Principles– (cont’d)
	b)Income (Loss) Statements
				(Restated
			(Restated	- Notes 12
			- Note 14 (g))	and 14(g))
		2007	2006	2005
	Net income (loss) under Canadian GAAP	$ (5,946,541)	$ (3,263,966)	$ 10,371,394
	Accretion of equity portion of convertible
	debt (c)	-	452,993	57,927
	Accretion on long-term debt	998,072	-	-
	Gain on change in fair value of derivative
	Liability	(735,281)	-	-
	Change in fair value of embedded derivative (e)	-	230,498	27,360
	Equity loss in write-off of resource property
	costs in Metalore Mining Corporation (d)	167,990	(167,990)	-
	Equity loss and write-off of resource property
	costs in Lascogan Mining Corporation (d)	(308,773)	(84,417)	-
	Accretion of debt discount (c)	(587,269)	(1,086,190)	(169,396)
	Net income (loss) under US GAAP	$ (6,411,802)	$ (3,919,072)	$ 10,287,285
	Basic income (loss) per share under US GAAP	$ (0.03)	$ (0.02)	$ 0.06
	Diluted income (loss) per share under US GAAP	$ (0.03)	$ (0.02)	$ 0.05
	Weighted average shares outstanding	239,623,217	195,609,707	175,619,805
	Diluted average shares outstanding	239,623,217	195,609,707	211,502,683

c)

Convertible Debentures

During the year ended December 31, 2006, the Company issued convertible debentures totalling £1,400,000 (CDN$2,880,500). As a result of the retrospective application of CICA section 3855, the Company determined that the conversion feature of the convertible debentures constituted a derivative liability having a fair value of $1,650,334 requiring bifurcation from the host contract. The discount resulting from recording the derivative liability is accreted from the inception of the debt using the effective interest method. The fair value of the derivative liability is re-measured at each financial statement date with the changes in fair value recorded in the statements of operations and comprehensive loss. Under US GAAP, the conversion feature of these convertible debentures meets the criteria for exemption under paragraph 11(a) of Statement of Financial Standard (“SFAS” No. 133 “Accounting for Derivative Instr uments and Hedging Activities” and is not required to be bifurcated from the host instrument.

F-35

Note 14	Differences BetweenCanadianandUnitedStatesGenerallyAcceptedAccounting
	Principles– (cont’d)

c)	Convertible Debentures– (cont’d)
	For the year ended December 31, 2007, under US GAAP, net loss would increase by a net amount of $262,791 as a result of an increase of $998,072, the amount of accretion expense recorded upon accreting the debt discount arising from bifurcating the derivative liability and a decrease of $735,281 arising from recording the change in fair value of the derivative liability.
	Under Canadian GAAP, for the year ended December 31, 2006 prior to the adoption of CICA 3855, the conversion option embedded in the convertible debentures in the amount of $370,271 was presented separately as a component of shareholders’ equity and the amount allocated to the equity component was to be accreted back to debentures payable as a charge to interest over the life of the debenture. For the year ended December 31, 2006, the accretion expense totalled $167,968. Under US GAAP, the conversion feature of the convertible debentures was not subject to bifurcation. As a result, liabilities under US GAAP as at December 31, 2006 would have increased by $202,303 representing the remaining balance of the conversion option that was to have been accreted. Under US GAAP, the adjustment to opening deficit as at January 1, 2007 in the amount of $167,968 recorded as a result of retrospectively adopting CICA 3855 is reversed
	Under US GAAP, on the commitment date of the debenture, the Company is required to assess whether there is an intrinsic beneficial conversion feature in place. When the Company issues convertible debt securities with a non-detachable conversion feature that is below market value on the commitment date, it is known as a beneficial conversion feature (“BCF”) and pursuant to EITF Issue 98-5 “Accounting for Convertible Securities with Beneficial Conversion Features on contingently Adjustable Conversion Ratios” and EITF issue No. 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”, the conversion feature of the security that has characteristics of an equity instrument is measured at its intrinsic value at the commitment date and is recorded as additional paid-in capital. The resulting discount of the debt instrument is amortized into income as interest expense at the conversion feat ure’s earliest conversion date.

F-36

Note 14	Differences Between	Canadian	and	United	States	Generally	Accepted	Accounting
	Principles– (cont’d)

c)	Convertible Debentures– (cont’d)
	During the year ended December 31, 2006, the Company issued convertible debentures totalling £1,400,000 (CDN$2,880,500) for which it determined there was a beneficial conversion feature in the amount of $1,005,932 (Note 14(g)). Under US GAAP, this conversion feature would have been recorded as a debt discount and would be accreted as interest expense to December 20, 2007, the date of the convertible debentures’ maturity, using the effective interest method. Consequently, the total liabilities under US GAAP as at December 31, 2007 would increase by $Nil (2006: decrease by $587,269). The net loss under US GAAP for the year ended December 31, 2007 would have increased by $587,269 (2006: $418,663) as a result of the accretion of debt discount.
	In May 2005, the Company issued convertible debentures totalling $1,223,364 (US$970,000). In accordance with Canadian GAAP, at the inception of the debt, the embedded conversion feature of this debt in the amount of $158,574 was presented separately as a component of shareholders’ equity and the amount allocated to the equity component was to be accreted back to debentures payable as a charge to interest over the life of the debentures. For the year ended December 31, 2006, the accretion expense was $139,126 (2005: $19,448). Under US GAAP, the conversion feature is not subject to bifurcation. As a result, under US GAAP, net loss for the year ended December 31, 2006 would decrease by $ 139,126 (2005: $19,448).
	Under US GAAP, for this convertible debentures there was a beneficial conversion feature totalling $704,220 (US$582,000). During the year ended December 31, 2005, as a result of measuring this conversion feature, debt discount and additional paid-in capital each would have increased under US GAAP by $704,220. During the year ended December 31, 2006, the terms of the debentures were amended allowing the holders to an early payout. As a result, net income under US GAAP would have decreased by $610,324 (2005: $93,896) as a result of accreting the remaining deferred debt discount.
	As a result of convertible debenture conversions during the year, net income would decrease by $Nil (2006: $57,203, 2005: $47,563 ) which is the amount of the deferred financing costs associated with those convertible debentures converted to common shares during the year and which is the amount of deferred financing costs charged to earnings in the year in accordance with the Emerging Issues Task Force (“EITF”) Issue No. 98-5.

F-37

Note 14	Differences Between Canadian	and	United	States	Generally	Accepted	Accounting
	Principles– (cont’d)
b)Convertible Debentures– (cont’d)

	The Company had issued convertible debentures during the year ended December 31, 2004 of which $461,555 (US $358,000) had remained outstanding during the year ended December 31, 2005. In accordance with Canadian GAAP, the conversion feature of this debt in the amount of $192,394 was presented as a component of shareholders’ equity and was to be accreted back to debentures payable as a charge to interest over the life of the debentures. For the year ended December 31, 2006, accretion expense on these debentures was $145,899 (2005: $38,478). Under US GAAP, the conversion feature is not subject to bifurcation. As a result, under US GAAP, net loss for the year ended December 31, 2006 would decrease by $145,899 (2005: $38,478)
	During the year ended December 31, 2006, some of the holders of the convertible debenture converted the debt into common stock of the Company. As a result, share capital under US GAAP should decrease by $137,574 (cumulatively $703,466) which was the amount related to the equity component.
d)	Resource Property Costs
	Under Canadian GAAP, the costs of acquiring mineral properties and related exploration and development expenditures are deferred. Under US GAAP, resource property costs related to exploration can only be deferred subsequent to the establishment of reserves. The financial statements of the Company’s investment in Lascogan Mining Corporation (“Lascogan”) reflect deferred exploration costs at December 31, 2007 of $2,037,931 (2006: $1,265,998). For purposes of US GAAP, the Company’s equity share of the income or loss in its investment in Lascogan is adjusted for its share of the expensing of exploration costs prior to the establishment of reserves under US GAAP. For the year ended December 31, 2007, this amounted to $308,773 (2006: $84,417).
	During the year ended December 31, 2007, the company wrote down its investment in Metalore to $Nil. Under US GAAP, for the year ended December 31, 2007, this write-down would decrease by $167,990 representing the exploration costs which have already been expensed under US GAAP for the year ended December 31, 2006.
	During the year ended December 31, 2006, the financial statements of Metalore reflected deferred exploration costs of $639,932 resulting in an increase to the company’s equity share of its loss in Metalore of $167,990.

F-38

Note 14	Differences Between	Canadian	and	United	States	Generally	Accepted	Accounting
	Principles– (cont’d)

e)	Embedded Derivative
	Pursuant to the provisions of SFAS 133, the terms of the Langley Agreement which required the Company to sell back a number of Langley shares at a purchase price of 1 pence per share based on a formula was considered an embedded derivative and recorded as such in the liability section of the Company’s balance sheet using the fair value method for determining its value. The change in fair value of the liability at each reporting period was charged to the statement of loss and deficit. At inception, the value of the derivative was $511,071. During the year ended December 31, 2006, net loss would decrease by $Nil (2006: $230,498; 2005: $27,360) as a result of recording the fair value changes of the embedded derivative liability.
f)	Other Disclosures – Subtotal in Operating Cash Flows
	The Company includes a subtotal in cash provided by operating activities in the statements of cash flows. The SEC prohibits the inclusion of this subtotal.
g)	Correction of Error

During the year ended December 31, 2006 in Note 14, the Company reported a beneficial conversion feature in the amount of $1,005,932 on its convertible debentures for US GAAP purposes. The Company accreted the resulting debt discount in its entirety during the year ended December 31, 2006 whereas it should have accreted to the maturity of the debt using the effective interest method. The accreted amount for the year ended December 31, 2006 should have been $418,663 and the remaining debt discount balance as at December 31, 2006 was $287,269..The impact on the previously reported financial statements for US GAAP is as follows:

Balance Sheet 2006
	Amount per
	US GAAP as
	reported at
	December 31,		Amount as
	2006	Restatement	Restated
	$ $		$
Total liabilities	3,894,770	(587,269)	3,307,501
Total equity	9,161,859	587,269	9,749,128

F-39

Note 14	Differences Between Canadian	and	United	States	Generally	Accepted	Accounting
	Principles– (cont’d)

g)      Correction of Error– (cont’d) Income (Loss) Statements 2006

	Amount per
	US GAAP as
	reported at
	December 31,		Amount as
	2006	Restatement	Restated
	$ $		$
Accretion of debt discount	(1,673,459)	587,269	(1,086,190)
Net loss under US GAAP	(4,506,341)	587,269	(3,919,072)

h)	Recent US Accounting Pronouncements
	i)	Newly Adopted Accounting Pronouncements
		On January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”. The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”. This interpretation provides guidance on recognition and measurement of uncertainties in income taxes and is effective for the Company’s 2007 fiscal year end. The adoption of FIN 48 did not have a significant impact on the Company’s results of operations or financial position.
	ii)	New Accounting Pronouncements
		The FASB has issued SFAS 157, “Fair Value Measurements”, which defines fair value, establishes a framework for consistently measuring fair value under GAAP and expands disclosures about fair value measurements. SFAS 157 is to be particularly effective as of the first fiscal year that begins after November 15, 2007 (i.e. for the Company’s fiscal year beginning January 1, 2008). The adoption of SFAS 157 is not expected to have an effect on the Company’s financial position.

F-40

Note 14	Differences Between Canadian and United States	Generally	Accepted	Accounting
	Principles– (cont’d)
g)	Recent US Accounting Pronouncements– (cont’d)

In February, 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits all entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. If an entity elects the fair value option for a held-to-maturity or available-for sale- security in conjunction with the adoption of this Statement, that security shall be reported as a trading security under Statement 115, but the accounting for a transfer to the trading ca tegory under paragraph 15 (b) of Statement 115 does not apply. Electing the fair value option for an existing held-to-maturity security will not call into question the intent of an entity to hold other debt securities to maturity in the future. This statement is effective as of the first fiscal year that begins after November 15, 2007 (i.e. for the Company’s fiscal year beginning January 1, 2008). The Company is currently analyzing the effects of SFAS 159 but does not expect its implementation will have a significant impact on the Company’s financial condition or results of operations.

In December 2007, the SEC issued Staff Accounting Bulletin (“SAB”) No. 110 which amends SAB 107 to allow for the continued use, under certain circumstances, of the “simplified” method in developing an estimate of the expected term of so-called “plain vanilla” stock options accounted for under FAS 123R, “Share-Based Payment.” When SAB 107 was published, the staff believed that more information about employee exercise behavior (e.g., employee exercise patterns by industry or other categories of companies) would become available. Therefore, the staff stated in SAB 107 that it would not expect the simplified method to be used for stock option grants after December 31, 2007. The staff now understands that such information will not be widely available by December 31, 2007. Accordingly, the SEC staff will accept, under certain circumstances, the use of the simplified method beyond December 31, 2007 for & #147;plain vanilla” options (as described in SAB 110). The Company does not believe that SAB 110 will have a significant impact on its financial statements.

F-41

Note 14	Differences Between CanadianandUnitedStatesGenerallyAcceptedAccounting
	Principles– (cont’d)

h)	Recent US Accounting Pronouncements– (cont’d)
	In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. The standard requires all entities to report noncontrolling (minority) interests as equity in consolidated financial statements. SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The Company is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.
	In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements.

F-42

F-57

ITEM 18. FINANCIAL STATEMENTS

We have elected to report under Item #17.

ITEM 19. EXHIBITS

Following is a list of all exhibits filed as part of our annual report, including exhibits incorporated by reference.

1.1	Certificate of Continuance (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form F-1, File No. 33-81290 (the “Registration”); *
1.2	Bylaws (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 *
4.6	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 the Share Purchase Agreement dated March 11, 2003 as amended by an agreement dated April 2, 2003; *
4.9	Amendment dated April 2, 2003 to the Share Purchase Agreement dated March 11, 2003 as amended by agreement dated March 21, 2003; *
8.	List of Subsidiaries; *
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.

161

SIGNATURES

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

	FEC Resources Inc.
	(Registrant)
Date: June 26, 2008	By:	/s/Larry W. Youell
	Title:	Chief Executive Officer (Principal Executive
		Officer)

Date: June 26, 2008	By:	/s/Riaz Sumar
	Name: Riaz Sumar
	Title:	Chief Financial Officer (Principal Financial Officer
		and Principal Accounting Officer)

162