20-F/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

AMENDMENT NO. 2

[  ]	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
[ X ]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004
	OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to ______________________

Commission file number 000-50339

CAPITAL RESERVE CANADA LIMITED

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant's name into English)

Alberta, Canada

(Jurisdiction of incorporation or organization)

1530-9 Avenue S.E.

Calgary, Alberta, Canada

T2G 0T7

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class
Class A Common Stock Name of each exchange on which registered
Not applicable

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

None

(Title of Class)

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 capital or common stock as of the close period covered by the annual report.

2,000,000 Class A common shares

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

[ X]Yes  [  ] No

Indicate by check mark which financial statement item the registrant has elected to follow.

[  ] Item 17  [X ] Item 18

_________________________________

(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.

[  ]Yes  [  ] No

TABLE OF CONTENTS

PART I

2

Item 1.

Identity of Directors, Senior Management and Advisors

2

Item 2.

Offer Statistics and Expected Timetable

2

Item 3.

Key Information

2

Item 4.

Information on the Company

7

Item 5.

Operating and Financial Review and Prospects

12

Item 6.

Directors, Senior Management and Employees

14

Item 7.

Major Shareholders and Related Party Transactions

17

Item 8.

Financial Information

19

Item 9.

The Offering and Listing

19

Item 10.

Additional Information

19

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 12.

Description of Securities Other than Equity Securities

22

PART II

22

Item 13.

Defaults, Dividend Arrearages and Delinquencies

22

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds.

22

Item 15.

Controls and Procedures

22

Item 16A. Audit Committee Financial Expert

23

Item 16B. Code of Ethics

23

Item 16C.  Principal Accountant Fees and Services

23

Item 16D. Exemptions from the Listing Standards for Audit Committees

23

PART III

24

Item 17.

Financial Statements

24

Item 18.

Financial Statements

24

Item 19.

Exhibits

24

1

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3.

KEY INFORMATION

SELECTED FINANCIAL DATA

Exchange Rates

All dollar amounts in this document are in U.S. Dollars unless otherwise indicted.

This Annual Report contains conversions of certain amounts in Canadian dollars ("CDN$") into United States dollars ("US$") based upon the exchange rate in effect at the end of the  month or of the calendar year to which the amount relates, or the exchange rate on the date specified. For such purposes, the exchange rate means the noon buying rate for United States dollars from the Bank of Canada (the "Noon Buying Rate"). These translations should not be construed as representations that the Canadian dollar amounts actually represent such U.S. dollar amounts or that Canadian dollars could be converted into U.S. dollars at the rate indicated or at any other rate. The Noon Buying Rate at the end of each of the five years ended December 31, the average of the Noon Buying Rates on the last day of each month during each of such fiscal years and the high and low Noon Buying Rate for each of such fiscal year's were as follows:

	December 31
	2000 $	2001 $	2002 $	2003 $	2004 $
At end of period	0.67	0.63	0.63	0.77	0.83
Average for period	0.67	0.65	0.64	0.72	0.77
High for period	0.70	0.67	0.66	0.77	0.85
Low for period	0.64	0.62	0.62	0.64	0.72

Following is a table of the Noon Buying Rates on the last day of each month for the last six months ended June 30, 2005:

	January	February	March	April	May	June
At end of period	0.81	0.81	0.83	0.80	0.80	0.82
Average for period	0.82	0.81	0.82	0.81	0.80	0.81
High for period	0.83	0.81	0.83	0.82	0.81	0.82
Low for period	0.81	0.80	0.80	0.80	0.79	0.80

The Noon Buying Rate as of   July 15, 2005 was

Forward Stock Split

On May 28, 2003, the Company’s stock was forward split on the basis of basis of 2,000 shares to 1 bringing the total number of issued and outstanding shares of Class A Common Stock to 2,000,000 shares.  All share and per share data contained in this filing has been revised to reflect this stock split retroactively including the audited financial statements included in this filing.

2

	For the fiscal year ending December 31
	2000	2001	2002	2003	2004
Operating Revenues	91,838	94,864	77,354	30,583	2,089
Income (loss) from Operations	(82,330)	(577,444)	(31,321)	19,887	(22,550)
Net Income (loss)	(64,739)	(581,362)	(21,429)	27,646	(1,671)
Net Income (loss) from operations per share	(65)	(581)	(0.01)	0.01	0.0
Total Assets	621,124	123,706	87,578	31,797	12,109
Net Assets	(64,088)	(626,074)	(648,978)	(652,053)	(662,947)
Capital Stock	68	68	68	68	68
Number of Shares	2,000,000	2,000,000	2,000,000	2,000,000	2,000,000

CAPITALIZATION AND INDEBTEDNESS

Not Applicable

REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

RISK FACTORS

Our business operations are speculative.  The failure of our plans could ultimately force us to reduce or suspend operations and even liquidate our assets and wind-up and dissolve our company.

Capital Canada's business is the acquisition of oil and natural gas assets or businesses in the oil and gas industry that either produce or that we hope will produce revenue.  Presently we do not hold any assets having divested of our assets during the period covered by this report.  While we do intend to acquire other exploration or development properties, we do not intend to conduct exploration, development or drilling operations.  We expect that these operations will be  carried out by third party operators, who share an interest in the properties.  Exploration and development of oil and natural gas is extremely risky, particularly given our present financial condition.  An investment in our company should be considered highly speculative due to the nature of our indirect involvement in the exploration, development and production of oil and natural gas.  Oil and gas exploration involves a high degree of ris k, which even a combination of experience, knowledge and careful evaluation may not be able to overcome.  There is no assurance that expenditures we make on future exploration will result in new discoveries of oil or gas.  Exploratory drilling is subject to numerous risks, including the risk that no commercially productive oil and natural gas reservoirs will be encountered.  The cost to drill, complete and operate wells is often uncertain, and drilling operations may be curtailed, delayed or cancelled as a result of a variety of factors including unexpected drilling conditions, abnormal pressures, equipment failures, premature declines of reservoirs, blow-outs, cratering, sour gas releases, fires, spills or other accidents, as well as weather conditions, compliance with governmental requirements, delays in receiving governmental approvals or permits, unexpected environmental issues and shortages or delays in the delivery of equipment. These uncertainties could result in our portion of the dril ling costs exceeding our financial resources to fund the drilling and therefore could result in suspension of drilling activities prior to completion of a well. Our inability to participate in the drilling of wells that produce commercial quantities of oil and natural gas would have a material adverse effect on our business, consolidated financial condition and results of operations.

Future oil and gas exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after exploration, drilling, operating and other costs.  Completion of wells does not ensure a profit on the investment or recovery of exploration, drilling, completion and operating costs.  Drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect production.  Adverse conditions include delays in obtaining governmental

3

approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity or other geological and mechanical conditions.

Capital Canada has divested itself of its unprofitable operating well and its prior oil and gas exploration properties.  Capital Canada intends to continue with identification of exploration and development projects  or businesses in the oil and gas industry which may alter our currently proposed operational plans. There can be no guarantee that we will be successful in locating and acquiring working interests in additional projects of merit or in location a suitable business acquisition.

We have incurred net losses since inception save for the year ended December 31, 2003  and anticipate that losses will continue, which could impact on the value of an investor's investment in our common stock.

We have incurred losses since inception save for the year ended December 31, 2003 and had an accumulated deficit of $641,556 at December 31, 2004.  We anticipate that we will continue to incur net losses due to our expectation of a  high level of planned operating and capital expenditures, additional personnel requirements and our general growth objectives.  We anticipate that our net losses will increase in the near future as we implement our business strategy.  Our ability to earn a profit will depend, in addition to the other risks discussed in this annual report, on successful identification and acquisition of oil and gas properties that generate revenue in excess of operating expenses for the properties and operating expenses of our business, which has not yet been achieved.  We may never achieve profitability.  

We may be unable to continue as a going concern if we are unable to raise additional capital.

In light of the risks described in this section, our auditors have expressed considerable doubt as to our ability to continue as a going concern.  We will be unable to continue as a going concern if we are unable to earn sufficient revenues from our operations or to raise additional capital through debt or equity financings to meet our working capital obligations.  At December 31, 2004, we had a working capital deficit of $664,530.  Our plan of operation which called for us to raise an additional $250,000 by way of financing during the third quarter of 2004 was not met and we have been unable to raise any additional capital to the date of this report.  We are seeking to raise a minimum of $50,000 to meet our capital requirements through 2005 just to sustain present operations.  We will require additional capital, the amount of   which is anticipated to vary depending on the Company's ability to identify and ac quire either oil and gas exploration properties or producing oil and gas properties or businesses operating in the oil and gas industry.      If we do not raise the $50,000 in  capital, we will be unable to continue as a going concern and you may lose your entire investment.  If we cannot raise the capital required to acquire further assets we will not have any assets and even if we are successful in raising the $50,000 for working capital we may not be able to continue as a going concern.

Our future operating results may fluctuate significantly and are difficult to predict.

Our future operating results may fluctuate significantly depending upon a number of factors including industry conditions, prices of oil and natural gas, rate of drilling success, rates of production from completed wells and the timing of capital expenditures.  This variability makes it very difficult to predict when we might reach profitability and hence would have a serious impact on the value of investor's investment in our Company.  In addition, any failure or delay in the realization of expected cash flows from initial operating activities could limit our future ability to continue exploration and to participate in economically attractive projects.

A significant or prolonged decrease in oil and natural gas prices will seriouslyand  negatively impact our business plans and operations.

Oil and natural gas are commodities whose prices are determined based on world demand and supply.  It is impossible to predict future oil and natural gas price movements with any certainty, as they have historically been subject to wide fluctuations in response to a variety of market conditions, including relatively minor changes in the supply and demand for oil and natural gas, economic, political and regulatory developments, and competition from other sources of energy.

Any extended or substantial decline in oil and natural gas prices would have a material adverse effect on our ability to negotiate favorable joint ventures with viable industry participants, our ability to acquire drilling rights, the volume of oil and natural gas that could be economically produced, our cash flow and our access to capital.

4

We do not currently intend to engage in hedging activities (although we reserve the right to do so in the future), and may be more adversely affected by fluctuations in oil and natural gas prices than other industry participants that do engage in such activities.  A sustained material decline in prices from historical average prices could add additional limitation factors to our borrowing base, reducing credit available to our company.  Our business, financial condition and results of operations would be materially and adversely affected by adverse changes in prevailing oil and natural gas prices.  

Our officers have limited experience in marketing oil and natural gas.

If we pursue development of an oil and gas prospect without a partner, we will have to establish markets for any oil and natural gas we do produce and we will also have to market our oil and natural gas to prospective buyers.  The marketability and price of oil and natural gas, which may be acquired or discovered by us, will be affected by the differential between the price paid by refiners for light quality oil and the grades of oil produced by us.  Our ability to market our oil and gas production may depend upon our ability to acquire space on pipelines which deliver oil and gas to commercial markets.  We will also likely be affected by deliverability uncertainties related to the proximity of our reserves to pipelines and processing facilities and relating to price, taxes, royalties, land tenure, allowable production, and the export of oil and natural gas.   We have limited direct experience in the marketing of oil an d natural gas.

We compete directly with independent, technology-driven exploration and service companies, and with major oil and natural gas companies in our exploration for and development of commercial oil and natural gas properties.    

The oil and natural gas industry is highly competitive.  Many companies and individuals are engaged in the business of acquiring interests in and developing oil and natural gas properties, and the industry is not dominated by any single competitor or a small number of competitors.  We will compete with numerous industry participants for the acquisition of land and rights to prospects, and for the equipment and labor required to drill and develop those prospects.  Many of these competitors have financial, technical and other resources substantially in excess of those available to us.  These competitive disadvantages could adversely affect our ability to participate in projects with favorable rates of return.

We may be unable to effectively manage our planned growth.

Our success will depend upon the expansion of our business.  Expansion will place a significant strain on our financial, management and other resources, and will require us, among other things, to change, expand and improve our operating, managerial and financial systems and controls and improve coordination between our various corporate functions.  We presently have no full time employees or management personnel.

We presently have no properties having disposed of our non-profitable oil property and our exploration properties.  We intend to acquire further properties which are expected to be development, exploration or producing properties.  We would rely on outside operators for the operations of our oil and gas properties.  Should we begin operating our own oil and gas properties we will be forced to hire either field contractors or our own field staff and management personnel to oversee the field operations.

Our inability to effectively manage our growth, including the failure of any new personnel we hire to achieve anticipated performance levels, would have a material adverse effect on our business, consolidated financial condition and results of operations.  

Some of our Directors face possible conflicts of interest through dual directorships.

Two (2) of our directors, Mr. Desmond Smith and Ms. Jacqueline Danforth, also serve as directors for Texas T Petroleum Inc. and Texas T. Petroleum Ltd., and Ms. Jacqueline also serves as a director for Stone Canyon Resources Inc. All of the above  are corporations that operate in the oil and gas industry.  It is possible that such directors may face a conflict of interest if they obtain information regarding an oil and gas asset available for acquisition that would fall in the parameters of acquisitions being sought by both corporations.  Capital Canada expects that if such event did occur, that the director would pass the information regarding such acquisition to both corporations for consideration and withdraw from further activity regarding such asset except with the written consent of bothcorporations.

5

Capital Canada has had no business interaction with Texas T Petroleum Inc. or Texas T Petroleum Ltd.  Prior to Ms. Danforth becoming a director of Stone Canyon Resources Inc. on December 23, 2004, effective as of December 1, 2004, the Company entered into an agreement with Stone Canyon Resources Inc. to divest itself of its oil and gas producing leases and its exploration leases.  Capital Canada has no other business interaction with Stone Canyon Resources Inc. save for the acquisition agreement described above.

There is a possibility that we could incur environmental liabilities that are not covered by insurance, which liabilities could be in excess of any revenues or assets that we may accumulate.

We intend that any operations of our oil and gas assets will be conducted by third party operators that carry excess liability insurance.  In the event that losses or damages result from the operation of the assets that are not covered by the operator's insurance these losses or damages would become a liability for Capital Canada.  It is possible that uncovered losses and damages could be incurred which could cause us to have to file for bankruptcy protection from the courts.

U.S. Investors face the risk that their investment may be subject to special U.S. federal income tax rules.  

For any taxable year of Capital Canada, if at least 75% of Capital Canada's gross income is “Passive income” (as defined in the Internal Revenue Code of 1986, as amended (the “Code”)), or if at least 50% of Capital Canada's assets, by average fair market value, are assets that produce or are held for the production of passive income, Capital Canada will be a Passive Foreign Investment Corporation (“PFIC”).

If Capital Canada is a PFIC for any taxable year during which an individual who is a citizen or resident of the Untied States or a domestic corporation (a “U.S. Taxpayer”) owns any common stock, the U.S. Taxpayer will be subject to special U.S. federal income tax rules, set forth in Sections 1291 to 1297 of the Code, with respect to all of such U.S. Taxpayer's common stock. For example, gifts, exchanges pursuant to corporate reorganizations and use of the common stock as security for a loan may be treated as taxable disposition, and a stepped-up basis upon the death of such a U.S. Taxpayer may not be available. Furthermore, in the absence of an election by such U.S. Taxpayer to treat Capital Canada as a “qualified electing fund” (the “QEF election”), as discussed below, the U.S. Taxpayer would be required to (i) report any gain on disposition of any common stock as ordinary income rather than capital gain, (ii) to compute the tax liability on such gain and on certain distributions as if the shares had been earned pro rata over the U.S. Taxpayer's holding period (or a certain portion thereof) for the common stock, and (iii) would be subject to the highest ordinary income tax rate for each taxable year of the U.S. Taxpayer in which the shares were treated as having been earned. Such U.S. Taxpayer would also be liable for interest (which may be non-deductible by certain U.S. Taxpayers) on the foregoing tax liability as if such liability had been due with respect to each such prior year.

U.S. Taxpayers are strongly urged to consult his or her own tax advisor in that regard.

The foregoing discussion of United States taxation is of a general and summary nature only and is not intended to be, nor should it be considered to be, legal or tax advice to any particular shareholder. Accordingly, prospective investors should consult their own tax advisors as to the tax consequences of receiving dividends from Capital Canada or disposing of their common stock and thus any investment in our common stock could be illiquid. For an indefinite period of time.

Risks Relating to Our Stock

There is no public market for our common shares at this time.

There is no public market for our common shares and we cannot give you any assurance that we will be able to attain a listing for our securities.   We will attempt to have our stock authorized for quotation on the Over the Counter Bulletin Board (“OTC/BB”) following the acquisition of a project for the Company.   This will be dependent upon our ability to locate a market maker to submit an application for trading on the OTC/BB.  We currently do not have a relationship with any market makers.

You should not expect to receive dividends on your investment.

We have never paid any cash dividends on shares of our capital stock, and we do not anticipate that we will pay any dividends in the foreseeable future.  Our current business plan is to retain any future earnings to finance the expansion of

6

our business.  Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our financial condition, results of operations, capital requirements and other factors as our board of directors may deem relevant at that time.

ITEM 4.

INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

Capital Reserve Canada Limited (“Capital Canada” or the “Company”) was incorporated on December 8, 1999 as a private corporation under the Business Corporations Act (Alberta, Canada).  On January 15, 2003, we amended our articles of incorporation to enable us to be a public company under the laws of the Province of Alberta.  On May 28, 2003, we amended our Articles of Incorporation to forward split our issued and outstanding shares of Class A common stock on the basis of 2000 shares for every 1 share held.  From the date of incorporation to November 1, 2004,  Capital Canada was a wholly owned subsidiary of FACT Corporation from inception.  On November 1, 2004 FACT Corporation distributed the shares of the Company to the FACT shareholders and to a creditor and the Company was no longer a subsidiary of FACT.  (See below under “SPIN OFF FROM FACT CORPORATION”).

Our registered offices are located at 1530-9^th Avenue S.E., Calgary, Alberta, T2G 0T7, Canada, (403) 693-8000.  We act as our own agent for service in Canada.

On March 1, 2000, FACT Corporation purchased a 5% interest in a producing oil and gas property in Alberta Canada from Stone Canyon Resources Ltd.  FACT Corporation issued a total of 817,050 common shares at a deemed price of $0.50US per common share which  the Company booked as an inter-company loan in the amount of $408,525($600,000CDN) .  The deemed price of $0.50 per share was agreed to with Stone Canyon based on an offering being undertaken by FACT Corporation at the time which was priced at $0.50 per share.  The cost of the acquisition was based on an evaluation by an independent oil and gas consultant to be $612,788 (CDN $900,000), and was paid by way of $204,263 (CDN$300,000) in cash and in 817,050 shares of Class A common stock of FACT Corporation, at a deemed price of $0.50 per share. Stone Canyon Resources Ltd. was an independent party from both the Company and FACT Corporation at the time of the transaction.  Stone Canyon Resources Ltd. became an affiliate of FACT Corporation upon the issuance of shares of FACT Corporation to Stone Canyon Resources Ltd. due to the fact that Stone Canyon Resources Ltd. then owned approximately 20% of FACT Corporation's issued and outstanding shares.  

The cash portion of the acquisition  was provided from the draw down of $204,263 (CDN$300,000) from a stand-by operating line of credit at an annual interest rate of the Bank of Canada's prime rate plus 1% provided to Capital Canada by the Alberta Treasury Branches. The line of credit was secured by a floating charge debenture over all of Capital Canada's assets, which means that the lender had a security interest in all of Capital Canada's assets in an amount equal to the current amount owed under the line of credit.   

The property is operated by Hornet Energy Ltd, a division of Compton Petroleum Corporation, a company located in Calgary, Alberta, Canada. Hornet Energy Ltd. is an independent party from Capital Canada.  

 Production from this property initially met the payment obligations to the Alberta Treasury Branches and provided some working capital for the Company.  However, the Company participated in the drilling of a well on this property which was unsuccessful and the cash flow from the property was used to pay down the drilling obligations.  During 2002 and the first quarter of 2003 this property was not producing sufficient cash flow to pay the drilling obligations and  the ongoing payments required under the loan with the Alberta Treasury Branches, therefore the Board of Directors determined to sell the property to pay off the loan to Alberta Treasury Branches and to retire the debt owed to Hornet Energy Ltd. from operations.   On May 15, 2003, the Company sold this property to Hornet Energy Ltd. for CDN$150,000.00 or approximately US$113,920.  The funds received paid off the above noted loan with Alberta Treasury Branches in full, funded the drilling of an exploration well in Montana (discussed below in the immediately subsequent paragraph) and paid down a total of $57,526 of the intercompany debt with FACT Corporation.

On June 10, 2003 we executed an agreement with FACT Corporation and Terra Nostra Technology Ltd. whereby we acquired an interest in certain oil and gas leases held in Rosebud and Garfield Counties, Montana which had previously been sold by FACT Corporation to Terra Nostra Technology Ltd. (previously Terra Nostra Resources Ltd.)  (“Terra Nostra”) for consideration of 40,000 shares of Terra Nostra, a 5% gross overriding royalty on any and all revenues

7

generated from hydro carbon production volumes obtained from the lease lands.  The agreement between Terra Nostra and FACT Corporation was also conditional on Terra Nostra assuming and fulfilling all funding obligations in regard to the first well to be drilled on the Leases.  Terra Nostra advised FACT Corporation that it would not be funding the drilling of the well and therefore FACT Corporation demanded return of the leases.  Under the terms of the agreement FACT Corporation did not have an obligation to return the 40,000 shares of Terra Nostra, however, Terra Nostra offered to transfer to FACT Corporation its interest in the the additional leases located in Washington County, Colorado in exchange for the 40,000 restricted shares of  Terra Nostra.  FACT Corporation agreed to the offer as presented and transferred title to the additional leases located in Washington County, Colorado and the M ontana  leases to the Company in exchange for an agreement to pay $10,000. W. Scott Lawler, a director of both FACT Corporation and the Company, was a shareholder in Terra Nostra Technology Ltd. at the time of the transaction.  We received the properties in  consideration of an agreement to pay to  FACT Corporation the amount of $10,000.  Presently the $10,000 is carried on the books of FACT Corporation as   a part of the promissory note issued by the Company to FACT Corporation as at November 1, 2004. (See “SPIN OFF” below under this Item 4).  As part of the agreement with FACT Corporation and Terra Nostra Technology Ltd., we also took ownership of a small producing oil and gas well in Colorado, known as the Kejr leases.   The Company expended a total of $6,181 for the drilling of an exploration well on the Montana leases during July, 2003.  The well was a dry hole.  The operations of the Kejr leases was unprofitable during 2004 and the o perator of the Montana leases was recommending that the leases be dropped as they came up for renewal and did not recommend any new drilling targets on the Montana leases.  Therefore, the management of the Company determined to divest itself of the Kejr leases and the Montana leases.  On December 23, 2004, effective as of December 1, 2004, the Company entered into a agreement with Stone Canyon Resources Inc. (“Stone Canyon”) whereby the Company transferred all rights and interest in and to the Kejr and Montana leases in exchange for Stone Canyon assuming all current liabilities and any future liabilities for the Kejr and Montana leases.

We are presently seeking new acquisitions for the Company.   At present we expect to seek acquisitions in the oil and gas industry.

Our current monthly overhead is minimal as the Company has no employees and limited operations.   Our current revenues as at the date of this report are approximately $500 per month, which is derived from a sublease of space which the Company had initially leased from FACT Corporation for its operations which is sub-let to one tenant as at the date of this report. The revenues we currently generate will not be sufficient to allow us to fund any growth plan for the Company and we will still be required to raise funds or issue shares of the Company to acquire new oil and gas assets.  We will not receive any rental revenue from the sublease after October 1, 2005 as the lease will terminate on that date.  We will have no revenues unless we can raise capital for the Company or access a revenue producing acquisition.

SPIN OFF FROM FACT CORPORATION

The Company filed a registration statement on Form 20-F pursuant to a decision by the Board of Directors of FACT Corporation to divest itself of its non-core business assets and investments.  The Company’s oil and natural gas holdings no longer fit with FACT Corporation's primary business focus which is the functional food industry.

On November 1, 2004, FACT Corporation distributed  1,604,919 Class A Common shares to the FACT Corporation stockholders on a basis of one (1) share of Capital Canada Class A Common Shares for every five (5) shares of Fact Corporation Class A Common Stock held.  All fractional shares were rounded up to a whole share.  All of the shares were held by FACT Corporation since December 8, 1999.  

The remaining 395,081 shares of our Class A Common Shares held by FACT Corporation were issued to Ultimate Resort Destinations Inc. (“Ultimate”), in exchange for the release of the Capital Class A Commmon Shares pursuant to a debenture that Ultimate held over all of the assets of FACT Corporation. During the quarter ended June 30, 2004,  Ultimate agreed to release a total of 2,000,000 Class A Common Shares held by FACT Corporation from the debenture to allow for the spin off of Capital Canada in exchange for the 395,081 shares of Capital Canada.  The shares were delivered to Ultimate on November 1, 2004 by FACT.

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BUSINESS OVERVIEW  

The Company is an Alberta, Canada corporation formed in December 1999 to locate and acquire producing oil and gas assets in Canada.  The Company disposed of its Canadian oil and gas production on May 15, 2003, which consisted of a 5% interest in a field located in Alberta.  The Company divested of its  interests in oil and gas exploration and development leases in Montana and a producing oil and gas property located in Colorado effective as of December 1, 2004.  

The Company determined to locate and acquire oil and gas leases for the purposes of exploration and development both in the U.S. and Canada as well producing oil and gas assets both in the U.S. and Canada.  During 2004 and to the date of this report, the Company reviewed other acquisition opportunities both in the U.S., Canada and the Ukraine, both production and exploration properties but was unsuccessful in negotiating any acquisitions.  Presently the Company is reviewing the opportunity to acquire a company operating in the oil and gas services industry.  The Company will also continue to seek oil and gas properties for acquisition.

Disclosure of Oil and Gas Operations:

Reserves Reported to Other Agencies:

The Company did not report any reserves to other agencies since the beginning of the last fiscal year.

Production:

Following is a table showing production data for the last three fiscal years:

Average Sales Price
2004			2003			2002
Oil per BOE		Gas per BOE*	Oil per BOE		Gas per BOE*	Oil per BOE	Gas Per BOE*
36.00		0	36.06		32.69	23.02	15.99
Average Production Cost
2004**			2003			2002
Oil and Gas per BOE*			Oil and Gas per BOE*			Oil and Gas per BOE*
22.92			11.45			7.62
Net Production (less royalties)
2004			2003			2002
Oil BOE's	Gas BOE's*		Oil BOE's	Gas BOE's*		Oil BOE's		Gas BOE's*
75	0		423	596		1,635		2,428

* 6 mcf of gas equals one barrel of oil

** The Average Production costs for 2004 include costs of production while the wells were shut in and not operational which substantially impact on the cost of production.  Average production costs only related to the barrels produced are $13.75 per BOE.

Productive Well and Acreage as of December 31, 2004:

As at December  31, 2004, the Company no producing wells due to the disposition of the Kejr leases effective December 1, 2004.

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Developed Acreage as at December 31, 2004:

As at December 31, 2004 the Company had no developed acreage due to the disposition of the Kejr leases effective December 1, 2004

.  

Undeveloped Acreage as at December 31, 2004:

As at December 31, 2004, the Company had no undeveloped acreage due to the disposition of the Montana leases effective December 1, 2004.

Drilling Activity:

There were no development wells drilled during the last three fiscal years.

The Company participated in the drilling of an exploratory well during 2003 on the Montana Leases.  The well was a dry hole.  

Present Activities:

The Company is presently seeking acquisitions in the oil and gas industry.  It presently has no business and no oil and gas properties having disposed of its non-profitable Kejr wells and its Montana leases effective December 1, 2004.  The Company is presently reviewing the potential acquisition of an oil and gas services company.

Delivery Commitments:

The Company does not have any delivery commitments or any short or long term contractual obligations.  

Marketing    

We currently do not conduct any marketing activities.  When we have oil and gas producing properties, the sale of the extracted products is determined by existing market conditions.  We do not believe that any marketing activities will be necessary to conduct operations following the acquisition of any of the properties described above.  The properties described above currently have operators who will be responsible for the marketing.  Should we take on the operatorship of a property then one of the responsibilities would be the marketing of the products.  At this time, we have no plans for becoming an operator.

Competition

Our competition comes from other oil and gas companies that are acquiring oil and gas assets that we would contemplate acquiring due to its investment and capital costs compared to our financial capabilities.  Since our financial resources are severely limited at this time, we are at a distinct disadvantage when competing against companies with significant assets.

Employees

We presently have no employees.   We hire consultants as required and rely on present management, being the directors and officers, to direct our business.   We will need to hire employees with experience in the oil and gas industry as we implement our business plan to grow the Company by acquisition of producing oil and gas assets and exploration and development properties where the Company may participate in drilling or in the acquisition of any business in the oil and gas industry.  The business plan of the Company at present does not require the Company to become the operator of any of the oil and gas properties they may acquire.  However, as the Company grows through acquisitions it will require employees with oil and gas expertise to review potential acquisitions and accounting and administrative staff to manage revenues and expenditures.  The Company intends to hire these employees as it raises capital and completes acquisitions requiring these employees.   While the Company does not intend to operate any of the properties it acquires at this time, should the Company find a property or properties of merit which would require an operator, the Company would need to hire additional staff for operations.  Should the Company be successful in the acquisition of an already operating business

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in the oil and gas industry such as the business 4in the services industry presently being reviewed then the company acquired may have existing employees that could assist Capital Canada or Capital Canada may be required to hire employees to undertake the oversight of the acquired business.

REGULATORY MATTERS AFFECTING OUR BUSINESS

Environment and Safety

Capital Canada's oil and gas acquisitions will be  subject to numerous federal, state and local laws and regulations relating to environmental protection from the time oil and gas projects commence until abandonment. These laws and regulations govern, among other things, the amounts and types of substances and materials that may be released into the environment, the issuance of permits in connection with exploration, drilling and production activities, the release of emissions into the atmosphere, the discharge and disposition of generated waste materials, offshore oil and gas operations, the reclamation and abandonment of wells and facility sites and the remediation of contaminated sites. In addition, these laws and regulations may impose substantial liabilities for the failure to comply with them or for any contamination resulting from the operations associated with Capital Canada's assets.  Laws and regulations protecting the envir onment have become more stringent in recent years, and may in certain circumstances impose "strict liability," rendering a person liable for environmental damage without regard to negligence or fault on the part of such person. Such laws and regulations may expose Capital Canada to liability for the conduct of or conditions caused by others, or for acts of Capital Canada which were in compliance with all applicable laws at the time such acts were performed. The application of these requirements or the adoption of new requirements could have a material adverse effect on Capital Canada's financial position and results of operations.

The Oil Pollution Act of 1990 ("OPA") and regulations promulgated pursuant thereto impose a variety of requirements on "responsible parties" related to the prevention of oil spills and liability for damages resulting from such spills. Few defenses exist to the liability imposed by the OPA, and such liability could be substantial. A failure to comply with ongoing requirements or inadequate cooperation in a spill event could subject a responsible party to civil or criminal enforcement action.

Capital Canada takes the issue of environmental stewardship very seriously and works diligently with its operators to insure that compliance with applicable environmental and safety rules and regulations. Compliance with such laws and regulations has not had a material effect on Capital Canada's operations or financial condition in the past. However, because environmental laws and regulations are becoming increasingly more stringent, there can be no assurances that such laws and regulations or any environmental law or regulation enacted in the future will not have a material effect on Capital Canada's operations or financial condition.

Exploration and Operating Risks

Capital Canada's business will be  subject to all of the operating risks normally associated with the exploration for and production of oil and gas, including blowouts, cratering and fire, any of which could result in damage to, or destruction of, oil and gas wells or formations or production facilities and other property and injury to persons. As protection against financial loss resulting from these operating hazards, the Company  will maintain, through its operators, insurance coverage, including certain physical damage, employer's liability, comprehensive general liability and worker's compensation insurance. Although Capital Canada is not insured against all risks in all aspects of its business, such as political risk, business interruption risk and risk of major terrorist attacks, Capital Canada believes that this coverage is customary for companies engaged in similar operations. The occurrence of a significant event against whi ch Capital Canada is not fully insured would have a material adverse effect on Capital Canada's financial position.

ORGANIZATIONAL STRUCTURE

The Company has no subsidiaries as at the year ended December 31, 2004. The Company was a wholly owned subsidiary of  FACT Corporation until November 1, 2004 when FACT Corporation completed the spin-off of the Company by the distribution of a total of  1,604,919 shares to the shareholders of FACT Corporation as at March 3, 2003.

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PROPERTY, PLANTS AND EQUIPMENT

Our principal corporate and administrative offices are located at 1530-9^th Avenue S.E. Calgary, Alberta, Canada and are provided free of charge to us by International Securities Group Ltd., a company owned by one of our directors.  We may be required to find other space or enter into an agreement with International Securities Group Ltd. for some cash consideration to remain in the present space.  

 We also have approximately 2,409 square feet of office and laboratory space at another Calgary, Alberta commercial building held under a lease from Calfrac Well Services that expires on October 31, 2005. This space is located at 335-25^th Street S.E., Calgary, Alberta.  For the year ended December 31, 2004 the financial commitment under the terms of this lease was the payment of CDN$2258 per month plus operating costs estimated at $8.00 per sq ft.    For the period from January 1, 2005 to October 31, 2005 the total  financial commitment is $23,126 plus operating costs estimated at $8.00 per sq ft.  We have sublet all of the space in this building.  As sublessor we executed a sublease agreement with T2/H2B Analytical Services, Inc. on October 30, 2000 for approximately 2,409 square feet at a rate of CDN$2570 per month plus operating costs for the period of November 1, 2000 to October 31, 2003 at which time the rate increased to CDN$2891 per month plus operating costs until the expiry of the sublease on October 31, 2005.  We will not renew this lease upon its expiry on October 31, 2005.

Oil and Natural Gas Properties

We do not presently own any oil and natural gas properties.  We are presently seeking acquisitions in the oil and gas industry.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OPERATING RESULTS

During the fiscal year ended December 31, 2004, we earned $2,089 in petroleum and natural gas revenue, compared to $30,583 for the fiscal year ended December 31, 2003.  We also earned $48,270 in rental income for the fiscal year ended December 31, 2004, compared to $34,609 in rental income for the fiscal year ended December 31, 2003.  The decrease in petroleum and natural gas revenue was due to the decrease in revenues from the Kejr leases and the divestiture of our Alberta oil and gas producing property during 2003. The increase in rental income was due to an increase in the rate to our sub-tenants. Our operating expenses in fiscal year 2004 increased to $52,921  from $34,679 in fiscal year 2003.  The increase was due to an increase in rental costs to $28,282 for 2004 from 23,983 in 2003 and a loss on disposal of assets of $16,481 in 2004 from the disposition of our oil and gas leases as compared to a gain in disposal of as sets of $27,804 for the year ended 2003 due to the sale of our Alberta oil and gas leases.    Our administrative expenses decreased to $6,682 in 2004 from $10346 in 2003 due to reduced activity during year 2004 as the Company was not actively pursuing additional acquisition opportunities and the increases costs in 2003 due to the legal fees for the spin off from FACT Corporation..  

The Company realized a   net loss in  year  2004 of $1,640  compared to  net earnings for year 2003 of $27,646.  As noted above, the gain is primarily due to the divestiture of our primary oil and gas asset in May 2003 and the loss is primarily due to a loss on disposal of our oil and gas leases during 2004.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2004, we had total assets of $12,109 compared to total assets of $31,797 as of December 31, 2003.   The reduction in total assets is related to the sale of the Company's oil and gas assets in 2004.

As of December 31, 2004, we had a working capital deficit of $664,530, compared to a working capital deficit at December 31, 2003 of $668,951.  As of December 31, 2004, our accumulated deficit was $641,556, compared to an accumulated deficit of $639,885 as of December 31, 2003.  

We financed our operations during fiscal year 2004 with loans from our parent corporation, FACT Corporation and with revenues from our rental property.  As at   the year ended December 31, 2004, FACT Corporation had spun off the shares

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of our Company and we entered into negotiations on the loans.  The loans as at December 31, 2004 were non-interest bearing with no fixed terms of repayment.  As of the date of this report, we have entered into a convertible debenture with FACT Corporation in the principal amount of $662,059 convertible for a period of two years from July 1, 2005 at $0.05 per share.  We have agreed to accrue interest on the loan back to the initial date of the loan which was March 1, 2000 at the rate of Bank of America prime plus 1% compounded annually.  If not converted the note plus accrued interest will be due on June 30, 2007.    We received  cash from  operations of $12,472  and used  cash from investing activities of $1,862.  The Company does not have sufficient revenue from its rental properties to meet its present capital requirements, and the Company will be required t o  raise additional monies to effect its business plan. The Company will seek to find investment capital from existing shareholders either by way of equity or loans or to source new capital.  There is no guarantee that the Company will be successful in its fund raising.

The Company had current assets of $10,526 as at December 31, 2004 which consisted of cash of $2,408, accounts receivable of $1,559 and loan receivables of $6,559 as compared to current assets of $11,832 comprised of cash of $11,832 and accounts receivable of $7,912 and no loan receivable   at December 31, 2003.  

MATERIAL CAPITAL COMMITMENTS

As of the date of this report, we have entered into a convertible debenture with FACT Corporation in the principal amount of $662,059 convertible for a period of two years from July 1, 2004 at $0.05 per share.  We have agreed to accrue interest on the loan back to the initial date of the loan which was March 1, 2000 at the rate of Bank of America prime plus 1% compounded annually.  If not converted the note plus accrued interest will be due on June 30, 2007.  

The Company’s only other  material capital commitments is the lease for rental space from FACT Corporation which is described under  “PROPERTY, PLANTS AND EQUIPMENT” above.

RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

The Company has no research and development activity.  

TREND INFORMATION

Capital Canada is not aware as of the filing of this annual report of any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on its financial condition.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

DISCLOSURE OF CONTRACTUAL OBLIGATIONS

CAPITAL RESERVE CANADA LIMITED AS AT DECEMBER 31, 2004
DISCLOSURE OF CONTRACTUAL OBLIGATIONS
	Payments due by period
CONTRACTUAL OBLIGATIONS	Total	Less than one year	1-3 years	3-5 years	More than 5 years
Lease Obligations (Office Space) (1)	36,182	36,182	-	-	-
Related Party Loans(2)	662,059	-	662,059	-	-
Total	698,241	36,182	662,059	-	-

⁽¹⁾  The Company has sublet this lease space for the entire term of the obligations but remains responsible for the lease payments should the subtenants fail to make the payments.

 ⁽²⁾ The Company has debt obligation to FACT Corporation

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ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person and the date such person became a director or executive officer.   Our executive officers are elected annually by our Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Unless described below, there are no family relationships among any of the directors and officers, and no persons have been elected as a director or officer at the request of any shareholders, customers, suppliers, or others.    

Name	Age	Title	Date
N. Desmond Smith	51	President and Director	February 13, 2003
W. Scott Lawler	43	Secretary-Treasurer and Director	December 8, 1999
Jacqueline R. Danforth	33	Director	September 3, 2002

N Desmond Smith

Mr. Smith has been our President and a member of our board of directors since February 13, 2003.  Mr. Smith has been the Manager of Development for Nostra Terra (Overseas) Ltd., an oil and gas exploration company, since May 2000.  In this capacity he is responsible for the development and operations of oil and gas projects in the Ukraine. From February 1995 to May 2000, Mr. Smith was the Chief Operating Officer of A&B Geoscience Corp., an oil and gas exploration company,  where he was responsible for the development of oil and gas projects in the Republic of Azerbaijan.  Mr. Smith is a director of Texas T Petroleum Ltd. and Texas T Petroleum Inc.,  an oil and gas company and the President and a director of Lion's Gate Investments Ltd., a holding company which derives its revenues from over-riding royalties from oil and gas production.  He obtained his Bachelor of Science in Geology in 1975 from the University o f British Columbia.   Mr. Smith devotes approximately (one) 1 day per week of aggregated time to the business of the Company at present.   Please see the Risk Factor under Item 3 above, entitled “Some of our Directors face possible conflicts of interest through dual directorship” on page 7.

W. Scott Lawler, Esq.

Mr. Lawler has been a member of our Board of Directors and our Secretary-Treasurer since incorporation. Mr. Lawler is an attorney and is admitted in the State Bar of California. Currently, Mr. Lawler is a director and the President of International Securities Group, Inc., a private venture capital company. Mr. Lawler has been a member of the Board of Directors of FACT Corporation since November 1999 and served as President of FACT from November 1, 1999 to August 7, 2001, and serves as a director of subsidiaries of FACT, including Food and Culinary Technology Group, Inc. since July 2001, FACT Bread Company Inc, since November 2001. As well, Mr. Lawler has also served as a director of Crysler Corp. since November 2001 and E-one Corporation since October 2002.  Mr. Lawler received a Bachelor's Degree in Business Management in 1984 from Brigham Young University and his Juris Doctorate degree from University of Southern California Law Center in 1988. Mr. Lawler was admitted to the California State Bar in 1988. Mr. Lawler has been the principal of Lawler & Associates, specializing in corporate and securities matters, since 1995.  Mr. Lawler devotes approximately one (1) day per month to the Company in his capacity as a Board Member and Secretary-Treasurer.  Mr. Lawler also acts for the Company in the capacity of U.S. securities counsel.

Jacqueline R. Danforth

Ms. Danforth has been a member of our Board of Directors since September 3, 2002. Ms. Danforth has spent the past several years in the employ of publicly traded companies providing management, administrative and accounting services. She has been a member of the Board of Directors and the President of FACT Corporation, a public corporation engaged in the business of functional foods, since August 7, 2001. Ms. Danforth has been a director and Secretary-Treasurer of Food and Culinary Technology Group Inc., FACT Corporation's primary operational subsidiary, since its acquisition by

14

FACT Corporation on November 7, 2001. Ms. Danforth became President of Food and Culinary Technology Group Inc. on July 22, 2002.  Ms. Danforth was the Secretary, Treasurer and a member of the Board of Directors of Synergy Technologies Corporation, an oil and gas technology company, from December 1997 to June 2001. During her tenure at Synergy Technologies, Ms. Danforth was a member of Synergy's Audit Committee; and a  director of Synergy's operating subsidiaries, Carbon Resources Ltd., SynGen Technologies Limited, and Lanisco Holdings Limited. Ms. Danforth also currently serves as the President and a  Director of Texas T Minerals Inc., a publicly traded Alberta corporation operating in the mining industry, as well as on the Board of Directors of Texas T Petroleum Ltd. and Texas T Petroleum Inc., private companies operation in the oil and gas industry.  On May 6, 2005, Ms. Danforth also was appointed President and a director of Stone Canyon Resources Inc., a wholly owned subsidiary of Stone Canyon Resources Ltd., a company operating in the oil and gas industry. She is the President and sole director of Argonaut Management Group, Inc., a private consulting company.  Ms. Danforth handles the administration of the Company and overseas the financial statement preparation.  She presently spends approximately three days (3) per month on the affairs of the Company.  Please see the Risk Factor under Item 3 above entitled “Some of our Directors face possible conflicts of interest through dual directorship” on page 7.

None of our directors has been involved in any bankruptcy or criminal (excluding traffic violations and other minor offenses) proceedings. None of our directors is subject to any order, judgment or decree related to his involvement in any type of business, securities or banking activities or has been found to have violated a federal or state securities or commodities law.

COMPENSATION

The following table sets forth the compensation paid to our directors and members of our management group for the last fiscal year .  No executive officer of Capital Reserve Canada Limited earned a salary and bonus for such fiscal year in excess of CDN$100,000.

	Annualized Compensation			Long Term Compensation
Name and Principal Position	Year	Salary (CDN$)	Bonus (CDN$)	Securities Under Options to be Granted (#)	Long Term Incentive Plan Payouts (CDN$)	All other Compensation (CDN$)
N. Des Smith President & Director	2004	-	-	-	-	-
N. Des Smith President & Director	2003	-	-	24,000	-	-
James F. Marsh President & Director	2002	3,000	-	-	-	-
Jacqueline Danforth Director	2002	-	-	-	-	-
W. Scott Lawler Director & Secretary Treasurer	2002	-	-	-	-	-

The Company has not paid any other compensation to any other members of its management, administrative or supervisory bodies.   

15

Compensation of Directors

No directors receive any form of compensation in their capacity as directors of Capital Canada, save for Mr. Smith, who has been granted an incentive stock option which  is described below under “SHARE OWNERSHIP”.

BOARD PRACTICES

Members of our Board of Directors are elected annually at the Annual Shareholders' Meeting and hold the position until the next Annual Shareholders' Meeting or until his successor is duly elected and qualified.  Ms. Danforth and Messrs. Lawler and Smith were elected at our last Annual Shareholders' Meeting which was held on July 31, 2004. We have not entered into any formal service contracts with any of our directors.

We do not have any standing audit, nominating, or compensation committees of the Board of Directors.  Our executive officers are elected annually by our Board of Directors and hold such positions until the following year or until his successor is duly elected by our Board of Directors.

EMPLOYEES

We have had no employees to date and until November 1, 2004 we relied on the employees of our then parent corporation, FACT Corporation, to undertake all of the day to day operational duties.  FACT Corporation supplied a total of two accounting staff and one secretarial staff member to the Company over the last three fiscal years on a part time basis, with an average of approximately one day per week for each FACT Corporation employee being spent on the business of the Company.  All of the employees were located at FACT and the Company's offices in Calgary, Alberta Canada.  From November 1, 2004 to the date of this report we have relied on the employees of International Securities Group Ltd., a company owned by one of our directors to undertake the day to day operations duties.  The employees were located at the offices of International Securities Group Ltd. and the Company in Calgary Alberta.

SHARE OWNERSHIP

The following table sets forth information, as of July 15, 2005, with respect to the beneficial ownership of Capital Reserve Canada Limited's Class A common stock by each of the Company's officers and directors, and by the officers and directors of the Company as a group. Information is also provided regarding beneficial ownership of Class A common stock if all outstanding options, warrants, rights and conversion privileges are exercised and additional shares of Class A common stock are issued.

TITLE OF CLASS	BENFICIAL OWNER	AMOUNT AND NATURE OF BENEFICIAL OWNER	PERCENT OF CLASS (1)
Class A Common	W. Scott Lawler, director of Capital Reserve Canada Limited and Secretary/Treasurer c/o 1530-9th Ave S.E. Calgary, Alberta, Canada T2G OT7	45,569 common shares held directly (2)	2.3%
Class A Common	Jacqueline R. Danforth, director of Capital Reserve Canada and President and director of Fact Corporation; c/o 1530-9th Ave S.E. Calgary, Alberta, Canada T2G OT7	273,911 common shares of which 200 common shares are held directly and 273,711 are held indirectly(3)	13.5%
Class A Common	N. Desmond Smith, President and Director of Capital Reserve Canada Limited c/o 1530-9th Avenue SE Calgary, Alberta T2G 0T7	124,000 common shares of which 24,000 common shares are held directly and 100,000 common shares are held indirectly.(4)	4.9%
	All Officers and Directors as a group	443,480 common shares	20.7%

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(1) Based on 2,000,000 shares of Class A Common Stock.

(2) This position includes  1,200 Class A common  shares owned by Nate Lawler, the son of W. Scott Lawler.

(3) Ms. Danforth is the beneficial owner of Argonaut Management Group Inc. which holds a total of 71,167 common shares and is a director and officer of Stone Canyon Resources Ltd. and Stone Canyon Resources Inc. which collectively own a total of 202,544 common shares.  Ms. Danforth disclaims any beneficial ownership of the shares held by Stone Canyon Resources Ltd. and Stone Canyon Resources Inc.

(4) Mr. Smith has been granted a total of 24,000 incentive stock options at $0.01 per share which will vest 1,000 shares per month commencing  30 days after the Company's common stock is approved for quotation on the OTC Bulletin Board.  Commencing on the first monthly anniversary of the option agreement, 1,000 options shall vest.  On each subsequent monthly anniversary, 1,000 options will vest.  No shares have vested as at the date of this filing and thus no options are currently exercisable and it is not anticipated that any will be exercisable within the next 60 days.   The options will expire on May 12, 2013.  The 100,000 shares are held by Texas T Petroleum Ltd., a company of which Mr. Smith is an officer and director.  Mr. Smith disclaims any beneficial interest in any of the Company shares here by Texas T Petroleum Ltd.

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

There are a total of 2,000,000 Class A Common shares of the Company issued and outstanding as of the date of this report of which a total of 56 shareholders in Canada hold a total of  739,916 Class A Common shares.

The following table sets forth information, as of July 15, 2005, with respect to the beneficial ownership of Capital Reserve Canada Limited's Class A common stock by each person know to be the beneficial owner of more than 5% of the outstanding Class A common stock.   Information is provided regarding beneficial ownership of Class A common stock if all outstanding options, warrants, rights and conversion privileges are exercised and additional shares of Class A common stock are issued.

TITLE OF CLASS	BENFICIAL OWNER	AMOUNT AND NATURE OF BENEFICIAL OWNER	PERCENT OF CLASS (1)
Class A Common	Ultimate Resort Destinations Inc. (2) 1530-9th Ave S.E. Calgary, Alberta T2G 0T7	395,081 shares	19.75%
Class A Common	Caribbean Overseas Investments Ltd. (3) 25 Regent Street, Belize City, Belize	181,160 shares	9.06%
Class A Common	Bahamian Overseas Investment Fund Sociedad(4) Nassau, Bahamas	164,934 shares	8.25%
Class A Common	Buccaneer Holdings Inc. (5) P.O. Box 1678 Belize City, Belize	143,055 shares	7.15%
Class A Common	Stone Canyon Resources Ltd. (5) 1530-9th Ave S.E. Calgary, Alberta T2G 0T7	195,044 shares held directly and 7,500 shares held indirectly	10.13%

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Class A Common
Texas T Petroleum Ltd. ⁽⁶⁾ 1530-9^th Ave S.E. Calgary, Alberta T2G 0T7
100,000 shares
5.00%

(1)Based on 2,000,000 shares of Class A common stock.

(2) Ultimate Resort Destinations, Inc. is a wholly owned subsidiary of Ultimate Destinations Inc. whose beneficial owners are Clifford Larry Winsor and Caribbean Overseas Investments Ltd.

(3) Caribbean's beneficial owner is Crysler Investments Ltd.

(4)Bahamian Overseas Investment Fund Sociedad beneficial owner is John King.

(5) Buccaneer Holdings Inc.'s beneficial owners are Walter Brown, Al Brown, Berta Tillman, Alfonso Sevasey, Renegade Recreational Rentals, Inc., Dorothy Vasquez, Rupert Flowers, Gerald Jones and Yvette Burks.

(5)  Stone Canyon Resources Ltd. is a Company that has more than 50 shareholders and its sole officer and director is Jacqueline Danforth.  Stone Canyon Resources Inc., a wholly owned subsidiary of Stone Canyon Resources Ltd. holds a total of 7,500 shares.

(6)  Texas T Petroleum Ltd. is a private Company, of which Mr. Smith and Ms. Danforth are both directors but disclaim any beneficial ownership.

RELATED PARTY TRANSACTIONS

During the quarter ended June 30, 2003, the Company executed an agreement with FACT Corporation and Terra Nostra Technology Ltd. whereby we acquired an interest in certain oil and gas leases held in Rosebud and Garfield Counties, Montana which had previously been sold by FACT Corporation to Terra Nostra Technology Ltd. (previously Terra Nostra Resources Ltd.). FACT Corporation currently is Capital Canada’s sole shareholder. Moreover, W. Scott Lawler, a director of FACT Corporation and the Company was a shareholder in Terra Nostra Technology Ltd. at the time of the transaction.  We received the properties in consideration of an agreement to pay to FACT Corporation the amount of $10,000.  Presently the $10,000 is on carried on the books of FACT Corporation and the Company as an intercompany loan.  This amount will become a part of the promissory note to be issued by the Company to FACT Corporation upon the spin off of the Comp any from FACT Corporation.  As part of the agreement with FACT Corporation and Terra Nostra Technology Ltd., the Company will also take ownership of a small producing oil and gas well in Colorado.   

All of related party loans were retired by the issuance of shares of FACT Corporation during the quarter ended September 30, 2003.  

During the fiscal year ended December 31, 2003, the Company was charged consulting fees totaling $3,539 by International Securities Group Ltd., a company controlled by W. Scott Lawler, a director of Capital Canada.  A total of $207 remained unpaid as to the year ended December 31, 2003.

 During the fiscal year ended December 31, 2004, the Company was charged fees totaling $223 and reimbursement of expenses totaling $1,923 by International Securities Group Ltd., a Company controlled by a W. Scott Lawler, a director of the Company, a total of $2,368 remained unpaid as at the year ended December 31, 2004.

The Company has, in the past,  paid management and consulting fees to various companies controlled by directors of the Company.  The Company will require minimal services from International Securities Group Ltd. and will continue to use their services for photocopying and faxing and telephone and some minor secretarial work.   

During the fiscal year ended December 31, 2004, the Company advanced an amount of $6,559 to Wall Street Investments Ltd., a wholly owned subsidiary of FACT Corporation.

During the fiscal year ended December 31, 2004, the Company entered into a verbal agreement with FACT Corporation to negotiate the terms of an outstanding loan in the amount of $662,059.   As at the year ended December 31, 2004, the loan was non-interest bearing.  Two directors of the Company are also directors of FACT Corporation.

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During the fiscal year ended December 31, 2004, FACT Corporation transferred a total of 395,081 shares of Capital Canada held by FACT Corporation to Ultimate Resort Destinations Inc. in exchange for Ultimate agreeing to release the shares of Capital Canada held under a debenture agreement with FACT Corporation.

INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8.

FINANCIAL INFORMATION

The required financial statements are provided at the end of this Registration Statement starting on Page F-1.

ITEM 9.

THE OFFER AND LISTING

OFFER AND LISTING DETAILS

Since all of our outstanding shares have been held by one shareholder, there has been no trading in our stock and thus no price history of our stock is available.

PLAN OF DISTRIBUTION

Not Applicable

MARKETS

Currently, there is no market for any of our classes of stock.  There is no assurance that there will be liquidity in the any of our stock.  Upon completion of the spin-off we intend to apply to have our Class A Common stock traded on the Over The Counter Bulletin Board.  There cannot be any assurance that our application for listing will be approved.

SELLING SHAREHOLDERS

Not Applicable

DILUTION

Not Applicable

EXPENSES OF THE ISSUE

Not Applicable

ITEM 10.

ADDITIONAL INFORMATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

Capital Canada incorporates by reference herein the information set forth under the heading “MEMORANDUM AND ARTICLES OF ASSOCIATION” located in Capital Canada’s Amendment No. 4 to Form 20F/A filed with the Securities and Exchange Commission on March 16, 2004.

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MATERIAL CONTRACTS

On December 23, 2004 effective as of December 1, 2004, the Company entered into a Petroleum, Natural Gas, and General Rights Conveyance with  Stone Canyon Resources Ltd. whereby Stone Canyon Resources Ltd. agree to acquire the Kejr leases and the Montana leases in consideration for assuming all past and present liabilities of the Company in regard to these leases.

On July 1, 2005, the Company agreed to enter into a convertible loan with FACT Corporation in the principal amount of $662,059 convertible for a period of two years from July 1, 2005 at $0.05 per share.  We have agreed to accrue interest on the loan back to the initial date of the loan which was March 1, 2000 at the rate of Bank of America prime plus 1% compounded annually.  If not converted the note plus accrued interest will be due on June 30, 2007.  The Company has not yet executed the documents but expects to execute convertible loan agreements by July 31, 2005.

EXCHANGE CONTROLS

There are no governmental laws, decrees, regulations or other legislation of Canada that may affect the import or export of capital for use.

Other than the withholding of any taxes due under the terms of specific treaties between countries on dividends paid to shareholders of the Corporation there are no restrictions on the remittance of dividends, interests or other payments.

TAXATION

The discussions below summarize the material tax considerations relevant to an investment in common shares by individuals and corporations who, for income tax purposes, are resident in the U.S. for purposes of the Convention (as hereinafter defined) and are not resident in Canada, who hold common shares as a capital asset, and who do not hold the common shares in carrying on a business through a permanent establishment in Canada or in connection with a fixed base in Canada (collectively, "Unconnected U. S. Shareholders" or "Holders"). The tax consequences of an investment in common shares by investors who are not Unconnected U.S. Shareholders may differ substantially from the tax consequences discussed herein. The discussion of U.S. tax consideration is addressed only to Unconnected U. S. Shareholders whose "functional currency" within the meaning of Section 985 of the Internal Revenue Code of 1986, as amended (the "Code"), is the U. S. dollar, and to U. S. citizens who are not residents in the U.S. for the purpose of the Convention, but who otherwise meet the definition of Unconnected U.S. Shareholders. Furthermore, the discussion of U.S. tax consideration does not address the tax treatment of Unconnected U. S. Shareholders that own, or are deemed for U.S. federal income tax purposes to own, 10% or more of the total combined voting power of all classes of voting stock of Capital Reserve Canada Limited. The discussion of Canadian tax considerations does not address the tax treatment of a trust, company, organization or other arrangement that is a resident of the U.S. and that is generally exempt from U. S. tax.

This discussion does not address all of the income tax consequences that may be applicable to any Holder subject to special treatment under the U.S. federal income tax law or to any particular Holder in light of such Holder's particular facts and circumstances. Some Holders, including tax exempt entities, banks, insurance companies and persons who hold common shares as part of a hedging transaction may be subject to special or different rules not discussed below. The discussion of U.S. tax considerations is based on the provisions of the Code.

 The discussion of Canadian tax consideration is based upon the provisions of the Income Tax Act (Canada), as amended from time to time (the "Tax Act"), the Convention between Canada and the U.S. with Respect to Taxes on Income and Capital, as amended from time to time (the "Convention"), and the Company's understanding of published administrative practices of Canada Customs and Revenue Agency and judicial decision, all of which are subject to change. The discussion does not take into account the tax laws of the various provinces or territories of Canada or the tax laws of the various state and local jurisdictions in the U. S.

20

U.S. Federal Income Tax Considerations

Unconnected U.S. Shareholders generally will treat the gross amount of the distributions paid by the Company, including the amount of any Canadian tax withheld, as foreign source dividend income for U.S. federal income tax purposes to the extent of the Company's current or accumulated earnings and profits, as computed for U.S. federal income tax purposes. Distribution in excess of that amount will reduce an Unconnected U.S. Shareholder's tax basis in the common shares, but not below zero, and the remainder, if any, will be treated as taxable capital gains. In general, in computing its U.S. federal income tax liability, an Unconnected U.S. Shareholder may elect for each taxable year whether to claim a deduction or, subject to the limitations described below, a credit for Canadian taxes withheld from dividends paid on its common shares. If the Unconnected U.S. Shareholder elects to claim a credit for such Canadian taxes, the election will be bind ing for all foreign taxes paid or accrued by the Shareholder for such taxable year. The Code applies various limitations on the amount of foreign tax credit that may be available to a U.S. taxpayer based upon the segregation of foreign source income into separate categories of income. The amount of credit which may be claimed with respect to the category of income to which the dividend is allocated, and to which the foreign taxes are attributable generally may not exceed the same portion of the U.S. tax on worldwide taxable income, before applying the foreign tax credit as the U.S. holder's foreign source taxable income allocation to such category bears to such U.S. holder's entire taxable income. The foreign tax credit is disallowed for dividends on stock unless a minimum holding period is satisfied and additional limitations may restrict the ability of some individuals to claim the foreign tax credit. Accordingly, we urge investors to consult their own tax advisors with respect to the potential consequence s to them of the foreign tax credit limitations.

For U. S. federal income tax purposes, the amount of any distributions made on a common share to an Unconnected U.S. Shareholder in Canadian dollars will equal the U.S. dollar value of the Canadian dollars calculated by reference to the appropriate exchange rate in effect on the date of receipt of the distribution, regardless of whether the Canadian dollars are actually converted into U.S. dollars upon receipt. Unconnected U.S. Shareholders are urged to consult their own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any Canadian dollars which are converted into U.S. dollars subsequent to receipt by the shareholder.

The sale of common shares generally will result in a gain or loss to the Holder in an amount equal to the difference between the amount realized and the Holder's adjusted cost basis in the shares. Provided that the Holder is not considered a "dealer' in the shares sold, gain or loss on the sale of the common shares will generally be capital gain or loss.

Capital losses are used to offset capital gains. Individual taxpayers may deduct the excess of capital losses over capital gains of up to US$3,000 a year, US$1,500 in the case of a married individual filing separately, from ordinary income. Non-corporate taxpayers may carry forward unused capital losses indefinitely.  Unused capital losses of a corporation may be carried back three years and carried forward five years.

Canadian Tax Considerations

Dividends received or deemed to be received, on the common shares by Unconnected U.S. Shareholders will be subject to Canadian withholding tax at the rate of 25%, subject to reduction under the Convention. Under the Convention, the maximum rate of withholding tax on such dividends is reduced to 15% if the beneficial owner of such dividends is an Unconnected U.S. Shareholder. However, that rate is reduced to 5% under the Convention if the beneficial owner of such dividends is an Unconnected U.S. Shareholder that is a corporation that owns at least 10% of the voting stock of the company.

An Unconnected U.S. Shareholder will not be subject to tax in Canada on any capital gain realized upon the disposition or deemed disposition of the common shares, provided that the common shares do not constitute "taxable Canadian property" of the shareholder within the meaning of the Tax Act.

Canada does not currently impose any estate taxes or succession duties.

DIVIDENDS AND PAYING AGENTS

Not applicable.

21

STATEMENTS BY EXPERTS

Not Applicable

DOCUMENTS ON DISPLAY

All documents filed in connection with this registration statement have been filed with the Securities and Exchange Commission using the EDGAR (Electronic Data Gathering, Analysis and Retrieval) system.  The Securities and Exchange Commission maintains a Web site on the Internet at the address http://www.sec.gov that contains reports, proxy information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.

SUBSIDIARY INFORMATION

The Company does not have any subsidiaries.

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

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

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and acting Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.   

At the end of the period covered by this annual report we carried out an evaluation, under the supervision and with the participation of our management, including our President and acting Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.  Based upon the foregoing, our President and our acting Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2004, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

22

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not presently have an audit committee.

ITEM 16B.

CODE OF ETHICS

As of the date of this report, the Company has not adopted a code of ethics that applies to is principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.  The Company had  intended to prepare such a code of ethics and present it to its Board of Directors for adoption during the second quarter of fiscal year 2003, however while it prepared plans for review, it did not complete the planned adoption of a code of ethics.  The Company has target the second quarter of fiscal year 2004 to review and finalize the adoption of a code of ethics.   Upon adoption, the Company will file a copy of its code of ethics with the Securities and Exchange Commission as an exhibit to its annual report for the year ending December 31, 2004 and post it on its website.

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the fees billed to the Company for professional services rendered by the Company's principal accountant, for the year ended December31, 2004 and December 31, 2003:

Services	2004	2003
Audit fees	$4,151	$1,500
Audit related fees	-	$375
Tax fees	-	-0-
Total fees	$4,151	$1,875

There were no audit fees charged to the Company by Miller McCollom for the year 2003 as all of the audit fees from Miller & McCollom have been charged to FACT Corporation, the parent of the Company at the time of the audit.  FACT Corporation has charged the Company $,1500 for the audit fees disbursed by FACT to Miller and McCollom.  This number was calculated as a percentage of the audit work related to each of the FACT subsidiaries.  Schwartz, Levinsky, Feldman have not yet presented a bill for audit fees for the Company’s financial statements for the year ended December 31, 2003, however the Company has accrued $4,151 for audit fees on its balance sheet for 2004.   

Audit fees consist of fees for the audit of the Company's annual financial statements or the financial statements of the Company’s subsidiaries or services that are normally provided in connection with the statutory and regulatory filings of the annual financial statements.

Audit-related services include the review of the Company's financial statements and quarterly reports that are not reported as Audit fees.

Tax fees included tax planning and various taxation matters.

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not Applicable

23

PART III

ITEM 17.

FINANCIAL STATEMENTS

See Item 18 Below.

ITEM 18.

FINANCIAL STATEMENTS

The required financial statements are provided herein starting on page F-1.

ITEM 19.

EXHIBITS

Exhibit No.	Exhibit
1.1	Certificate of Incorporation of the Company consisting of the Articles of Incorporation filed with the Alberta Registries on December 8, 1999, filed with the Registrant’s Form 20-F filed on July 11, 2003 (file # 000-50339)
1.2	Amendment to Articles of Incorporation of the Company filed with Alberta Registries on January 15, 2003, incorporated by reference to the Exhibits filed with the Registrant's Form 20-F filed on July 11, 2003 (file # 000-50339)
1.3	By-Laws of the Company, dated December 8, 1999, incorporated by reference to the Registrant's Form 20-F filed on July 11, 2003 (file # 000-50339)
4.1	Lease between Capital Reserve Corporation (now known as FACT Corporation) and Capital Reserve Canada Limited, dated August 30, 2000, incorporated by reference to the Exhibits filed with the Registrant's Form 20-F filed on July 11, 2003 (file # 000-50339)
4.2	Amendment to Lease between Capital Reserve Corporation (now known as FACT Corporation) and Capital Reserve Canada Limited, dated September 7, 2000, incorporated by reference to the Exhibits filed with the Registrant's Form 20-F filed on July 11, 2003 (file # 000-50339)
4.3	Amendment to Lease between Capital Reserve Corporation (now known as FACT Corporation) and Capital Reserve Canada Limited, dated October 30, 2000, incorporated by reference to the Exhibits filed with the Registrant's Form 20-F filed on July 11, 2003 (file # 000-50339)
4.4	Sublease between Capital Reserve Canada Limited and TJ/H2b Analytical Services Inc, dated October 30, 2000, incorporated by reference to the Exhibits filed with the Registrant's Form 20-F filed on July 11, 2003 (file # 000-50339)
4.5	Sublease between Capital Reserve Canada Limited and Canada Chemical Corporation, dated January 3, 2003, incorporated by reference to the Exhibits filed with the Registrant's Form 20-F filed on July 11, 2003 (file # 000-50339)
4.6	Specific Variable Rate Loan Agreement between Alberta Treasury Branches and Capital Reserve Canada Limited, dated September 27, 2001, incorporated by reference to the Exhibits filed with the Registrant's Form 20-F filed on July 11, 2003 (file # 000-50339)
4.7	Option Agreement between Capital Reserve Canada Limited and N. Desmond Smith, dated May 12, 2003, incorporated by reference to the Exhibits filed with Amendment No. 2 to the Registrant's Form 20-F filed on November 28, 2003 (file # 000-50339)

24

4.8	Purchase Agreement between Capital Reserve Canada Limited, FACT Corporation and Terra Nostra Technology Ltd. dated June 10, 2003, incorporated by reference to the Exhibits filed with Amendment No. 2 to the Registrant's Form 20-F filed on November 28, 2003 (file # 000-50339)
4.9	Petroleum, Natural Gas, and General Rights Conveyance between Hornet Energy Ltd. and Capital Reserve Canada Limited dated May 5, 2003, incorporated by reference to  the Exhibits filed with Amendment No. 2 to the Registrant's Form 20-F filed on November 28, 2003 (file # 000-50339)
4.10	Petroleum, Natural Gas, and General Rights Conveyance between Capital Reserve Canada Limited and Stone Canyon Resources Ltd. dated December 23, 2004, incorporated by reference to the Exhibits filed with the Registrant's 20-F filed Annual Return for the year ended December 31, 2004. (file # 000-50339)
12	Certifications required by Rule 13a-14(a) or Rule 15d-14(a), filed herewith.
13	Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States code (18 U.S.C. 1350), filed herewith.

SIGNATURES

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

CAPITAL RESERVE CANADA LIMITED

/s/ James Baker

James Baker

President

/s/ Jacqueline Danforth

Jacqueline Danforth

Secretary

Date:  January 31, 2006

25

CAPITAL RESERVE CANADA LIMITED

FINANCIAL STATEMENTS

AS AT THE FISCAL YEARS ENDED DECEMBER 31, 2004 AND 2003

with

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

(Amounts Expressed in U.S. Dollars)

INDEX TO FINANCIAL STATEMENTS

CAPITAL RESERVE CANADA LIMITED

FINANCIAL STATEMENTS

with

REPORT OF INDEPENDENT REGISTED PUBLIC ACCOUNTING FIRM

(Amounts Expressed in U.S. Dollars)

	Page
Report of Independent Certified Public Accountants	F-2
Financial Statements:
Balance Sheets	F-4
Statements of Operations	F-5
Statements of Cash Flows	F-6
Statement of Shareholders’ Deficit	F-7
Notes to Financial Statements	F-8 to F-14
Supplemental Information	F-15 to F-17

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of

Capital Reserve Canada Limited

We have audited the balance sheet of Capital Reserve Canada Limited as at December 31, 2004 and the related statements of operations and changes in stockholders’ deficiency and cash flows for the year ended December 31, 2004. 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 audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board in the United States.  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatements.  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.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Reserve Canada Limited as at December 31, 2004 and the results of its operations and its cash flows for the year ended December 31, 2004, in conformity with generally accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming the company will continue as a going concern.  As outlined in note 2 to the financial statements, the company has reported a net liability position and has accumulated operating losses since inception.  This raises substantial doubt of its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The financial statements as at December 31, 2003 and for the year then ended, were audited by other auditors who expressed an opinion without reservation on the statements in their report dated April 12, 2004.

        SCHWARTZ LEVITSKY FELDMAN LLP (SIGNED)

Montreal, Quebec, Canada

July 10, 2005

Chartered Accountants

F-2

Report of Independent Certified Public Accountants

Board of Directors

Capital Reserve Canada Limited

We have audited the accompanying balance sheets of Capital Reserve Canada Limited as of December 31, 2003 and December 31, 2002, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2003 and December 31, 2002. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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 presentations. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Reserve Canada Limited as of December 31, 2003 and December 31, 2002 and the consolidated results of its operations, stockholders’ equity, and its cash flows for the years ended December 31, 2003 and December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1, the Company has limited working capital and continued operating losses, which raise substantial doubts about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Miller and McCollom

MILLER AND MCCOLLOM

Certified Public Accountants

4350 Wadsworth Boulevard, Suite 300

Wheat Ridge, Colorado 80033

April 12, 2004

F-3

CAPITAL RESERVE CANADA LIMITED

Balance Sheets

As At December 31, 2004 and 2003

(Amounts expressed in United States Dollars)

	2004	2003
ASSETS
Current
Cash	$ 2,408	$ 3,920
Accounts receivable	1,559	3,929
Accounts receivable (related party)	-	3,983
Loan receivable (related party)	6,559	-
Total current assets	10,526	11,832
Oil & Gas Leases (net of accumulated depletion) (Full cost method)
Evaluated	-	5,506
Unevaluated	-	14,459
Office equipment and computers (net of accumulated depreciation of $279 (2004) and $1,583 (2003))	1,583	-
Total assets	$ 12,109	$ 31,797
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current
Accounts payable and accrued liabilities	$ 10,629	$ 15,201
Accounts payable (related party)	2,368	207
Loans payable	-	1,087
Due to FACT Corporation	662,059	664,288
Total current liabilities	675,056
Provision for site restoration	-	3,067
Total liabilities	675,056	683,850
Commitments and contingencies-note7
Stockholders’ deficiency
Common stock, authorized unlimited number of Class A common shares, no par value, 2,000,000 shares issued and outstanding	68	68
Accumulated deficit	(641,556)	(639,885)
Accumulated other comprehensive loss	(21,459)	(12,236)
Total stockholders’ deficit	(662,947)	(652,053)
Total liabilities and stockholders’ deficiency	$ 12,109	$ 31,797

The accompanying notes are an integral part of these financial statements

F-4

CAPITAL RESERVE CANADA LIMITED

Statements Of Operations

For the Year Ended December 31, 2004 and 2003

(Amounts expressed in United States Dollars)

	2004	2003	2002
Revenue
Petroleum and natural gas (net of royalties)	$2,089	$30,583	$       77,354
Rental income	48,270	34,609	39,028
Total revenue	50,359	65,192	116,382
Operating expenses
Petroleum and natural gas related costs (including depletion)	975	22,712	77,699
Rental operating costs	28,282	23,983	20,994
Legal	222	2,162	542
Consultants	-	2,799	13,148
Administrative expenses	6,682	10,346	5,060
Depreciation and amortization	279	480	7,566
Loss (Gain) on disposal of assets	16,481	(27,804)	4,660
	52,921	34,679	129,669
Earnings (loss) from operations	(2,562)	30,513	(13,287)
Other income and expenses:
Interest income	899	2,084	-
Interest expense	(8)	(4,951)	(8,142)
	891	(2,867)	(8,142)
Net earnings (loss)	$(1,671)	27,646	$(21,429)
Net earnings (loss) per common share	(0.001)	0.01	(0.01)
Weighted average number of common shares outstanding
Basic	2,000,000	2,000,000	2,000,000
Diluted	2,000,000	2,000,000	2,000,000

The accompanying notes are an integral part of these financial statements

F-5

CAPITAL RESERVE CANADA LIMITED

Statements Of Cash Flows

For the Year Ending December 31, 2004 and 2003

(Amounts expressed in United States Dollars)

	2004	2003	2002
Operating activities
Net earnings (loss)	$ (1,671)	$ 27,646	(22,904)
Adjustments to reconcile net earnings to net cash used in operating activities:
Depletion, amortization and site restoration	279	4,991	38,268
(Gain) Loss on disposal of assets	16,481	(27,804)	4,660
(Increase) decrease in accounts receivable	6,353	835	(3,729)
Decrease (increase) in loans receivable	(6,559)	-	-
Decrease in prepaid expenses	-	581	89
Decrease in accounts payable and accrued liabilities	(2,411)	(8,533)	(37,830)
Net cash flows provided by (used in) operating activities	12,472	(2,285)	(19,971)
Investing activities
Drilling expenditures	-	(6,959)	-
Proceeds from sale of oil & gas assets	-	113,920	-
Acquisition/Disposition of office equipment	(1,862)		6,114
Loan advances	-	402	(402)
Net cash flows provided by (used in)  investing activities	(1,862)	107,363	(5,836)
Financing activities
Loan proceeds	-	1,087	25,828
Loan repayment	(1,087)	(50,500)	(119,054)
Repayment to loan from FACT Corporation	(2,229)	(6,187)	116,757
Net cash flows provided by (used in) financing activities	(3,316)		23,531
Effects of foreign currency exchange rate on cash and    cash equivalents	(8,806)	(46,059)	(1,475)
Net increase (decrease) in cash and cash equivalents	(1,512)	3,419	(3,751)
Cash and cash equivalents, beginning of the year	3,920	501	4,252
Cash and cash equivalents, end of the year	$ 2,408	$ 3,920	$             501

Supplemental disclosure of cash flow information:
Interest paid	$               8	$ 4,326	$ 6,323
Income tax paid	$               0	$ 0	$ 0

The accompanying notes are an integral part of these financial statements

F-6

CAPITAL RESERVE CANADA LIMITED

Statement Of Changes In Stockholders’ Deficiency

For the Year Ended December 31, 2004

(Amounts expressed in United States Dollars)

	Class A Common Stock
	Shares	Amount	Accumulated deficit	Accumulated other comprehensive income (loss)	Total Shareholders’ Deficit
Balance at December 31, 2001	2,000,000	68	(646,101)	19,959	(626,074)
Net loss for the year	¾	¾	(21,429)	¾	(21,429)
Foreign currency translation	¾	¾	¾	(1,475)	(1,475)
Balance at December 31, 2002	2,000,000	68	(667,530)	18,484	(648,978)
Net earnings for the year	¾	¾	27,646	¾	27,646
Foreign currency translation	¾	¾	¾	(30,720)	(30,720)
Balance at December 31, 2003	2,000,000	68	(639,885)	(12,236)	(652,053)
Net loss for the year	¾	¾	(1,671)	¾	(1,671)
Foreign currency translation	¾	¾	¾	(9,223)	(9,223)
Balance December 31, 2004	2,000,000	68	(641,556)	(21,459)	(662,947)

The accompanying notes are an integral part of these financial statements

F-7

Capital Reserve Canada Limited

Notes to Financial Statements

December 31, 2004 and 2003

(Amounts expressed in United States Dollars)

Note 1- Summary of Significant Accounting Policies

This summary of significant accounting policies of Capital Reserve Canada Limited (the “Company”) is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.

Organization

The Company is an Alberta, Canada corporation formed December 8, 1999 to locate and acquire producing oil and gas assets in Canada. The Company was a wholly owned subsidiary of FACT Corporation, a publicly traded Colorado corporation, up until November 1, 2004, when FACT Corporation distributed  ownership of the Company to its existing shareholders and its debenture holder.

Operations

The Company presently has no ongoing operations having divested of its oil and gas leases as at December 1, 2004.  The Company is presently reviewing other acquisitions in the oil and gas industry.

Use of Estimates in the preparation of the financial statements

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

Depreciation

Depreciation has been provided in amounts sufficient to relate the costs of depreciable assets to operations over their estimated useful lives principally on the straight-line method from two to five years.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.

Currency

The functional currency of the Company is the Canadian dollar. Assets and liabilities in the accompanying financial statements are translated to United States dollars at current exchange rates and income statement accounts are translated at the average rates prevailing during the period. Related translation adjustments are reported as other comprehensive income, a component of stockholders’ equity.

Gain (Loss) Per Share

Gain (loss) per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding during the year.  Fully diluted earnings per share are not presented because they are anti-dilutive.

F-8

Note 1- Summary of Significant Accounting Policies (cont’d)

Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 107 (“SFAS 107”), Disclosure About Fair Value of Financial Instruments. SFAS 107 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Company’s cash and cash equivalents, accounts receivable, prepaid expenses and other current expenses, and the current portions of notes payable approximate their estimated fair values due to their short-term maturities.

Valuation of Long-Lived Assets

The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operating cash flows on a basis consistent with accounting principles generally accepted in the United States of America.

Income taxes

The Company is subject to Canadian income taxes.

Income taxes are accounted for under the asset and liability method.  Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

Revenue recognition

Revenues are recognized in accordance with SEC Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements."  Rental income from real estate properties is recognized on a monthly basis in accordance with lease provisions unless the Company determines that collection is unlikely. The Company recognizes oil and gas sales upon delivery to the purchaser using the sales method.  

Other

The company has selected December 31 as its year-end.

The Company paid no dividends in 2004 or 2003.

Reclassifications

Certain reclassifications have been made to previously reported statements to conform to the Company’s current financial statement format.

F-9

Note 2 – Basis of Presentation and Going Concern

Generally accepted accounting principles in the United States of America contemplates the continuation of the Company as a going concern.  However, the Company has reported a net liability position and has accumulated operation losses since its inception, which raises substantial doubt about the Company’s ability to continue as a going concern.  The continuation of the Company is dependent upon the continuing financial support of creditors and stockholders and upon obtaining the capital requirements for the continuing operations of the Company.  Management believes actions planned and presently being taken provide the opportunity for the Company to continue as a going concern.

Note 3 – Oil and Gas Activities

Acquisition of exploration leases in Montana and a producing property in Colorado:

On June 10, 2003, FACT Corporation, Terra Nostra Resources Ltd. and Capital Reserve Canada Limited entered into an agreement whereby Capital Reserve Canada Limited acquired a 4% working interest in petroleum and natural gas rights in Rosebud County Montana, U.S.A. (the “Montana leases”), and a 10% interest in certain oil and gas assets, known as the “Kejr leases”, S/2 Section 11, Township 2 South, Range 56 West, Washington County, Colorado,  in consideration of the amount of $10,000, which Capital Canada agreed to pay to the FACT Corporation.  There are two producing wells on the leases, the Kejr 23-11, and the Kejr 24-11.

The Kejr 23-11 came on production in December 1996 and the Kejr 24-11, which was a marginal well, was brought on production by the operator in June 1997.  A third well drilled on the Kejr leases, the Keela 34-10, was a dry hole and was shut in.  

The operation of the Kejr wells and the sale of the oil are managed by the operator, Merit Energy Company (“Merit”) and thus Capital Canada is dependent upon the expertise of Merit to deliver the output of these wells in the most beneficial manner possible. The operating agreement executed between Capital Canada and the operator, Merit, requires Merit to comply with any and all environmental and other governmental agency laws, regulations and permit requirements. Merit carries excess liability insurance with a limit of $5,000,000 at a cost of $180.00 per annum. Capital Canada’s portion of the liability insurance is $18.00 per annum which is included in the monthly billings for operating costs from the operator of the property. The lease operating costs are current.

Capital Canada was advised that the insurance costs would be $12,000 per annum for extra coverage over and above that carried by Merit as operator, but declined to effect such coverage as the costs were prohibitive.  Any losses or damages caused in the operation of this well that is not covered by operator’s insurance would be a liability for Capital Canada. Capital Canada believes that the liability insurance carried by the operator is sufficient to pay for any and all claims which may arise from the operation of the well or any breaches of environmental laws, save for any claims which may be due to operator negligence or fraud. Capital Canada could be named in any litigation brought against the operator by any party and may be found liable should the operator be unable to pay any awards from such litigation. In such event, Capital Canada could be unable to pay and may not be able to continue to exist. Ca pital Canada will also be liable for a pro-rata portion of expenses incurred in the event the wells are shut-in which are estimated to be 10% of $6,000 total costs.  Production from these wells was minimal in 2004 and therefore, the Company determined to divest itself of these leases, and all other undeveloped oil and gas leases.  On December 23, 2004 the Company executed an agreement with Ultimate Destinations Inc., whereby it agreed to transfer all of its oil and gas assets in exchange for indemnity from the purchaser against any and all future costs, claims or actions arising from the producing properties and exploration/development leases.  As a result of this transaction the Company has written down all capitalized leasehold and acquisition costs relating to each of its formerly owned oil and gas interests, recovered any outstanding reclamation liabilities and expensed any remaining depletion as at the date of the transaction for a net loss of $16,481.

F-10

Note 3 – Oil and Gas Activities (Cont’d)

Drilling  activities

During the spring of 2003 an eight mile geophysical seismic program was conducted on the Montana leases to define drilling locations.  The operator of the project identified a 6,400 foot drilling location and Capital Canada participated in the drilling of an exploration well in July, 2003.  Capital Canada’s total portion of drilling costs and associated costs was US$6,959. The well was a dry hole.

Capital Canada divested its interest in the Montana leases effective December 1, 2004.

For all oil and gas figures reported up to the time of divestiture in fiscal 2004, the Company elected to follow the full cost method of accounting for its oil & gas activities.  Accordingly, all costs associated with

the acquisition, exploration, and development of oil and gas reserves, including directly related overhead costs, are capitalized.

During the year ended December 31, 2003 Capital Canada expended a total of $6,959 for the drilling of an exploration well and associated costs with respect to the Montana leases discussed above.  These costs were capitalized during the fiscal year ended December 31, 2003.  Concurrent with the divestiture of the leases, however, this amount has been written down at the close of the current fiscal year. Additionally, the Company has expensed the future site allowance with respect to the Colorado leases, in accordance with SFAS 143, and their divestiture.

All capitalized costs of oil and gas properties, including estimated future costs to develop proved reserves, are depleted on the unit of production method using estimates of proved reserves.  Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs.  If the results of an assessment of unproved properties indicate that they are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

 In addition, the capitalized costs are subject to a “ceiling test”, which basically limits such costs to the aggregate of the “estimated present value” discounted at a 10 percent interest rate of future net revenues from proved reserves based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income.  Abandonment of properties are accounted for as adjustments of capitalized costs with no loss recognized.

Capitalized leasehold costs by geographic areas are as follows:

Area	December 31, 2004	December 31, 2003
Canada	$ —	$ —
United States	—	19,965

Note 4 – Loans Payable

Loans payable as at the year ended December 31, 2003 includes an amount of $1,087 bearing interest at a rate of 18% per annum with no specific terms of repayment.  This amount was retired in full during the current fiscal year ending December 31, 2004.

F-11

Note 5 – Due to FACT Corporation

Due to FACT Corporation consists of amounts advanced from the Company’s former parent, and are presently non-interest bearing.  During fiscal 2003, the Company’s former parent, FACT Corporation, a publicly traded Colorado corporation, determined to spin off to its shareholders its 100% interest in the Company. As a result a 20-F registration statement was filed with the SEC on  July 11, 2003.  During the final quarter of fiscal 2004, the spin-off became effective and the Company ceased to be a wholly owned subsidiary of FACT Corporation.  As of December 31, 2004 the Company is in debt to FACT Corporation in the net amount of $662,059, which amount, as at the date of this financial statement was under negotiation by the Boards of the Company and FACT Corporation as to repayment options.  Presently the amount is a demand loan with no specific terms of repayment.

Note 6 – Related Party Transactions

During the fiscal year ended December 31, 2004, the Company was charged fees totaling $223 and reimbursement of expenses totaling $1,923 by International Securities Group Ltd., a Company controlled by a W. Scott Lawler, a director of the Company, a total of $2,368 remained unpaid as at the year ended December 31, 2004. The Company was charged $3,539 in consulting and administrative fees during 2003 by International Securities Group Ltd.

During the fiscal year ended December 31, 2004, the Company advanced an amount of $6,559 to Wall Street Investments Ltd., a wholly owned subsidiary of FACT Corporation.

Note 7 – Commitments

The Company has entered into an office lease agreement to make minimum lease payments as follows:

2005 $ 37,552

The Company has subleased this property for the remaining term of the lease.  The lease will expire on October 31, 2005 and will not be renewed.

 Note 8 – Income Taxes

The Company is subject to Canadian income taxes.

Significant components of the Company’s net deferred income tax asset are as follows:

Undepreciated capital cost of capital assets over net book value	2,887
Non-capital loss carry forward	331,564
Cumulative Canadian oil and gas property expenses	736,627
Less: Valuation allowance	(1,071,078)
Net deferred income tax asset	—

As of December 31, 2004, the Company’s non-capital losses of approximately $332,000 and cumulative Canadian oil and gas property expenses of approximately $737,000 are carried forward for tax purposes and are available to reduce taxable income of future years. The non-capital losses expire in 2007 through 2010, the cumulative Canadian oil and gas property expenses can be forward indefinitely. No deferred income taxes have been recorded because of the uncertainty of future taxable income to offset. These carryforwards may not be available if there is a significant change in ownership of the company.

F-12

Note 8 – Income Taxes (cont’d)

The reconciliation of income tax (benefit) computed at the statutory rate to income tax expense (benefit) is as follows:

Tax (benefit) at federal statutory rate	(38.60)%
Valuation allowance	38.60
Tax provision (benefit)	0.00%

Note 9 – Segment reporting

The Company’s operations consist of one reportable segment which derives its revenue from the sale of oil, natural gas, and related products.   Effective as at December 1, 2004 the Company divested all of its oil and gas assets and presently has no operations.  

Note 10  – Recent Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." It requires existing unconsolidated variable interest entities (VIE's) to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the parties involved. It applies immediately to VIE's created after January 31, 2003 and to VIE's in which an enterprise holds a variable interest that was acquired before February 1, 2003, the Interpretation applies for periods beginning after June 15, 2003. In December 2003, the FASB reissued Interpretation No. 46 with certain modifications and clarifications for certain VIE's. The Company has no unconsolidated VIE's and therefore its financial statements are in compliance with the requirements of Interpretation No. 46.

In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", which amends and clarifies the accounting guidance on certain derivative instruments and hedging activities. SFAS 149 is generally effective for contracts entered into or modified after June 30, 2003 and hedging relationships designated after June 30, 2003. The adoption of this statement did not impact the Company's financial position, results of operations, or cash flows.

In May 2003, the FASB issued SFAS No.150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  SFAS 150 establishes standards for how an issuer of equity (including the equity shares of any entity whose financial statements are included in the consolidated financial statements) classifies and measures on its balance sheet certain financial instruments with characteristics of both liabilities and equity.  SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003 and for existing financial instruments after July 1, 2003.  The adoption of this statement did not impact the Company’s financial position, results of operations, or cash flows.

During 2004, the FASB issued SFAS No. 151, “Inventory Costs – an amendment of ARB No. 43, Chapter 4”, SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions – an amendment of FASB Statements No. 66 and 67”, SFAS No. 153, “Exchanges of Nonmonetary Assets – an amendment of APB Opinion No. 29”, and SFAS No.123 (revised 2004), “Share-based Payment”.  These statements are effective for periods after these financial statements.  We do not believe the impact of adoptions of these statements will be significant to our overall results of operations or financial position.

F-13

Note 11 – Subsequent Events

On July 1, 2005, the Company agreed  into a convertible loan with FACT Corporation in the principal amount of $662,059 convertible for a period of two years from July 1, 2005 at $0.05 per share.  We have agreed to accrue interest on the loan back to the initial date of the loan which was March 1, 2000 at the rate of Bank of America prime plus 1% compounded annually.  If not converted the note plus accrued interest will be due on June 30, 2007.  

The Company is presently reviewing the potential acquisition of an oil and gas services company.

F-14

Capital Reserve Canada Limited

Supplemental Information

December 31, 2004 and 2003

(Amounts expressed in United States Dollars)

Capitalized Costs Relating to Oil and Gas Producing Activities:
		Total		U.S.		Canada
At December 31, 2003
Evaluated oil and gas properties
Developments costs		—		—		—
Acquisition costs	$	—	$	—	$	—
Unevaluated oil and gas properties						—
Developments costs	$	6,959		6,959		—
Acquisition costs		13,067		13,067		—
Less accumulated depreciation, depletion,
amortization, and impairment reserves		(61)		(61)		—
Net capitalized costs	$	19,965	$	19,965	$	—
At December 31, 2004
Evaluated oil and gas propertie1s
Developments costs		—		—		—
Acquisition costs	$	—	$	—	$	—
Unevaluated oil and gas properties
Developments costs		—		—		—
Acquisition costs	$	—	$	—	$	—
Less accumulated depreciation, depletion,
amortization, and impairment reserves		—		—		—
Net capitalized costs	$	—	$	—	$	—
Costs Incurred in Oil and Gas Producing Activities -
		Total		U.S.		Canada
For the Year Ended December 31, 2003:
Exploration costs -
Undeveloped oil and gas properties		6,959		6,959		—
Development costs		—		—		—
Amortization rate per equivalent barrel of production	$	1.49
For the Year Ended December 31, 2004:
Exploration costs -
Undeveloped oil and gas properties		—		—		—
Development costs		—		—		—
Amortization rate per equivalent barrel of production	$	—

F-15

Results of Operations for Oil and Gas Producing Activities -
		Total		U.S.		Canada
For the Year Ended December 31, 2003:
Oil and gas sales, net of royalties	$	30,583	$	2,847	$	27,736
Production costs		(18,147)		(2,465)		(15,682)
Depreciation, depletion, and amortization		(4,566)		(61)		(4,505)
						7,549
Income tax expense		—		—		—
Results of operations for oil and gas producing       activities (excluding corporate overhead and       financing costs)	$	7,870	$	321	$	7,549
For the Year Ended December 31, 2004:
Oil and gas sales, net of royalties	$	2,089	$	2,089	$	—
Production costs		(975)		(975)		—
Depreciation, depletion, and amortization		—		—		—
						—
Income tax expense		—		—		—
Results of operations for oil and gas producing       activities (excluding corporate overhead and       financing costs)	$	1,114	$	1,114	$	—

Reserve Information:

The Company has no reserves concurrent with the divestiture of all oil and gas operations effective December 1, 2004.  The following estimates of proved developed reserve quantities and related standardized measure of discounted cash flow are estimates only, and do not purport to reflect realizable values or fair market values of the company’s reserves.  The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, estimates are expected to change as future information becomes available.

Proved reserves are estimated reserves of crude oil (including condensate and natural gas liquids) and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those expected to be recovered through existing wells, equipment, and operating methods.

The standardized measure of discounted future net cash flows is computed by applying year-end prices of oil and gas (Edmonton Light Sweet for oil and Edmonton spot for gas, without consideration for price changes since the Company has no long-term contractual arrangements) to the estimated future production of proved oil and gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expenses (based on year-end statutory tax rates, with consideration of future tax rates already legislated) to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of  existing economic conditions.  The estimated future net cash flows are then discounted using a rate of 10 percent a year to reflect the estimated timing of the future cash flows.

F-16

	December 31, 2004		December 31, 2003
	Oil (Bbls)	Gas (Mcf)	Oil (Bbls)	Gas (Mcf)
Proved developed and undeveloped reserves -
Beginning of year	3,270	—	8,243	63,000
Revisions of previous estimates	—	—	—	—
Purchase of minerals in place	—	—	3,351	—
Production	131	—	423	3,578
Sale of US pool	(3,139)	—	—	—
Sale of Canadian pool	—	—	7,901	59,422
End of year	—	—	3,270	—
Proved developed reserves -
Beginning of year	3,270	—	8,243	63,000
End of year	—	—	3,270	—

Standardized Measure of Discounted Future Net Cash Flows:

Net Cash Flows at December 31, 2004 and 2003 -
		2004		2003
Net cash inflows	$	—	$	10,249
Future production costs		—		(5,125)
Future development costs		—		—
Future income tax expense		—		—
Future net cash flows		—		5,124
10% annual discount for estimated timing of cash flows		—		(762)
Standardized measure of discounted future net		—
Cash flows relating to proved oil and gas reserves	$	—	$	4,362

The following reconciles the change in the standardized measure of discounted future net cash flow:

Net Cash Flows at December 31, 2004 and 2003 -
		2004		2003
Beginning of year	$	4,362	$	82,000
Sales of oil and gas produced, net of production costs		(1,114)		(12,435)
Sale of Canadian pool		—		(69,946)
Sale of US pool		(3,248)		—
Purchase of minerals in place		—		3,981
Net change in prices and production costs		—		—
Development costs incurred during the year which were   previously estimated		—		—
Revisions of previous quantity estimates		—		—
Accretion of discount		—		—
Net change in income taxes		—		—
Other		—		762
End of year	$	—	$	4,362

F-17

EX-12

RULE 13A-14(A)/15D-14(A) CERTIFICATION

I, James Baker, certify that:

(1) I have reviewed this Annual Report Amendment No.2 of Capital Reserve Canada Ltd.  (the “Registrant”).

(2) Based on my knowledge, this amended annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this amended annual report.

(3) Based on my knowledge, the financial statements, and other financial information included in this amended annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this amended annual report.

(4) The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”), Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this amended report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this amended report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this amended report based on such evaluation; and

(d) Disclosed in this amended report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

(5) The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(d) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date:  January 31, 2006

By:  /s/ James Baker

Name: James Baker

Title:   Principal Executive Officer

EX-12

RULE 13A-14(A)/15D-14(A) CERTIFICATION

I, Jacqueline Danforth, certify that:

(1) I have reviewed this Annual Report Amendment No.2 of Capital Reserve Canada Ltd.  (the “Registrant”).

(2) Based on my knowledge, this amended annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this amended annual report.

(3) Based on my knowledge, the financial statements, and other financial information included in this amended annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this amended annual report.

(4) The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”), Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this amended report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this amended report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this amended report based on such evaluation; and

(d) Disclosed in this amended report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

(5) The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(d) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date:  January 31, 2006

By: /s/ Jacqueline Danforth

Name: Jacqueline Danforth

Title:   Principal Accounting Officer

EX-13

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002

In connection with the Annual Report Amendment No. 2 of Capital Reserve Canada Ltd. (the "Company") on Form 20-F for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James Baker, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ James Baker

Name: James Baker

Title:

Principal Executive Officer

Date:

January 31, 2006

EX-13

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002

In connection with the Annual Report Amendment No. 2 of Capital Reserve Canada Ltd. (the "Company") on Form 20-F for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jacqueline Danforth , Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ Jacqueline Danforth

Name: Jacqueline Danforth

Title:

Principal Accounting Officer

Date:

January 31, 2006

CORRESP

CAPITAL RESERVE CANADA LIMITED

1530 9^th Avenue, S.E.

Calgary, Alberta T2G 0T7

Tel: 403-693-8000 / 403-272-3620

January 31, 2006

Securities and Exchange Commission

Division of Corporate Finance

100 F Street, N.E.

Washington, D.C. 20549-7010

Attention:  April Sifford – Branch Chief

By Facsimile and Electronic Filing

RE:  

Capital Reserve Canada Ltd.

Form 20-F for the Fiscal Year Ended December 31, 2004

Filed July 29, 2005

Form 20-F/A for the Fiscal Year Ended December 31, 2004

Filed October 3, 2005

File No. 0-50339

Dear Ms. Sifford:

In response to your letter of December 16, 2005, we provide the following written response.

Form 20-F for the Fiscal Year ended December 31, 2004

Controls and Procedures, page 22

Comment:

1.  

We note you have reported there have been no changes in your internal controls.  The requirements of Item 15(d) of Formo 20-F require that you address any change in the internal controls over financial reporting that have occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, your internal controls over financial reporting.  Please revise your statement to address this requirement in an amended filing.

Response:

1.

We have revised the statement accordingly in Amendment No. 2 to the Form 20-F for the fiscal year ended December 31, 2004.

Report of Independent Registered Public Accounting Firm, page F-2

Comment

2.

We note that The Report of Independent Auditors’ references to another auditor’s report.  Please amend your filing to provide the separate report of the other auditor.

Response:

2.

We have amended our filing accordingly to include the separate report of the other auditor.

Statements of Operations, page F-4

Comment:

3.  

Your Statements of Operations and your Statements of Cash Flows on page F-5 should include the results for the last three years, as required by Item 18 of Form 20-F.  Please provide these statements in an amended filing.

Response:

3.

The statements noted have been revised accordingly in our amended filing.

Closing:

The Company hereby acknowledges that:

-

the company is responsible for the adequacy and accuracy of the disclosure in the filing;

-

staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

-

the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Sincerely,

/s/ Jacqueline Danforth

Jacqueline Danforth

Chief Financial Officer

cc:  Gary Newberry