UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM
20-F



|                                                  |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|-------------------------------------------------- |  | ----------------------------------------------------------------------------------------------
|OR                                                
|x                                                  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|For
        fiscal year ended December 31, 2014   
|OR                                                
|                                                  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|For the transition period from ____ to ______     
|OR                                                
|                                                  |  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   
|Date of event requiring this shell company report:



Commission
file number: 0-18860







CANARC RESOURCE CORP.

(Exact name of Registrant as specified
in its charter)









Province
of British Columbia, Canada

(Jurisdiction of incorporation
or organization)



Suite
#301 - 700 West Pender Street, Vancouver, British Columbia, Canada, V6C 1G8



(Address of principal executive
offices)



Philip Yee, Chief Financial
Officer, Phone: (604) 685-9700, Fax: (604) 685-9744, e-mail: philip@canarc.net

Canarc
Resource Corp., Suite #301 - 700 West Pender Street, Vancouver, British Columbia, Canada, V6C 1G8



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








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



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



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








Indicate
the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of the close of the period
covered by the annual report: 157,436,305 common shares as at December 31, 2014



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No
þ









If
this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes  No þ



Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes þ
No 



Indicate
by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
Yes 
No þ



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



Large
accelerated filer  Accelerated filer  Non-accelerated filer þ



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



U.S. GAAP 
International
Financial Reporting Standards as issued Other 

by the International Accounting
Standards Board þ



If
“Other” has been checked in response to the previous question, indicate by check mark which financial statement item
the Registrant has elected to follow: Item 17  Item 18 



If
this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes  No þ















TABLE OF CONTENTS





|PART I                                                            | 9 
|----------------------------------------------------------------- | --
|ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 9 
|ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE               | 9 
|ITEM 3.     KEY INFORMATION                                       | 9 
|3.A      Selected Financial Data                                  | 9 
|3.B     Capitalization and Indebtedness                           | 12
|3.C     Reasons for the Offer and Use of Proceeds                 | 12
|3.D      Risk Factors                                             | 12
|ITEM 4.     INFORMATION ON THE COMPANY                            | 23
|4.A     History and Development of the Company                    | 23
|4.B     Business Overview                                         | 31
|4.C      Organizational Structure                                 | 33
|4.D     Property, Plants and Equipment                            | 34
|ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS          | 49
|5.A     Operating Results                                         | 49
|5.B     Liquidity and Capital Resources                           | 57
|5.C     Research and Development, Patents and Licenses, etc.      | 60
|5.D     Trend Information                                         | 60
|5.E     Off-Balance Sheet Arrangements                            | 61
|5.F     Tabular Disclosure of Contractual Obligations             | 62
|5.G     Safe Harbor                                               | 63
|ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            | 64







|6.A     Directors and Senior Management                         | 64 
|--------------------------------------------------------------- | ---
|6.B     Compensation                                            | 66 
|6.C     Board Practices                                         | 75 
|6.D     Employees                                               | 81 
|6.E     Share Ownership                                         | 81 
|ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS   | 86 
|7.A     Major Shareholders                                      | 86 
|7.B     Related Party Transactions                              | 88 
|7.C     Interests of Experts and Counsel                        | 91 
|ITEM 8.     FINANCIAL INFORMATION                               | 91 
|8.A     Consolidated Statements and Other Financial Information | 91 
|8.B     Significant Changes                                     | 94 
|ITEM 9.     THE OFFER AND LISTING                               | 94 
|9.A     Offer and Listing Details                               | 94 
|9.B     Plan of Distribution                                    | 96 
|9.C     Markets                                                 | 97 
|9.D     Selling Shareholders                                    | 97 
|9.E     Dilution                                                | 97 
|9.F     Expenses of the Issue                                   | 97 
|ITEM 10.     ADDITIONAL INFORMATION                             | 97 
|10.A     Share Capital                                          | 98 
|10.B     Notice of Articles and Articles of Association         | 98 
|10.C     Material Contracts                                     | 106
|10.D     Exchange Controls                                      | 107
|10.E     Taxation                                               | 109
|10.F     Dividends and Paying Agents                            | 116







|10.G     Statement by Experts                                                                            | 116
|-------------------------------------------------------------------------------------------------------- | ---
|10.H     Documents on Display                                                                            | 116
|10.I     Subsidiary Information                                                                          | 116
|ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                  | 117
|ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                                      | 121
|PART II                                                                                                  | 122
|ITEM 13.     DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                             | 122
|ITEM 14.     MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS                | 122
|ITEM 15.     CONTROLS AND PROCEDURES                                                                     | 122
|ITEM 16.     AUDIT COMMITTEE FINANCIAL EXPERT, CODE OF ETHICS AND PRINCIPAL ACCOUNTANT FEES AND SERVICES | 125
|16.A     Audit Committee Financial Expert                                                                | 125
|16.B     Code of Ethics                                                                                  | 126
|16.C     Principal Accountant Fees and Services                                                          | 127
|16.D     Exemptions from the Listing Standards for Audit Committees                                      | 127
|16.E     Purchases of Equity Securities by the Registrant and Affiliated Purchasers                      | 127
|16.F     Change in Registrant's Certifying Accountant                                                    | 128
|16.G     Corporate Governance                                                                            | 128
|16.H     Mine Safety Disclosure                                                                          | 128
|PART III                                                                                                 | 129
|ITEM 17.     FINANCIAL STATEMENTS                                                                        | 129
|ITEM 18.     FINANCIAL STATEMENTS                                                                        | 129
|ITEM 19.     EXHIBITS                                                                                    | 130





















CAUTION – FORWARD-LOOKING
STATEMENTS



This annual report on Form 20-F
and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward looking statements concern the Registrant’s anticipated results and developments
in the Registrant’s operations in future periods, planned exploration and development of its mineral property interests,
plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information
that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.



Any statements that express or
involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events
or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is
expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or
“intends”, or stating that certain actions, events or results “may”, “could”, “would”,
“might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking
statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which
could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without
limitation:



| | · | risks related to our exploration and development activities;
| | - | ------------------------------------------------------------

| | · | risks related to the financing needs of our planned operations;
| | - | ---------------------------------------------------------------

| | · | risks related to estimates of mineral deposits, resources and reserves;
| | - | -----------------------------------------------------------------------

| | · | risks related to fluctuations in mineral prices;
| | - | ------------------------------------------------

| | · | risks related to the titles of our mineral property interests;
| | - | --------------------------------------------------------------

| | · | risks related to competition in the mineral exploration and mining industry;
| | - | ----------------------------------------------------------------------------

| | · | risks related to potential conflicts of interest with our officers and directors;
| | - | ---------------------------------------------------------------------------------

| | · | risks related to environmental and regulatory requirements;
| | - | -----------------------------------------------------------

| | · | risks related to foreign currency fluctuations;
| | - | -----------------------------------------------

| | · | risks related to our possible status as a passive foreign investment company;
| | - | -----------------------------------------------------------------------------

| | · | risks related to the volatility of our common stock; and
| | - | --------------------------------------------------------

| | · | risks related to the possible dilution of our common stock.
| | - | -----------------------------------------------------------





1Canarc Resource Corp.Form 20-F





This list is not exhaustive of
the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking
statements are described further under the sections titled “Risk Factors” and “Information on the Company”
of this annual report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently
to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events other than as may be specifically required by applicable securities laws and
regulations.



We qualify all the forward-looking
statements contained in this annual report by the foregoing cautionary statements.







Unless the context otherwise
requires, all references to “we” or “our” or the “Registrant” or the “Company”
or “Canarc” refer to Canarc Resource Corp. and/or its subsidiaries. All monetary figures are in terms of United States
dollars unless otherwise indicated.



2Canarc Resource Corp.Form 20-F







GLOSSARY OF MINING TERMS





The following is a glossary of
some of the terms used in the mining industry and referenced herein:



|1933 Act - means the United States Securities Act of 1933, as amended.                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|adit – a horizontal tunnel in an underground mine driven from a hillside surface.                                                                                                                                          
|Ag – silver.                                                                                                                                                                                                               
|alluvial mining - mining of gold bearing stream gravels using gravity methods to recover the gold, also known as placer mining.                                                                                            
|andesite - a volcanic rock of intermediate composition, the extrusive equivalent of diorite.                                                                                                                               
|arsenopyrite – an ore mineral of arsenic, iron, and sulphur, often containing gold.                                                                                                                                        
|assay – a precise and accurate analysis of the metal contents in an ore or rock sample.                                                                                                                                    
|Au - gold.                                                                                                                                                                                                                 
|auger drill – a handheld machine that produces small, continuous core samples in unconsolidated materials.                                                                                                                 
|autoclave – a mineral processing vessel operated at high temperature and pressure in order to oxidize sulfide and carbon compounds, so the contained metals can be leached and concentrated.                               
|Banka drilling - a hand operated drill specifically designed for sampling alluvial deposits. The drill rods (10-12 centimetres in diameter) are forced into the gravel and then the core sample is extracted from the rods.
|Commission- United States Securities and Exchange Commission, or S.E.C.                                                                                                                                                    
|concentrate – a concentrate of minerals produced by crushing, grinding and processing methods such as gravity or flotation.                                                                                                
|contained gold – total measurable gold in grams or ounces estimated to be contained within a mineral deposit.  Makes no allowance for economic criteria, mining dilution or recovery losses.                               
|Cu– copper.                                                                                                                                                                                                                
|cut-off grade –deemed grade of mineralization, established by reference to economic factors, above which material is considered ore and below which is considered waste.                                                   
|diamond drill – a large machine that produces a continuous core sample of the rock or material being drilled.                                                                                                              
|diorite – a plutonic rock of intermediate composition, the intrusive equivalent of andesite.                                                                                                                               

3Canarc Resource Corp.Form 20-F







|dorė– bullion of gold, with minor silver and copper produced by smelting, prior to refining.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|epithermal – used to describe hydrothermal mineral deposits, typically in veins, formed at lower temperatures and pressures within 1 km of the earth surface.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Exchange Act – means the United States Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|feasibility study – a detailed report assessing the feasibility, economics and engineering of placing a mineral deposit into commercial production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|flotation – a mineral recovery process using soapy compounds to float finely ground metallic minerals into a concentrate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|garimpeiros – a Brazilian term used in South America referring to small scale, artisanal miners and prospectors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|gold deposit - means a mineral deposit mineralised with gold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|gold equivalent - a method of presenting combined gold and silver concentrations or weights for comparison purposes. Commonly involves expressing silver as its proportionate value in gold based on the relative values of the two metals.                                                                                                                                                                                                                                                                                                                                                                                                                         
|gold resource – see mineral resource.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|gpt- grams per tonne.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|grams per cubic meter - alluvial mineralisation measured by grams of gold contained per cubic meter of material, a measure of gold content by volume not by weight.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|greenstone - a field term for any compact dark-green altered or metamorphosed basic igneous rock that owes its colour to green minerals such as chlorite, actinolite or epidote.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|indicated resource -means that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
|inferred resource -means that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.                                                                                                                                                                                                                                  
|laterite- highly weathered residual superficial soils and decomposed rocks, rich in iron and aluminum oxides, that are characteristically developed in tropical climates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|lode mining – mining of ore, typically in the form of veins or stockworks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

4Canarc Resource Corp.Form 20-F







|measured
    resource -means that part of a mineral resource for which quantity, grade or quality, densities, shape, physical
    characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate
    application of technical and economic parameters, to support production planning and evaluation of the economic viability of
    the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through
    appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely
    enough to confirm both geological and grade continuity.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|mesothermal – used to describe hydrothermal mineral deposits, typically in veins, formed at higher temperatures and pressures deeper than 1 km of the earth’s surface.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|mineral reservemeans the economically mineable part of a measured or indicated resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined.                                                                                                                                                                                                                               
|mineral resource – a body of mineralized material which has not yet been determined to be ore, and the potential for mining of which has not yet been determined;  categorized as possible, probable and proven, according to the degree of certainty with which their grade and tonnage are known;  sometimes referred to as a “geological resource” or “mineral inventory”.                                                                                                                                                                                                                                                                                                                                    
|net profits interest or NPI – a royalty based on the net profits generated after recovery of all costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|net smelter royalty or NSR - a royalty based on the gross proceeds received from the sale of minerals less the cost of smelting, refining, freight and other related costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|nugget effect – an effect of high variability of gold assays, due to the gold occurring in discreet coarse grains such that their content in any given sample is highly variable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|ore – a naturally occurring rock or material from which economic minerals can be extracted at a profit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|ounce or oz. - a troy ounce or 20 pennyweights or 480 grains or 31.103 grams.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|opt– troy ounces per ton.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|porknockers- a local term used in Guyana and Suriname to refer to small scale artisanal miners and prospectors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|porphyry – an igneous rock containing coarser crystals in a finer matrix.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|probable reserve- the economically mineable part of an indicated, and in some circumstances a measured resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.                                                                                                                                                                                                                                                                                                                         
|professional association,for the purposes of the definition of a Qualified Person below, means a self-regulatory organization of engineers, geoscientists or both engineers and geoscientists that (a) has been given authority or recognition by statute; (b) admits members primarily on the basis of their academic qualifications and experience; (c) requires compliance with the professional standards of competence and ethics established by the organization; and (d) has disciplinary powers, including the power to suspend or expel a member.                                                                                                                                                       
|prospect – an area prospective for economic minerals based on geological, geophysical, geochemical and other criteria                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

5Canarc Resource Corp.Form 20-F







|proven reservemeans the economically mineable part of a measured resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.                                                            
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|pyrite – an ore mineral of iron and sulphur.                                                                                                                                                                                                                                                                                                                                                              
|Qualified Personmeans an individual who (a) is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these; (b) has experience relevant to the subject matter of the mineral project and the technical report; and (c) is a member in good standing of a professional association.
|quartz – a rock-forming mineral of silica and oxygen, often found in veins also.                                                                                                                                                                                                                                                                                                                          
|raise – a vertical or inclined tunnel in an underground mine driven upwards from below.                                                                                                                                                                                                                                                                                                                   
|ramp – an inclined tunnel in an underground mine driven downwards from surface.                                                                                                                                                                                                                                                                                                                           
|reverse circulation drill– a large machine that produces a continuous chip sample of the rock or material being drilled.                                                                                                                                                                                                                                                                                  
|saprolite- a soft, earthy, clay rich and thoroughly decomposed rock with its original textures intact, formed in place by chemical weathering of igneous, sedimentary or metamorphic rocks.                                                                                                                                                                                                               
|scoping study– a conceptual report assessing the scope, economics and engineering of placing a mineral deposit into commercial production.                                                                                                                                                                                                                                                                
|shaft – a vertical or inclined tunnel in an underground mine driven downward from surface.                                                                                                                                                                                                                                                                                                                
|shear – a tabular zone of faulting within which the rocks are crushed and flattened.                                                                                                                                                                                                                                                                                                                      
|stibnite – an ore mineral of antimony and sulphur.                                                                                                                                                                                                                                                                                                                                                        
|stock or pluton – a body of intrusive rock that covers less than 40 square miles, has steep dips and is discordant with surrounding rock.                                                                                                                                                                                                                                                                 
|stockwork– multiple small veins of mineralisation that have so penetrated a rock mass that the whole rock mass can be considered mineralised.                                                                                                                                                                                                                                                             
|strike length - the longest horizontal dimensions of a body or zone of mineralisation.                                                                                                                                                                                                                                                                                                                    
|stripping ratio - the ratio of waste material to ore that is estimated for or experienced in mining an ore body.                                                                                                                                                                                                                                                                                          
|sulphide – an ore mineral compound linking sulphur with one or more metals.                                                                                                                                                                                                                                                                                                                               
|ton- short ton (2,000 pounds).                                                                                                                                                                                                                                                                                                                                                                            
|tonne- metric tonne (2,204.6 pounds).                                                                                                                                                                                                                                                                                                                                                                     
|trenching – the surface excavation of a linear trench to expose mineralization for sampling.                                                                                                                                                                                                                                                                                                              
|vein – a tabular body of rock typically of narrow thickness and often mineralized occupying a fault, shear, fissure or fracture crosscutting another pre-existing rock.                                                                                                                                                                                                                                   

6Canarc Resource Corp.Form 20-F







|winze – an internal shaft in an underground mine.
|-------------------------------------------------





For ease of reference, the following conversion
factors are provided:



|1 mile | = 1.609 kilometres | 1 pound                  | = 0.4535 kilogram
|------ | ------------------ | ------------------------ | -----------------
|1 yard | = 0.9144 meter     | 2,000 pounds/1 short ton | = 0.907 tonne    
|1 acre | = 0.405 hectare    | 1 troy ounce             | = 31.103 grams   









7Canarc Resource Corp.Form 20-F











CAUTIONARY NOTE TO U.S. INVESTORS





This annual report on Form 20-F
has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements
of United States securities laws. The terms “mineral reserve”, “proven mineral reserve” and “probable
mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards
of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the
“CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as
amended. These definitions differ from the definitions in the United States Securities and Exchange Commission (“SEC”)
Industry Guide 7 (“SEC Industry Guide 7”) under the United States Securities Act of 1933, as amended. Under
SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves,
the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental
analysis or report must be filed with the appropriate governmental authority.



In addition, the terms “mineral
resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral
resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC
Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors
are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.
“Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility
studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists
or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under
Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves”
by SEC standards as in place tonnage and grade without reference to unit measures.



Accordingly, information contained
in this report and the documents incorporated by reference herein containing descriptions of our mineral deposits may not be comparable
to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States
federal securities laws and the rules and regulations thereunder.



8Canarc Resource Corp.Form 20-F









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





3.A Selected Financial Data





The following financial information
(stated in United States dollars) with respect to the last five fiscal years ended December 31, 2014, 2013, 2012, 2011 and 2010
have been derived from Canarc’s audited consolidated financial statements which are prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
All dollar amounts
are expressed in United States dollars unless otherwise indicated. The consolidated financial statements as of December 31, 2014
and 2013 and for the years ended December 31, 2014, 2013 and 2012 are set out and included in Item 18 of this annual report on
Form 20-F.





9Canarc Resource Corp.Form 20-F









|                                                                |                                           | IFRS                                               
|--------------------------------------------------------------- | ----------------------------------------- | ---------------------------------------------------
|Selected Financial Information                                  | As at and for the years ended December 31
|(stated in thousands of U.S. dollars, except per share amounts) | 2014                                      | 2013                                               
|                                                                |                                           |                                                    
|(a)                                                             | Total revenues (1)                        | $              -                                   
|                                                                |                                           |                                                    
|(b)                                                             | Other incomes (2)                         | $              -                                   
|                                                                |                                           |                                                    
|(c)                                                             | Income (loss) before extraordinary items: |                                                    
|                                                                | (i)  Total                                | $     (1,831)                                      
|                                                                | (ii)  Basic earnings (loss) per share     | $       (0.01)                                     
|                                                                |                                           |                                                    
|(d)                                                             | Net income (loss):                        |                                                    
|                                                                | (i)  Total                                | $     (1,831)                                      
|                                                                | (ii)  Basic earnings (loss) per share     | $       (0.01)                                     
|                                                                | (iii)  Diluted earnings (loss) per share: | $       (0.01)                                     
|                                                                |                                           |                                                    
|(e)                                                             | Total assets                              | $     12,564                                       
|                                                                |                                           |                                                    
|(f)                                                             | Total long-term debt (3)                  | $            -                                     
|                                                                |                                           |                                                    
|(g)                                                             | Shareholders' equity (net assets)         | $     11,650                                       
|                                                                |                                           |                                                    
|(h)                                                             | Dividends per share                       | No cash dividends declared in any of these periods.
|                                                                |                                           |                                                    
|(i)                                                             | Shares:                                   |                                                    
|                                                                | Diluted number of common shares           | 207,901,803                                        
|                                                                | Number of common shares                   | 157,436,305                                        
|                                                                |                                           |                                                    





| | (1) | Canarc has no sources of operating revenues.
| | --- | --------------------------------------------



| | (2) | Other income includes gains from the disposition of marketable securities and investment and other
income.
| | --- | ----------------------------------------------------------------------------------------------------------



| | (3) | Canarc has no preferred shares.
| | --- | -------------------------------





The Company is involved with mineral
exploration and does not have any sources of operating revenues.

10Canarc Resource Corp.Form 20-F







On April 22, 2015, the Bank of
Canada closing rate for the conversion of one United States dollar into Canadian dollars was CAD$1.2228.



The following table reflects the
monthly high and low exchange rates for U.S.$1.00 to the Canadian dollar for the following periods:





|Month    | Year | High  (CAD$) | Low  (CAD$)
|-------- | ---- | ------------ | -----------
|October  | 2014 | 1.1385       | 1.1090     
|November | 2014 | 1.1452       | 1.1191     
|December | 2014 | 1.1672       | 1.1314     
|January  | 2015 | 1.2800       | 1.1679     
|February | 2015 | 1.2697       | 1.2353     
|March    | 2015 | 1.2835       | 1.2407     



The following table lists the
high, low, average and closing exchange rates for U.S.$1.00 to the Canadian dollar for the last five years:



|Year | High (CAD$) | Low (CAD$) | Average Rate (CAD$) | Close (CAD$)
|---- | ----------- | ---------- | ------------------- | ------------
|     |             |            |                     |             
|2010 | 1.0848      | 0.9931     | 1.0299              | 0.9946      
|2011 | 1.0658      | 0.9407     | 0.9891              | 1.0170      
|2012 | 1.0443      | 0.9642     | 0.9996              | 0.9949      
|2013 | 1.0704      | 0.9838     | 1.0298              | 1.0617      
|2014 | 1.1672      | 1.0589     | 1.1045              | 1.1601      





11Canarc Resource Corp.Form 20-F





3.B Capitalization and Indebtedness



Not applicable.





3.C Reasons for the Offer and Use of Proceeds



Not applicable.





3.D Risk Factors



The following is a brief discussion
of those distinctive or special characteristics of the Registrant’s operations and industry that may have a material impact
on, or constitute risk factors in respect of, the Registrant’s future financial performance.





Risks Related to the Registrant’s
Business





The Registrant’s exploration
activities may not be commercially successful, which could lead it to abandon its plans to develop its mineral property interests
and its investments in exploration and there is no assurance given by the Registrant that its exploration and development programs
and mineral property interests will result in the discovery, development or production of a commercially viable ore body.



The business of exploration for
minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines.
There is no assurance that the Registrant’s mineral exploration and development activities will result in any discoveries
of bodies of commercial ore. Unusual or unexpected geological structures or formations, fires, power outages, labour disruptions,
floods, explosions, cave-ins, land slides and the inability to obtain suitable or adequate machinery, equipment or labour are
other risks involved in the operation of mines and the conduct of exploration programs. The Registrant has relied and may continue
to rely upon consultants and others for construction and operating expertise. The economics of developing gold and other mineral
properties are affected by many factors including capital and operating costs, variations of the grade of ore mined, fluctuating
mineral markets, costs of processing equipment and such other factors as government regulations, including regulations relating to royalties,
allowable production, importing and exporting of minerals and environmental protection. Depending on the price of gold or other
minerals produced, the Registrant may determine that it is impractical to commence or continue commercial production. Substantial
expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract metal from ore,
and to develop the mining and processing facilities and infrastructure at any site chosen for mining. No assurance can be given
that funds required for development can be obtained on a timely basis. The marketability of any minerals acquired or discovered
may be affected by numerous factors which are beyond the Registrant’s control and which cannot be accurately foreseen or
predicted, such as market fluctuations, the global marketing conditions for precious and base metals, the proximity and capacity
of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations
relating to royalties, allowable production, importing and exporting minerals and environmental protection. In order to commence
exploitation of certain properties presently held under exploration concessions, it is necessary for the Registrant to apply for
an exploitation concession. There can be no guarantee that such a concession will be granted.

12Canarc Resource Corp.Form 20-F











The Registrant’s planned
operations will require future financing and there is no assurance given by the Registrant that it will be able to secure the financing
necessary to explore, develop and produce its mineral property interests.



The Registrant does not presently
have sufficient financial resources or operating cash flows to undertake by itself all of its planned exploration and development
programs. The development of the Registrant’s mineral property interests may therefore depend on the Registrant’s joint
venture partners, if any, and on the Registrant’s ability to obtain additional required financing. There is no assurance
the Registrant will be successful in obtaining the required financing, the lack of which could result in the loss or substantial
dilution of its interests (as existing or as proposed to be acquired) in its mineral property interests as disclosed herein. In
addition, the Registrant does not have sufficient experience in developing mining properties into production and its ability to
do so will be dependent upon securing the services of appropriately experienced personnel or entering into agreements with other
major mining companies which can provide such expertise.



As noted in its audited consolidated
financial statements for the year ended December 31, 2014, the Registrant has no operating revenues, has incurred significant operating
losses and has an accumulated deficit of approximately $50.3 million at December 31, 2014. Furthermore, the Registrant has a working
capital deficiency of approximately $156,000 as at December 31, 2014, and lack sufficient funds to achieve the Registrant’s
planned business objectives. The Registrant’s ability to continue as a going concern is dependent on continued financial
support from its shareholders and other related parties, the ability of the Registrant to raise equity financing, and the attainment
of profitable operations, external financings and further share issuances to meet the Registrant’s liabilities as they become
payable.



The report of our independent
registered public accounting firm on the December 31, 2014 consolidated financial statements includes an additional paragraph that
states the existence of material uncertainties that cast substantial doubt about the Registrant’s ability to continue as
a going concern. The consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.

13Canarc Resource Corp.Form 20-F









The figures for the Registrant’s
resources are estimates based on interpretation and assumptions and may yield less mineral production under actual conditions than
is currently estimated and there is no assurance given by the Registrant that any estimates of mineral deposits herein will not
change.



Although all figures with respect
to the size and grade of mineralized deposits included herein have been carefully prepared by the Registrant, or, in some instances
have been prepared, reviewed or verified by independent mining experts, these amounts are estimates only and no assurance can be
given that any identified mineralized deposit will ever qualify as a commercially viable mineable ore body that can be legally
and economically exploited. Estimates regarding mineralized deposits can also be affected by many factors such as permitting regulations
and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations
and work interruptions. In addition, the grade of ore ultimately mined may differ from that indicated by drilling results. There
can be no assurance that gold recovered in small-scale laboratory tests will be duplicated in large-scale tests under on-site
conditions. Material changes in mineralized tonnages, grades, stripping ratios or recovery rates may affect the economic viability
of projects. The existence of mineralized deposits should not be interpreted as assurances of the future delineation of ore reserves
or the profitability of future operations. The refractory nature of gold mineralization at New Polaris project may adversely affect
the economic recovery of gold from mining operations.





Changes in the market price
of gold, silver and other metals, which in the past have fluctuated widely, will affect the profitability of the Registrant’s
planned operations and financial condition and there is no assurance given by the Registrant that mineral prices will not change.



The mining industry is competitive
and mineral prices fluctuate so that there is no assurance, even if commercial quantities of a mineral resource are discovered,
that a profitable market will exist for the sale of same. Factors beyond the control of the Registrant may affect the marketability
of any substances discovered. The prices of precious and base metals fluctuate on a daily basis, have experienced volatile and
significant price movements over short periods of time, and are affected by numerous factors beyond the control of the Registrant,
including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically,
the U.S. dollar relative to other currencies), interest rates, central bank transactions, world supply for precious and base metals,
international investments, monetary systems, and global or regional consumption patterns (such as the development of gold coin
programs), speculative activities and increased production due to improved mining and production methods. The supply of and demand
for gold are affected by various factors, including political events, economic conditions and production costs in major gold producing
regions, and governmental policies with respect to gold holdings by a nation or its citizens. The exact effect of these factors
cannot be accurately predicted, and the combination of these factors may result in the Registrant not receiving adequate returns
on invested capital or the investments retaining their respective values. There is no assurance that the prices of gold and other
precious and base metals will be such that the Registrant’s properties can be mined at a profit.

14Canarc Resource Corp.Form 20-F









There is no assurance given
by the Registrant that it owns legal title to its mineral property interests.



The acquisition of title to mineral
property interests is a very detailed and time-consuming process. Title to any of the Registrant’s mining concessions
may come under dispute. While the Registrant has diligently investigated title considerations to its mineral property interests,
in certain circumstances, the Registrant has only relied upon representations of property partners and government agencies. There
is no guarantee of title to any of the Registrant’s mineral property interests. The mineral property interests may be subject
to prior unregistered agreements or transfers, and title may be affected by unidentified and undetected defects. In British Columbia
and elsewhere, native land claims or claims of aboriginal title may be asserted over areas in which the Registrant’s mineral
property interests are located. To the best of the knowledge of the Registrant, although the Registrant understands that comprehensive
land claims submissions have been received by Indian and Northern Affairs Canada from the Taku Tlingit (Atlin) Band (which encompasses
the New Polaris property) and from the Association of United Tahltans and the Nisga’a Tribal Council (which may encompass
the Eskay Creek property), no legal actions have been formally served on the Registrant to date asserting such rights with respect
to mining properties in which the Registrant has an interest.





The Registrant competes
with larger, better capitalized competitors in the mining industry and there is no assurance given by the Registrant that it can
compete for mineral properties, future financings and technical expertise.



Significant and increasing competition
exists for the limited number of gold acquisition opportunities available in North, South and Central America and elsewhere in
the world. As a result of this competition, some of which is with large established mining companies which have greater financial
and technical resources than the Registrant, the Registrant may be unable to acquire additional attractive gold mining properties
on terms it considers acceptable. Accordingly, there can be no assurance that the Registrant’s exploration and acquisition
programs will yield any new resources or reserves or result in any commercial mining operation.



The Registrant may also encounter
increasing competition from other mining companies in its efforts to hire experienced mining professionals. Competition for exploration
resources at all levels is currently very intense, particularly affecting the availability of manpower, drill rigs, mining equipment
and production equipment. Increased competition could adversely affect the Registrant’s ability to attract necessary capital
funding or acquire suitable producing properties or prospects for mineral exploration in the future.





15Canarc Resource Corp.Form 20-F





The Registrant’s directors
and officers may have conflicts of interest as a result of their relationships with other companies and there is no assurance given
by the Registrant that its directors and officers will not have conflicts of interest from time to time.



The Registrant’s directors
and officers may serve as directors or officers of other public resource companies or have significant shareholdings in other public
resource companies and, to the extent that such other companies may participate in ventures in which the Registrant may participate,
the directors of the Registrant may have a conflict of interest in negotiating and concluding terms respecting the extent of such
participation. In particular, Bradford Cooke, a Director of the Registrant, is also a Director of Aztec Metals Corp. (“Aztec”)
and Endeavour Silver Corp. (“Endeavour”), companies in which the Registrant previously owned or currently owns shares.
The interests of these companies may differ from time to time. In the event that such a conflict of interest arises at a meeting
of the Registrant’s directors, a director who has such a conflict will abstain from voting for or against any resolution
involving any such conflict. From time to time several companies may participate in the acquisition, exploration and development
of natural resource properties thereby allowing for their participation in larger programs, permitting involvement in a greater
number of programs and reducing financial exposure in respect of any one program. It may also occur that a particular company will
assign all or a portion of its interest in a particular program to another company due to the financial position of the company
making the assignment. In accordance with the laws of the Province of British Columbia, Canada, the directors of the Registrant
are required to act honestly, in good faith and in the best interests of the Registrant. In determining whether or not the Registrant
will participate in any particular exploration or mining project at any given time, the directors will primarily consider the upside
potential for the project to be accretive to shareholders, the degree of risk to which the Registrant may be exposed and its financial
position at that time.





The Registrant does not
insure against all risks which we may be subject to in our planned operations and there is no assurance given by the Registrant
that it is adequately insured against all risks.



The Registrant may become subject
to liability for cave-ins, pollution or other hazards against which it cannot insure or against which it has elected not to
insure because of high premium costs or other reasons. The payment of such liabilities would reduce the funds available for exploration
and mining activities.





The Registrant is subject
to significant governmental and environmental regulations and there is no assurance given by the Registrant that it has met all
environmental or regulatory requirements.



The current or future operations
of the Registrant, including exploration and development activities and commencement of production on its mineral property interests,
require permits from various foreign, federal, state and local governmental authorities and such operations are and will be governed
by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards,
occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies
engaged in the development and operation of mines and related facilities generally experience increased costs, and delays in production
and other schedules as a result of the need to comply with applicable laws, regulations and permits. There can be no assurance
that approvals and permits required in order for the Registrant to commence production on its various mineral property interests
will be obtained. Additional permits and studies, which may include environmental impact studies conducted before permits can be
obtained, are necessary prior to operation of the other properties in which the Registrant has interests and there can be no assurance
that the Registrant will be able to obtain or maintain all necessary permits that may be required to commence construction, development
or operation of mining facilities at these properties on terms which enable operations to be conducted at economically justifiable
costs.

16Canarc Resource Corp.Form 20-F









Failure to comply with applicable
laws, regulations, and permitting requirements may result in enforcement actions including orders issued by regulatory or judicial
authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation
of additional equipment or remedial actions. Parties engaged in mining operations may be required to compensate those suffering
loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable
laws or regulations. New laws or regulations or amendments to current laws, regulations and permits governing operations and activities
of mining companies, or more stringent implementation of current laws, regulations or permits, could have a material adverse impact
on the Registrant and cause increases in capital expenditures or production costs or reduction in levels of production at producing
properties or require abandonment or delays in development of new mining properties.



As a prior holder of an interest
in a U.S. mineral property, the Registrant may be subject to the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended (“CERCLA”). CERCLA, along with analogous statutes in certain states, imposes strict, joint
and several liability on owners and operators of facilities which release hazardous substances into the environment. CERCLA imposes
similar liability upon generators and transporters of hazardous substances disposed of at an off-site facility from which a
release has occurred or is threatened. Under CERCLA’s strict joint and several liability provisions, the Registrant could
potentially be liable for all remedial costs associated with property that it owned or operated regardless of whether the Registrant’s
activities are the actual cause of the release of hazardous substances. Such liability could include the cost of removal or remediation
of the release and damages for injury to the natural resources. The Registrant’s one prior property was located in a historic
mining district and may include abandoned mining facilities (including waste piles, tailings, portals and associated underground
and surface workings). Releases from such facilities or from any of the Registrant’s prior U.S. properties due to past or
current activities could form the basis for liability under CERCLA and its analogs. In addition, off-site disposal of hazardous
substances, including hazardous mining wastes, may subject the Registrant to CERCLA liability. The Registrant’s prior U.S.
property is not, to the Registrant’s knowledge, currently listed or proposed for listing on the National Priority List and
the Registrant is not aware of pending or threatened CERCLA litigation which names the Registrant as a defendant or concerns any
of its prior U.S. properties or operations. The Registrant cannot predict the potential for future CERCLA liability with respect
to its prior U.S. property, nor can it predict the potential impact or future direction of CERCLA litigation in the area surrounding
its prior property.



To the best of the Registrant’s
knowledge, the Registrant is operating in compliance with all applicable environmental and regulatory regulations.

17Canarc Resource Corp.Form 20-F









Land reclamation requirements
for the Registrant’s properties may be burdensome.



There is a risk that monies allotted
for land reclamation may not be sufficient to cover all risks, due to changes in the nature of the waste rock or tailings and/or
revisions to government regulations. Therefore additional funds, or reclamation bonds or other forms of financial assurance may
be required over the tenure of the project to cover potential risks. These additional costs may have material adverse impact on
the financial condition and results of the Registrant.





Mining is inherently dangerous
and subject to conditions or events beyond the Registrant’s control, which could have a material adverse effect on the Registrant’s
business.



Mining involves various types
of risks and hazards, including:



| | · | environmental hazards,
| | - | ----------------------

| | · | power outages,
| | - | --------------

| | · | metallurgical and other processing problems,
| | - | --------------------------------------------

| | · | unusual or unexpected geological formations,
| | - | --------------------------------------------

| | · | structural cave-ins or slides,
| | - | ------------------------------

| | · | flooding, fire, explosions, cave-ins, landslides and rock-bursts,
| | - | -----------------------------------------------------------------

| | · | inability to obtain suitable or adequate machinery, equipment or labour,
| | - | ------------------------------------------------------------------------

| | · | metals losses, and
| | - | ------------------

| | · | periodic interruptions due to inclement or hazardous weather conditions.
| | - | ------------------------------------------------------------------------



These risks could result in damage
to, or destruction of, mineral properties, production facilities or other properties, personal injury, environmental damage, delays
in mining, increased production costs, monetary losses and possible legal liability. The Registrant may not be able to obtain insurance
to cover these risks at economically feasible premiums. Insurance against certain environmental risks, including potential liability
for pollution or other hazards as a result of the disposal of waste products occurring from production, is not generally
available to the Registrant or to other companies within the mining industry. The Registrant may suffer a material adverse effect
on its business if it incurs losses related to any significant events that are not covered by its insurance policies.

18Canarc Resource Corp.Form 20-F











The Registrant will
be required to locate mineral reserves for its long-term success.



Because
mines have limited lives based on proven and probable mineral reserves, the Registrant will have to continually replace and expand
its mineral reserves, if any. The Registrant’s ability to maintain or increase its annual production of gold and other base
or precious metals once its current properties are producing, if at all, will be dependent almost entirely on its ability to acquire,
explore, and develop new properties and bring new mines into production.





The Registrant’s
properties may be located in foreign countries and political instability or changes in the regulations in these countries may adversely
affect the Registrant’s ability to carry on its business.



Certain of the Registrant’s
properties may be located in countries outside of Canada, and mineral exploration and mining activities may be affected in varying
degrees by political stability and government regulations relating to the mining industry. Any changes in regulations or shifts
in political attitudes may vary from country to country and are beyond the control of the Registrant and may adversely affect its
business. Such changes have, in the past, included nationalization of foreign owned businesses and properties. Operations may be
affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls,
income and other taxes and duties, expropriation of property, environmental legislation and mine safety. These uncertainties may
make it more difficult for the Registrant and its joint venture partners to obtain any required production financing for its mineral
properties.





Fluctuations in foreign
currency exchange rates may adversely affect the Registrant’s future profitability.



In addition to CAD dollar currency
accounts, the Registrant maintains a portion of its funds in U.S. dollar denominated accounts. Certain of the Registrant’s
mineral property interests and related contracts may be denominated in U.S. dollars. Accordingly, the Registrant may take some
steps to reduce its risk to foreign currency fluctuations. However, the Registrant’s operations in countries other than Canada
are normally carried out in the currency of that country and make the Registrant subject to foreign currency fluctuations and such
fluctuations may materially affect the Registrant’s financial position and results. In addition future contracts may not be denominated in U.S.
dollars and may expose the Registrant to foreign currency fluctuations and such fluctuations may materially affect the Registrant’s
financial position and results. In addition, the Registrant is or may become subject to foreign exchange restrictions which may
severely limit or restrict its ability to repatriate capital or profits from its mineral property interests outside of Canada to
Canada. Such restrictions have existed in the past in countries in which the Registrant holds property interests and future impositions
of such restrictions could have a materially adverse effect on the Registrant’s future profitability or ability to pay dividends.

19Canarc Resource Corp.Form 20-F







The Registrant is reliant
on third parties.



The Registrant’s rights
to acquire interests in certain mineral properties may have been granted by third parties who themselves hold only a property option
to acquire such properties. As a result, the Registrant may have no direct contractual relationship with the underlying property
holder.





Jurisdiction and Enforcement
in U.S. and Canadian Courts.



The enforcement of civil liabilities
under the U.S. federal and state securities laws may be affected adversely by the fact that the Registrant is incorporated under
the laws of a foreign country, that certain of its officers and directors are residents of a foreign country, that the independent
registered public accounting firm and some or all of the experts named in this report may be residents of a foreign country and
that all or a substantial portion of the assets of the Registrant and said persons may be located outside the U.S. In particular,
uncertainty exists as to whether Canadian courts would entertain claims or enforce judgments based on the civil liability provisions
of the U.S. federal and state securities laws.





The Registrant’s possible
PFIC status may have possible adverse tax consequences for United States Investors.



Potential investors who are United
States taxpayers should be aware that Canarc may be classified for United States tax purposes as a passive foreign investment company
(“PFIC”) for the current fiscal year and may also have been a PFIC in prior years, and may also be a PFIC in subsequent
years. This status arises due to the fact that Canarc’s excess exploration funds may be invested in interest bearing securities
creating “passive income” which, while modest and ancillary to the exploration business, has been Canarc’s only
substantive source of income in the past. If Canarc is a PFIC for any year during a United States taxpayer’s holding period,
then such a United States taxpayer, generally, will be required to treat any so-called “excess distribution” received
on its common shares, or any gain realized upon a disposition
of common shares, as ordinary income and to pay an interest charge on a portion of such distribution or gain, unless the taxpayer
makes a qualified electing fund (“QEF”) election or a mark-to-market election with respect to the shares of Canarc.
In certain circumstances, the sum of the tax and the interest charge may exceed the amount of the excess distribution received,
or the amount of proceeds of disposition realized, by the taxpayer. A United States taxpayer who makes a QEF election generally
must report on a current basis its share of Canarc’s net capital gain and ordinary earnings for any year in which Canarc
is a PFIC, whether or not Canarc distributes any amounts to its shareholders. A United States taxpayer who makes the mark-to-market
election generally must include as ordinary income each year the excess of the fair market value of the common shares over the
taxpayer’s tax basis therein. Item 10.E provides further details.

20Canarc Resource Corp.Form 20-F











While we believe we have
adequate internal control over financial reporting, internal controls cannot provide absolute assurance that objectives are met.



Pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, we have furnished a report by management on our internal controls over financial reporting in this
annual report on Form 20-F. Such report contains, among other matters, an assessment of the effectiveness of our internal control
over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective.



The Registrant’s management
does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,
within the Registrant have been detected. These inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become
inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because
of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.





Risks Related to the Registrant’s
Common Shares





21Canarc Resource Corp.Form 20-F





The volatility of the Registrant’s
common shares could cause investor loss.



The market price of a publicly
traded stock, especially a junior resource issuer like Canarc, is affected by many variables in addition to those directly related
to exploration successes or failures. Such factors include the general condition of the market for junior resource stocks, the
strength of the economy generally, the availability and attractiveness of alternative investments, and the breadth of the public
market for the stock. The effect of these and other factors on the market price of the common shares on the Toronto Stock Exchange
(the “TSX”) and NASD-OTC suggests that Canarc’s shares will continue to be volatile. Therefore, investors could
suffer significant losses if Canarc’s shares are depressed or illiquid when an investor seeks liquidity and needs to sell
Canarc’s shares.





Penny stock classification
could affect the marketability of the Registrant's common stock and shareholders could find it difficult to sell their stock.



The Registrant's stock may be
subject to "penny stock" rules as defined in the Exchange Act rule 3a51-1. The Securities and Exchange Commission has
adopted rules which regulate broker-dealer practices in connection with transactions in penny stocks. The Registrant’s common
shares may be subject to these penny stock rules. Transaction costs associated with purchases and sales of penny stocks are likely
to be higher than those for other securities. Penny stocks generally are equity securities with a price of less than U.S.$5.00
(other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current
price and volume information with respect to transactions in such securities is provided by the exchange or system).



The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer
also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the
customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be
given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before
or with the customer’s confirmation.



Further, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the
secondary market for the Registrant’s common shares in the United States and shareholders may find it more difficult to sell
their shares.

22Canarc Resource Corp.Form 20-F









Possible dilution to current
shareholders based on outstanding options and warrants.



At December 31, 2014, the Company
had 157,436,305 common shares and 10,130,000 outstanding share purchase options and 40,335,498 share purchase warrants outstanding.
The resale of outstanding shares from the exercise of dilutive securities could have a depressing effect on the market for the
Company’s shares. At December 31, 2014, securities that could be dilutive represented approximately 32.1% of the Company’s
issued shares. None of these dilutive securities were exercisable at prices below the December 31, 2014 closing market price of
CAD$0.03 for the Company’s shares, which would not accordingly result in dilution to existing shareholders.





ITEM 4. INFORMATION ON THE COMPANY



The Registrant is a Canadian mineral
exploration company and is subject to National Instrument 43-101, a National Instrument adopted by all of the Securities Commissions
in Canada that deals with standards of disclosure for mineral projects. It applies to all oral statements and written disclosure
of scientific or technical information, including disclosure of a mineral resource or mineral reserve, made by or on behalf of
a company in respect of its material mineral projects. In addition to other matters, it sets out strict guidelines for the classification
of and use of the terms ‘mineral resource’ and ‘mineral reserve’ and it requires all technical disclosure
on all material properties to be subject to review by a senior engineer or geoscientist in good standing with a relevant professional
association. The full text of NI 43-101 can be found at http://www.bcsc.bc.ca/policy.asp?id=2884&scat=4&title=4%20-%20Distribution%20Requirements.
While the Registrant believes that its technical disclosure, when made, was accurate, technical disclosure prepared by the Registrant
before NI 43-101 came into force in February 2001 has not been updated by the Registrant to be compliant with NI 43-101 other than
as specifically disclosed herein.





4.A History and Development of the Company





Incorporation and Reporting Status



The Registrant was incorporated
under the laws of British Columbia, Canada, on January 22, 1987 under the name, “Canarc Resource Corp.”, by registration
of its Memorandum and Articles with the British Columbia Registrar of Companies.

23Canarc Resource Corp.Form 20-F







The Company was originally incorporated
under the previous Company Act (British Columbia) and transitioned to the Business Corporations Act (British Columbia) in 2005;
the Business Corporations Act (British Columbia) replaced the Company Act (British Columbia) on March 29, 2004.



The Registrant is a reporting
company in British Columbia, Alberta, Saskatchewan, Ontario and Nova Scotia. The Registrant became a reporting issuer under the
United States Securities Exchange Act of 1934, as amended, upon filing its registration statement on Form 20-F dated October 9,
1990 with the Securities and Exchange Commission.





Business Address



Office address:	                                   Suite
#301, 700 West Pender Street

Vancouver,
British Columbia, Canada, V6C 1G8

Phone:
(604) 685-9700



Registered address:                           
#1040 – 999 West
Hastings Street

Vancouver, British Columbia, Canada, V6C 2W2

Phone: (604) 683-1102





Introduction



The Registrant commenced operations
in 1987 and, since inception, has been engaged in the business of the acquisition, exploration and, if warranted, development of
precious metal properties. The Registrant currently owns or holds, directly or indirectly, interests in several precious metal
properties which are located in Canada, as follows:



-	New Polaris property in British
Columbia,

24Canarc Resource Corp.Form 20-F





-	Windfall Hills properties,
British Columbia, and

-	Eskay Creek property in British
Columbia,



of which the New Polaris property
is the material mineral property of the Registrant.



In its consolidated financial
statements prepared in accordance with IFRS, the Registrant has capitalized costs, net of recoveries and write-downs, of approximately
$11.8 million in connection with the acquisition, exploration and development on its currently held properties as at December 31,
2014 and are summarized as follows for the past three fiscal years:





|                           |             |                  |            |  |             |                  |            |  |             |                  |          
|-------------------------- | ----------- | ---------------- | ---------- |  | ----------- | ---------------- | ---------- |  | ----------- | ---------------- | ---------
|                           |             | 2014             |            |  |             | 2013             |            |  |             | 2012             |          
|                           | Acquisition | Exploration/     |            |  | Acquisition | Exploration/     |            |  | Acquisition | Exploration/     |          
|(in terms of $000s)        | Costs       | Development      | Total      |  | Costs       | Development      | Total      |  | Costs       | Development      | Total    
|                           |             |                  |            |  |             |                  |            |  |             |                  |          
|British Columbia (Canada): |             |                  |            |  |             |                  |            |  |             |                 
|New Polaris                | $     3,876 | $          7,090 | $  10,966  |  | $     3,892 | $          7,938 | $   11,830 |  | $     3,905 | $          8,643 | $  12,548
|Windfall Hills             | 401         | 437              | 838        |  | 408         | 92               | 500        |  | 210         | 117              | 327      
|                           |             |                  |            |  |             |                  |            |  |             |                  |          
|Yukon (Canada):            |             |                  |            |  |             |                  |            |  |             |                  |          
|Tay-LP (1)                 | -           | -                | -          |  | -           | -                | -          |  | 174         | 495              | 669      
|                           |             |                  |            |  |             |                  |            |  |             |                  |          
|                           | $     4,277 | $          7,527 | $   11,804 |  | $     4,300 | $          8,030 | $  12,330  |  | $     4,289 | $          9,255 | $  13,544







(1)	The Tay-LP property was written
off in 2013.





Further information and details regarding Canarc’s
mineral property interests are provided in Item 4.D.





Developments over the Last
Three Financial Years





Over the course of the past three
years ended December 31, 2014 and to the date of this Form 20-F, the Registrant had been engaged in exploration and development
of precious metal projects in Canada. The major events in the development of the Registrant’s business over
the last three years are set out below. Information and details regarding the Registrant’s properties are provided in Item
4.D.

25Canarc Resource Corp.Form 20-F









Strategic Mine Acquisition
Partnership with Canford Capital Inc. (“Canford”)



In late September 2012, Canarc granted
Canford a 120-day period of exclusivity to complete its due diligence and to execute a property option agreement to earn up to
a 51% interest in the New Polaris gold project in return for up to a CAD$30 million investment in exploration and development of
the property. Canarc was to be the manager of the project during the property option period. In February 2013, Canarc entered into
a Strategic Mine Acquisition Partnership (“SMAP”) with Canford for the purpose of acquiring, expanding and operating
gold mines in North America (the “Acquisition Opportunities”). The main parameters of the SMAP agreement were as follows:



| | (1) | Canarc was to be the manager of the SMAP, and was to identify and
evaluate each Acquisition Opportunity including the timing and capital required;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Once Canarc and Canford agreed to pursue a particular Acquisition
Opportunity, Canarc was to complete the due diligence on behalf of the SMAP and Canford was to then arrange 100% of the debt financing
required by the SMAP;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Upon closing each Acquisition Opportunity, Canford was to own a 51%
interest and Canarc was to own a 49% interest therein until the debt financing was repaid in full;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Upon repayment of the debt financing, Canarc would then own a 51%
interest and Canford would own a 49% interest therein;
| | --- | ------------------------------------------------------------------------------------------------------------------------

| | (5) | Canford was to exercise its warrants for 5.65 million common shares
of Canarc with an exercise price of CAD$0.15 for total proceeds of CAD$847,500, on the date of closing of the first Acquisition
Opportunity; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Canarc was to grant Canford a further 60 day period of exclusivity
to execute a property option agreement to earn up to a 51% interest in the New Polaris gold mine project in return for up to a
CAD$30 million investment in exploration and development, as previously agreed, on the date of closing of the first Acquisition
Opportunity.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This Agreement was to be binding upon
both Canarc and Canford until it was replaced by a more formal Strategic Joint Venture Partnership Agreement. Canarc and Canford
agreed to use their respective commercially reasonable best efforts to complete a more formal Strategic Mine Acquisition Partnership
Agreement on or before March 1, 2013. In March 2013, no formal SMAP agreement was executed, and Canford did not commit nor arrange
financing for the proposed property option and joint venture to develop the New Polaris gold project nor for the SMAP to acquire
operating gold mines in North America.





Letter of
Intent with Pan American Goldfields Ltd.



In February
2014, Canarc signed a Letter of Intent (the “LOI”) with Pan American Goldfields Ltd. (“Pan American”) with
respect to a business combination whereby Canarc may acquire all of the outstanding common shares of Pan American (the “Transaction”).
The LOI was however terminated in May 2014 as a result of Canarc’s due diligence.



The main asset of Pan American
was its interest in the La Cieneguita mine properties located in Chihuahua State, Mexico. Pan American, together with its partner
operator, Minera Rio Tinto SA de CV (“MRT”), was in pilot production at its gold-silver mine at La

26Canarc Resource Corp.Form 20-F





Cieneguita whereby Pan American
received 35% of net cash flow from production. Subject to due diligence, Canarc and Pan American were of the view that the mine
can potentially be modernized and expanded in phases to become a core asset of the combined company.



The structure of the proposed
Transaction was subject to review and consultation by the parties; however, the LOI anticipated that Canarc would acquire all of
the outstanding common shares of Pan American (the "Shares") and that the shareholders of Pan American would receive
0.82 (the “Exchange Ratio”) of a common share of Canarc and 0.25 of a warrant of Canarc (each whole warrant being a
“Warrant”) for each Share held. The proposed Exchange Ratio implied a 25% premium to the volume weighted average price
of the Shares over the last 20 trading days and accounted for the USD to CAD currency conversion. Each Warrant would be exercisable
to purchase one common share of Canarc at an exercise price equal to CAD$0.15 for a period of 3 years.



Pan American had granted Canarc
a 130 day period of exclusivity (the “Exclusivity Period”) to complete its due diligence and negotiate a definitive
agreement with respect to the Transaction. The LOI would terminate on June 30, 2014 unless terminated earlier by either party as
a result of its due diligence.



Pursuant to the terms of the LOI,
Canarc had agreed to pay $100,000 (the “Funds”) to Pan American, following TSX approval; funds of $40,000 were advanced
in April 2014 which bore an interest rate of 1% per month and was written off in September 2014 as collectability was doubtful.
Pan American had agreed to repay the Funds to Canarc in the event that (a) Canarc terminated the LOI or determined not to proceed
with the Transaction as a result of its due diligence; or (b) Pan American terminated the LOI or determined not to proceed with
the Transaction for any reason.



Canarc planned to use commercially
reasonable efforts to raise up to $1.8 million in working capital financing pursuant to a private placement, subject to regulatory
approval. In the event that the private placement was completed, the parties had agreed to negotiate an interim loan facility (the
“Loan”). Under the Loan, Canarc would lend Pan American up to a total of $250,000 prior to closing of the Transaction.



Following the completion of the
Transaction, Pan American would have the right to nominate two persons to the board of directors of the combined company. The remainder
of the board would be nominees of Canarc.



The Transaction was subject to the parties
negotiating and entering into a definitive agreement by June 30, 2014. Entering into a definitive agreement with respect to the
Transaction was subject to, among other things: (a) each party being satisfied in its sole discretion as to the results of its
due diligence review, and (b) approval of the board of directors of each party. The definitive agreement would include customary
provisions and deal protections, including receipt of all necessary consents and approvals, including all required stock exchange
and shareholder approvals.



27Canarc Resource Corp.Form 20-F





In May 2014, as a result of its due diligence,
Canarc terminated the LOI with Pan American.





Share Exchange
Agreement with Santa Fe Gold Corporation



On July 15,
2014, Canarc and Santa Fe Gold Corporation (“Santa Fe”) entered into a Share Exchange Agreement (the “Share Exchange
Agreement”) pursuant to which Santa Fe was to issue 66,000,000 shares of its common stock to Canarc, and Canarc was to issue
33,000,000 of its common shares to Santa Fe (the "Share Exchange"). Upon consummation of the Share Exchange, Santa Fe
would own approximately 17% of Canarc 's outstanding shares and Canarc would own approximately 34% of Santa Fe's outstanding common
shares. The Share Exchange Agreement did not close and terminated on its own terms on October 15, 2014.



The purpose of the Share Exchange
was to facilitate a significant turnaround for Santa Fe and a material new opportunity for Canarc driven by the appointment of
Canarc’s nominees to the Santa Fe’s management team and Board of Directors, the re-capitalization of Santa Fe, the
re-structuring of Santa Fe’s secured debt and re-development of its Summit gold-silver mine in New Mexico, USA. The Share
Exchange Agreement contained representations, warranties, conditions and covenants of the parties customary for transactions of
this type.



In connection with the strategic
Share Exchange:



| | · | Santa Fe's senior secured creditors, Waterton Global Value, L.P.
("Waterton"), Sandstorm Gold Ltd. and Sandstorm Gold (Barbados) Ltd. ("Sandstorm") have entered into respective
agreements that demonstrated that they were supportive of the share exchange transaction and that they were amenable to restructuring
collectively approximately $20 million of Santa Fe indebtedness.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Santa Fe had entered into a "best-efforts" Placement Agreement
with an investment bank, pursuant to which it would place an estimated $22 million of 8% Gold Bonds due in 2018 that were redeemable
in cash or gold ETF.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Mr. Bradford Cooke, Chairman and Founder of Canarc had been appointed
as Chairman of Santa Fe and Santa Fe's board shall consist of three current Santa Fe directors: Messrs. Jakes Jordan, Michael Heeley
and Erich Hofer, and two nominees from Canarc: Messrs. Bradford Cooke and Catalin Chiloflischi.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Canarc’s CEO, Mr. Catalin Chiloflischi, had been appointed
President and Chief Executive Officer and Director of Santa Fe, and Canarc’s Chief Operating Officer, Mr. Garry Biles, had
been appointed Chief Operating Officer of Santa Fe.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

28Canarc Resource Corp.Form 20-F







Pursuant to the Share Exchange
Agreement, in July 2014, Canarc advanced a promissory note loan of $200,000 to Santa Fe, which initially bore an interest rate
of 12% per annum compounded monthly; both the principal and interest were due and payable on January 15, 2015, and any past due
principal and interest shall bear an interest rate of 14%. In September 2014, further funds of $20,000 were advanced to Santa Fe.
The promissory note receivable from Santa Fe along with accrued interest was determined to be impaired as collectability was doubtful,
and was written off at December 31, 2014. In 2015, demand notices for repayment have been submitted by Canarc to Santa Fe, as Canarc
maintains its legal rights relative to the promissory note loan.



On October 15, 2014, the conditions
precedent set forth in the Share Exchange Agreement were not satisfied and the agreement terminated on that date, and Canarc’s
officers and directors who were appointed to the Santa Fe management and/or board, as specified in the Share Exchange Agreement,
resigned from their respective roles as Santa Fe officers and/or directors.





Pre-Development and Earn-In Binding Agreement with
PanTerra Gold (British Columbia) Limited



On February 24, 2015, Canarc entered
into a Pre-Development and Earn-In Binding Agreement with PanTerra. PanTerra has a 30-month option to earn a 50% interest in the
New Polaris project by spending a total of CAD$10 million in three stages of predevelopment activities including metallurgical
test work, drilling, detailed mine planning, tailings dam design, environmental permitting, and completion of a definitive feasibility
study. In Stage One, PanTerra shall spend CAD$500,000 for laboratory production of flotation concentrate followed by test work
through the Glencore Technology Albion pilot plant, and for comprehensive technical and economic review and commencement of environmental
baseline data collection required for permitting. In Stage Two, PanTerra can earn a 20% interest in the New Polaris project by
spending CAD$3.5 million in predevelopment expenditures which would include 10,000 m drilling program and engineering and completion
of field data required for environmental permitting. In Stage Three, PanTerra can earn an additional 30% interest in the project
for a total interest of 50% by spending CAD$6 million in predevelopment expenditures which would primarily focus on the completion
of a definitive feasibility study and would include further 10,000 m of infill drilling, additional metallurgical test work, and
preliminary engineering. PanTerra can increase its interest in the New Polaris project to 51% by purchasing 1% from Canarc within
six months of completion of the definitive feasibility study at a cost of 1% of the net present value established by the definitive
feasibility study using a 10% discount rate.





Others





29Canarc Resource Corp.Form 20-F





In April 2011, the Company entered
into two property option agreements to purchase 100% interests in two adjacent gold properties located in British Columbia, collectively
known as the Windfall Hills property. The Company acquired 100% interests in the Atna and Dunn properties in April 2013. Item 4.D
provides further details.



In May 2011, the Company staked three
gold properties, Devils’ Thumb property, totalling 17,175 hectares northeast of its Windfall Hills properties in central
British Columbia, which was written off in September 2012.



On September 28, 2012, the Company
closed a brokered private placement for 11.3 million units at a price of CAD$0.10 per unit for gross proceeds of CAD$1.13 million,
with each unit comprised of one common share and one transferrable common share purchase warrant. Canford was the sole subscriber
in the private placement and became an insider of the Company by virtue of holding more than 10% of the issued and outstanding
share capital of the Company at that time. Item 5.B provides further details.



In 2012, the Company arrange demand
loans of $358,000 from certain directors and an officer of the Company. These loans were repayable on demand and bore an interest
rate of 12% compounded monthly with interest payable semi-annually. In October and December 2012, the Company repaid all principal
and interest in full settlement of outstanding demand loans.



In December 2012 and January 2013,
the Company closed a non-brokered private placement in three tranches totalling 6.1 million units at a price of CAD$0.11 per unit
for gross proceeds of CAD$671,000 with each unit comprised of one common share and one common share purchase warrant. Item 5.B
provides further details.



In November 2013, the TSX had advised
the Company that the TSX was reviewing the eligibility for continued listing on the TSX of the securities of the Company pursuant
to Part VII of the Toronto Stock Exchange Company Manual. The Company was being reviewed under the Remedial Review Process and
had been initially granted 120 days to comply with all requirements for continued listing with subsequent extensions to comply.
Specifically the Company needed to comply with expenditures of CAD$350,000 on exploration or development work on its mineral resource
properties and with adequate working capital. For the nine months ended September 30, 2014, the Company closed private placements
for gross proceeds totalling CAD$3.26 million and completed its drilling program for the Windfall Hills property. In September
2014, the TSX confirmed that the Company satisfied the TSX’s continued listing requirements.



In fiscal 2013, the Company received
demand loans of $126,000 from two directors, which were repayable on demand and bore an interest rate of 12% compounded monthly
with interest payable semi-annually. In January 2014, the Company repaid all principal and interest in full settlement of outstanding
demand loans.



30Canarc Resource Corp.Form 20-F





On January 31, 2014, the Company closed
a non-brokered private placement for 18 million units at a price of CAD$0.05 per unit for gross proceeds of CAD$900,000, with each
unit comprised of one common share and one-half of a whole common share purchase warrant. Item 5.B provides further details.



In March and April 2014, the Company
closed a private placement in two tranches totalling 19.6 million units at a price of CAD$0.10 per unit for gross proceeds of CAD$1.96
million with each unit comprised of one common share and one-half of a whole common share purchase warrant. Item 5.B provides further
details.



On July 9, 2014, the Company closed
a private placement for 5 million units at CAD$0.08 per unit for gross proceeds of CAD$400,000. Each unit was comprised of one
flow-through common share and one-half of a whole common share purchase warrant; each whole warrant is exercisable to acquire one
non-flow through common share at an exercise price of CAD$0.15 per share until July 9, 2016. Funds of CAD$382,900 were expended
for flow-through purposes as at December 31, 2014. Item 5.B provides further details.





4.B Business Overview





Nature of operations and
principal activities



The Registrant’s principal
business activities are the acquisition, exploration and development of mineral resource property interests. The Registrant is
in the process of exploring and developing its mineral property interests and has not yet determined whether these mineral property
interests contain reserves. The recoverability of amounts capitalized for mineral property interests is dependent upon the existence
of economically recoverable reserves in its mineral resource properties, the ability of the Registrant to arrange appropriate financing
to complete further work on its mineral property interests, confirmation of the Registrant’s interest in the underlying properties,
the receipt of necessary permitting and upon future profitable activities on the Registrant’s mineral property interests
or proceeds from the disposition thereof. The Registrant has incurred significant operating losses and currently has no operating
revenues. The Registrant has financed its activities principally by the issuance of equity securities. The Registrant’s ability
to continue as a going concern is dependent on continued financial support from its shareholders and other related parties, the
ability of the Registrant to raise equity financing, and the attainment of profitable operations to fund its operations.



The Registrant and its management
group have in the past been actively involved in the evaluation, acquisition and exploration of mineral properties in Canada, U.S.A.,
and Central and South America. Starting with grass roots exploration prospects, it progressed to more advanced properties. To date,
the Registrant has not received any operating revenues from its mineral property interests. The Registrant plans to continue exploring
and developing its mineral property interests and, if appropriate, the Registrant intends to seek partners or buyers to
purchase or to assist in further advancement (by way of joint venture or otherwise) of its mineral property interests. The Registrant
seeks to identify properties with significant potential and to acquire those properties on the basis of property option agreements
relying on the representations and warranties of the vendor as to the state of title, with limited or no title work being performed
by the Registrant. Detailed title work is only undertaken once it has been determined that the property is likely to host a significant
body of ore, which may not occur. Consequently, there is a significant risk that adverse claims may arise or be asserted with respect
to certain of the Registrant’s mineral property interests. Items 3.D and 4.A provide further details.

31Canarc Resource Corp.Form 20-F









Further information and details
regarding the Registrant’s properties are provided in Item 4.D.



Sales and revenue distribution,
sources and availability of raw materials, and marketing channels



As of the date of this annual
report, the Registrant has not generated any operating revenues from its mineral property interests.



Competitive conditions



Significant competition exists
for natural resource acquisition opportunities. As a result of this competition, some of which is with large, well established
mining companies with substantial capabilities and significant financial and technical resources, the Registrant may be unable
to compete for nor acquire rights to exploit additional attractive mining properties on terms it considers acceptable. Accordingly,
there can be no assurance that the Registrant will be able to acquire any interest in additional projects that would yield reserves
or results for commercial mining operations.



Government regulations



The Registrant’s operations
are subject to governmental regulations in Canada, where the Registrant had interests in mineral properties.



The current and anticipated future
operations of the Registrant, including further exploration and/or production activities may require additional permits from governmental
authorities. Such operations are subject to various laws governing land use, the protection of the environment, production, exports,
taxes, labour standards, occupational health, waste disposal, toxic substances, mine safety and other matters. Unfavourable amendments
to current laws, regulations and permits governing operations and activities of mineral exploration companies, or more stringent
implementation thereof, could have a materially adverse impact on the Registrant and could cause increases in capital expenditures
which could result in a cessation of operations by the Registrant. To the best of its knowledge, the Registrant is operating in
compliance with applicable laws.

32Canarc Resource Corp.Form 20-F







Trends



The cumulative annual average
for gold prices decreased from $1,669 in 2012 to $1,411 in 2013 and then decreased to $1,266 in 2014 and closing at $1,196 on March
25, 2015. Gold prices did not achieve new highs in 2014 and 2013 relative to 2012. In 2012, prices reached an annual high of $1,792
in October 2012, but only achieved annual highs of $1,694 in 2013 and $1,385 in 2014. The high for 2015 was $1,297 on January 22,
2015 which is lower than the annual highs in the prior three years.



During the same period from January
2012 to December 2014, the closing market price for Canarc’s shares decreased from CAD$0.09 to CAD$0.03 – a decrease
of 67%, and the high of CAD$0.24 was in February 2013. On April 22, 2015, the closing market share price was CAD$0.03. The lack
of financing and a joint venture partner to advance the New Polaris gold project contributed to the ongoing weaknesses in the market
price of Canarc’s shares although the liquidity and market price of its shares were heightened during the exclusivity period
with Canford from September 2012 to early March 2013. Management continues to foresee opportunities to finance the mineral exploration
and development efforts on Canarc’s mineral property interests, and also to evaluate and consider new acquisitions in the
gold arena. In February 2015, the Company did enter into a Pre-Development and Earn-In Binding Agreement with PanTerra. Items 4.A
and 4.D provide further details.



Risk factors in Item 3.D provide
further details regarding competition and government regulations.





4.C Organizational Structure





The Registrant carries on its
business in large part through its subsidiaries. The Registrant has a number of direct or indirect wholly or majority owned subsidiaries
of which the active subsidiaries are as follows:



Benzdorp Gold N.V. was incorporated
under the laws of Suriname on February 4, 2004 when Suriname presidential assent was received. The Registrant owns 40% of the voting
shares of this company.



Canarc (Barbados) Mining Ltd.
is a company duly incorporated under the laws of Barbados on July 26, 1993. The Registrant owns 100% of the issued and outstanding
shares.



33Canarc Resource Corp.Form 20-F





Canarc Suriname (Barbados) Ltd.
is a company duly incorporated under the laws of Barbados on January 26, 1994. The Registrant owns 100% of the issued and outstanding
shares.



Canarc van Suriname N.V. is a
company duly incorporated under the laws of Suriname on November 10, 1995. The Registrant owns 100% of the issued and outstanding
shares.



New Polaris Gold Mines Ltd. (“New
Polaris”) (formerly Golden Angus Mines Ltd. - name change effective April 21, 1997) is a corporation formed through the amalgamation
of 2820684 Canada Inc. (“2820684”), a former wholly-owned subsidiary of the Registrant incorporated under the Canada
Business Corporation Act on May 13, 1992, and Suntac Minerals Inc. The Registrant owns 100% of the issued and outstanding shares.





4.D Property, Plant and Equipment





Description of Properties



Property Summary Chart (as of December 31, 2014):







|Property Name   | Location   | Maximum % Interest Held (or to be earned) (1) | Capitalized Acquisition Expenditures(3) | Capitalized Exploration Expenditures(3) | Total Capitalized Expenditures(3)
|--------------- | ---------- | --------------------------------------------- | --------------------------------------- | --------------------------------------- | ---------------------------------
|New Polaris (2) | BC, Canada | 100.00%                                       | $3,876,000                              | $7,090,000                              | $10,966,000                      
|Windfall Hills  | BC, Canada | 100.00%                                       | $401,000                                | $437,000                                | $838,000                         
|Eskay Creek     | BC, Canada | 33.33%                                        | $0                                      | $0                                      | $0                               





1	Subject to any
royalties or other interests as disclosed below.

2
Previously known
as “Polaris-Taku”.

3Net of
recoveries and write-downs.



34Canarc Resource Corp.Form 20-F





NOTE: All monetary figures
are in terms of U.S.$ unless otherwise noted. See below for further details on each property.





The following is a more detailed
description of the mineral properties listed above in which the Registrant has an interest.





Material Mineral Projects





Cautionary Note to U.S.
Investors concerning estimates of Measured and Indicated Resources. This section and certain related exhibits may
use the terms “measured” and “indicated resources”. We advise U.S. investors that while those terms are
recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. investors
are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.
See “Cautionary Note to U.S. Investors” at the beginning of this annual report.



Cautionary Note to U.S.
Investors concerning estimates of Inferred Resources.This section and certain related exhibits may use the term
“inferred resources”. We advise U.S. investors that while this term is recognized and required by Canadian regulations,
the U.S. Securities and Exchange Commission does not recognize it. “Inferred resources” have a great amount of uncertainty
as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part
of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. U.S. investors are cautioned
not to assume that part or all of an inferred resource exists, or is economically or legally minable. See “Cautionary Note
to U.S. Investors” at the beginning of this annual report.





New Polaris Gold Project, British Columbia,
Canada



Discovered by prospectors in 1929,
the original mine was constructed in 1936 and operated from 1937 to 1942 and again from 1946 to 1951. A total of 232,000 oz. of
gold was produced. Flotation concentrates were shipped seasonally for refining to the smelter in Tacoma, Washington. The first
barge load in 1951 sank in a storm off the B.C. coast, causing the mine to shut down. Cominco upgraded the mill in 1952 and used
it to process the nearby Tulsequah Chief ores from 1953 to 1957. New Polaris was then dormant for 30 years until exploration resumed
in 1988. Canarc acquired New Polaris in 1992 and has partially cleaned up the original mill site and infrastructure, which
had been previously abandoned. Canarc constructed a new office complex at the New Polaris mine site and the camp is now capable
of supporting 35 people. The machinery from the mill was removed from the site by previous owners in the 1970's. No remaining equipment
from the mine operation was salvaged as it was all inoperable. The only original buildings remaining are one large shed (the former
machine shop) and 3 small houses. These existing buildings have been refurbished and serve as both sleeping quarters and the kitchen
facility. The former machine shop has also been maintained as a maintenance facility. Current fixed equipment include 10,000 and
25,000 gallon Terra Tanks, and mobile equipment on the property include a D6 Cat, backhoe, grader, electric Alimak machine, pumping
equipment, welding machines and several generators. The existing underground workings are accessible, although dewatering is required
to access those workings below the 50 foot level. Power to the site is currently supplied by diesel generators.

35Canarc Resource Corp.Form 20-F









In 2007, Canarc completed a pre-feasibility
program for the New Polaris gold mine project, including dewatering of the underground mine workings, mapping and sampling of the
lower mine levels, optimizing metallurgical recoveries, continuing site-related environmental studies, developing a conceptual
mine plan and completing a preliminary economic assessment for the project. No additional work is being carried out at this time
as Canarc is seeking a strategic partner to advance the project to final feasibility and, if positive, to production, subject to
financing.



The New Polaris Gold Project consists
of 61 contiguous Crown-granted mineral claims and one modified grid claim covering 2,100 acres. All claims are 100% owned and held
by New Polaris Gold Mines Ltd., a wholly owned subsidiary of Canarc Resource Corp., subject to a 15% net profit interest held by
Rembrandt Gold Mines Ltd. Canarc can reduce this net profit interest to a 10% net profit. A Table of the claims is set out below.



36Canarc Resource Corp.Form 20-F









Table 1 - LIST OF CLAIMS



|Claim Name         | Lot No. | Folio # | Claim Name         | Lot No. | Folio #
|------------------ | ------- | ------- | ------------------ | ------- | -------
|Polaris No.1       | 6109    | 4472    | Snow               | 3497    | 4545   
|Polaris No.2       | 6140    | 5223    | Snow #2            | 3495    | 5088   
|Polaris No.3       | 6141    | 5223    | Snow #3            | 3494    | 5495   
|Polaris No.4       | 3498    | 4545    | Snow #4            | 3499    | 5495   
|Polaris No.5       | 6143    | 5223    | Snow #5            | 6105    | 4472   
|Polaris No.6       | 6144    | 5223    | Snow #8            | 6107    | 4472   
|Polaris No.7       | 6145    | 5223    | Snow #7            | 3500    | 4472   
|Polaris No.8       | 6146    | 5223    | Snow #6            | 6106    | 4472   
|Polaris No.9       | 6147    | 5223    | Snow #9            | 6108    | 4472   
|Polaris No.10      | 6148    | 5290    | Black Diamond      | 3491    | 4472   
|Polaris No.11      | 6149    | 5290    | Black Diamond No.3 | 6030    | 4944   
|Polaris No.12 Fr   | 6150    | 5290    | Blue Bird No.1     | 5708    | 4545   
|Polaris No.13 Fr   | 6151    | 5290    | Blue Bird No.2     | 5707    | 4545   
|Polaris No.14      | 6152    | 5290    | Lloyd              | 6035    | 5010   
|Polaris No.15      | 6153    | 5290    | Lloyd No.2         | 6036    | 5010   
|Silver King No.1   | 5489    | 4804    | Rand No.1          | 6039    | 5010   
|Silver King No.2   | 5490    | 4804    | Rand No.2          | 6040    | 5010   
|Silver King No.3   | 5493    | 4804    | Minto No.2         | 6033    | 4944   
|Silver King No.4   | 5494    | 4804    | Minto No.3         | 6034    | 4944   
|Silver King No.5   | 5491    | 4804    | Jumbo No.5         | 6031    | 4944   
|Silver King No.6   | 5492    | 4804    | Ready Bullion      | 6032    | 4944   
|Silver King No.7   | 5495    | 4804    | Roy                | 6042    | 5088   
|Silver King No.8   | 5717    | 4545    | Frances            | 6041    | 5010   
|Sliver Queen No 1  | 6026    | 4545    | Eve Fraction       | 6170    | 5495   
|Sliver Queen No 2  | 6027    | 4545    | Eve No.1 Fraction  | 6171    | 5495   
|Sliver Queen No 3  | 6028    | 4944    | P.T. Fraction      | 3493    | 5495   
|Sliver Queen No 4  | 6029    | 4944    | Ant Fraction       | 3492    | 5088   
|Silver Strand      | 6037    | 5010    | Atlin Fraction     | 3496    | 5088   
|Silver Strand No.2 | 6038    | 5010    | Powder Fraction    | 6043    | 5088   
|F.M Fraction       | 6044    | 5088    | Jay Fraction       | 6045    | 5088   
|Par Fraction       | 6154    | 5290    |                    |         |        



James Moors, P.Geo, who was Vice
President Exploration of the Registrant at that time, was the Qualified Person for the purposes of the foregoing technical disclosure
on the New Polaris Gold Project. The information in the following summary on the New Polaris Gold Project has been derived in part
from and is partially based on the assumptions, qualifications and procedures set out in the Technical Report titled “Resource
Potential, New Polaris Project” (the “New Polaris Technical Report”) dated March 14, 2007 and prepared by R.J.
Morris, MSc, PGeo, of Moose Mountain Technical Services and G.H. Giroux, MASc, PEng, of Giroux Consultants Limited, who are independent
Qualified Persons as defined by National Instrument 43-101 (“NI 43-101”) and was prepared in compliance with NI 43-101,
to the best of the Registrant’s knowledge.

37Canarc Resource Corp.Form 20-F









The following extracted from,
or are accurate paraphrasing of, the executive summary, or other sections as indicated from the New Polaris Technical Report, the
full copy of which is available online at www.sedar.com as filed on March 16, 2007. Defined terms and abbreviations used herein
and not otherwise defined shall have the meanings ascribed to such terms in the New Polaris Technical Report.



Summary



New Polaris (formerly Polaris-Taku)
is an early Tertiary mesothermal gold mineralized body located in northwestern British Columbia about 100 kilometres south of Atlin,
BC and 60 kilometres northeast of Juneau, Alaska. The nearest roads in the area terminate twenty kilometers due south of Atlin
and 10 kilometres southeast of Juneau. Access at the present time is by aircraft. A short airstrip for light aircraft exists on
the property.



The deposit was mined by underground
methods from 1938 to 1942, and from 1946 to early 1951, producing a total of 740,000 tonnes of ore at an average grade of 10.3g/t
gold.



The property consists of 61 contiguous
Crown-granted mineral claims and one modified grid claim covering 2,100 acres. All claims are 100% owned and held by New Polaris
Gold Mines Ltd., a wholly owned subsidiary of Canarc Resource Corp., subject to a 15% net profit interest held by Rembrandt Gold
Mines Ltd. Canarc can reduce this net profit interest to a 10% net profit.



The deposit is composed of three
sets of veins (quartz-carbonate stringers in altered rock), the “AB” veins are northwest striking and southwest dipping,
the “Y” veins are north striking and dipping steeply east and finally the “C” veins are east-west striking
and dipping to the south to southeast at 65o to vertical. The “C” veins appear to hook around to the north and
south into the other two sets of veins so that their junctions form an arc. The gold is refractory and occurs dominantly in finely
disseminated arsenopyrite grains that mineralize the altered wallrock and stockwork veins. The next most abundant mineral is pyrite,
followed by minor stibnite and a trace of sphalerite. The zones of mineralization range from 15 to 250 metres in length and 0.3
to 14 metres in width.



Canarc explored the “C”
vein system between 1988 and 1997, and carried out infill drilling in 2003 through 2006, to better define the continuity and grade
of the vein systems.

38Canarc Resource Corp.Form 20-F







The total New Polaris database
consists of 1,056 diamond drill holes with a total of 31,514 sample intervals.



The geologic continuity of the
C vein has been well established through historic mining and diamond drilling. Grade continuity was quantified using a geostatistical
method called the semivariogram, which measures distances (ranges) and directions of maximum continuity. The four principle veins
in the semivariogram model produced ranges between 50 and 90 metres, along strike and down plunge.



Sample Method and Approach, Sample Preparation,
Analyses and Security, and Data Verification



Sampling of the vein was done
by a wire line diamond drills using NQ-size rods. Drill collar locations were surveyed in by total station surveying method. Drilling
azimuth and dip were set using a brunton compass and clinometer. Routine down hole measurements of azimuth and dip were not done
on the three holes drilled in 2003 and prior. In 2004, three different down hole survey systems were tried before settling on a
Reflex system. The Reflex system was also used in 2005. The down hole surveying was operated by the Hytech’s drill crew.
This information was entered into a GEMCOM program to plot the location of the collar and the pierce point of the veins.



Core recovery was very good and
ranged from the low 90% to nearly 100% and is a fair sampling of the mineralization at the point where the drill hole pierced the
vein.



The vein mineralization has well
marked contacts with the wall rock. The transition from mineralized to non mineralized rock occurs over a few centimeters. Free
gold is extremely rare and to the end of 2005 had not been recognized in core samples. The majority of the gold occurs in arsenopyrite
and to a lesser extent in pyrite and stibnite. Because there is no visible gold and the host sulphides are very fine grained and
disseminated there is little nugget effect and gold values even over short intervals rarely exceed 1 opt. Out of 4700 samples with
greater than 0.03 opt gold collected from core and the underground workings, only 185 samples had a value greater than 1 opt, the
highest being 3.69 opt. For this reason, no cutting of assays has been done in calculating composites nor are there many cases
where a composite sample is carried by a single assay.



Determining intervals of core
for sampling was done by the geologist during logging of the core. The mineralized vein structures were marked out. Selections
of core intervals for sampling were based in the presences of veining and sulphide mineralization particularly arsenopyrite. Within
the defined vein structure sample interval ranged from 1 foot to 5 feet. Divisions were based on intensity of mineralization and
veining. Sampling of the core for 10s of feet either side of the mineralized vein structures was also done to the point where hydrothermal
alteration disappeared. No sampling of core from the unaltered rock was done.



39Canarc Resource Corp.Form 20-F





The core was logged and stored
in the camp. Access to be core was only available to the geologists and the core sampler. The core was brought from the drill set
up to the logging facility by the geologist at the end of each shift. The core was geologically logged, recoveries calculated and
samples marked out in intervals of 0.5 to 1 metre. The core was handed to the sample cutter who cut it with a diamond saw. Each
sample was individually wrapped in plastic bags for shipment. The sample intervals were easily identified and correlate well with
the drill logs.



The 2006 Quality Assurance, Quality
Control program was similar to the previous programs in that samples were collected by employees of Canarc on site and shipped
to ALS Chemex in Vancouver. For quality control and quality assurance, core samples were regularly mixed with blanks, duplicates,
and standards. The program in the field was run in an efficient and proper manner following accepted engineering standards.



Mr. Morris, one of the authors,
spent two days on the New Polaris property. While on the property, he examined underground workings to confirm the nature of mineralization,
dimensions and extent of the vein system. He also viewed a selection of core from key holes drilled from the early 1990’s
to the end of 2006 and compared his observations with those documented in the drill logs. In both the case of the underground workings
and the core, the author found that his observations confirmed that recorded in logs and sections. He also confirmed that core
had been properly cut and stored. In addition to the site visit, a detailed review of the database was completed. Forty-one drill
holes were selected from the C vein area, and the drill logs and assay sheets were compared with the database. Only minor differences
were observed between the hard copy material and the database. As well, the input of the database into the modeling program was
also checked. The procedures used in the development of the database follow accepted engineering standards.



Location Map



40Canarc Resource Corp.Form 20-F











In April 2011, Canarc completed
a preliminary economic assessment of the New Polaris property. The report which is dated April 10, 2011 is titled “New Polaris
Project - Preliminary Assessment Update”. J.H.Gray, P.Eng., R.J. Morris, M.Sc., P.Geo. and G.H. Giroux, MASc., P. Eng. were
the Qualified Persons for that Report. The Qualified Person (“QP”) pursuant to NI 43-101 for the updated preliminary
economic assessment report is Jim Gray, P. Eng.





Efforts had commenced on the application
for an underground development and exploration program at the New Polaris project in 2011 which was halted in February 2012, due
to the lack of financial resources.



In July 2012 Canarc significantly reduced
the estimated cost of the proposed work program to complete a feasibility study for commercial development of the New Polaris project
from CAD$26 million to approximately CAD$9 million. Canarc previously planned a CAD$26 million work program which included underground
mine development in order to complete a feasibility study for the project. Under the revised program, the underground mine development
work will be deferred to the post-feasibility mine development program. Instead, Canarc planned to carry out an additional 15,000
meters of infill core drilling in approximately 35 holes in order to provide sufficient measured and indicated resources for feasibility.
About CAD$4 million of the CAD$9 million revised cost was related to drilling
and the balance was related to permitting and engineering. The proposed work program to complete a feasibility study was subject
to securing a partner for the project and/or financing.

41Canarc Resource Corp.Form 20-F









In late September 2012, Canarc granted
Canford a 120-day period of exclusivity to complete its due diligence and to execute an option agreement to earn up to a 51% interest
in the New Polaris gold project in return for up to a CAD$30 million investment in exploration and development of the property.
Canarc was to be the manager of the project during the option period. Pursuant to an agreement to form a SMAP dated February 1,
2013, Canarc granted Canford a further 60-day period of exclusivity on the date on which Canarc was to close an acquisition opportunity
subject to the execution of a formal SMAP agreement on or before March 1, 2013. However, in March 2013, no formal SMAP agreement
was executed, and Canford was not able to commit or arrange financing for the proposed option and joint venture to develop the
New Polaris gold project.



On February 24, 2015, Canarc entered
into a Pre-Development and Earn-In Binding Agreement with PanTerra. PanTerra has a 30-month option to earn a 50% interest in the
New Polaris project by spending a total of CAD$10 million in three stages of predevelopment activities including metallurgical
test work, drilling, detailed mine planning, tailings dam design, environmental permitting, and completion of a definitive feasibility
study. In Stage One, PanTerra shall spend CAD$500,000 for laboratory production of flotation concentrate followed by test work
through the Glencore Technology Albion pilot plant, and for comprehensive technical and economic review and commencement of environmental
baseline data collection required for permitting. In Stage Two, PanTerra can earn a 20% interest in the New Polaris project by
spending CAD$3.5 million in predevelopment expenditures which would include 10,000 m drilling program and engineering and completion
of field data required for environmental permitting. In Stage Three, PanTerra can earn an additional 30% interest in the project
for a total interest of 50% by spending CAD$6 million in predevelopment expenditures which would primarily focus on the completion
of a definitive feasibility study and would include further 10,000 m of infill drilling, additional metallurgical test work, and
preliminary engineering. PanTerra can increase its interest in the New Polaris project to 51% by purchasing 1% from Canarc within
six months of completion of the definitive feasibility study at a cost of 1% of the net present value established by the definitive
feasibility study using a 10% discount rate.





Other Mineral Projects





The following projects are considered
not material by the Registrant and are not compliant with NI 43-101 unless otherwise stated. There is currently no ongoing or proposed
exploration or development programs for the properties set out below, other than as specifically stated.





Tay-LP Property, Yukon, Canada



42Canarc Resource Corp.Form 20-F





On August 24, 2009, Canarc entered
into a property option agreement with Ross River Minerals Inc. and Ross River Gold Ltd. (collectively, “Ross River”)
to acquire up to a 100% interest in the Tay-LP gold property by paying CAD$1 million in cash and/or shares and spending CAD$1.5
million on exploration over a three-year period, which can occur in two stages. In the first stage, Canarc could have earned a
51% interest by paying CAD$150,000 in cash and spending CAD$900,000 on exploration over a two-year period. In the second stage,
Canarc could have earned an additional 49%, thereby totalling 100% interest, by paying CAD$850,000 in cash or shares at Canarc’s
discretion and spending CAD$600,000 on exploration by the third year. If Canarc did not proceed with the second stage, then a joint
venture would have been formed. Canarc was to pay to the optionors a gold bonus equal to CAD$1 per ounce of gold for all proven
and probable gold reserves and measured and indicated gold resources to a maximum of 1 million oz gold. The property option agreement
was subject to net smelter returns (“NSR”) totalling 3% which could be reduced to 1.5% by payments totalling $1.95
million. Commencing on or before October 31, 2009 and continuing on or before October 31 of each subsequent year until the property
was put into commercial production, Canarc was to pay to the NSR holders an annual advance NSR royalty payments totalling CAD$25,000
or that number of common shares of Canarc and which was to be deducted from NSR obligations. The NSR of 3% was subject to maximum
total payments based on one million payable ounces of gold being mined by commercial production but could have been been reduced
to 500,000 payable ounces of gold if the NSR was reduced to 1.5%.



On September 3, 2011, Canarc
and Ross River amended the property option agreement by increasing the cash payment of CAD$50,000 to CAD$75,000 due by October
31, 2011 (paid), deferring the exploration expenditures of CAD$500,000 from October 31, 2011 to October 31, 2012 and exploration
expenditures of CAD$600,000 from October 31, 2012 to October 31, 2013, and including a cash payment of CAD$25,000 due by October
31, 2012.



In October 2012, Canarc amended
the property option agreement by extending the due date for the cash payment of CAD$25,000 from October 31, 2012 to December 15,
2012 (paid); exploration expenditures of CAD$500,000 for a 51% interest which were due on October 31, 2012 were increased to CAD$700,000
and its due date extended to December 15, 2013; the due date of October 31, 2013 for both the payment of CAD$850,000 in cash or
that number in common shares and exploration expenditures of CAD$600,000 for the remaining 49% interest was extended to December
15, 2014. Also the due date for annual advance NSR royalty payments of CAD$25,000 or that number of common shares was extended
from October 31, 2012 to December 15, 2012 and for each subsequent year thereafter.



Cash payments of CAD$75,000 were
paid in 2011 for property option payments. Canarc issued 215,580 common shares at a value of CAD$0.116 per common share as the
annual advance NSR royalty for CAD$25,000 for the Tay-LP property for 2011.



Cash payments of CAD$25,000 in
property option obligation and CAD$25,000 in advance NSR royalty were paid in December 2012.



In late March 2010, Canarc entered
into a property option agreement with Cap-Ex Ventures Ltd. (“Cap-Ex”) whereby Cap-Ex can acquire 50% of Canarc’s
interest in the Tay-LP gold property, by paying CAD$100,000 of which CAD$25,000 have been paid, issuing 200,000 common shares of
which 100,000 common shares have been received, incurring exploration expenditures of CAD$675,000, and maintaining Canarc’s
underlying option agreement in good standing until October 2011. Cap-Ex terminated the property option agreement with Canarc in
March 2011.



43Canarc Resource Corp.Form 20-F





Canarc completed a Phase 1 exploration
program for 10 holes including 2,000 m of diamond drilling in the third and fourth quarters of 2009. The objective of the program
was to extend known mineralization along strike and down-dip of existing gold intercepts in three principle target areas.



David St. C. Dunn, P.Geo., and
James Moors, P.Geo, who was Vice President Exploration of the Registrant at that time, were the Qualified Persons for the purposes
of the technical disclosure on the Tay-LP property as set out in the Technical Report titled “2009 Diamond Drilling Program
on the Tay-LP Property” dated March 30, 2010, prepared by David St. C. Dunn, P.Geo., and James G. Moors, PGeo (BC), who was
Vice-President, Exploration, of the Registrant at that time (the “Tay-LP Technical Report”).



The following information was
extracted from, or includes accurate paraphrasings of, the executive summary, or other sections as indicated, from the Tay-LP Technical
Report, the full copy of which is available online at www.sedar.com as filed on April 1, 2010. Defined terms and abbreviations
used herein and not otherwise defined shall have the meanings ascribed to such terms in the Tay-LP Technical Report.



Property Description



The Tay-LP project of Ross River
Gold Ltd. is a gold exploration project, covering an area of approximately 8150 hectares, located in south-central Yukon near the
Village of Ross River. The project comprises 413 mineral claims. The Tay-LP area was first staked, following a prospecting discovery
in 1984. The property has since been explored intermittently by various companies for intrusion-related gold deposits. Gold is
associated with pyrrhotite-dominant, quartz-sulphide veins and replacement zones hosted by folded Paleozoic meta-sedimentary rocks.



The 2009 exploration program was
carried out between September 9th and September 25th and comprised 1868 metres of diamond drilling. Personnel included:
one of the authors, James Moors, P.Geo., who was V.P. Exploration of Canarc Resource Corp. at that time; Robin S. Tolbert, Project
Geologist; Lyle Hansen, Assistant Geologist; and core cutters Robert Smallwood and John Dicks of Atlin. Diamond drilling was performed
by Hy-Tech Diamond Drilling of Smithers, B.C.



A road accessible tent camp located
near the centre of the property was the base of operations.



The cost of field work and analysis
on the property in 2009 was $480,000.



Reserves or resources have not
been calculated for the property.



44Canarc Resource Corp.Form 20-F





The primary author was part of
the 2003 Prospecting and Geochemical surveying program on the Tay-LP claims (Schmidt, U., 2004).



Summary



The Tay-LP project of Canarc Resource
Corp. is a gold exploration project, covering an area of approximately 7575 hectares, located in south-central Yukon, approximately
50 km south of the Village of Ross River and 160 kilometres northeast of Whitehorse. The project comprises 410 contiguous mineral
claims. Option agreements give Canarc the right to earn 100% of the property. The property is accessible by road during the summer
months via the South Canol Road and a 20 km long dirt branch road.



The region surrounding the property
is underlain by variably metamorphosed, folded and faulted Paleozoic miogeoclinal rocks of the Pelly-Cassiar Platform. They range
in age from Late Proterozoic to Triassic and include miogeoclinal clastic, carbonate and volcanic rocks. They are considered North
American in origin and were deformed during Mesozoic arc continent collision. These rocks have been intruded by mid-Cretaceous
intrusions of intermediate composition.



Gold mineralization on the property
is hosted by Cambro-Ordovician calcareous phyllite, marble and schist. Mineralization fits the intrusion-related epigenetic gold
mineralization model of the "Tintina Gold Belt", based on gold-bismuth-tellurium chemistry, mineralogy, tectonic setting
and age of intrusion. Mineralization occurs in structurally controlled veins and in replacement zones which parallel and in some
cases cross-cut the dominant foliation. The exploration objective is to define sufficient structurally controlled or skarn style
gold mineralization to support a profitable mine.



The 2009 program consisted of
10 drill holes totaling 1868 metres, drilled in 3 target areas. Results confirmed the presence and continuity of gold bearing structures.
The total cost of the field program for 2009 was $480,000.



It is recommended that a first phase
of work including an airborne geophysical survey with more advanced systems than those utilized in the 1999 survey should be carried
out. This survey will better and more accurately define the geology beneath the glacial overburden that covers the most prospective
portions of the property.



Ground Max-Min geophysical surveys
should also be carried out to extend the known anomalies and test for mineralization on the peripheries of the known intrusive
bodies. This work is estimated to take six weeks to complete at a cost of $252,328.



Following the interpretation of
the surveys recommended in Phase 1, a second phase of work consisting of systematic drilling along strike and down dip of current
pierce points that returned significant gold content and along the full range of Max-Min and aerially defined geophysical anomalies.
This program should consist of at least 2,500 meters of diamond drilling and is estimated to take eight weeks to complete at a
cost of $504,000.

45Canarc Resource Corp.Form 20-F







Location Map











David St. C. Dunn, P.Geo., and
James Moors, P.Geo, who was Vice President Exploration of the Registrant at that time, are the Qualified Persons for the Tay-LP
Technical Report.



46Canarc Resource Corp.Form 20-F







In 2010, Cap-Ex completed
a 470 kilometer airborne geophysical survey at Tay-LP which identified several new EM conductors and magnetic anomalies within
prospective geological settings. In March 2011, Cap-Ex terminated its property option agreement with Canarc.



Canarc
completed the permitting process for exploration work at the Tay-LP property in 2012.



Canarc
decided not to proceed with any further expenditure on the Tay-LP property which was written off in 2013.





Windfall Hills properties,
British Columbia, Canada



In April 2011, Canarc entered
into two property option agreements to purchase 100% interests in two adjacent gold properties located in British Columbia. In
April 2011, Canarc entered into a property option agreement with Atna Resources Ltd. (“Atna”) whereby Canarc can acquire
a 100% interest in the Uduk Lake properties by making $750,000 in cash payments over a four year period of which $125,000 has been
paid, honouring a pre-existing 1.5% NSR production royalty that can be purchased for CAD$1 million, and granting the vendor a 2%
NSR production royalty. In March 2012, Canarc amended the property option agreement in which the option payment of $100,000 due
on April 21, 2012 was payable in 12 monthly installments of $8,333 over a twelve month period beginning April 21, 2012. Property
option payments of $25,000 were paid in 2013 (2012 - $75,000). In April 2013, Canarc entered into a property purchase agreement
with Atna whereby Canarc acquired a 100% undivided interest in the Uduk Lake properties by the issuance of 1,500,000 common shares
at a value of CAD$0.10 per share, honouring a pre-existing 1.5% NSR production royalty that can be purchased for CAD$1 million,
and granting Atna a 3% NSR production royalty.



In April 2011, Canarc entered
into a property option agreement with a vendor whereby Canarc can acquire a 100% interest in the Dunn properties by making CAD$250,000
in cash payments over a four year period, and a final bonus payment based on all gold resources estimated in an independent NI
43-101 technical report. The formula for the bonus payment is $30 per oz for measured resources, $20 per oz for indicated resources,
and $10 per oz for inferred resources. In March 2012, Canarc amended the property option agreement in which the option payment
of CAD$25,000 due on April 20, 2012 was payable in three monthly installments of CAD$8,333 over a three month period beginning
April 21, 2012 which were paid. In April 2013, Canarc entered into a property purchase agreement whereby Canarc acquired a 100%
undivided interest in the Dunn properties by the issuance of 500,000 common shares at a value of CAD$0.10 per share and granting
the vendor a 2% NSR royalty which can be reduced to 1% NSR royalty for $500,000.



47Canarc Resource Corp.Form 20-F





Canarc completed a Phase 1 exploration
program on its Windfall Hills project which included detailed soil and rock geochemical sampling over known target areas in 2011.
A total of 340 geochemical soil samples were collected on a 100 meter by 25 meter grid over the main 2.8 sq. km. prospect area.
Two anomalies were delineated on the basis of multi-element geochemistry.



In June 2014, Canarc received
government permit for the drilling program which was mobilized in July 2014 and was financed by a flow-through financing of CAD$400,000
which closed in July 2014. Funds of CAD$382,900 were expended for flow through purposes as at December 31, 2014. Canarc completed
3 holes and 1,149 metres of drilling that intersected an alteration zone anomalous in gold-silver. The Company is evaluating the
possibility of additional geochemical and geophysical surveys in 2015 in order to better target the mineralized zone, subject to
financing.





Devil’s Thumb property,
British Columbia, Canada



In May 2011, Canarc staked three gold
properties, known as Devil’s Thumb, totalling 17,175 hectares, which was located northeast of its Windfall Hills properties
in central British Columbia. Canarc wrote-off the property in the third quarter of 2012.





Eskay Creek property,
British Columbia, Canada



Canarc has a one-third carried
interest in the Eskay Creek property which is located in the Skeena Mining Division, British Columbia, Canada. In fiscal 2005,
Canarc elected to write-off the associated property costs, but continues to have a one-third carried interest in the Eskay Creek
property.





ITEM 4A. UNRESOLVED STAFF COMMENTS





Not
applicable, except as noted in the Form 20-F.



In
November 2013, the TSX had advised the Registrant that the TSX was reviewing the eligibility for continued listing on the TSX
of the securities of the Registrant pursuant to Part VII of the Toronto Stock Exchange Company Manual. The Registrant was
being reviewed
under the Remedial Review Process and had been initially granted 120 days to comply with all requirements for continued listing
with subsequent extensions to comply. Specifically the Registrant needed to comply with expenditures of CAD$350,000 on exploration
or development work on its mineral resource properties and with adequate working capital. For the nine months ended September 30,
2014, the Registrant closed private placements for gross proceeds totalling CAD$3.26 million and completed its drilling program
for the Windfall Hills property. In September 2014, the TSX confirmed that the Registrant satisfied the TSX’s continued listing
requirements.

48Canarc Resource Corp.Form 20-F











ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS





Management’s discussion
and analysis in this Item 5 are intended to provide the reader with a review of factors that affected the Registrant’s performance
during the years presented and factors reasonably expected to impact on future operations and results. The following discussion
of the financial condition, changes in financial condition and results of operations of the Registrant for the three fiscal years
ended December 31, 2014, 2013 and 2012 should be read in conjunction with the consolidated financial statements of the Registrant
and related notes included therein.



The Registrant’s consolidated
financial statements are prepared in accordance with IFRS as issued by the IASB, and all dollar amounts are expressed in United
States dollars unless otherwise indicated.





5.A Operating Results





In accordance with IFRS, all costs
related to investments in mineral property interests are capitalized on a property-by-property basis. Such costs include mineral
property acquisition costs and exploration expenditures, net of any recoveries and write-downs.



The Registrant’s ability
to continue as a going concern is dependent on continued financial support from its shareholders and other related parties, the
ability of the Registrant to raise equity financing, and the attainment of profitable operations, external financings and further
share issuances to meet the Registrant’s liabilities as they become payable and for settlement of expenditures.



49Canarc Resource Corp.Form 20-F





The Registrant is not aware of
any seasonality in the business that has a material effect upon its financial condition, results of operations or cash flows. The
Registrant is not aware of any changes in the results of its operations that are other than those normally encountered in its ongoing
business.





Fiscal Year 2014– Year ended December 31, 2014 compared with December 31, 2013



Canarc incurred a net loss of
$1.83 million for the year ended December 31, 2014 which is higher than the net loss of $1.38 million for fiscal 2013, with commensurately
higher operating expenses in the current year. Net losses were impacted by different functional expense items.



Canarc has no sources of operating
revenues. Operating losses continue to be incurred for ongoing activities of Canarc in seeking an appropriate joint venture partner
to advance the New Polaris property and in pursuing mining projects of merit.



Corporate development expenses
were lower in the first quarter of 2014 than the same quarter in 2013, but were higher in the remaining quarters of 2014. In the
second quarter of fiscal 2014, Canarc conducted due diligence work on the main asset of Pan American which was its interest in
the La Cieneguita mine properties located in Chihuahua State, Mexico. This resulted in the signing of a letter of intent in February
2014 which anticipated that Canarc would acquire all of the outstanding common shares of Pan American, but was terminated in May
2014 due to results from Canarc’s due diligence. In the second quarter, Canarc focused its efforts on Santa Fe and its gold-silver
mine and mill and the organic growth potential in the district which culminated in the execution of the Share Exchange Agreement
in July 2014 whereby Canarc would issue 33 million common shares to Santa Fe and Santa Fe would issue 66 million common shares
to Canarc; effectively Canarc would have a 34% interest in Santa Fe and Santa Fe would have a 17% interest in Canarc. In October
2014, the conditions precedent set forth in the Share Exchange Agreement was not satisfied and the agreement terminated on its
own terms. Corporate development activities in the fourth quarter of fiscal 2014 focused on evaluating an alternative metallurgical
process which resulted in the Pre-Development and Earn-In Binding Agreement with PanTerra in February 2015 to advance Canarc’s
New Polaris project. Major expenses incurred for corporate development include: legal fees for drafting and finalizing agreements,
corporate and securities due diligence and property title opinions; geological and metallurgical assessments; salary allocations;
and travel expenses for Mexico and the USA. In early 2013, Canarc was involved in a strategic mine acquisition partnership which
intensified Canarc’s efforts to identify acquisition opportunities which were to be debt financed but such arrangement ceased
in March 2013. Corporate development expenses were negligible for the remaining quarters of 2013.



Remuneration for employees was
higher in the current period relative to the prior period in 2013. The employment of a full time senior officer along with severance
settlements for two other senior officers contributed to higher employee remuneration. Such employment contributed to Canarc’s
ability to close three private placements totalling CAD$3.26 million, letter of intent with Pan American which was subsequently
terminated, share exchange agreement with Santa Fe which was subsequently terminated, and the pre-development and earn-in
agreement in February 2015. Salary allocations during the term of the share exchange agreement prior to its termination resulted
in lower salaries incurred for general administration in the third quarter of fiscal 2014 in comparison to prior comparative quarters
of 2014 and 2013; these expenses have been accordingly allocated to corporate development efforts.

50Canarc Resource Corp.Form 20-F









General and administrative expenses
were higher in 2014 than in 2013. The principle factor was legal services rendered to Canarc in relation to TSX delisting review,
advisory services rendered to the Board on compensation matters, appointment of a new senior officer, severance settlements with
two other senior officers, and corporate finance issues relating to its working capital. In 2013, legal services were mainly for
the strategic mine acquisition partnership which was terminated in March 2013. Office and sundry and rent reflect the ongoing expenditures
for ancillary office support facilities in which the former was higher in the current period due to increased level of corporate
activity related to project due diligence, equity financings and exploration program for the Windfall Hills project. Regulatory
fees were higher for the current fiscal year from the proposed shares-for-debt settlement for directors’ fees payable which
required shareholder approval at Canarc’s annual general meeting held in June 2014 which resolution did not pass. In 2013,
Canarc had reduced discretionary expenses due to limited cash resources.



Shareholder relations activities
were heightened in 2014 than in 2013 for shareholder communications and marketing services principally in Europe to attract a greater
breadth of investor base, to promote new interest in Canarc’s mineral properties, and to create greater awareness of its
letter of intent with Pan American for the La Cieneguita mine project at that time. Such activities provided the catalyst for Canarc
to close equity financings of CAD$3.26 million with a geographically diverse group of overseas shareholders. Shareholder activities
continued from commitments from prior quarters with no new shareholder activities being implemented in the remaining quarters of
fiscal 2014 as the primary focus was the Share Exchange Agreement with Santa Fe and arranging financing for Santa Fe, which agreement
was terminated in October 2014.



Share-based payments were higher
in the current period than in the prior comparable period. Canarc granted 500,000 stock options in January 2014 which are subject
to vesting provisions in which 20% of the options vest immediately on the grant date and 20% vest every six months thereafter.
Then in July 2014, Canarc granted 4,050,000 stock options to directors, officers and employees with an exercise price of CAD$0.10
and an expiry date of July 17, 2019, and which are subject to vesting provisions in which 20% of the options vest immediately on
the grant date and 20% vest every six months thereafter; this resulted in the increase in share based payments expenses in the
third quarter of 2014. Two million stock options with vesting provisions were granted in the second quarter of 2013. The forfeiture
of stock options in January 2014 and April 2014 due to the retirement of two senior officers reduced share-based payments. Also
the 1,460,000 stock options which were granted in June 2012 with an exercise price of CAD$0.145 and an expiry date of June 18,
2017 will only vest when Canarc consummates a major transaction or at the discretion of its Board of Directors, and such stock
options have not vested as at December 31, 2014. No probable likelihood of a material transaction was attributed to these June
2012 stock option grants, and therefore no share-based payments have been recognized.



Interest income is realized from
Canarc’s premium investment savings account which is cashable at any time and for the accrued interest for the $40,000 loan
owed by Pan American and the $200,000 promissory note and a further loan of $20,000 owed by Santa Fe in which such demand loans
were written off due to impairment issues as collectability was doubtful. In 2015, demand notices for repayment have been submitted
by Canarc to Santa Fe, as Canarc maintains its legal rights relative to the promissory note loan.

51Canarc Resource Corp.Form 20-F







Interest expense was higher in
2013 from the demand loans and for the estimated flow through indemnity obligation from ineligible Canadian exploration expenditures
for flow-through purposes; the latter was derecognized at the end of fiscal 2013 as Canarc determined that it was improbable that
any further cash outlays would be required. Demand loans were repayable on demand and bore an interest rate of 12% compounded monthly
with interest payable semi-annually. In January 2014, Canarc repaid all principal and interest in full settlement of outstanding
demand loans.



Foreign exchange gain or loss
reflects the transactional impact in the foreign exchange fluctuations of the US$ relative to the CAD$, and not attributable to
translation effects.



As at December 31, 2014, Canarc
has mineral property interests which are comprised of the following:





|                                        |  | British Columbia (Canada) |                      | Yukon (Canada) |                        | 
|--------------------------------------- |  | ------------------------- | -------------------- | -------------- | ---------------------- | 
|($000s)                                 |  | New Polaris               | Windfall Hills       |                | Tay-LP                 | 
|                                        |  |                           |                      |                |                        | 
|Acquisition Costs:                      |  |                           |                      |                |                        | 
|                                        |  |                           |                      |                |                        | 
|Balance, December 31, 2012              |  | $              3,905      | $                210 |                | $                174   | 
|Additions                               |  | -                         | 212                  |                | -                      | 
|Foreign currency translation adjustment |  | (13)                      | (14)                 |                | (11)                   | 
|Write-off                               |  | -                         | -                    |                | (163)                  | 
|Balance, December 31, 2013              |  | 3,892                     | 408                  |                | -                      | 
|Additions                               |  | -                         | 27                   |                | -                      | 
|Foreign currency translation adjustment |  | (16)                      | (34)                 |                | -                      | 
|Balance, December 31, 2014              |  | $              3,876      | $                401 |                | $                    - | 
|                                        |  |                           |                      |                |                        | 
|Deferred Exploration Expenditures:      |  |                           |                      |                |                        | 
|                                        |  |                           |                      |                |                        | 
|Balance, December 31, 2012              |  | $              8,643      | $                117 |                | $                495   | 
|Additions                               |  | 17                        | (18)                 |                | 10                     | 
|Foreign currency translation adjustment |  | (722)                     | (7)                  |                | (32)                   | 
|Write-off                               |  | -                         | -                    |                | (473)                  | 
|Balance, December 31, 2013              |  | 7,938                     | 92                   |                | -                      | 
|Additions, net of recoveries            |  | 23                        | 352                  |                | -                      | 
|Foreign currency translation adjustment |  | (871)                     | (7)                  |                | -                      | 
|Balance, December 31, 2014              |  | $              7,090      | $                437 |                | $                    - | 
|                                        |  |                           |                      |                |                        | 
|Mineral property interests:             |  |                           |                      |                |                        | 
|Balance, December 31, 2013              |  | $            11,830       | $                500 |                | $                    - | 
|Balance, December 31, 2014              |  | 10,966                    | 838                  |                | -                      | 
|                                        |  |                           |                      |                |                        | 





52Canarc Resource Corp.Form 20-F







Fiscal Year 2013– Year ended December 31, 2013 compared with December 31, 2012



Canarc incurred a net loss of
$1.38 million for the year ended December 31, 2013 which is slightly higher than the net loss of $1.21 million for fiscal 2012,
whereas operating losses were lower in the current year. Net losses were impacted by different functional expense items.



Canarc has no sources of operating
revenues. Operating losses continue to be incurred for ongoing activities of Canarc in seeking an appropriate joint venture partner
for the New Polaris property and in pursuing new projects of merit.



Corporate development expenses
were higher in the first quarter of 2013 than the same quarter in 2012. The equity financings in the latter half of fiscal 2012
and in January 2013 allowed some discretionary funds for Canarc to actively assess projects of merit. The impetus was also pre-empted
by the SMAP arrangement between Canarc and Canford as Canarc intensified its efforts to identify acquisition opportunities which
were to be debt financed by Canford and which arrangement ceased in March 2013. Corporate development expenses were negligible
in the remaining quarters of 2013.



Remuneration for employees was
lower in each quarterly period in 2013 relative to the comparable periods in 2012 due to reduction in staff personnel and the retirement
of one director in the first half of 2013, as Canarc continued to evaluate gold projects for acquisition purposes and to seek possible
partners for the New Polaris project. Similar effects occurred on a quarterly comparative basis for 2013. Exploration activities
were nominal for Canarc’s mineral exploration properties which were subject to financing, resulting in lower employee allocations
to its various mineral property interests.



General and administrative expenses
were lower in 2013 than in 2012 which were attributed to the reduced level of corporate activity for most of 2013 and for professional
fees for audit. On a quarter by quarter basis for 2013, legal fees were higher in the second quarter due to higher legal fees in
formalizing the engagement with Canford and the adoption of the advance notice policy for the nomination of directors. Office and
sundry and rent reflect the ongoing minimalistic expenditures for ancillary office support facilities. Regulatory fees generally
are higher earlier in the fiscal year due to sustaining and annual filing fees and annual general meeting. Canarc has reduced discretionary
expenses due to limited cash resources.



Shareholder relations activities
were higher in the early part of 2012 so as to promote greater awareness of the profile of Canarc and its portfolio of projects,
especially the New Polaris project with its revised preliminary economic assessment which indicated conceptually the project’s
stronger financial viability due to heightened gold prices, and its other mineral property interests in Tay-LP and Windfall Hills.
The focus of the shareholder relations program in 2012 was to expand the market awareness of Canarc and its base of shareholders,
so as to allow Canarc to advance its New Polaris project through a joint venture or strategic partnership. These efforts continued
to attract expressions of interests in Canarc’s New Polaris project, and would supplement the financial advisory services from Primary
Capital in evaluating strategic alternatives to enhance shareholder value for Canarc in 2012. Also such activities provided the
catalyst for the brokered private placement for CAD$1.13 million with Canaccord as agent and with Canford as the single subscriber
which became an Insider of Canarc by virtue of holding more than 10% of the issued and outstanding share capital of Canarc at the
closing date of the financing in September 2012, and a 120-day period of exclusivity for Canford to complete its due diligence
and to execute a property option agreement for Canford to earn up to a 51% interest in the New Polaris gold project in return for
up to a CAD$30 million investment in exploration and development of the property. This relationship between Canarc and Canford
transitioned into a SMAP in February 2013 in which such relationship ended in March 2013. Shareholder relations activities subsided
during 2013, given the ongoing market weaknesses and trend of gold prices at that time.

53Canarc Resource Corp.Form 20-F









Share-based payments were significantly
lower in 2013 than in 2012. Fewer stock options vested or were subject to vesting provisions in the current year than in the prior
year. Also the 1,460,000 stock options which were granted in June 2012 with an exercise price of CAD$0.145 and an expiry date of
June 18, 2017 will only vest when Canarc consummates a major transaction or at the discretion of its Board of Directors, and such
stock options have not vested as at December 31, 2013. No probable likelihood of a material transaction was attributed to these
June 2012 stock option grants, and therefore no share-based payments were recognized. The retirement of a director in June 2012
and June 2013 resulted in the forfeiture of unvested stock options which reduced share-based payments expense.



In 2013, Canarc recognized a gain
of $99,000 from writing off certain payables related to an exploration project which was written off in 2008.



Also in 2013, Canarc recognized
a gain from writing off the provision for $213,000 related to flow-through tax obligations. Canarc determined that it was improbable
that the obligation would result in cash outlays.



The higher operating losses in
2012 were offset by the realized gain of $77,000 from the disposition of available-for-sale securities. The disposition of Cap-Ex
shares provided proceeds of CAD$92,400 for working capital in the first quarter of 2012.



Interest expense was higher in
2012 from the compounding effects of interest accruals for existing and greater demand loans in 2012 and for the estimated flow
through indemnity obligation from ineligible Canadian exploration expenditures for flow-through purposes. In fiscal 2012, Canarc
arranged demand loans of $358,000 from certain directors and an officer of Canarc, which were repayable on demand and bore an interest
rate of 12% compounded monthly with interest payable semi-annually. Demand loans which were outstanding in 2012 were settled in
full in the fourth quarter of 2012. In fiscal 2013, Canarc received demand loans of $126,000 from certain directors of Canarc,
which were repayable on demand and bore an interest rate of 12% compounded monthly with interest payable semi-annually. Interest
expense in 2013 was accrued for the demand loans and for the estimated flow through indemnity obligation. In January 2014, Canarc
repaid all principal and interest in full settlement of outstanding demand loans.



54Canarc Resource Corp.Form 20-F





The appreciation of the US$ relative
to the CAD$ had nominal impact on Canarc’s net loss for 2013.



In fiscal 2013, Canarc wrote-down
its investment in Aztec Metals Corp. (“Aztec”), a company with two common directors, to a nominal value of CAD$100
due to the lack of liquidity of the shares of Aztec. There has been no quoted market value for the Aztec shares and such investment
has in the past been recorded at cost. Canarc also wrote-off its receivable of $52,000 from Aztec due to Aztec’s inability
to raise adequate financing to repay its debts owed to Canarc.



In 2013, Canarc wrote-off the
Tay LP property amounting to $636,000, which contributed significantly to the higher net loss in comparison to 2012. Canarc wrote-off
the Devil’s Thumb property in 2012.



As at December 31, 2013, Canarc
has mineral property interests which are comprised of the following:



55Canarc Resource Corp.Form 20-F









|                                               |  | British Columbia (Canada) |                       | Yukon (Canada)         |  |                       
|---------------------------------------------- |  | ------------------------- | --------------------- | ---------------------- |  | ----------------------
|($000s)                                        |  | New Polaris               | Windfall Hills        | Devil's Thumb          |  | Tay-LP                
|                                               |  |                           |                       |                        |  |                       
|Acquisition Costs:                             |  |                           |                       |                        |  |                       
|                                               |  |                           |                       |                        |  |                       
|Balance, December 31, 2011                     |  | $              3,900      | $                  67 | $                    6 |  | $                146  
|Additions                                      |  | -                         | 141                   | -                      |  | 25                    
|Adjustments from change in functional currency |  | 5                         | 2                     | -                      |  | 3                     
|Write-off                                      |  | -                         | -                     | (6)                    |  | -                     
|Balance, December 31, 2012                     |  | 3,905                     | 210                   | -                      |  | 174                   
|Additions                                      |  | -                         | 212                   | -                      |  | -                     
|Foreign currency translation adjustment        |  | (13)                      | (14)                  | -                      |  | (11)                  
|Write-off                                      |  | -                         | -                     | -                      |  | (163)                 
|Balance, December 31, 2013                     |  | $              3,892      | $                408  | $                    - |  | $                    -
|                                               |  |                           |                       |                        |  |                       
|Deferred Exploration Expenditures:             |  |                           |                       |                        |  |                       
|                                               |  |                           |                       |                        |  |                       
|Balance, December 31, 2011                     |  | $              8,285      | $                106  | $                  15  |  | $                423  
|Additions                                      |  | 118                       | 9                     | 5                      |  | 62                    
|Adjustments from change in functional currency |  | 240                       | 2                     | 1                      |  | -                     
|Write-off                                      |  | -                         | -                     | (21)                   |  | 10                    
|Balance, December 31, 2012                     |  | 8,643                     | 117                   | -                      |  | 495                   
|Additions                                      |  | 17                        | (18)                  | -                      |  | 10                    
|Foreign currency translation adjustment        |  | (722)                     | (7)                   | -                      |  | (32)                  
|Write-off                                      |  | -                         | -                     | -                      |  | (473)                 
|Balance, December 31, 2013                     |  | $              7,938      | $                  92 | $                    - |  | $                    -
|                                               |  |                           |                       |                        |  |                       
|Mineral property interests:                    |  |                           |                       |                        |  |                       
|Balance, December 31, 2012                     |  | $            12,548       | $                327  | $                    - |  | $                669  
|Balance, December 31, 2013                     |  | 11,830                    | 500                   | -                      |  | -                     
|                                               |  |                           |                       |                        |  |                       



Environmental Liabilities



The Registrant’s policy
is to maintain all operations at North American standards, notwithstanding that certain of the countries within which it may operate
may not yet have fully developed such standards in respect to environmental concerns. In accordance with government requirements
in Canada, refundable deposits of CAD$250,000 have been placed with regulatory agencies in respect to the Registrant’s New
Polaris gold property in British Columbia. There are no known environmental contingencies in respect to these or any of the other
Registrant’s mineral property interests.



56Canarc Resource Corp.Form 20-F







Critical Accounting Policies



For the Registrant’s exploration
activities, there is no product, sales or inventory in the conventional sense. The recoverability of costs capitalized to mineral
property interests and the Registrant’s future financial success are dependent upon the extent to which it can discover mineralization
and the economic viability of advancing such mineral property interests beyond the exploration stage. Such activities may take
years to complete and the amount of resulting income, if any, is difficult to determine with any certainty. Many of the key factors
are outside of the Registrant’s control. The sales value of any mineralization discovered by the Registrant is largely dependent
upon factors beyond the Registrant’s control such as the market value of the metals.



As the carrying value and amortization
of mineral property interests and capital assets are, in part, related to the Registrant’s mineral reserves, the estimation
of such reserves is significant to the Registrant’s position and results of operations. As of the date of this annual report,
the Registrant has not established any reserves on its mineral property interests.



In accordance with an acceptable
accounting policy under IFRS, all costs related to investments in mineral property interests are capitalized on a property-by-property
basis. Such costs include mineral property acquisition costs and exploration and development expenditures, net of any recoveries.
The costs related to a mineral property interest from which there is production, together with the costs of mining equipment, will
be amortized using the unit-of-production method. When there is little prospect of further work on a mineral property interest
being carried out by the Registrant or its partners or when a property interest is abandoned or when the capitalized costs are
not considered to be economically recoverable, the related mineral property costs are written down to the amount recoverable. The
amounts for mineral property interests as shown in the Registrant’s consolidated financial statements represent costs incurred
to date, less write-downs and any recoveries, and are not intended to reflect present or future values.



The Registrant accounts for share-based
payments using a fair value-based method with respect to all stock-based payments to directors, employees and non-employees. Share-based
payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based
payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments
issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the
goods or services are received. The offset to the recorded cost is to the reserve for share-based payments. Consideration received
on the exercise of stock options is recorded as share capital and the related reserve for share-based payments is transferred to
share capital. Upon expiry, the recorded fair value is transferred from reserve for share-based payments to deficit.





5.B Liquidity and Capital Resources



57Canarc Resource Corp.Form 20-F





The Registrant is in the exploration
stage and has not yet determined whether its mineral property interests contain reserves. The recoverability of amounts capitalized
for mineral property interests is entirely dependent upon the existence of reserves, the ability of the Registrant to obtain the
necessary financing to complete the development and upon future profitable production. The Registrant knows of no trends, demands,
commitments, events or uncertainties that may result in the Registrant’s liquidity either materially increasing or decreasing
at the present time or in the foreseeable future. Material increases or decreases in the Registrant’s liquidity are substantially
determined by the success or failure of the Registrant’s exploration programs and overall market conditions for smaller mineral
exploration companies. Since its incorporation in 1987, the Registrant has endeavoured to secure mineral property interests that
in due course could be brought into production to provide the Registrant with cash flow which would be used to undertake work programs
on other projects. To that end, the Registrant has expended its funds on mineral property interests that it believes have the potential
to achieve cash flow within a reasonable time frame. As a result, the Registrant has incurred losses during each of its fiscal
years since incorporation. This result is typical of smaller exploration companies and will continue unless positive cash flow
is achieved.



The following table contains selected
financial information of Canarc’s liquidity:





|                             | December 31,       
|---------------------------- | -------------------
|($000s)                      | 2014               
|                             |                    
|Cash                         | $               675
|Working capital (deficiency) | (156)              
|                             |                    





Canarc has no sources of operating
revenues, and ongoing operating expenses continue to reduce its cash resources and working capital. Operating losses continued
to be incurred for ongoing activities of Canarc in seeking an appropriate joint venture partner for the New Polaris property and
in pursuing new projects of merit.



In 2013, stock options for 769,000
common shares were exercised for proceeds of CAD$77,800. Also stock options for 700,000 common shares were cancelled for the exercise
of share appreciation rights for 207,024 common shares.



In fiscal 2013, Canarc received
demand loans of $126,000 from two directors, which were repayable on demand and bore an interest rate of 12% compounded monthly
with interest payable semi-annually. In January 2014, the Company repaid all principal and interest in full settlement of outstanding
demand loans.



The working capital deficiency
of $921,000 at December 31, 2013 includes demand loans of $131,000 which were fully settled in January 2014.

58Canarc Resource Corp.Form 20-F







On January 31, 2014, Canarc closed a
private placement for 18 million units at a price of CAD$0.05 per unit for gross proceeds of CAD$900,000. Each unit was comprised
of one common share and one-half of a whole common share purchase warrant; each whole warrant is exercisable to acquire one common
share at an exercise price of CAD$0.10 per share until January 31, 2016. Finder’s fees of CAD$22,500 were paid for the private
placement.



In March and April 2014, Canarc closed
a private placement in two tranches totalling 19.6 million units at a price of CAD$0.10 per unit for gross proceeds of CAD$1.96
million with each unit comprised of one common share and one-half of a whole common share purchase warrant; each whole warrant
is exercisable to acquire one common share at an exercise price of CAD$0.15 per share for a three year period. On March 18, 2014,
Canarc closed the first tranche for 10.6 million units for CAD$1.06 million, and paid CAD$66,170 in cash and issued 661,718 in
warrants as finders’ fees. On April 3, 2014, Canarc closed the second tranche for 9 million units for CAD$900,000, and paid
CAD$6,070 in cash and issued 60,725 in warrants as finders’ fees. The finders’ fee warrants have the same terms as
the underlying warrants in the unit private placement.



On July 9, 2014, Canarc closed a private
placement for 5 million units at CAD$0.08 per unit for gross proceeds of CAD$400,000. Each unit was comprised of one flow-through
common share and one-half of a whole common share purchase warrant; each whole warrant is exercisable to acquire one non-flow through
common share at an exercise price of CAD$0.15 per share until July 9, 2016. Funds of CAD$382,900 were expended for flow-through
purposes as at December 31, 2014.



In October 2014, Canarc received
358,000 shares from Aztec Metals Corp., a company sharing certain common directors, (“Aztec”) in settlement of debt
owed to Canarc which Canarc had written off in 2013.



At December 31, 2014, to maintain
its interest and/or to fully exercise the options under various property agreements covering its property interests, Canarc must
incur exploration expenditures on the properties and/or make payments in the form of cash and/or shares to the optionors as follows:





| |                                          |          
| | ---------------------------------------- | ---------
| |                                          | Number of
| |                                          | Shares   
| |                                          |          
| | New Polaris:                             |          
| | Net profit interest reduction or buydown | 150,000  
| |                                          |          
| |                                          | 150,000  
| |                                          |          





These amounts may be reduced in
the future as Canarc determines which properties to continue to explore and which to abandon.



59Canarc Resource Corp.Form 20-F





Canarc has entered into a number
of option agreements for mineral property interests that involve payments in the form of cash and/or shares of Canarc as well as
minimum exploration expenditure requirements. Under Item 5.F, further details of contractual obligations are provided as at December
31, 2014.



On February 24, 2015, Canarc entered
into a Pre-Development and Earn-In Binding Agreement with PanTerra. PanTerra has a 30-month option to earn a 50% interest in Canarc’s
New Polaris project by spending a total of CAD$10 million in three stages of predevelopment activities including metallurgical
test work, drilling, detailed mine planning, tailings dam design, environmental permitting, and completion of a definitive feasibility
study. Items 4.A and 4.D provide further details.



Canarc’s ability to continue
as a going concern is dependent on the ability of Canarc to raise debt or equity financings, and the attainment of profitable operations.
Management would need to raise the necessary capital to meet its planned business objectives.



Canarc will continue to rely upon
equity financing as its principal source of financing its projects and its ongoing working capital needs.





5.C Research and Development, Patents
and Licenses, etc.



The Registrant does not currently
carry out research and development activities.



Items 4.A, 4.D, 5.A and 5.F provide
details of the Registrant’s mineral property interests, exploration activities, acquisitions and write-downs.





5.D Trend Information



The Registrant knows of no trends,
demand, commitments, events or uncertainties that are reasonably likely to have a material effect on the Registrant’s net
sales or revenues, income from continuing operations, profitability, liquidity or capital resources or that would cause financial
information not necessarily to be indicative of future operating results or financial condition, other than disclosed or inferred
in this Form 20-F.



60Canarc Resource Corp.Form 20-F





The Registrant currently has no
active business operations that would be affected by recent trends in productions, sales, etc. The Registrant has no material net
sales or revenues that would be affected by recent trends other than the general effect of mineral prices on its ability to raise
capital and those other general economic items as set out in Item 3.D.





5.E Off-Balance Sheet Arrangements



There are no known significant
or material off-balance sheet arrangements other than those disclosed in this Form 20-F and in the Registrant’s audited consolidated
financial statements for the years ended December 31, 2014, 2013 and 2012.





Shareholder Rights Plan



On May 31, 2005, the shareholders
of the Registrant approved a shareholder rights plan (the “Plan”), that became effective on April 30, 2005. The Plan
is intended to ensure that any entity seeking to acquire control of the Registrant makes an offer that represents fair value to
all shareholders and provides the board of directors with sufficient time to assess and evaluate the offer, to permit competing
bids to emerge, and, as appropriate, to explore and develop alternatives to maximize value for shareholders. Under the Plan, each
shareholder at the time of the Plan’s adoption was issued one Right for each common share of the Registrant held. Each Right
entitles the registered holder thereof, except for certain “Acquiring Persons” (as defined in the Plan), to purchase
from treasury one common share at a 50% discount to the prevailing market price, subject to certain adjustments intended to prevent
dilution. The Rights are exercisable after the occurrence of specified events set out in the Plan generally related to when a person,
together with affiliated or associated persons, acquires, or makes a take-over bid to acquire, beneficial ownership of 20% or more
of the outstanding common shares of the Registrant. The Rights expire on April 30, 2015. Item 10.B provides further details.





Share Appreciation Rights



At the discretion of the Board,
certain stock option grants provide the stock option holder the right to receive the number of common shares, valued at the quoted
market price at the time of exercise of the stock options, that represent the share appreciation since granting the stock options.





61Canarc Resource Corp.Form 20-F





5.F Tabular Disclosure of Contractual
Obligations



As the Registrant performs exploration
on its mineral property interests, it decides which ones to proceed with and which ones to abandon. Accordingly, the minimum expenditure
commitments are reduced as the Registrant narrows its interests. To fully exercise the options under various agreements for the
acquisition of interests in properties located in Canada, the Registrant must incur exploration expenditures on the properties
and make payments to the optionors as follows as at December 31, 2014:



|                                         |                        |               |                        |                     |               
|---------------------------------------- | ---------------------- | ------------- | ---------------------- | ------------------- | --------------
|                                         | Payments due by Period |               | Payments due by Period |                     |               
|                                         | (CAD$000s)             |               | (US$000s)              |                     | Others        
|                                         |                        | Less          |                        |                     | More          
|                                         |                        | than          |                        |                     | than          
|                                         | Total                  | 1 year        | 1-3 years              | 3-5 years           | 5 years       
|                                         |                        |               |                        |                     |               
|New Polaris:                             |                        |               |                        |                     |               
|Net profit interest reduction or buydown | $           -          | $           - | $               -      | $                 - | $            -
|                                         |                        |               |                        |                     |               
|Total                                    | $           -          | $           - | $               -      | $                 - | $            -



These amounts may be reduced
in the future as the Registrant determines which properties continue to be of merit and abandons those with which it does not
intend to proceed.



Pursuant to the terms of the LOI,
Canarc had agreed to pay $100,000 (the “Funds”) to Pan American, following TSX approval; funds of $40,000 were advanced
in April 2014 which bore an interest rate of 1% per month and was written off in September 2014 as collectability was doubtful.
Pan American had agreed to repay the Funds to Canarc in the event that (a) Canarc terminated the LOI or determined not to proceed
with the Transaction as a result of its due diligence; or (b) Pan American terminated the LOI or determined not to proceed with
the Transaction for any reason. Canarc and Pan American were to negotiate an interim loan facility whereby Canarc would lend Pan
American up to a total of $250,000 prior to closing of the Transaction. In May 2014, as a result of its due diligence, Canarc terminated
the LOI with Pan American. Item 4.A provides further details.



Pursuant to the Share Exchange
Agreement with Santa Fe in July 2014, Canarc advanced a promissory note loan of $200,000 to Santa Fe, which initially bore an interest
rate of 12% per annum compounded monthly; both the principal and interest were due and payable on January 15, 2015, and any past
due principal and interest shall bear an interest rate of 14%. In September 2014, further funds of $20,000 were advanced to Santa
Fe. The promissory note receivable from Santa Fe along with accrued interest was determined to be impaired as collectability was
doubtful, and was written off at December 31, 2014. In 2015, demand notices for repayment have been submitted by Canarc to Santa
Fe, as Canarc maintains its legal rights relative to the promissory note loan. Item 4.A provides further details.





62Canarc Resource Corp.Form 20-F





5.G Safe Harbor



This
document may contain forward-looking statements. See “Caution – Forward-Looking Statements” at the beginning
of this annual report. The Registrant desires to take advantage of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protections of the safe harbor
with respect to all forward-looking statements. Several important factors, in addition to the specific factors discussed in connection
with such forward-looking statements individually, could affect the future results of the Registrant and could cause those results
to differ materially from those expressed in the forward-looking statements contained herein.



The Registrant’s estimated
or anticipated future results or other non-historical facts are forward-looking and reflect the Registrant’s current perspective
of existing trends and information. These statements involve risks and uncertainties that cannot be predicted or quantified, and
consequently actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks
and uncertainties include, among others:



| | · | risks related to our exploration and development activities;
| | - | ------------------------------------------------------------

| | · | risks related to the ongoing financing of our planned operations;
| | - | -----------------------------------------------------------------

| | · | risks related estimates of mineral deposits;
| | - | --------------------------------------------

| | · | risks related to fluctuations in mineral prices;
| | - | ------------------------------------------------

| | · | risks related to the title of our properties;
| | - | ---------------------------------------------

| | · | risks related to the highly competitive mineral exploration and mining
industry;
| | - | --------------------------------------------------------------------------------

| | · | risks related to potential conflicts of interest with our officers
and directors;
| | - | ---------------------------------------------------------------------------------

| | · | risks related to environmental and regulatory requirements;
| | - | -----------------------------------------------------------

| | · | risks related to foreign currency fluctuations;
| | - | -----------------------------------------------

| | · | risks related to the Registrant’s possible status as a passive
foreign investment company;
| | - | ------------------------------------------------------------------------------------------

| | · | risks related to the volatility of the Registrant’s common
stock; and
| | - | ---------------------------------------------------------------------

| | · | risks related to the possible dilution of the Registrant’s
common stock,
| | - | ------------------------------------------------------------------------



as well as other risks and uncertainties
detailed in this annual report and from time to time in the Registrant’s other SEC filings.



Therefore, the Registrant cautions
each reader of this document to consider carefully these factors as well as the specific factors that may be discussed with each
forward-looking statement in this document or disclosed in the Registrant’s filings with the SEC as such factors, in some cases, could
affect the ability of the Registrant to implement its business strategy and may cause actual results to differ materially from
those contemplated by the statements expressed therein. Forward-looking statements are subject to a variety of risks and uncertainties
including, but not limited to, the risks referred under the section “Risk Factors” under Item 3.D above.

63Canarc Resource Corp.Form 20-F











ITEM 6. DIRECTORS, SENIOR MANAGEMENT
AND EMPLOYEES





6.A Directors and Senior Management



In accordance with the provisions
of the Business Corporations Act (British Columbia) the overall control of the business and affairs of the Registrant is
vested in its board of directors. The board of directors of the Registrant currently consists of four members elected by the shareholders
of the Registrant at each annual meeting of shareholders of the Registrant.



64Canarc Resource Corp.Form 20-F









The directors and senior management
of Canarc as of April 22, 2015 are:



|Name
        and
        Province/State
        and Country of Residence | Principal
        Occupation and Occupation during the Past 5 Years (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Current
        Position with the Registrant and Period of Service                             
|------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------
|COOKE,
        Bradford
        British Columbia,
        Canada         | Chairman and Director
        of Canarc Resource Corp.
        (since January
        22, 1987);
        Chief Executive
        Officer
        (from January
        22, 1987 to January 13, 2014);
        President of Canarc
        Resource Corp.
        (from January 22,
        1987 to January 1, 2006);
        Chief Executive
        Officer and Director of Endeavour Silver Corp.
        (since July 25,
        2002).                                                                                                                                                                                                  | Chairman and Director
        of Canarc Resource Corp.
        (since January
        22, 1987)
|BRIED, Bruce(2)
        British Columbia,
        Canada                 | President and
        Chief Operating Officer of Canarc Resource Corp.
        (from February
        15, 2007 to May 31, 2008);
        Vice-President, Mining, for Endeavour Silver Corp.
        (from March 2005 to February 2007)                                                                                                                                                                                                                                                                                                                                                                                                      | Director
        (since June 1,
        2008)                                                  
|BURIAN, Martin (2)
        British Columbia,
        Canada              | Chief Financial Officer of Cap-Ex Iron Ore Ltd.
        (since July 11, 2013);
        Director and Chief Financial Officer of Tinkerine Studio
        Ltd.
        (since Feb. 2014);
        Director of Alberta Star Development Corp.
        (since June 14, 2013);
        Director of Atlas Cloud Enterprises Inc.
        (since July 9, 2014);
        Managing Director of Investment Banking for Haywood
        Securities Inc.
        (from Nov. 2010 to May 2013);
        President (from July 2009 to Oct. 2010) and Vice-President
        (from July 2005 to July 2009) Corporate Finance of Bolder Investment Partners | Director
        (since November
        1, 2013)                                              
|HARRIS, Leonard (2)
        Colorado, U.S.A.                             | Retired                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Director
        (since June 5,
        2001)                                                  
|CHILOFLISCHI,
        Catalin
        British Columbia,
        Canada   | Director of Corporate Communications for Aurcana Corporation
        (from September 2012 to December 2013);
        Manager/Director of Investor Communications for Selwyn
        Resources Corp.
        (from July 2010 to September 2012);
        Senior Analyst for Northwest & Ethical Investments
        (from August 2004 to July 2010)                                                                                                                                                                                                                                                                                          | Chief Executive
        Officer
        (since January
        13, 2014)                       
|BILES, Garry
        British Columbia,
        Canada                    | Vice-President,
        Mining, of Canarc Resource Corp.
        (from March 1,
        2007 to May 31, 2008);
        General Manager of Glencairn Gold Corp.
        (from April 2005 to January 2007)                                                                                                                                                                                                                                                                                                                                                                                                                                    | President and
        Chief Operating Officer
        (since June 1,
        2008)             
|LOCKWOOD, Stewart
        British Columbia,
        Canada               | Barrister & Solicitor, Vector Corporate Finance Lawyers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Secretary
        (since 1994)                                                                 
|YEE, Philip
        British Columbia,
        Canada                     | Chief Financial
        Officer, Vice-President (Finance) and Director of Caza Gold Corp.
        (since November
        2007);
        Chief Financial
        Officer and Vice-President (Finance) of Parallel Resources Ltd.
        (since November
        2009 to October 2011);
        Finance Manager
        and/or Controller for Canarc Resource Corp.
        (from May 2003
        to June 2005);
        Chief Financial
        Officer, Finance Manager and/or Controller for Endeavour Silver Corp.
        (from May 2003
        to February 2007)                                                                    | Chief Financial
        Officer and Vice-President (Finance)
        (since June 2005)         



| | (1) | Unless otherwise stated above, each of the above-named persons has held the principal occupation
or employment indicated for at least five years.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Members of the Audit Committee.
| | --- | -------------------------------



65Canarc Resource Corp.Form 20-F







No director or officer has any
family relationship with any other director or officer. The term of office of each of the directors will continue until the next
annual general meeting, or until his successor is duly elected, unless his office is vacated in accordance with the articles of
the Registrant. Officers hold office at the pleasure of the directors.



To the best of the Registrant’s
knowledge, there are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which
any of the Registrant’s officers or directors was selected as an officer or director of the Registrant.





6.B Compensation





Statement of Executive
Compensation



66Canarc Resource Corp.Form 20-F





The
Registrant is required, under applicable securities legislation in Canada, to disclose to its shareholders details of compensation
paid to its directors and officers. The following fairly reflects all material information regarding compensation paid to the Registrant's
directors and officers that has been disclosed to the Registrant’s shareholders under applicable Canadian law.



During
the fiscal period ended December 31, 2014, the aggregate compensation incurred by the Registrant to all individuals who were directors
and officers, at the time of their remuneration, in all capacities as a group was CAD$770,000 of which CAD$150,000 was for severance.



The table below discloses information
with respect to executive compensation paid by the Registrant to its directors and officers for the fiscal year ended December
31, 2014. The following table sets forth, for the periods indicated, the compensation of the directors and officers.



SUMMARY
OF COMPENSATION

PAID
TO DIRECTORS AND OFFICERS

(in
terms of Canadian dollars)



|Name and
        principal position                                    | Year                                 | Salary(1)
        ($) | Share-based awards($) | Option-based awards(2)
        ($) | Non-equity incentive
        plan compensation(3)
        ($) | Pension
        value(5)
        ($) | All other
        compensation(6)
        ($) | Total
        compensation(7)
        ($)
|---------------------------------------------------------------------- | ------------------------------------ | --------------------- | --------------------- | ---------------------------------- | ------------------------------------------------------------- | ------------------------------------ | --------------------------------------------- | -----------------------------------------
|Annual
        Incentive
        plans(3)                              | Long-term
        incentive plans(4)
|Bradford J. Cooke(8)
        Director, Chairman and former CEO         | 2014                                 | Nil                   | Nil                   | $63,620                            | Nil                                                           | Nil                                  | Nil                                           | $4,000                                   
|2013                                                                   | $18,511                              | Nil                   | $31,639               | Nil                                | Nil                                                           | Nil                                  | $8,000                                        | $58,150                                  
|2012                                                                   | $35,290                              | Nil                   | $3,860                | Nil                                | Nil                                                           | Nil                                  | $8,000                                        | $47,150                                  
|Leonard Harris
        Director                                        | 2014                                 | Nil                   | Nil                   | $23,858                            | Nil                                                           | Nil                                  | Nil                                           | $5,000                                   
|2013                                                                   | Nil                                  | Nil                   | $12,656               | Nil                                | Nil                                                           | Nil                                  | $8,000                                        | $20,656                                  
|2012                                                                   | Nil                                  | Nil                   | $3,860                | Nil                                | Nil                                                           | Nil                                  | $8,000                                        | $11,860                                  
|Martin Burian (9)
        Director                                     | 2014                                 | Nil                   | Nil                   | $23,858                            | Nil                                                           | Nil                                  | Nil                                           | $6,000                                   
|2013                                                                   | Nil                                  | Nil                   | Nil                   | Nil                                | Nil                                                           | Nil                                  | $1,326                                        | $1,326                                   
|2012                                                                   | N/A                                  | N/A                   | N/A                   | N/A                                | N/A                                                           | N/A                                  | N/A                                           | N/A                                      
|Bruce Bried
        Director                                           | 2014                                 | Nil                   | Nil                   | $23,858                            | Nil                                                           | Nil                                  | Nil                                           | $5,000                                   
|2013                                                                   | Nil                                  | Nil                   | $12,656               | Nil                                | Nil                                                           | Nil                                  | $8,000                                        | $20,656                                  
|2012                                                                   | Nil                                  | Nil                   | $3,860                | Nil                                | Nil                                                           | Nil                                  | $8,000                                        | $11,860                                  
|Catalin Chiloflischi (10)
        Chief Executive Officer              | 2014                                 | $154,852              | Nil                   | $99,193                            | Nil                                                           | Nil                                  | Nil                                           | Nil                                      
|2013                                                                   | N/A                                  | N/A                   | N/A                   | N/A                                | N/A                                                           | N/A                                  | N/A                                           | N/A                                      
|2012                                                                   | N/A                                  | N/A                   | N/A                   | N/A                                | N/A                                                           | N/A                                  | N/A                                           | N/A                                      
|Garry D. Biles
        President and COO                               | 2014                                 | $207,925              | Nil                   | $63,620                            | Nil                                                           | Nil                                  | Nil                                           | Nil                                      
|2013                                                                   | $201,095                             | Nil                   | $25,311               | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $226,406                                 
|2012                                                                   | $210,953                             | Nil                   | $3,860                | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $214,813                                 
|James Moors(11)
        Former Vice-President, Exploration             | 2014                                 | Nil                   | Nil                   | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $60,000                                  
|2013                                                                   | $40,117                              | Nil                   | $6,328                | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $46,445                                  
|2012                                                                   | $130,241                             | Nil                   | Nil                   | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $130,241                                 
|Gregg Wilson(12)
        Former Vice-President, Investor Relations     | 2014                                 | $18,750               | Nil                   | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $90,000                                  
|2013                                                                   | $90,178                              | Nil                   | $6,328                | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $96,506                                  
|2012                                                                   | $90,391                              | Nil                   | Nil                   | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $90,391                                  
|Stewart Lockwood
        Secretary                                     | 2014                                 | Nil                   | Nil                   | $3,976                             | Nil                                                           | Nil                                  | Nil                                           | $112,235 (13)                            
|2013                                                                   | Nil                                  | Nil                   | $6,328                | Nil                                | Nil                                                           | Nil                                  | $69,435 (13)                                  | $75,763                                  
|2012                                                                   | Nil                                  | Nil                   | Nil                   | Nil                                | Nil                                                           | Nil                                  | $82,264 (13)                                  | $82,264                                  
|Philip Yee
        Chief Financial Officer and Vice-President, Finance | 2014                                 | $106,273              | Nil                   | $31,810                            | Nil                                                           | Nil                                  | Nil                                           | Nil                                      
|2013                                                                   | $90,877                              | Nil                   | $18,984               | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $109,861                                 
|2012                                                                   | $124,709                             | Nil                   | Nil                   | Nil                                | Nil                                                           | Nil                                  | Nil                                           | $124,709                                 





67Canarc Resource Corp.Form 20-F









Notes:



| | (1) | Includes the dollar value of cash and non-cash
base salary earned during a financial year covered.
| | --- | --------------------------------------------------------------------------------------------------

| | (2) | The amount represents the fair value, on the date
of grant and on each vesting date, as applicable, of awards made under the Company’s Stock Option Plan. The grant date fair
value has been calculated using the Black Scholes Option Pricing Model in accordance with IFRS.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | These amounts include annual non-equity incentive
plan compensation, such as bonuses and discretionary amounts for the year ended December 31, 2014.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | N/A.
| | --- | ----

| | (5) | N/A.
| | --- | ----

| | (6) | These amounts cover all compensation other than
amounts already set out in the table for the year ended December 31, 2013 and include directors fees, as applicable, and annual
bonuses for prior year’s performance, if any.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | These amounts include dollar value of total compensation
for the covered year. This is the sum of all amounts reported in columns with footnotes 1 to 6 above for each director and officer.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | Mr. Bradford Cooke resigned as Chief Executive
Officer effective January 13, 2014 but remain Chairman and Director.
| | --- | -------------------------------------------------------------------------------------------------------------------

| | (9) | Mr. Martin Burian was nominated to the Board of
Directors effective November 1, 2013.
| | --- | -------------------------------------------------------------------------------------

| | (10) | Mr. Catalin Chiloflischi was appointed Chief Executive
Officer effective January 13, 2014.
| | ---- | ------------------------------------------------------------------------------------------

| | (11) | Mr. James Moors retired as Vice-President of Exploration
effective January 31, 2014 and received severance of CAD$60,000.
| | ---- | -------------------------------------------------------------------------------------------------------------------------

| | (12) | Mr. Gregg Wilson retired as Vice-President of
Investor Relations effective April 30, 2014 and received severance of CAD$90,000.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------

| | (13) | Legal fees charged to Canarc by a law firm in
which Mr. Stewart Lockwood is a partner.
| | ---- | --------------------------------------------------------------------------------------

68Canarc Resource Corp.Form 20-F









Item
10.C provides further details of employment contracts and agreements with current and former senior officers of the Registrant.





The
following table sets forth information concerning outstanding stock options under the Registrant’s Stock Option Plan as at
December 31, 2014to each director and officer of the Registrant. No SARs were outstanding.





Options and Stock Appreciation Rights (“SARs”)



The following table discloses
incentive stock options which were granted to directors and officers during the fiscal year ended December 31, 2014:





69Canarc Resource Corp.Form 20-F







SUMMARY
OF STOCK OPTIONS

GRANTED
TO DIRECTORS AND OFFICERS

From
January 1, 2014 to December 31, 2014



|Name
        and
        Principal
        Position                                         | Date
        of Grant | Title
        of Underlying Security | Number
        of
        Underlying
        Security | Exercise
        Price per Share
        (CAD$) | Expiry
        Date
|------------------------------------------------------------------------------------------- | --------------------- | ------------------------------------ | ----------------------------------------------------- | ----------------------------------------------- | -------------------
|Bradford J.
        Cooke(1)
        Chief Executive
        Officer, Chairman and Director | July 17, 2014         | Common shares                        | 800,000                                               | $0.10                                           | July 17, 2019      
|Bruce Bried
        Director                                                                | July 17, 2014         | Common shares                        | 300,000                                               | $0.10                                           | July 17, 2019      
|Leonard Harris
        Director                                                             | July 17, 2014         | Common shares                        | 300,000                                               | $0.10                                           | July 17, 2019      
|Martin Burian
        Director                                                              | July 17, 2014         | Common shares                        | 300,000                                               | $0.10                                           | July 17, 2019      
|Catalin Chiloflischi
        Chief Executive
        Officer                                | January 14, 2014      | Common shares                        | 500,000                                               | $0.05                                           | January 14, 2019   
|July 17, 2014                                                                               | Common shares         | 1,000,000                            | $0.10                                                 | July 17, 2019                                  
|Garry Biles
        President and Chief Operating Officer                                   | July 17, 2014         | Common shares                        | 800,000                                               | $0.10                                           | July 17, 2019      
|James Moors(2)
        Former Vice-President,
        Exploration                           | N/A                   | N/A                                  | N/A                                                   | N/A                                             | N/A                
|Stewart Lockwood
        Secretary                                                          | July 17, 2014         | Common shares                        | 50,000                                                | $0.10                                           | July 17, 2019      
|Gregg Wilson(3)
        Former Vice-President
        (Investor Relations)                  | N/A                   | N/A                                  | N/A                                                   | N/A                                             | N/A                
|Philip Yee
        Chief Financial
        Officer and Vice-President (Finance)             | July 17, 2014         | Common shares                        | 400,000                                               | $0.10                                           | July 17, 2019      



Notes:	(1)Mr.
Bradford Cooke resigned as Chief Executive Officer effective January 13, 2014 but remains Chairman and Director.

70Canarc Resource Corp.Form 20-F





(2)	Mr. James Moors retired as Vice-President
of Exploration effective January 31, 2014.

(3)	Mr. Gregg Wilson retired as Vice-President
of Investor Relations effective April 30, 2014.





At the discretion of the directors,
certain option grants provide the holder with the right to receive the number of common shares, valued at the quoted market price
at the time of exercise of the stock options, that represent the share appreciation since granting the stock options.





Pension Plan



The Registrant does not have any
pension plan arrangements in place.





Report on Executive Compensation



The
Registrant’s executive compensation program is administered by the Compensation Committee on behalf the board of directors
(the “Board”).



Compensation
of Directors



Bradford
J. Cooke, the former Chief Executive Officer and a Director of Canarc, received compensation as consideration for his duties as
an operating officer of Canarc as disclosed in the Summary Compensation Table above; Mr. Cooke resigned as Chief Executive Officer
on January 13, 2014 but remains Chairman and a Director.



At
a Compensation Committee meeting held on March 22, 2013, it was resolved that each director shall earn a remuneration of CAD$2,000
per quarter as compensation in his capacity as a director and such remuneration shall continue to be accrued.



71Canarc Resource Corp.Form 20-F





At
a Compensation Committee meeting held on June 26, 2014, it was resolved that fees for members of the Audit, Compensation and Nomination
Committees will be CAD$1,000 per quarter per Committee Chairman and CAD$500 per quarter per Committee Member, and are to be paid
each quarter. It was further resolved that no directors fees shall be payable to directors in their capacity as Directors. These
resolutions were effective July 1, 2014.



During
the fiscal year ended December 31, 2014, Canarc granted stock options to directors for up to 1.7 million common shares. These stock
options have an exercise price of CAD$0.10 and an expiry date of July 17, 2019, and are subject tovesting provisions in
which 20% of the stock options vest on grant date and 20% vest every six months thereafter.





Executive
Compensation Program



The
Registrant’s executive compensation program is based on a pay for performance philosophy. The executive compensation program
is designed to encourage, compensate and reward employees on the basis of individual and corporate performance, both in the short
and the long term. Base salaries are set at levels which are competitive with the base salaries paid by companies within the mining
industry having comparable capitalization to that of the Registrant, thereby enabling the Registrant to compete for and retain
executives critical to the Registrant’s long term success. Incentive compensation is directly tied to corporate and individual
performance. Share ownership opportunities are provided to align the interests of executive officers with the longer term interests
of shareholders.



Compensation
for directors and officers, as well as for executive officers as a whole, consists of a base salary, along with annual incentive
compensation in the form of an annual bonus, and a longer term incentive in the form of stock options. As an executive officer’s
level of responsibility increases, a greater percentage of total compensation is based on performance (as opposed to base salary
and standard employee benefits) and the mix of total compensation shifts towards stock options, thereby increasing the mutuality
of interest between executive officers and shareholders.



No
funds were set aside or accrued by the Registrant or its subsidiaries during the year ended December 31, 2014 to provide pension,
retirement or similar benefits for directors or officers of the Registrant pursuant to any existing plan provided or contributed
to by the Registrant or its subsidiaries under applicable Canadian laws.



Base
Salary



The
Board approves ranges for base salaries for executive employees of the Registrant based on reviews of market data from peer groups
and industry in general. The level of base salary for each employee within a specified range is determined by the level of past
performance, as well as by the level of responsibility and the importance of the position to the Registrant.

72Canarc Resource Corp.Form 20-F







The
Registrant’s Chief Executive Officer prepares recommendations for the Compensation Committee which are then presented to
the Board with respect to the base salary to be paid to the CEO and other senior executive officers. The CEO’s recommendations
for base salaries for the senior executive officers, including the Chief Executive Officer, President and Chief Operating Officer,
and the Chief Financial Officer, are then submitted for approval by the Board from the Compensation Committee.



Bonus



The
Board annually evaluates performance and allocates an amount for payment of bonuses to executive officers and senior management.
The aggregate amount for bonuses to be paid will vary with the degree to which targeted corporate performance was achieved for
the year. The individual performance factor allows the Registrant effectively to recognize and reward those individuals whose efforts
have assisted the Registrant to attain its corporate performance objective.



The
CEO prepares recommendations for the Board with respect to the bonuses to be paid to the executive officers and to senior management.



No
bonuses were distributed nor paid to executive officers and senior management of Canarc in the 2012, 2013 and 2014 fiscal years.



Stock
Options



A
Stock Option Plan is administered by the Board. The Stock Option Plan is designed to give each option holder an interest in preserving
and maximizing shareholder value in the longer term, to enable the Registrant to attract and retain individuals with experience
and ability, and to reward individuals for current performance and expected future performance. The Board considers stock option
grants when reviewing executive officer compensation packages as a whole.



During
the fiscal year ended December 31, 2014, Canarc granted stock options to senior officers, excluding senior officers who are directors
and including those who were senior officers at the time of grant, for up to 2.75 million common shares. Stock options for 500,000
common shares have an exercise price of CAD$0.05 and an expiry date of January 14, 2019; stock options for 2.25 million common
shares have an expiry date of July 17, 2019. These stock options are subject tovesting provisions in which 20% of the stock
options vest on grant date and 20% vest every six months thereafter.





73Canarc Resource Corp.Form 20-F





Other
Compensation



Bradford J. Cooke, formerly CEO
and who remains Chairman and Director of Canarc, is a party to an employment arrangement with Endeavour Silver Corp., a company
in which Mr. Cooke is a Director, (“Endeavour”) whereby Endeavour is reimbursed by Canarc for time spent by Mr. Cooke
on a cost recovery basis. During the financial year ended December 31, 2014, Canarc incurred CAD$Nil (2013 - CAD$18,511 and 2012
- CAD$35,290) in salary paid or payable to Endeavour for services rendered by Mr. Cooke to Canarc. Mr. Bradford Cooke resigned
as Chief Executive Officer of Canarc effective January 13, 2014 but remains its Chairman and Director.



Directors’ and Officers’
Liability Insurance



In fiscal 2014, Canarc acquired
an insurance policy for itself and its directors and officers against liability incurred by them in the performance of their duties
as directors and officers of Canarc. In January 2014, Canarc renewed its policy which had a CAD$1 million limit of liability, retentions
of up to CAD$50,000, and a policy period from January 1, 2014 to January 1, 2015 for a premium of CAD$14,000. In October 2014,
Canarc increased its coverage to CAD$5 million limit of liability and extended the term to October 17, 2015 for a net premium of
$25,048.





Performance Graph



Shareholder Return Performance
Graph



The
graph below compares the yearly percentage change in the cumulative total shareholder return on the Registrant’s common shares
against the cumulative total shareholder return of the TSX 300 Total Return Index for the period commencing December 31, 2009 and
ending December 31, 2014.



74Canarc Resource Corp.Form 20-F





Comparison of Total Shareholder
Return on Common Shares

of the Registrant and the Toronto
Stock Exchange Indice

(based on Canadian Funds)











The
graphs assume that the initial value of the investment on the TSX in the Registrant’s common shares and in the indice was
$100 on the initial date.





6.C Board Practices





Statement of Corporate Governance
Practices



The Registrant is required to
report annually to its shareholders on its corporate governance practices and policies with reference to National Policy 58-201,
Corporate Governance Guidelines (the “Policy”) and National Instrument 58-101, Disclosure of Corporate Governance
Practices, as adopted by the Canadian Securities Administrators, and effective June 30, 2005.



The Board of Directors

75Canarc Resource Corp.Form 20-F







The Board currently consists of
four directors, of which three directors (Martin Burian, Bruce Bried and Leonard Harris) are currently “independent”
in the context of the Policy. Bradford J. Cooke is not an independent director because he was the Chief Executive Officer of Canarc
until his resignation on January 13, 2014 but remains its Chairman and Director.



Certain directors of the Registrant
are presently directors of other issuers that are reporting issuers (or the equivalent) in any jurisdiction including foreign jurisdictions,
as follows:



|Director       | Other Reporting Issuers              
|-------------- | -------------------------------------
|Bradford Cooke | Endeavour Silver Corp.               
|               | Radius Gold Inc.                     
|               |                                      
|Martin Burian  | Tinkerine Studios Ltd.               
|               | Atlas Cloud Enterprises Inc.         
|               | Cap-Ex Iron Ore Ltd.                 
|               | Alberta Star Development Corp.       
|               |                                      
|Leonard Harris | Cardero Resource Corp.               
|               | Wealth Minerals Ltd.                 
|               | Solitario Exploration & Royalty Corp.
|               |                                      
|Bruce Bried    | International Montoro Resources Inc. 
|               |                                      





The independent directors do not
hold regularly scheduled meetings at which non-independent directors and members of management are not in attendance. However,
during the course of a directors’ meeting, if a matter is more effectively dealt with

76Canarc Resource Corp.Form 20-F





without the presence of members
of management, the independent directors ask members of management to leave the meeting, and the independent directors then meet.



Bradford J. Cooke is the Chairman
of the Board of Directors of Canarc. Martin Burian, as an independent director, was appointed the Lead Director of the Board, with
the mandate to ensure that the Board’s Agenda will enable it to successfully carry out its duties and to do so without interference
from the Chairman of the Board that could result from potential conflicts from his status as a non-independent Board member given
that Mr. Cooke as Chairman was the Chief Executive Officer until his resignation on January 13, 2014.



Since January 1, 2007, the Registrant
has held board meetings at least quarterly and at which the majority, if not all, Board members have attended, either in person
or by telephone conference call, during the time in which they were directors of the Registrant.



Board Mandate



The Board of Directors is responsible
for supervising management in carrying on the business and affairs of the Registrant. Directors are required to act and exercise
their powers with reasonable prudence in the best interests of the Registrant. The Board agrees with and confirms its responsibility
for overseeing management's performance in the following particular areas:



- the strategic planning process of the Registrant;
- identification and management of the principal risks
associated with the business of the Registrant;
- planning for succession of management;
- the Registrant's policies regarding communications
with its shareholders and others; and
- the integrity of the internal controls and management
information systems of the Registrant.



In carrying out its mandate, the
Board relies primarily on management to provide it with regular detailed reports on the operations of the Registrant and its financial
position. The Board reviews and assesses these reports and other information provided to it at meetings of the Board and/or of
its committees. The CEO reports directly to the Board, giving the Board direct access to information in his areas of responsibility.
Other management personnel regularly attend Board meetings to provide information and answer questions. Directors also consult
from time to time with management and have, on occasion, visited the properties of the Registrant. The reports and information
provided to the Board include details concerning the monitoring and management of the risks associated with the Registrant's activities,
such as compliance with safety standards and legal requirements, environmental issues and the financial position and liquidity
of the Registrant. At least annually, the Board reviews management's report on its business and strategic plan and any changes
with respect to risk management and succession planning.

77Canarc Resource Corp.Form 20-F







Position Descriptions



The Board of Directors has not
yet developed written position descriptions for the Chairman, the chairman of any Board committees, the CEO, the President or the
CFO. The Board is of the view that given the size of the Registrant, the relatively frequent discussions between Board members,
the CEO, the President and the CFO and the experience of the individual members of the Board, the responsibilities of such individuals
are known and understood without position descriptions being reduced to writing. The Board will evaluate this position from time
to time, and if written position descriptions appear to be justified, they will be prepared.



Orientation and Continuing
Education



The Board does not have a formal
policy relating to the orientation of new directors and continuing education for directors. The appointment of a new director is
a relatively infrequent event in the Registrant’s affairs, and each situation is addressed on its merits on a case-by-case
basis. The Registrant has a relatively restricted scope of operations, and most candidates for Board positions will likely have
past experience in the mining business; they will likely be familiar therefore with the operations of a resource company of the
size and complexity of the Registrant. The Board, with the assistance of counsel, keeps itself apprised of changes in the duties
and responsibilities of directors and deals with material changes of those duties and responsibilities as and when the circumstances
warrant. The Board will evaluate these positions, and if changes appear to be justified, formal policies will be developed and
followed.



Ethical Business Conduct



The Registrant has adopted a whistle
blower policy, which is set out in its Charter of the Audit Committee which is available for viewing on SEDAR as a schedule to
the Registrant’s Annual Information Form dated March 25, 2015.



Nomination of Directors



The Board has neither a formal
policy for identifying new candidates for Board nomination. If and when the Board determines that its size should be increased
or if a director needs to be replaced, the nomination committee meeting shall be convened. The terms of reference of such a committee
will be determined, but are expected to include the determination of the independence of the candidate, his or her experience in
the mining business and compatibility with the other directors.



Compensation

78Canarc Resource Corp.Form 20-F







Taking into account the Registrant’s
present status as an exploration-stage enterprise, the Board of Directors reviews the adequacy and form of compensation provided
to Directors on a periodic basis to ensure that the compensation is commensurate with the responsibilities and risks undertaken
by an effective director.



At
a Compensation Committee meeting held on March 22, 2013 which was ratified by a Board of Directors meeting on that same day , it
was resolved that each director shall earn a remuneration of CAD$2,000 per quarter as compensation in his capacity as a director
for fiscal 2013 and such remuneration shall continue to be accrued.



At
a Compensation Committee meeting held on June 26, 2014, it was resolved that fees for members of the Audit, Compensation and Nomination
Committees will be CAD$1,000 per quarter per Committee Chairman and CAD$500 per quarter per Committee Member, and are to be paid
each quarter. It was further resolved that no directors fees shall be payable to directors in their capacity as Directors. These
resolutions were effective July 1, 2014.



Other Board Committees



Aside from the Audit Committee
which has previously been established, the Board has established committees for Compensation and Nomination and Technical, Environmental,
Social and Safety in 2011 comprised of the following Board members and their respective mandates:



|Committee                                | Members                   | Mandate                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------- | ------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Nomination                               | Leonard Harris (Chairman) | The function of the Nominating Committee is to identify individuals qualified to become board members and to select, or to recommend that the Board of Directors select the director nominees for the next annual meeting of stockholders,to oversee the selection and composition of committees of the Board of Directors, and to oversee management continuity planning processes.
|                                         | Bruce Bried              
|Compensation                             | Bruce Bried (Chairman)    | The Compensation Committee shall advise and make recommendations to the Board of Directors in its oversight role with respect to the Company’s strategy, policies and programs on the compensation and development of senior management and directors.                                                                                                                              
|                                         | Martin Burian            
|Technical, Environmental, Social, Safety | Bruce Bried               | The Technical, Environmental, Social and Safety Committee shall advise and make recommendations in its oversight role with respect to technical, environmental, social and safety issues affecting the Company and its advanced mineral exploration projects.                                                                                                                       





79Canarc Resource Corp.Form 20-F









The Board has also a Disclosure
Committee comprised of the following management persons and its mandate:



|Members                                                 | Mandate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Chief Executive Officer or President, and               | A Disclosure Policy
        Committee oversees corporate disclosure practices andensures implementation and adherence
        to this policy. The Disclosure Policy Committee's responsibilities include:
        ·maintaining an awareness and understanding of governing disclosure
        rules and guidelines, including any new or pending developments;
        ·developing and implementing procedures to regularly review;
        ·update and correct corporate disclosure information, including information
        on the Internet website;
        ·bringing this policy to the attention of directors, management and
        staff;
        ·monitoring compliance with this policy and undertaking reviews of any
        violations, including assessment and implementation of appropriate consequences and remedial actions;
        ·reviewing this policy and updating as necessary and appropriate to
        ensure compliance with prevailing rules and guidelines; and
        ·ascertaining whether corporate developments constitute material information
        and, if so, ensuring compliance with the procedures outlined in this policy.
|Vice-President or Manager of Investor Relations, if any





Assessments



The Board has no formal process
for the assessment of the effectiveness and contribution of the individual directors. Each director has extensive public company
experience and is familiar with what is required of him. Frequency of attendance at Board and committee meetings and the quality
of participation in such meetings are two of the criteria by which the performance of a director will be assessed.



80Canarc Resource Corp.Form 20-F







6.D Employees



The Registrant’s business
is administered principally from its head office in Vancouver, British Columbia, Canada. As of April 22, 2015, the Registrant had
a staff of two full time and two part time employees based in Vancouver, BC, Canada.





6.E Share Ownership





As at April 22, 2015, the share
ownership and number of stock options of the directors and officers of the Registrant are as follows:





|                                                                                | Share Ownership          | Number of Stock Options
|------------------------------------------------------------------------------- | ------------------------ | -----------------------
|Name
        and
        Principal
        Position                             | Number
        of Shares | Percentage
        (1) 
|Bradford J.
        Cooke
        Chairman and Director                         | 4,922,480                | 3.13%                  
|350,000                                                                         | $0.135                   | July 6, 2016           
|250,000                                                                         | $0.145                   | June 18, 2017          
|500,000                                                                         | $0.08                    | June 26, 2018          
|800,000                                                                         | $0.10                    | July 17, 2019          
|Martin Burian
        Director                                                  | Nil                      | Nil                    
|Bruce Bried
        Director                                                    | 1,454,426                | 0.92%                  
|175,000                                                                         | $0.135                   | July 6, 2016           
|125,000                                                                         | $0.145                   | June 18, 2017          
|200,000                                                                         | $0.08                    | June 26, 2018          
|300,000                                                                         | $0.10                    | July 17, 2019          
|Leonard Harris
        Director                                                 | 1,276,000                | 0.81%                  
|140,000                                                                         | $0.135                   | July 6, 2016           
|125,000                                                                         | $0.145                   | June 18, 2017          
|200,000                                                                         | $0.08                    | June 26, 2018          
|300,000                                                                         | $0.10                    | July 17, 2019          
|Catalin Chiloflischi
        Chief Executive
        Officer                    | Nil                      | Nil                    
|1,000,000                                                                       | $0.10                    | July 17, 2019          
|Garry Biles
        President and Chief
        Operating Officer               | 770,926                  | 0.49%                  
|275,000                                                                         | $0.135                   | July 6, 2016           
|225,000                                                                         | $0.145                   | June 18, 2017          
|400,000                                                                         | $0.08                    | June 26, 2018          
|800,000                                                                         | $0.10                    | July 17, 2019          
|Stewart Lockwood
        Secretary                                              | 736,674                  | 0.47%                  
|125,000                                                                         | $0.135                   | July 6, 2016           
|75,000                                                                          | $0.145                   | June 18, 2017          
|100,000                                                                         | $0.08                    | June 26, 2018          
|50,000                                                                          | $0.10                    | July 17, 2019          
|Philip Yee
        Chief Financial
        Officer and Vice-President (Finance) | Nil                      | Nil                    
|225,000                                                                         | $0.135                   | July 6, 2016           
|200,000                                                                         | $0.145                   | June 18, 2017          
|300,000                                                                         | $0.08                    | June 26, 2018          
|400,000                                                                         | $0.10                    | July 17, 2019          



81Canarc Resource Corp.Form 20-F





(1)	As at April 22, 2015, Canarc
had 157,436,305 common shares issued and outstanding.



(2)	Common shares.





All of the Registrant’s shareholders have the
same voting rights.





Details of all total outstanding options, warrants
and other rights to purchase securities of the Registrant and its subsidiaries as at April 22, 2015 unless otherwise stated, are
set forth below:





Stock Option Summary



Stock options which are outstanding as of April 22,
2015 are as follows:



|Amount Outstanding | Exercise Prices
        (CAD$) | Dates Granted     | Expiry Dates     
|------------------ | ------------------------------ | ----------------- | -----------------
|                   |                                |                   |                  
|1,445,000          | $0.10                          | September 8, 2010 | September 8, 2015
|1,360,000          | $0.135                         | July 6, 2011      | July 6, 2016     
|1,050,000          | $0.145                         | June 18, 2012     | June 18, 2017    
|1,750,000          | $0.08                          | June 26, 2013     | June 26, 2018    
|500,000            | $0.05                          | January 14, 2014  | January 14, 2019 
|4,000,000          | $0.10                          | July 17, 2014     | July 17, 2019    
|                   |                                |                   |                  
|10,105,000         | TOTAL                          |                   |                  



Of the 10,105,000 outstanding stock options, only 6,105,000
stock options are exercisable as at April 22, 2015.





82Canarc Resource Corp.Form 20-F









Warrant Summary Chart



Warrants which are outstanding as of April 22, 2015
are as follows:



|Amount Outstanding | Exercise Prices
        (CAD$) | Date Issued        | Expiry Dates            
|------------------ | ------------------------------ | ------------------ | ------------------------
|                   |                                |                    |                         
|11,300,000  (1)    | $0.20                          | September 28, 2012 | Until September 28, 2015
|904,000  (1)       | $0.20                          | September 28, 2012 | Until September 28, 2015
|4,500,000  (2)     | $0.20                          | December 19, 2012  | Until December 19, 2015 
|600,000(3)         | $0.20                          | January 11, 2013   | Until January 11, 2106  
|1,000,000(4)       | $0.20                          | January 18, 2013   | Until January 18, 2016  
|9,000,000          | $0.10                          | January 31, 2014   | January 31, 2016        
|5,309,055          | $0.15                          | March 18, 2014     | March 18, 2017          
|661,718            | $0.15                          | March 18, 2014     | March 18, 2017          
|4,500,000          | $0.15                          | April 3, 2014      | April 3, 2017           
|60,725             | $0.15                          | April 3, 2014      | April 3, 2017           
|2,500,000          | $0.15                          | July 9, 2014       | July 9, 2016            
|                   |                                |                    |                         
|40,335,498         | TOTAL                          |                    |                         





83Canarc Resource Corp.Form 20-F









| | (1) | These warrants are subject to an accelerated expiry whereby if after January 29, 2013, the volume
weighted average trading price as traded on the TSX equals or exceeds CAD$0.30 per share for a period of 10 consecutive trading
days, Canarc will have the right, within five business days, to accelerate the expiry date of the warrants by giving not fewer
than 30 days written notice to the warrant holder whereby the warrants shall expire 30 days after such date of the notice.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | These warrants are subject to an accelerated expiry whereby if after April 20, 2013, the volume
weighted average trading price as traded on the TSX equals or exceeds CAD$0.30 per share for a period of 10 consecutive trading
days, Canarc will have the right, within five business days, to accelerate the expiry date of the warrants by giving not fewer
than 30 days written notice to the warrant holder whereby the warrants shall expire 30 days after such date of the notice.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | These warrants are subject to an accelerated expiry whereby if after May 12, 2013, the volume weighted
average trading price as traded on the Toronto Stock Exchange equals or exceeds CAD$0.30 per share for a period of 10 consecutive
trading days, the Company will have the right, within five business days, to accelerate the expiry date of the warrants by giving
not fewer than 30 days written notice to the warrant holder whereby the warrants shall expire 30 days after such date of the notice.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | These warrants are subject to an accelerated expiry whereby if after May 19, 2013, the volume weighted
average trading price as traded on the Toronto Stock Exchange equals or exceeds CAD$0.30 per share for a period of 10 consecutive
trading days, the Company will have the right, within five business days, to accelerate the expiry date of the warrants by giving
not fewer than 30 days written notice to the warrant holder whereby the warrants shall expire 30 days after such date of the notice.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





84Canarc Resource Corp.Form 20-F





Stock Option/Share Incentive Plan



The Registrant’s directors
and shareholders have approved a Share Incentive Plan (the “Plan”). The Plan was initially approved by the TSX in 1996.
The principal purposes of the Plan are to promote a proprietary interest in the Registrant among its directors, officers and employees;
to retain, attract and motivate the qualified managers of the Registrant; to provide a long-term incentive element in overall
compensation; and to promote the long-term profitability of the Registrant.



Incentives to participate under
the Plan may be provided by the granting of share options or share appreciation rights (SARs). The share appreciation right entitles
the participant in the Plan to elect, subject to approval by the Board of Directors, in lieu of exercising an outstanding share
option, to receive the number of common shares of the Registrant equivalent in value to the difference between the option exercise
price and the net existing market price of the Registrant’s common shares multiplied by the number of common shares over
which he could otherwise exercise his stock option.



Under the Plan, the Board of Directors
of the Registrant or its Executive Committee may from time to time grant to directors, officers, consultants and full and part
time employees of the Registrant and its associated, affiliated, controlled and subsidiary companies, as the Board or its Executive
Committee shall designate, the stock option to purchase from the Registrant such number of its common shares as the Board or its
Executive Committee may designate. The Registrant’s Plan allows it to grant stock options to its employees, directors and
consultants to acquire up to 18,888,434 common shares, of which stock options for 10,130,000 common shares were outstanding as
at December 31, 2014, provided that the total number of common shares to be optioned to any one optionee shall not exceed 5% of
the issued common shares of the Registrant at the time of grant. The exercise price of each option cannot be lower than the last
recorded sale of a board lot on the TSX during the trading day immediately preceding the date of granting or, if there was no such
sale, the high/low average price for the common shares on the TSX based on the last five trading days before the date of the grant.
Pursuant to the Plan, stock options shall be granted pursuant to a stock option agreement in a form that complies with the rules
and policies of the TSX, which provide as follows:



| | (a) | all stock options granted shall be non-assignable;
| | --- | --------------------------------------------------

| | (b) | a stock option must be exercisable during a period not extending beyond 10 years from the time
of grant; and
| | --- | ------------------------------------------------------------------------------------------------------------

(c)	no financial assistance
will be provided with respect to the exercise of stock options.



At the Registrant’s annual
general meeting held on June 5, 2012, shareholder approval was provided for the increase in the maximum aggregate number of common
shares which may be reserved for issuance under the Plan from 16,335,000 shares to 18,888,434 shares at that time.





85Canarc Resource Corp.Form 20-F





ITEM 7. MAJOR SHAREHOLDERS AND RELATED
PARTY TRANSACTIONS





7.A Major Shareholders



To the best of the Registrant’s
knowledge, the Registrant is not directly or indirectly owned or controlled by another company or by any foreign government or
by any other natural or legal person(s) severally or jointly. There are no arrangements, known to the Registrant, the operation
of which may at a subsequent date result in a change in its control.



As at April 22, 2015, the only
persons or groups known to the Registrant to beneficially own 5% or more of the Registrant’s issued and outstanding common
shares and the number of common shares owned, directly or indirectly, by officers and directors of the Registrant as a group are
as follows:



|Title of Class | Identity of Person or Group                                          | Shares Owned (1)    | Percentage of Class(2)
|-------------- | -------------------------------------------------------------------- | ------------------- | ----------------------
|Common Shares  | CDS & Co.
        Toronto, Ontario, Canada                           | 73,014,625 (3), (4) | 46.38%                
|Common Shares  | CEDE & Co.
        New York, New York, USA                           | 38,063,790 (3), (4) | 24.18%                
|Common Shares  | Canford Capital Inc. (5)
        Vancouver, British Columbia, Canada | 11,300,000          | 7.18%                 
|Common Shares  | Chaim Ben-Ami
        Tel Aviv, Israel                               | 9,000,000 (6)       | 5.72%                 
|Common Shares  | Officers and Directors as a group                                    | 9,160,506 (7)       | 5.82%                 



| | (1) | Common shares.
| | --- | --------------



| | (2) | As at April 22, 2015, Canarc had 157,436,305 common shares issued and outstanding.
| | --- | ----------------------------------------------------------------------------------



86Canarc Resource Corp.Form 20-F





| | (3) | Owners of record only. CDS & Co. is a clearing agency through which Canadian
brokers and dealers hold their securities. CEDE & Co. is a U.S. clearing agency. The Registrant believes that all of these
shares are held by the registered holder in a fiduciary, trustee, or nominee capacity, and the identities of the beneficial owners
of such shares are not known to the Registrant and, except for named individuals and the officers and directors as a group, the
Registrant is not aware of any person or group of persons which beneficially owns more than 5% of the Registrant’s outstanding
common shares.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Certain of these shares may be held in “street form” and may
be included in the shares registered in the name of CDS & Co. or CEDE & Co.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



| | (5) | As at April 22, 2015, Canford owned 11,300,000 common shares of Canarc representing
a 7.18% interest in Canarc. Canford does not exert control over Canarc nor over its Board of Directors, is not actively involved
in the operations of Canarc, and does not have any material interest, directly or indirectly, in any transaction that has materially
affected or will materially affect Canarc, to the best of Canarc’s knowledge, except as disclosed in this Form 20-F. Items
4.A and 5.B provide further details regarding Canford and its relationship with Canarc.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | As at April 22, 2015, Mr. Chaim Ben-Ami owned 9,000,000 common shares of
Canarc representing a 5.72% interest in Canarc. Mr. Ben-Ami does not exert control over Canarc nor over its Board of Directors,
is not actively involved in the operations of Canarc, and does not have any material interest, directly or indirectly, in any transaction
that has materially affected or will materially affect Canarc, to the best of Canarc’s knowledge, except as disclosed in
this Form 20-F.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





All shares of Canarc, including
all those held by any major shareholders, are common shares with similar voting rights. As of April 22, 2015 there were 157,436,305
common shares of Canarc which were issued and outstanding. Based on the records of Canarc’s registrar and transfer agent,
Computershare Investor Services Inc., of 3rd Floor, 510 Burrard Street, Vancouver, British Columbia, Canada, as at such date there
were 439 registered holders of Canarc’s common shares resident in the United States (70.69% of all registered holders) holding
62,834,911 common shares. This number represents approximately 39.91% of the total issued and outstanding common shares of Canarc
at that date.



Control by Another Corporation,
Foreign Government or Other Persons



To the best of the Registrant’s
knowledge, the Registrant is not directly or indirectly owned or controlled by another corporation(s), by any foreign government
or by any other natural or legal person(s) severally or jointly.

87Canarc Resource Corp.Form 20-F







Change of Control



As of the date of this Form 20-F
being April 22, 2015, there is no arrangement known to the Registrant which may at a subsequent date result in a change of control
of the Registrant.





7.B Related Party Transactions



For the fiscal year ended December
31, 2014, the Registrant had transactions with related parties.



Key management includes directors
(executive and non-executive) and senior management. The compensation paid or payable to key management for employee services is
disclosed in the table below.



Except as may be disclosed elsewhere
in the Form 20-F, general and administrative costs during 2014, 2013 and 2012 include:



88Canarc Resource Corp.Form 20-F









|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|------------------------------------------------------------------------------------------------------------------------------- | ------------------------ |  | ------------------ |  | ------------------ |  | -------------------------------- |  | -----------------
|                                                                                                                                |                          |  |                    |  |                    |  | Net balance receivable (payable)
|($000s)                                                                                                                         | Years ended December 31, |  | as at December 31,
|                                                                                                                                | 2014                     |  | 2013               |  | 2012               |  | 2014                             |  | 2013             
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Key management compensation:                                                                                                    |                          |  |                    |  |                    |  |                                  |  |                  
|Executive salaries and remuneration(1)                                                                                          | $             441        |  | $             428  |  | $             592  |  | $           (203)                |  | $           (222)
|Severance                                                                                                                       | 136                      |  | -                  |  | -                  |  | (4)                              |  | -                
|Directors fees                                                                                                                  | 18                       |  | 29                 |  | 35                 |  | (198)                            |  | (201)            
|Share-based payments                                                                                                            | 205                      |  | 76                 |  | 89                 |  | -                                |  | -                
|                                                                                                                                | $             800        |  | $             533  |  | $             716  |  | $           (405)                |  | $           (423)
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Legal fees incurred to a law firm in which a senior officer of the Company is a partner(2)                                      | $             102        |  | $               67 |  | $               82 |  | $           (172)                |  | $           (158)
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Net office, sundry, rent and salary allocations recovered from (incurred to) company(ies) sharing certain common director(s)(3) | (74)                     |  | 59                 |  | 36                 |  | (141)                            |  | (108)            
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Write-down of long-term investments(4)                                                                                          | -                        |  | 91                 |  | -                  |  | -                                |  | -                
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Write-off of receivables(5)                                                                                                     | -                        |  | 54                 |  | -                  |  | -                                |  | -                
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  



| | (1) | Includes key management compensation which is included in mineral property interests and corporate
development.
| | --- | ---------------------------------------------------------------------------------------------------------------



(2)	Includes
legal fees which are included in share issuance expenses.



| | (3) | The company(ies) include Aztec, BYG Ventures Ltd. (“BYG”) and Endeavour Silver Corp.
which share certain common director(s), and Caza Gold Corp. which shared a common director until December 17, 2013.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | The Company wrote-down its investment in Aztec to a nominal value of CAD$100 in 2013.
| | --- | -------------------------------------------------------------------------------------



| | (5) | The Company wrote-off receivables from Aztec and BYG in 2013. In October 2014, the Company received
358,000 shares from Aztec in settlement of debt owed to the Company which the Company had written off in 2013.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The above transactions were incurred
in the normal course of business and are recorded at the exchange amount, being the amount agreed upon by the related parties.

89Canarc Resource Corp.Form 20-F







Canarc shares common office facilities,
employee and administrative support, and office sundry amongst companies with certain common director(s), and such allocations
to Canarc are on a full cost recovery basis. Any balances due to related parties are payable on demand.



In fiscal 2012, Canarc arranged
demand loans of $358,000 from certain directors and an officer of Canarc, which were repayable on demand and bore an interest rate
of 12% compounded monthly with interest payable semi-annually. In 2012, Canarc repaid all principal, bonus and interest in full
settlement of outstanding demand loans.



In fiscal 2013, Canarc received
demand loans of $126,000 from two directors of Canarc, which were repayable on demand and bore an interest rate of 12% compounded
monthly with interest payable semi-annually. In January 2014, Canarc repaid all principal and interest in full settlement of outstanding
demand loans.



Items 4.A, 4.D, 5.B and 7.A provide
further details of transactions with Canford.



In each case the transactions
described below were, in the Registrant’s view, completed on terms no less favourable to the Registrant than if they had
been entered into with unaffiliated parties.





Compensation to Directors
and Senior Officers and Options to Purchase Securities



Item 6 provides further details
of compensation paid to, and options granted to and held by, directors and senior officers of the Registrant.



Indebtedness of Directors
and Senior Officers



At any time during the Registrant’s
last completed financial year, no director, executive officer or senior officer of the Registrant, proposed management nominee
for election as a director of the Registrant or each associate or affiliate of any such director, executive or senior officer or
proposed nominee is or has been indebted to the Registrant or any of its subsidiaries or is and has been indebted to another entity
where such indebtedness is or has been the subject of a guarantee, support agreement, letter of credit or other similar arrangement
or understanding provided by the Registrant or any of its subsidiaries, other than routine indebtedness and other than as
disclosed in the Registrant’s audited financial statements and in the Form 20-F.

90Canarc Resource Corp.Form 20-F









Interest of Insiders
in Material Transactions



Other than as set forth below
and in the Form 20-F and in the Registrant’s audited financial statements and other than transactions carried out in the
ordinary course of business of the Registrant or any of its subsidiaries, none of the directors or senior officers of the Registrant,
a proposed management nominee for election as a director of the Registrant, any member beneficially owning shares carrying more
than 5% of the voting rights attached to the shares of the Registrant nor an associate or affiliate of any of the foregoing persons
had since January 1, 2014 (being the commencement of the Registrant’s last audited fiscal period) any material interest,
direct or indirect, in any transactions which materially affected or would materially affect the Registrant or any of its subsidiaries.



The Registrant’s directors
and officers may serve as directors or officers of other public resource companies or have significant shareholdings in other public
resource companies and, to the extent that such other companies may participate in ventures in which the Registrant may participate,
the directors of the Registrant may have a conflict of interest in negotiating and concluding terms respecting the extent of such
participation. Also, certain directors and officers of Canarc are directors, officers and
/ or employees of Aztec, Caza and Endeavour.The interests of these companies may differ from time to time. Item 6.C provide
further details.





7.C Interests of Experts and Counsel



Not applicable.





ITEM 8. FINANCIAL INFORMATION





8.A Consolidated Statements and Other
Financial Information





Canarc’s audited consolidated
financial statements have been prepared in accordance with IFRS as issued by the IASB, and all dollar amounts are expressed in
United States dollars unless otherwise indicated.

91Canarc Resource Corp.Form 20-F







Consolidated financial statements
audited by an independent registered public accounting firm and accompanied by an audit report are comprised of the following,
which are attached hereto and form a part hereof.



| | (a) | Consolidated Statements of Financial Position as of December 31, 2014 and 2013;
| | --- | -------------------------------------------------------------------------------

| | (b) | Consolidated Statements of Comprehensive Loss for each of the years ended December 31, 2014, 2013
and 2012;
| | --- | -----------------------------------------------------------------------------------------------------------

| | (c) | Consolidated Statements of Changes in Shareholders’ Equity for each of the years ended December
31, 2014, 2013 and 2012;
| | --- | ------------------------------------------------------------------------------------------------------------------------

| | (d) | Consolidated Statements of Cash Flows for each of the years ended
December 31, 2014, 2013 and 2012; and
| | --- | -------------------------------------------------------------------------------------------------------

| | (e) | Notes to the consolidated financial statements.
| | --- | -----------------------------------------------



The Registrant is not involved
and has not been involved in the recent past in any legal or arbitration proceedings which may have, or had in the recent past,
significant effects on the Registrant’s financial position or profitability, including governmental proceedings pending or
known to be contemplated other than as disclosed in the Company’s continuous disclosure documents, regulatory filings, Form
20-F and consolidated financial statements for the years then ended.





Dividend Policy



During its last three completed
financial years, the Registrant has not declared or paid any cash dividends on its common shares and does not currently intend
to pay cash dividends. Management intends for earnings, if any, to be retained to finance further growth and activities relating
to the business of the Registrant.



The Directors of the Registrant
may from time to time declare and authorize payment of such dividends, if any, as they may deem advisable and need not give notice
of such declaration to any shareholder. No dividend shall be paid otherwise than out of funds and/or assets properly available
for the payment of dividends and a declaration by the Directors as to the amount of such funds or assets available for dividends
shall be conclusive. The Registrant may pay any such dividend wholly or in part by the distribution of specific assets and in particular
by paid up shares, bonds, debentures or other securities of the Registrant or any other corporation or in any one or more such
ways as may be authorized by the Registrant or the Directors and where any difficulty arises with regard to such a distribution
the Directors may settle the same as they think expedient, and in particular may fix the value for distribution of such specific
assets or any part thereof, and may determine that cash payments in substitution for all or any part of the specific assets to
which any shareholders are entitled shall be made to any shareholders on the basis of other value so fixed in order to adjust the rights of all parties
and may vest any such specific assets in trustees for the persons entitled to the dividend as may seem expedient to the Directors.

92Canarc Resource Corp.Form 20-F









Any dividend declared on shares
of any class by the Directors may be made payable on such date as is fixed by the Directors.



Subject to the rights of shareholders
(if any) holding shares with special rights as to dividends, all dividends on shares of any class shall be declared and paid according
to the number of such shares held.



The Directors may, before declaring
any dividend, set aside out of the funds properly available for the payment of dividends such sums as they think proper as a reserve
or reserves, which shall, at the discretion of the Directors, be applicable for meeting contingencies, or for equalizing dividends,
or for any other purpose to which such funds of the Registrant may be properly applied, and pending such application may, at the
like discretion, either be employed in the business of the Registrant or be invested in such investments as the Directors may from
time to time think fit. The Directors may also, without placing the same in reserve, carry forward such funds, which they think
prudent not to divide.



If several persons are registered
as joint holders of any share, any one of them may give an effective receipt for any dividend, bonuses or other moneys payable
in respect of the share.



No dividend shall bear interest
against the Registrant. Where the dividend to which a shareholder is entitled includes a fraction of a cent, such fraction shall
be disregarded in making payment thereof and such payment shall be deemed to be payment in full.



Any dividend, bonuses or other
moneys payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address
of the holder, or in the case of joint holders, to the registered address of that one of the joint holders who is first named in
the register, or to such person and to such address as the holder or joint holders may direct in writing. Every such cheque or
warrant shall be made payable to the order of the person to whom it is sent. The mailing of such cheque or warrant shall, to the
extent of the sum represented thereby (plus the amount of any tax required by law to be deducted) discharge all liability for the
dividend, unless such cheque or warrant shall not be paid on presentation or the amount of tax so deducted shall not be paid to
the appropriate taxing authority.



Notwithstanding anything contained
in the Registrant’s Articles of Incorporation, the Directors may from time to time capitalize any undistributed surplus on
hand of the Registrant and may from time to time issue as fully paid and non-assessable any unissued shares, or any bonds, debentures
or debt obligations of the Registrant as a dividend representing such undistributed surplus on hand or any part thereof.

93Canarc Resource Corp.Form 20-F







Legal Proceedings



The Registrant is not involved
in any legal or arbitration proceedings which have, or may have had in the recent past, significant effects on the Registrant’s
financial position or profitability other than as disclosed in the Registrant’s continuous disclosure documents, regulatory
filings, Form 20-F and consolidated financial statements for the years then ended.





8.B Significant Changes



There has been no significant
change in the financial condition of the Registrant since December 31, 2014 other than as disclosed in this Form 20-F and in the
Registrant’s continuous disclosure documents.





ITEM 9. THE OFFER AND LISTING





9.A Offer and Listing Details



This Form 20-F is being filed
as an annual report under the Exchange Act and does not relate to a new offer of securities, and accordingly, the information called
for is not required other than the price history information below.



The Registrant’s common
shares are traded on the TSX in Canada under the symbol “CCM”. The following prices are stated in terms of Canadian
dollars.



The following tables set forth
the high and low prices of the common shares for the periods indicated.



(Stated in terms of Canadian dollars)



94Canarc Resource Corp.Form 20-F







|Fiscal Year | High (CAD$) | Low (CAD$)
|----------- | ----------- | ----------
|            |             |           
|2014        | $0.13       | $0.03     
|2013        | $0.24       | $0.04     
|2012        | $0.22       | $0.09     
|2011        | $0.30       | $0.09     
|2010        | $0.29       | $0.07     
|            |             |           





|Quarter     | High (CAD$) | Low (CAD$)
|----------- | ----------- | ----------
|            |             |           
|2015        |             |           
|1st Quarter | $0.06       | $0.03     
|            |             |           
|2014        |             |           
|4th Quarter | $0.07       | $0.03     
|3rd Quarter | $0.11       | $0.06     
|2nd Quarter | $0.11       | $0.06     
|1st Quarter | $0.13       | $0.04     
|            |             |           
|2013        |             |           
|4th Quarter | $0.07       | $0.04     
|3rd Quarter | $0.12       | $0.07     
|2nd Quarter | $0.15       | $0.08     
|1st Quarter | $0.24       | $0.12     
|            |             |           





95Canarc Resource Corp.Form 20-F







|Month    | High (CAD$) | Low (CAD$)
|-------- | ----------- | ----------
|         |             |           
|2015     |             |           
|March    | $0.06       | $0.03     
|February | $0.06       | $0.03     
|January  | $0.04       | $0.03     
|         |             |           
|2014     |             |           
|December | $0.04       | $0.03     
|November | $0.05       | $0.03     
|October  | $0.07       | $0.04     
|         |             |           





9.B Plan of Distribution



Not applicable.



96Canarc Resource Corp.Form 20-F







9.C Markets



Since November 2, 1994, the Registrant’s
common shares have traded on the TSX. From March 16, 1988 to June 2, 1995 and from September 1996 to February 12, 1999, the Registrant’s
common shares traded on the Vancouver Stock Exchange (“VSE”) (the VSE merged with the Alberta Stock Exchange in 2000,
which became known as the Canadian Venture Exchange, and then the TSX acquired the Canadian Venture Exchange to form the TSX Venture
Exchange). In February 1997, the Registrant was listed for trading on the Berlin Stock Exchanges and has since voluntarily delisted
from the exchange. On August 3, 1998, the Registrant was listed on the Frankfurt Exchange. Management of the Registrant is not
aware of any trading market for the Registrant’s common shares in the United States apart from the United States OTC Bulletin
Board, on which the Registrant trades under the symbol CRCUF; on March 19, 2015, the Registrant’s common shares continued
trading on the OTCQB Marketplace.





9.D Selling Shareholders



Not applicable.





9.E Dilution



Not applicable.





9.F Expenses of the Issue



Not applicable.





ITEM 10. ADDITIONAL INFORMATION





97Canarc Resource Corp.Form 20-F





10.A Share Capital



Not applicable.





10.B Notice of Articles and Articles
of Association





The Registrant’s Notice
of Articles and articles of association, and related matters, are summarized below.



1.
The Registrant was incorporated
under the laws of British Columbia on January 22, 1987 under the name, “Canarc Resource Corp.” by registration of its
Memorandum and Articles with the British Columbia Registrar of Companies. At the Registrant’s annual and extraordinary general
meeting held in May 2005, the shareholders approved the Notice of Articles be altered to remove the application of the “Pre-Existing
Company Provisions” as set forth in Table 3 of the Business Corporations Regulations under the B.C. Business Corporations
Act, S.B.C. 2002 (the “BCBCA”) and the replacement of the Articles with a new set of Articles which comply with
the BCBCA. The Registrant no longer has a Memorandum, which has been replaced by, in part, its Notice of Articles.



The Registrant’s Memorandum
and Articles do not provide for any specific objects or purposes.



2.
Set forth below is a summary
of provisions contained in the Registrant’s Articles with respect to:



| | (a) | Director’s power to vote on a proposal, arrangement or contract in which the director is
materially interested:
| | --- | ---------------------------------------------------------------------------------------------------------------

| |  | A director who holds a disclosable interest in a contract or transaction into which the Registrant
has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction,
unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors
may vote on such resolution.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Directors’ power, in the absence of an independent quorum, to vote compensation to themselves
or any members of their body:
| | --- | ---------------------------------------------------------------------------------------------------------------------------

| |  | See (a), above. A director does not hold a disclosable interest in a contract or transaction merely
because the contract or transaction relates to the remuneration of the director in that person's capacity as director, officer,
employee or agent of the Registrant or of an affiliate of the Registrant.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

98Canarc Resource Corp.Form 20-F





| | (c) | Borrowing powers exercisable by the directors and how such borrowing powers can be varied:
| | --- | ------------------------------------------------------------------------------------------

abzThe
Registrant, if authorized by the directors, may:

| | (i) | borrow money in the manner and amount, on the security, from the sources and on the terms and conditions
that they consider appropriate;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | issue bonds, debentures and other debt obligations either outright or as security for any liability
or obligation of the Registrant or any other person and at such discounts or premiums and on such other terms as they consider
appropriate;
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | guarantee the repayment of money by any other person or the performance of any obligation of any
other person; and
| | ----- | ------------------------------------------------------------------------------------------------------------------

| | (iv) | mortgage, charge, whether by way of specific or floating charge, grant a security interest in,
or give other security on, the whole or any part of the present and future assets and undertaking of the Registrant.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | Retirement or non-retirement of directors under an age limit requirement:
| | --- | -------------------------------------------------------------------------

| |  | The directors are not required to retire upon reaching a specific age.
| |  | ----------------------------------------------------------------------

| | (e) | Number of shares, if any, required for director’s qualification:
| | --- | ----------------------------------------------------------------

| |  | A director is not required to hold any shares of the Registrant.
| |  | ----------------------------------------------------------------



3.	All common shares of the
Registrant rank equally as to dividends, voting powers and participation in assets (in the event of liquidation) and in all other
respects. Dividend entitlement is set by way of the shareholders status as a shareholder on the chosen record date and does not
lapse over time. Each share carries one vote per share at meetings of the shareholders of the Registrant. Directors do not stand
for re-election on staggered terms at present. There are no indentures or agreements limiting the payment of dividends and there
are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights attached to the common shares.
The shares presently issued are not subject to any calls or assessments. There is a Shareholders Right Plan as detailed in Item
10.B under Summary of Shareholders Rights Plan.



4.	The rights of holders of
common shares may not be modified other than by vote of 2/3 of the common shares voting on such modification. The quorum for the
transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the
aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting. Due to the quorum requirements, the rights
of holders of common shares may be modified by the votes of less than a majority of the issued common shares of the Registrant.



5.	The directors of the Registrant
call all annual general meetings and extraordinary general meetings. The directors may set a date as the record date for the purpose
of determining shareholders entitled to notice of any meeting of shareholders. The directors, the president (if any), the secretary
(if any), the assistant secretary (if any), any solicitor for the Registrant, the auditor of the Registrant and any other persons
invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting
of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is
a shareholder or proxy holder entitled to vote at the meeting.

99Canarc Resource Corp.Form 20-F









6.	There are no limitations
on the rights to own securities.



7.
There are no provisions
in the Registrant’s Articles that would have an effect on delaying, deferring or preventing a change of control other than
that the Registrant may remove any director before the expiration of his or her term of office only by way of special resolution.
In addition, there is a Shareholders Right Plan as detailed in Item 10.B under Summary of Shareholders Rights Plan.



8.	There are no by-law provisions
governing the ownership threshold above which shareholder ownership must be disclosed.



9.	The law of British Columbia,
Canada, relating to Items 2-8 is not significantly different from the law of the United States.



10.	There are no conditions
in the Memorandum and Articles governing changes in capital that are more stringent than is required by law.



11.	The BCBCA permits an unlimited
authorized share capital, and shares may be created with or without par value.



12.	There are no residency
requirements for directors under the BCBCA.



13.	Special Resolutions of
shareholders can be passed by a minimum of a two-thirds majority at a meeting of shareholders.



14.	General meetings can be
held outside British Columbia if the location is approved by resolution of the directors.



15.	The BCBCA provides for
shareholder proposals to be made at general meetings. Generally, shareholders holding at least 1% of the voting shares may submit
proposals to the Registrant three months prior to the anniversary of the last annual general meeting of shareholders of the Registrant.

100Canarc Resource Corp.Form 20-F







16.	Under the BCBCA, dividends
may be declared out of profits, capital or otherwise. As well, the BCBCA does not automatically make directors liable to the Registrant
for the declaration of dividends while the Registrant is insolvent.



17.
The BCBCA does not require
that a company’s offer to purchase or redeem its own shares be made on a pro-rata basis to all shareholders.



18.	The BCBCA permits a company
to indemnify its directors without court approval, and may also require reimbursement of expenses in certain cases for claims that
are successfully defended. Defense costs may also be advanced by a company in certain cases.



19.	All filings with the Registrar
under the BCBCA must be made electronically.



20.
Directors’ and shareholders’
meetings may be held by any form of communications medium permitted under the Articles, including internet chat lines and telephones.
In addition, directors’ consent resolutions may be passed in the manner provided under the Articles, including e-mail.



21.	A company may provide financial
assistance in connection with the purchase of its shares under the BCBCA.



22.	A company may, in limited
circumstances, amalgamate with a foreign company under the BCBCA, without the requirement to first continue the second company
into British Columbia. Amalgamations do not require court approval, although court approval may still be requested.



23.	The requisite majority to
pass a special resolution at a meeting of shareholders is a two-thirds majority.



24.
General meetings of shareholders
may, if the location is approved by directors’ resolution, be held outside British Columbia.



25.	General Meetings of shareholders
of the Registrant are required to be held each calendar year and not more than 15 months after the holding of the last preceding
annual general meeting.



101Canarc Resource Corp.Form 20-F





26.	Any offer by the Registrant
to purchase or redeem its own shares, need not be made pro-rata to all the shareholders.



27.
Changes to the Registrant’s
capital structure may be effected by ordinary resolution, including the following changes:

•
creation or cancellation
of one or more classes or series of shares;

•
creation or removal
of special rights and restrictions attaching to any class or series of shares;

•
changing the authorized
capital;

•
consolidating or
subdividing all or any of the Registrant’s issued or unissued shares; and

•
other alterations
to the share capital and authorized capital, where permitted under the BCBCA.



28.
The Registrant’s name
may be changed by ordinary resolution or resolution of the directors.



29.	The removal of court approval
of any agreement to indemnify a director or officer in most cases, as well as mandatory indemnification on certain eligible cases.



30.	The remuneration of the
auditor of the Registrant may be set by the directors, without the need of seeking a resolution of the shareholders authorizing
the directors to set such remuneration.



31.
A director of the Registrant
may be removed as a director of the Registrant before the expiration of the director’s term of office pursuant to an ordinary
resolution of the shareholders.





For further information, refer
to the full text of the Notice of Articles and Articles of the Registrant, which are available online at www.sedar.com as part
of the Registrant’s publicly available filings under the heading “Other”, as filed on November 10, 2005.





Summary of the Shareholder
Rights Plan



The following is a summary of
the terms of the Shareholder Rights Plan which was approved at the Registrant’s annual and extraordinary meeting held in
May 2005, and ratified and confirmed at the Registrant’s annual general meetings in April 2008 and again in June 2011.

102Canarc Resource Corp.Form 20-F







General



The rights will be issued pursuant
to a shareholder rights plan agreement dated and effective April 30, 2005, between the Registrant and Computershare Trust Company
of Canada as the rights agent. Each right will entitle the holder to purchase from the Registrant one common share at the exercise
price of CAD$50.00 per share, subject to adjustments, at any time after the separation time (defined below). However, if a flip-in
event (defined below) occurs, each right will entitle the holder to receive, upon payment of the exercise price, common shares
having a market value equal to two-times the exercise price. The rights are non-exercisable until the separation time.



Trading of Rights



Until the separation time, the
rights will be evidenced by the outstanding certificates for common shares and the rights will be transferred with, and only with,
the common shares. As soon as practicable following the separation time, separate certificates evidencing the rights will be mailed
to holders of record of common shares as of the close of business at the separation time and the separate rights certificates will
thereafter evidence the rights.



Separation Time and Acquiring
Person



The rights will separate and trade
apart from the common shares and become exercisable at the separation time. “Separation time” generally means the close
of business on the 10th trading day following the commencement or announcement of the intent of any person to commence a take-over
bid, other than a permitted bid or a competing bid, but under certain circumstances can mean the eighth trading day after a person
becomes an “acquiring person” by acquiring 20% or more of the voting shares of any class.



Flip-in Event



A “flip-in event”
will, in general terms, occur when a person becomes an acquiring person. Upon the occurrence of a flip-in event, each right will
entitle the holder to acquire, on payment of the exercise price, that number of common shares having a market value equal to two-times
the exercise price. However, any rights beneficially owned by an acquiring person or by any direct or indirect transferees of such
person, will be void. The term “beneficial ownership” is defined to include, under certain circumstances, shares owned
indirectly through affiliates, associates, trusts and partnerships, other situations of ownership deemed by operation of law, shares
subject to acquisition or voting agreements and shares owned by persons acting jointly or in concert. There are several exceptions, including exceptions
directed towards investment managers, trust companies, and independent managers of pension plans who are not participating in a
take-over bid.

103Canarc Resource Corp.Form 20-F









Permitted Bids



Permitted bids are exempted from
the operation of the Shareholder Rights Plan. In summary, a permitted bid is a take-over bid made by way of take-over bid circular
which complies with the following provisions:



| | (a) | It is made to all holders of voting shares of the Registrant of a particular class and for all
those voting shares.
| | --- | -------------------------------------------------------------------------------------------------------------------

| | (b) | No voting shares can be taken up and paid for before the close of business on the “Permitted
Bid Expiry Date”, as described below, and unless more than 50% of voting shares held by shareholders independent of the offeror
are tendered and not withdrawn.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Voting shares may be tendered at any time until the Permitted Bid Expiry Date and may be withdrawn
until taken up and paid for.
| | --- | -------------------------------------------------------------------------------------------------------------------------------

| | (d) | If the condition described in (b) above is met, there will be a public announcement and the take-over
bid will be open for a further period of 10 business days.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



The Shareholder Rights Plan contains
provisions designed to ensure that, if considered appropriate, the time for tendering to two or more competing permitted bids will
occur on the same date.



Permitted Bid Expiry Date



The Permitted Bid provisions require
that for a Take-Over to be a Permitted Bid it must be left open until the Permitted Bid Expiry Date. The “Permitted Bid Expiry
Date” means 60 days following the date of the Take-Over Bid.



Exchange Option



Under certain circumstances, the
board of directors of the Registrant can, on exercise of a right and payment of the exercise price, issue other securities or assets
of the Registrant in lieu of common shares. The board of directors of the Registrant can also determine to issue in exchange for
the rights, but without payment of the exercise price, common shares having a value equal to the exercise price or other securities
or assets of the Registrant having the same value.

104Canarc Resource Corp.Form 20-F









Adjustments



The exercise price, the number
and kind of shares subject to purchase upon exercise of each right and the number of rights outstanding are subject to adjustment
from time to time to prevent dilution in the event that the Registrant takes certain actions involving the Registrant's share capital
which would otherwise have a dilutive effect.



Redemption



At any time before the occurrence
of a flip-in event, the board of directors may elect to redeem the rights in whole at a redemption price of $0.0001 per right.



Waiver



The board of directors may waive
the application of the Shareholder Rights Plan to any flip-in event if it determines that a person became an acquiring person by
inadvertence, conditional upon such person having, within 10 days after the determination by the board of directors, reduced its
beneficial ownership of shares such that it is no longer an acquiring person. The board of directors may also, until a flip-in
event has occurred, waive the application of the Shareholder Rights Plan to any particular flip-in event, but in that event, the
board of directors shall be deemed to have waived the application of the Shareholder Rights Plan to any other flip-in event which
may arise under any take-over bid then in effect.



Amendments



The board of directors may amend
the Shareholder Rights Plan to correct clerical or typographical errors, to maintain the validity of the plan as a result of any
changes in any applicable legislation or to increase or decrease the exercise price. Any amendments required to maintain the validity
of the Shareholder Rights Plan must be submitted to the shareholders of the Registrant or, after the separation time, to the holders
of the rights for confirmation.



Other amendments can only be made
with the approval of the shareholders of the Registrant or, after the separation time, the holders of the rights. Any supplements
or amendments to the Shareholder Rights Plan require the prior written consent of the TSX.

105Canarc Resource Corp.Form 20-F







Term



The Shareholder Rights Plan has
a term of 10 years; however, it is subject to ratification at the Meeting, and also at each of the shareholder meetings following
the third and sixth anniversaries of the effective date of the Shareholder Rights Plan. If the Shareholder Rights Plan is not so
ratified at any meeting, the Shareholder Rights Plan shall terminate forthwith.



The text of the ordinary resolution,
in substantially the form which was presented to the shareholders, subject to such changes not affecting the general intent of
the said resolution as may be required by the regulatory authorities or by counsel for the Registrant, is set forth below:



“BE
IT RESOLVED, with or without amendment, as an ordinary resolution, that the Shareholder Rights Plan Agreement, dated for reference
April 30, 2005, between the Company and Computershare Trust Company of Canada, as described in the Information Circular of the
Company dated as at April 26, 2005, be and it is hereby approved, ratified and confirmed.”





10.C Material Contracts



The following executive employment
agreements were signed in 2014 and 2013:



| | - | On January 10, 2014, as amended June 26, 2014, an Executive Employment Agreement between Canarc
and Mr. Catalin Chiloflischi was signed in respect of Mr. Chiloflischi’s capacity as Chief Executive Officer for Canarc.
The employment agreement provides that Mr. Chiloflischi’s base remuneration is CAD$150,000 per annum plus a bonus based upon
the achievement of performance targets as determined by the Compensation Committee of Canarc.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | An Executive Employment Agreement between Canarc and Mr. Garry Biles was signed on January 23,
2007, as amended on June 1, 2011, January 1, 2012 and June 26, 2014, in respect of Mr. Biles’ capacity as Chief Operating
Officer and President for Canarc. The employment agreement provides that Mr. Biles’ base remuneration is CAD$200,000 per
annum plus a bonus based upon the achievement of performance targets as determined by the Compensation Committee of Canarc.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



106Canarc Resource Corp.Form 20-F





| | - | An Executive Employment Agreement between Canarc and Mr. James Moors was signed on June 1, 2011,
as amended on January 1, 2102, in respect of Mr. Moors’ capacity as Vice-President of Exploration for Canarc. The employment
agreement provided that Mr. Moors’ base remuneration was CAD$120,000 per annum plus a bonus based upon the achievement of
performance targets as determined by the Compensation Committee of Canarc. On January 31, 2014, Canarc and Mr. Moors entered into
a Settlement Agreement and General Release whereby Mr. Moors received a final settlement and severance of CAD$60,000 payable over
a 12 month period ending January 31, 2015 upon his retirement as Vice-President of Exploration for Canarc.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | An Executive Employment Agreement between Canarc and Mr. Gregg Wilson was signed on January 1,
2012, in respect of Mr. Wilson’s capacity as Vice-President of Investor Relations for both Canarc and Caza. The employment
agreement provided that Mr. Wilson’s base remuneration is CAD$90,000 per annum plus a bonus based upon the achievement of
performance targets as determined by the Compensation Committee. Mr. Wilson’s remuneration was allocated between Canarc and
Caza. On March 31, 2014, Canarc and Mr. Wilson entered into a Settlement Agreement and General Release whereby Mr. Wilson received
a final settlement and severance of CAD$90,000 (paid) upon his retirement as Vice-President of Investor Relations for Canarc effective
April 30, 2014.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | An Executive Employment Agreement between Caza and Mr. Philip Yee was signed on June 1, 2011 in
respect of Mr. Yee’s capacity as Chief Financial Officer and Vice-President of Finance for both Canarc and Caza, as approved
by Compensation Committees of both companies. The employment agreement provided that Mr. Yee’s base remuneration was CAD$180,000
per annum plus a bonus based upon the achievement of performance targets as determined by the Compensation Committee. Effective
January 1, 2012, Mr. Yee’s base remuneration was increased to CAD$193,500 per annum as approved by the Compensation Committees
of Caza and Canarc. Effective June 26, 2014, Mr. Yee signed an Executive Employment Agreement with Canarc with no change in base
remuneration as approved by Canarc’s Compensation Committee. Mr. Yee’s remuneration continues to be allocated between
Canarc and Caza.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





For the two years immediately
preceding April 22, 2015, there were no other material contracts entered into, other than contracts entered into in the ordinary
course of business, to which the Registrant or any member of the group was a party, and other than as disclosed in this Form 20-F.
For a description of those contracts entered into in the ordinary course of business refer to Items 4.A and 4.D.





10.D Exchange Controls



There are no governmental laws,
decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest,
dividends or other payments to non-resident holders of the Registrant’s common shares. Any remittances of dividends to United
States residents are, however, subject to a 15% withholding tax (10% if the shareholder is a corporation owning at least 10% of
the outstanding common shares of the Registrant) pursuant to Article X of the reciprocal tax treaty between Canada and the United
States.

107Canarc Resource Corp.Form 20-F









Except as provided in the Investment
Canada Act (the “Act”), there are no limitations under the laws of Canada, the Province of British Columbia or in the
charter or any other constituent documents of the Registrant on the right of foreigners to hold or vote the common shares of the
Registrant.



Management of the Registrant considers
that the following general summary is materially complete and fairly describes those provisions of the Investment Canada Act pertinent
to an investment by an American investor in the Registrant.



The following discussion summarizes
the principal features of the Investment Canada Act for a non-resident who proposes to acquire the common shares.



The Investment Canada Act generally
prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust
or joint venture (each an “entity”) that is not a "Canadian" as defined in the Investment Canada Act (a “non-Canadian”),
unless after review, the Director of Investments appointed by the minister responsible for the Investment Canada Act is satisfied
that the investment is likely to be of net benefit to Canada. An investment in the common shares by a non-Canadian other than a
“WTO Investor” (as that term is defined by the Investment Canada Act, and which term includes entities which are nationals
of or are controlled by nationals of member states of the World Trade Organization) when the Company was not controlled by a WTO
Investor, would be reviewable under the Investment Canada Act if it was an investment to acquire control of the Registrant and
the value of the assets of the Registrant, as determined in accordance with the regulations promulgated under the Investment Canada
Act, equals or exceeds $5 million for direct acquisition and over $50 million for indirect acquisition, or if an order for review
was made by the federal cabinet on the grounds that the investment related to Canada's cultural heritage or national identity,
regardless of the value of the assets of the Registrant. An investment in the common shares by a WTO Investor, or by a non-Canadian
when the Registrant was controlled by a WTO Investor, would be reviewable under the Investment Canada Act if it was an investment
to acquire control of the Registrant and the value of the assets of the Registrant, as determined in accordance with the regulations
promulgated under the Investment Canada Act was not less than a specified amount. A non-Canadian would acquire control of the Registrant
for the purposes of the Investment Canada Act if the non-Canadian acquired a majority of the common shares. The acquisition of
one third or more, but less than a majority of the common shares would be presumed to be an acquisition of control of the Registrant
unless it could be established that, on the acquisition, the Registrant was not controlled in fact by the acquirer through the
ownership of the common shares.



Certain transactions relating
to the common shares would be exempt from the Investment Canada Act, including: (a) an acquisition of the common shares by a person
in the ordinary course of that person's business as a trader or dealer in securities; (b) an acquisition of control of the Registrant
in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to
the provisions of the Investment Canada Act; and (c) an acquisition of control of the Registrant by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of the Registrant, through
the ownership of the common shares, remained unchanged.

108Canarc Resource Corp.Form 20-F







10.E Taxation





ALL
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE INCOME AND OTHER TAX CONSEQUENCES ARISING IN THEIR PARTICULAR CIRCUMSTANCES.
THE FOLLOWING IS A SUMMARY ONLY AND OF A GENERAL NATURE AND IS NOT INTENDED, NOR SHOULD IT BE CONSTRUED, TO BE LEGAL OR TAX ADVISE
TO ANY PARTICULAR SHAREHOLDER.





United
States Federal Income Tax Consequences



The following is a discussion
of material United States federal income tax consequences, under current law, applicable to a US Holder (as hereinafter defined)
of common shares of the Registrant. This discussion does not address consequences peculiar to persons subject to special provisions
of federal income tax law, such as those described below as excluded from the definition of a US Holder. In addition, this discussion
does not cover any state, local or foreign tax consequences. (Refer to “Certain Canadian Federal Income Tax Considerations”
for material Canadian federal income tax consequences).



The following discussion is based
upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal
Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently
applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which
are subject to differing interpretations. This discussion does not consider the potential effects, both adverse and beneficial,
of any proposed legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. This discussion is
for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder
or prospective holder of common shares of the Registrant and no opinion or representation with respect to the United States federal
income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common
shares of the Registrant should consult their own tax advisors about the federal, state, local, and foreign tax consequences of
purchasing, owning and disposing of common shares of the Registrant.



U.S. Holders



109Canarc Resource Corp.Form 20-F





As used herein, a “U.S.
Holder” means a holder of common shares of the Registrant who is (i) a citizen or individual resident of the United States,
(ii) a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision
thereof, (iii) an estate whose income is taxable in the United States irrespective of source or (iv) a trust subject to the primary
supervision of a court within the United States and control of a United States fiduciary as described Section 7701(a)(30) of the
Code. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to specific provisions
of federal income tax law, such as tax-exempt organizations, qualified retirement plans, individual retirement accounts and other
tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies,
broker-dealers, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders subject
to the alternative minimum tax, shareholders who hold common shares as part of a straddle, hedging, conversion transaction, constructive
sale or other arrangement involving more than one position, and shareholders who acquired their common shares through the exercise
of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares
as capital assets within the meaning of Section 1221 of the Code. This summary does not address the consequences to a person or
entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options,
warrants or other rights to acquire common shares.



Distribution on Common Shares
of the Company



U.S. Holders receiving dividend
distributions (including constructive dividends) with respect to common shares of the Registrant are required to include in gross
income for United States federal income tax purposes the gross amount of such distributions, equal to the U.S. dollar value of
such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Registrant has current
or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian
tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s federal income tax liability or,
alternatively, may be deducted in computing the U.S. Holder's federal taxable income by those who itemize deductions. (The section,
“Foreign Tax Credit”, below provides more details). To the extent that distributions exceed current or accumulated
earnings and profits of the Registrant, they will be treated first as a return of capital up to the U.S. Holder’s adjusted
basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term
capital gains are applicable to a U.S. Holder that is an individual, estate or trust. There are currently no preferential tax rates
for long-term capital gains for a U.S. Holder that is a corporation.



In the case of foreign currency
received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have
a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized
upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary
income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that
there are no expenses associated with the transaction that meet the requirements for deductibility as a trade or business expense
(other than travel expenses in connection with a business trip) or as an expense for the production of income.



Dividends paid on the common shares
of the Registrant generally will not be eligible for the dividends received deduction provided to corporations receiving dividends
from certain United States corporations. A U.S. Holder which is a corporation and which owns shares representing at least 10%
of the voting power and value of the Registrant may, under certain circumstances, be entitled to a 70% (or 80% if the U.S. Holder
owns shares representing at least 20% of the voting power and value of the Registrant) deduction of the United States source portion
of dividends received from the Registrant (unless the Registrant qualifies as a “passive foreign investment company,”
as defined below). The availability of this deduction is subject to several complex limitations that are beyond the scope of this
discussion.

110Canarc Resource Corp.Form 20-F









Certain information reporting
and backup withholding rules may apply with respect to the Registrant’s common shares. In particular, a payor or middleman
within the U.S., or in certain cases outside the U.S., will be required to withhold 31% of any payments to a holder of the Registrant’s
common shares of dividends on, or proceeds from the sale of, such common shares within the U.S., unless the holder is an exempt
recipient, if the holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish
an exemption from, the backup withholding tax requirements. Any amounts withheld under the U.S. backup withholding tax rules will
be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information
is furnished to the IRS. U.S. Holders are urged to consult their own tax counsel regarding the information reporting and backup
withholding rules applicable to the Registrant’s common shares.



Foreign Tax Credit



A U.S. Holder who pays (or has
withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Registrant may be entitled,
at the option of the U.S. Holder, to either receive a deduction or a tax credit for such foreign tax paid or withheld. Generally,
it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar
basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis
and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex
limitations that apply to the credit among which is the general limitation that the credit cannot exceed the proportionate share
of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or
its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation
is calculated separately with respect to specific classes of income such as “passive income”, “high withholding
tax interest,” “financial services income,” “shipping income,” and certain other classifications
of income. Dividends distributed by the Registrant will generally constitute “passive income” or, in the case of certain
U.S. Holders, “financial services income” for these purposes. In addition, U.S. Holders which are corporations that
own 10% or more of the voting stock of the Registrant may be entitled to an “indirect” foreign tax credit under Section
902 with respect to the payment of dividends by the Registrant under certain circumstances and subject to complex rules and limitations.
The availability of the foreign tax credit and the application of the limitations on the credit are fact specific, and U.S. Holders
of common shares of the Registrant should consult their own tax advisors regarding their particular circumstances.



Disposition of Common Shares
of the Company



111Canarc Resource Corp.Form 20-F





A U.S. Holder will recognize gain
or loss upon the sale of common shares of the Registrant equal to the difference, if any, between (i) the amount of cash plus the
fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Registrant.
Preferential tax rates apply to long-term capital gains of U.S. Holders that are individuals, estates or trusts. This gain or loss
will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term
capital gain or loss if the common shares of the Registrant are held for more than one year. Deductions for net capital losses
are subject to significant limitations. For U.S. Holders which are not corporations, any unused portion of such net capital loss
may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations
(other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried
forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.



Other Considerations



In the following circumstances,
the above sections of this discussion may not describe the United States federal income tax consequences resulting from the holding
and disposition of common shares:



Foreign Investment
Company



If 50% or more of the combined
voting power or total value of the Registrant's outstanding shares is held, directly or indirectly, by citizens or residents of
the United States, United States domestic partnerships or companies, or estates or trusts other than foreign estates or trusts
(as defined by the Code Section 7701(a)(31)), and the Registrant is found to be engaged primarily in the business of investing,
reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Registrant may be treated
as a "foreign investment company" as defined in Section 1246 of the Code, causing all or part of any gain realized by
a U.S. Holder selling or exchanging common shares to be treated as ordinary income rather than capital gain. The Registrant does
not believe that it currently qualifies as a foreign investment company. However, there can be no assurance that the Registrant
will not be considered a foreign investment company for the current or any future taxable year.



Passive Foreign Investment
Company



As a foreign corporation with
U.S. Holders, the Registrant could potentially be treated as a passive foreign investment company ("PFIC"), as defined
in Section 1297 of the Code, depending upon the percentage of the Registrant's income which is passive, or the percentage of the
Registrant's assets which produce or are held for the production of passive income. U.S. Holders owning common shares of a PFIC
are subject to the highest rate of tax on ordinary income in effect for the applicable taxable year and to an interest charge based
on the value of deferral of tax for the period during which the common shares of the PFIC are owned with respect to certain “excess
distributions” on and dispositions of PFIC stock. However, if the U.S. Holder makes a timely election to treat a PFIC as
a qualified electing fund ("QEF") with respect to such shareholder's interest therein, the above-described rules generally
will not apply. Instead, the electing U.S. Holder would include annually in his gross income his pro rata share of the PFIC's ordinary
earnings and net capital gain regardless
of whether such income or gain was actually distributed. A U.S. Holder of a QEF can, however, elect to defer the payment of United
States federal income tax on such income inclusions. Special rules apply to U.S. Holders who own their interests in a PFIC through
intermediate entities or persons. In addition, subject to certain limitations, U.S. Holders owning, actually or constructively,
marketable (as specifically defined) stock in a PFIC will be permitted to elect to mark that stock to market annually, rather than
be subject to the excess distribution regime of section 1291 described above. Amounts included in or deducted from income under
this alternative (and actual gains and losses realized upon disposition, subject to certain limitations) will be treated as ordinary
gains or losses. This alternative will apply to taxable years of U.S. Holders beginning after 1997 and taxable years of foreign
corporations ending with or within such taxable years of U.S. Holders.

112Canarc Resource Corp.Form 20-F









Because the PFIC determination
is made annually on the basis of income and assets, there can be no assurance that the Registrant will not be classified a PFIC
in the current or in a subsequent year. In addition, there can be no assurance that the Registrant's determination concerning its
PFIC status will not be challenged by the IRS, or that it will be able to satisfy record keeping requirements which will be imposed
on QEFs in the event that it qualifies as a PFIC.



Controlled Foreign Registrant



If more than 50% of the total
combined voting power of all classes of shares entitled to vote or the total value of the shares of the Registrant is owned, actually
or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates
or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), each of which own, actually or constructively,
10% or more of the total combined voting power of all classes of shares entitled to vote of the Registrant (“United States
Shareholder”), the Registrant could be treated as a controlled foreign corporation (“CFC”) under Subpart F of
the Code. This classification would affect many complex results, one of which is the inclusion of certain income of a CFC which
is subject to current U.S. tax. The United States generally taxes United States shareholders of a CFC currently on their pro rata
shares of the Subpart F income of the CFC. Such United States shareholders are generally treated as having received a current distribution
out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC’s earnings
invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under
Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Registrant which is
or was a United States Shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary
income to the extent of earnings and profits of the Registrant attributable to the shares sold or exchanged. If a foreign corporation
is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to United States Shareholders
of the CFC. This rule generally will be effective for taxable years of United States Shareholders beginning after 1997 and for
taxable years of foreign Registrants ending with or within such taxable years of United States Shareholders. Special rules apply
to United States Shareholders who are subject to the special taxation rules under Section 1291 discussed above with respect to
a PFIC. Because of the complexity of Subpart F, a more detailed review of these rules is outside of the scope of this discussion.
The Registrant does not believe that it currently qualifies as a CFC. However, there can be no assurance that the Registrant will
not be considered a CFC for the current or any future taxable year.



Certain
Canadian Federal Income Tax Considerations

113Canarc Resource Corp.Form 20-F







A brief description of certain
provisions of the tax treaty between Canada and the United States is included below, together with a brief outline of certain taxes,
including withholding provisions, to which United States security holders are subject under existing laws and regulations of Canada.
The consequences, if any, of provincial, state and local taxes are not considered.



The following information is general,
and security holders should seek the advice of their own tax advisors, tax counsel or accountants with respect to the applicability
or effect on their own individual circumstances of the matters referred to herein and of any provincial, state, or local taxes.



The discussion under this heading
summarizes the principal Canadian federal income tax consequences of acquiring, holding and disposing of shares of common stock
of the Registrant for a shareholder of the Registrant who is not a resident of Canada but is a resident of the United States and
who will acquire and hold shares of common stock of the Registrant as capital property for the purposes of the Income Tax Act
(Canada) (the “Canadian Tax Act”). This summary does not apply to a shareholder who carries on business in Canada through
a “permanent establishment” situated in Canada or performs independent personal services in Canada through a fixed
base in Canada if the shareholder’s holding in the Registrant is effectively connected with such permanent establishment
or fixed base. This summary is based on the provisions of the Canadian Income Tax Act and the regulations thereunder and on an
understanding of the administrative practices of Canada Revenue Agency, and takes into account all specific proposals to amend
the Canadian Tax Act or regulations made by the Minister of Finance of Canada as of the date hereof. It has been assumed that there
will be no other relevant amendment of any governing law although no assurance can be given in this respect. This discussion is
general only and is not a substitute for independent advice from a shareholder’s own Canadian and U.S. tax advisors.



The provisions of the Canadian
Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention
(1980), as amended (the “Convention”).



Dividends on Common Shares
and Other Income



Under the Canadian Tax Act, a
non-resident of Canada is generally subject to Canadian withholding tax at the rate of 25 percent on dividends paid or deemed to
have been paid to him or her by a corporation resident in Canada. The Convention limits the rate to 15 percent if the shareholder
is a resident of the United States and the dividends are beneficially owned by and paid to such shareholder, and to 5 percent if
the shareholder is also a corporation that beneficially owns at least 10 percent of the voting stock of the payor corporation.



The amount of a stock dividend
(for tax purposes) would generally be equal to the amount by which the paid up or stated capital of the Registrant had increased
by reason of the payment of such dividend. The Registrant will furnish additional tax information to shareholders in the event of
such a dividend. Interest paid or deemed to be paid on the Registrant’s debt securities held by non-Canadian residents may
also be subject to Canadian withholding tax, depending upon the terms and provisions of such securities and any applicable tax
treaty.

114Canarc Resource Corp.Form 20-F









The Convention generally exempts
from Canadian income tax dividends paid to a religious, scientific, literary, educational or charitable organization or to an organization
operated exclusively to administer or provide pension, retirement or employee benefit fund, if the organization is a resident of
the United States and is generally exempt from income tax under the laws of the United States provided it is not carrying on a
trade or business.



Dispositions of Common Shares



Under the Canadian Tax Act, subject
to certain restrictions, a taxpayer’s capital gain or capital loss from a disposition of a share of common stock of the Registrant
is the amount, if any, by which his or her proceeds of disposition exceed (or are exceeded by, respectively) the aggregate of his
or her adjusted cost base of the share and reasonable expenses of disposition. The capital gain or loss must be computed in Canadian
currency using a weighted average adjusted cost base for identical properties. Fifty percent of the capital gains net of losses
are included in income. The amount by which a shareholder’s capital loss exceeds the capital gain in a year may be deducted
from a capital gain realized by the shareholder in the three previous years or any subsequent year, subject to certain restrictions
in the case of a corporate shareholder.



Under the Canadian Tax Act, a
non-resident of Canada is subject to Canadian tax on taxable capital gains, and may deduct allowable capital losses, realized on
a disposition of "taxable Canadian property”. Shares of common stock of the Registrant will constitute taxable Canadian
property of a shareholder at a particular time if the shareholder used the shares in carrying on business in Canada, or if at any
time in the five years immediately preceding the disposition 25% or more of the issued shares of any class or series in the capital
stock of the Registrant belonged to one or more persons in a group comprising the shareholder and persons with whom the shareholder
and persons with whom the shareholder did not deal at arm’s length and in certain other circumstances.



The Convention relieves United
States residents from liability for Canadian tax on capital gains derived on a disposition of shares unless:



(a)
the value of the shares
is derived principally from “real property” in Canada, including the right to explore for or exploit natural resources
and rights to amounts computed by reference to production;



(b)	the shareholder was resident
in Canada for 120 months during any period of 20 consecutive years preceding the disposition, and at any time during the 10 years
immediately preceding, the disposition and the shares were owned by him or her when he or she ceased to be resident in Canada;
or

115Canarc Resource Corp.Form 20-F







(c)
the shares formed part
of the business property of a “permanent establishment” that the holder has or had in Canada within the 12 months preceding
the disposition.





10.F Dividends and Paying Agents



Not applicable.





10.G Statement by Experts



Not applicable.





10.H Documents on Display



Copies of documents referred to
in this Form 20-F may be inspected at the Registrant’s corporate office at Suite #301 - 700 West Pender Street, Vancouver,
British Columbia, Canada, V6C 1G8. The Registrant may require the payment of a reasonable fee in respect of a request made by a
person who is not a security holder of the Registrant.



The Registrant’s documents
publicly filed with the Securities and Exchange Commission may also be viewed and inspected at the SEC’s Public Reference
Room located at 100 F St. NE, Washington, DC, USA, 20549. Copies may also be obtained from the SEC at prescribed rates.





10.I Subsidiary Information



Not applicable.



116Canarc Resource Corp.Form 20-F







ITEM 11. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





Canarc’s audited consolidated
financial statements have been prepared in accordance with IFRS as issued by the IASB, and all dollar amounts are expressed in
United States dollars unless otherwise indicated.



Quantitative and qualitative disclosures
about market risk are provided in Canarc’s audited consolidated financial statements for the year ended December 31, 2014
and the notes thereto.



Item
3.D provides information concerning risk factors.





Management
of Capital



The Registrant is an exploration
stage company and this involves a high degree of risk. The Registrant has not determined whether its mineral property interests
contain reserves of ore and currently has not earned any revenues from its mineral property interests and, therefore, does not
generate cash flows from operations. The Registrant’s primary source of funds comes from the issuance of share capital and
proceeds from notes payable. The Registrant is not subject to any externally imposed capital requirements.



The Registrant defines its capital
as debt and share capital. Capital requirements are driven by the Registrant’s exploration activities on its mineral property
interests. To effectively manage the Registrant’s capital requirements, the Registrant has a planning and budgeting process
in place to ensure that adequate funds are available to meet its strategic goals. The Registrant monitors actual expenses to budget
on all exploration projects and overhead to manage costs, commitments and exploration activities.



The Registrant has in the past
invested its capital in liquid investments to obtain adequate returns. The investment decision is based on cash management to ensure
working capital is available to meet the Registrant’s short-term obligations while maximizing liquidity and returns of unused
capital.



Although the Registrant has been
successful at raising funds in the past through the issuance of share capital, it is uncertain whether it will be able to continue
this financing in the future. The Registrant will continue to rely on debt and equity financings to meet its commitments as they become due,
to continue exploration work on its mineral property interests, and to meet its administrative overhead costs for the coming periods.

117Canarc Resource Corp.Form 20-F









There were no changes in the Registrant’s
approach to capital management during the year ended December 31, 2014.





Management
of Financial Risk



The
Registrant is exposed in varying degrees to a variety of financial instrument related risks, including credit risk, liquidity risk,
and market risk which includes foreign currency risk, interest rate risk and other price risk. The types of risk exposure and the
way in which such exposure is managed are provided as follows.



The fair value hierarchy categorizes
financial instruments measured at fair value at one of three levels according to the reliability of the inputs used to estimate
fair values. The fair value of assets and liabilities included in Level 1 are determined by reference to quoted prices in active
markets for identical assets and liabilities. Assets and liabilities in Level 2 are valued using inputs other than quoted prices
for which all significant inputs are based on observable market data. Level 3 valuations are based on inputs that are not based
on observable market data.



The fair values of the Registrant’s
receivables, promissory note receivable, accounts payable and accrued liabilities and notes payable approximate their carrying
values due to the short terms to maturity. Cash is measured at fair values using Level 1 inputs. Disclosure is not made of the
fair value of the long-term investments as the shares do not have a quoted market price in an active market. There is no separately
quoted market value for the Registrant’s investment in the shares of Aztec, and the fair value cannot be reliably determined.
Therefore they were recorded at cost in 2012 and written down to a nominal value of CAD$100 in 2013 due to the lack of liquidity
in the stock. In October 2014, the Registrant received 358,000 shares from Aztec in settlement of debt owed to the Registrant which
the Registrant had written off in 2013. All gains and losses are included in operations in the period in which
they arise.



(a)	Credit risk:



Credit risk is the risk
of potential loss to the Registrant if the counterparty to a financial instrument fails to meet its contractual obligations.



118Canarc Resource Corp.Form 20-F





The Registrant's credit
risk is primarily attributable to its liquid financial assets including cash. The Registrant limits exposure to credit risk on
liquid financial assets through maintaining its cash with high-credit quality Canadian financial institutions.



Management has reviewed
the items comprising the accounts receivable balance which include amounts receivable from certain related parties, provincial
tax credit for qualified mineral expenditures, and goods and services tax refunds due from the government, and determined that
all accounts are collectible; accordingly there has been no allowance for doubtful accounts recorded.



(b)	Liquidity risk:



Liquidity
risk is the risk that the Registrant will not be able to meet its financial obligations as they become due.



The Registrant ensures that
there is sufficient capital in order to meet short-term business requirements, after taking into account the Registrant's holdings
of cash and its ability to raise equity financings. As at December 31, 2014, the Registrant had a working capital deficiency of
$156,000 (2013 - $921,000). The Registrant will require additional funding to meet its short-term liabilities and administrative
overhead costs, and to maintain its mineral property interests in 2015.



Accounts payable and accrued
liabilities are due in less than 90 days, and the notes payable, if any, are due on demand.



(c)	Market risk:



The significant market risk
exposures to which the Registrant is exposed are foreign currency risk, interest rate risk and other price risk.



(i)	Foreign currency
risk:



The Registrant’s mineral
property interests and operations are in Canada. A certain portion of its operating expenses are incurred in Canadian dollars,
and fluctuations in U.S. dollars would impact the cumulative translation adjustment of the Registrant and the values of its assets
and liabilities as its audited consolidated financial statements are stated in U.S. dollars.

119Canarc Resource Corp.Form 20-F







The Registrant is exposed
to currency risk for its U.S. dollar equivalent of assets and liabilities denominated in currencies other than U.S. dollars as
follows:





| |                                          |  |  |  |  |                  |  |                   
| | ---------------------------------------- |  |  |  |  | ---------------- |  | ------------------
| |                                          |  |  |  |  | December 31,    
| |                                          |  |  |  |  | 2014             |  | 2013              
| |                                          |  |  |  |  | (Held in CAD$)  
| |                                          |  |  |  |  |                  |  |                   
| | Cash                                     |  |  |  |  | $            643 |  | $               48
| | Accounts receivable                      |  |  |  |  | 10               |  | -                 
| | Accounts payable and accrued liabilities |  |  |  |  | (799)            |  | (852)             
| |                                          |  |  |  |  |                  |  |                   
| | Net assets (liabilities)                 |  |  |  |  | $          (146) |  | $           (804) 





Based upon the above net exposure
as at December 31, 2014 and assuming all other variables remain constant, a 10% depreciation or appreciation of the U.S. dollar
relative to the Canadian dollar could result in a decrease/increase of $14,600 (2013 - $80,400) in cumulative translation adjustment
in the Registrant’s shareholders’ equity.



The Registrant has not entered
into any agreements or purchased any instruments to hedge possible currency risks at this time.



(ii)	Interest rate risk:



In respect of financial assets,
the Registrant's policy is to invest cash at floating rates of interest in cash equivalents, in order to maintain liquidity, while
achieving a satisfactory return. Fluctuations in interest rates impact on the value of cash equivalents. Interest rate risk is
not significant to the Registrant as it has no cash equivalents at period-end and the promissory notes receivable and notes payable,
if any, are stated at fixed interest rates.



| | (iii) | Other price risk:
| | ----- | -----------------



Other price risk is the risk
that the value of a financial instrument will fluctuate as a result of changes in market prices.

120Canarc Resource Corp.Form 20-F







The Registrant’s other
price risk includes equity price risk, whereby the Registrant’s investment in marketable securities is subject to market
price fluctuations. The Registrant held no marketable securities at December 31, 2014 and 2013.





ITEM 12. DESCRIPTION OF SECURITIES
OTHER THAN EQUITY SECURITIES



Not applicable.











121Canarc Resource Corp.Form 20-F





PART II





ITEM 13. DEFAULTS, DIVIDEND ARREARAGES
AND DELINQUENCIES



None.





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





14.A - D



None.





14.E Proceeds



Not Applicable.





ITEM 15. CONTROLS AND PROCEDURES





Disclosure Controls and Procedures



At the end of the period
covered by this report, an evaluation was carried out under the supervision of and with the participation of the
Registrant’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”), of the effectiveness of the design and operations of
the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the
Exchange Act). Based on that evaluation the CEO and the CFO have concluded that as of the end of the period covered by this report,
the Registrant’s disclosure controls and procedures were adequately designed and effective at the reasonable assurance level
to ensure that: (i) information required to be disclosed by the Registrant in reports that it files or submits to the Securities
and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in applicable rules and forms; and (ii) material information required to be disclosed in our reports filed under the Exchange Act
is accumulated and communicated to the Registrant’s management, including its CEO and CFO, as appropriate, to allow for accurate
and timely decisions regarding required disclosure.

122Canarc Resource Corp.Form 20-F











Management’s Report on Internal Control
over Financial Reporting



The Registrant’s management,
including the CEO and CFO, does not expect that its disclosure controls and procedures or internal controls and procedures will
prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Registrant have been detected. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can
be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over
time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures
may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected. The Registrant’s controls include policies and procedures that:



| | - | pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Registrant;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - | provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with IFRS; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | - | provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Registrant’s assets that could have a material effect on the annual
financial statements or interim financial statements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Management conducted an evaluation
of the design and operation of the Registrant’s internal control over financial reporting as of December 31, 2014 based on
the criteria in a framework developed by the Registrant’s management pursuant to and in compliance with the SEC’s Guidance
Regarding Management’s Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, Release No. 33-8810 and based on the criteria set forth in Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (the COSO 2013 framework). This evaluation included review
of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation. Based upon its assessment, management, including the Registrant’s Chief Executive
Officer and Chief Financial Officer, concluded that, as of December 31, 2014, the Registrant’s internal control over financial
reporting was effective.

123Canarc Resource Corp.Form 20-F









On January 1, 2014, the Company
adopted the Committee of Sponsoring Organizations new internal control framework (“COSO 2013”), which did not have
a material impact on the Company’s disclosure controls and procedures and internal controls over financial reporting.



The Registrant’s independent
registered public accounting firm is not required to provide an attestation on management’s report on internal control over
financial reporting, because the Registrant was not an accelerated filer or large accelerated files. Therefore, this report does
not include an attestation report of the Registrant’s independent registered public accounting firm regarding internal controls
over financial reporting pursuant to rules of the Securities and Exchange Commission that permit the Registrant to provide only
management’s report in this annual report.





Changes in Internal Controls
over Financial Reporting



There were no changes in the Registrant’s
internal controls over financial reporting identified in connection with the evaluation described above that occurred during the
period covered by this annual report that has materially affected or is reasonably likely to materially affect the Registrant’s
internal control over financial reporting.



124Canarc Resource Corp.Form 20-F







ITEM
16. AUDIT COMMITTEE FINANCIAL EXPERT, CODE OF ETHICS AND PRINCIPAL ACCOUNTANT FEES AND SERVICES





16.A Audit Committee Financial Expert



The Registrant’s audit committee
is comprised of three directors, all of whom are independent, as set forth below:



Martin Burian Bruce Bried Leonard
Harris



Mr. Martin Burian, Chairman of
the Audit Committee, would be considered a financial expert, and the other audit committee members are financially literate, meaning
that they are able to read and understand financial statements. The Board of Directors has determined that its members of the Audit
Committee have sufficient skills to satisfy its duties given the stage and size of the Registrant.



Relevant Education and Experience



Martin Burian – Mr.
Burian is a Chartered Professional Accountant and Chartered Business Valuator with over eighteen years of investment banking experience.
He has a wealth of knowledge and expertise in corporate finance and advisory services, including mergers and acquisition in mineral
exploration and mining. He is currently the CFO of Cap-Ex Iron Ore Ltd., CFO and a director of Tinkerine Studio Ltd., and a director
of Alberta Star Development Corp. and Atlas Cloud Enterprises Inc. Mr. Burian was Managing Director of Investment Banking at Haywood
Securities Inc. from 2010 until mid-2013, prior to which he served as President of Bolder Investment Partners from 2009 until its
merger with Haywood Securities in 2010. Mr. Burian obtained his CPA and CBV designations while at KPMG and obtained his Bachelor
of Commerce from the University of British Columbia in 1986.



Bruce Bried – Mr.
Bried is a professional engineer with over 30 years of management experience in the mining industry in various capacities in Engineering,
Operations and Reclamation, specializing in underground vein gold and silver mines. He has a B.Sc. Mining Engineering, Colorado
School of Mines, Golden, CO. His significant experience in the last ten years has been VP Operations for Endeavour Silver Corp.
and General Manager for Kinross Gold USA Inc., at the Lupin Mine, General Manager of the Lead Mine in South Dakota and the Snip
Mine in British Columbia for Homestake Mining Company.



125Canarc Resource Corp.Form 20-F





Leonard Harris - Mr. Harris
is a professional engineer with a metallurgy diploma and 50 years of experience in all aspects of mineral processing and mining
operations world-wide, including the construction of the Yanacocha gold mine in Peru. Mr. Harris is currently a director for other
small cap mining and exploration public companies.





16.B Code of Ethics



The Registrant has not adopted
a formal written code of ethics given its relatively small size.



Directors, including the director/employee
of the Registrant, are subject to the laws of the Province of British Columbia, Canada, whereby they are required to act honestly,
in good faith and in the best interests of the Registrant. Also, the corporate secretary who is a securities lawyer is available
to the management of the Registrant to provide a high standard of due care in the activities of the Registrant and to provide guidance
when needed.



The Registrant expects all directors,
officers and employees to abide by the following code of ethics which have been communicated to them:



| | - | act with honesty and integrity and in an ethical manner resolve any actual or apparent conflicts
of interest between personal and professional relationships;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - | ensure that any public filings or announcements, whether they are statutory or regulatory filings
or other documents submitted for public disclosure and communication, are accurate, complete, fair, timely and understandable in
all material respects, taking into consideration applicable standards and regulations;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - | compliance with applicable laws, rules and regulations; and
| | - | -----------------------------------------------------------

| | - | prompt internal reporting of any violations, whether actual or potential, in the code of ethics.
| | - | ------------------------------------------------------------------------------------------------





16.C Principal Accountant Fees and
Services



The following table discloses
accounting fees and services of the Registrant:



126Canarc Resource Corp.Form 20-F





(Stated in terms of Canadian dollars)



|Type of Services Rendered | 2014
        Fiscal Year
        (CAD$) | 2013
        Fiscal Year
        (CAD$)
|------------------------- | --------------------------------------- | ---------------------------------------
|                          |                                         |                                        
|(a)  Audit Fees           | $33,000                                 | $36,000                                
|                          |                                         |                                        
|(b)  Audit-Related Fees   | Nil                                     | Nil                                    
|                          |                                         |                                        
|(c)  Tax Fees             | Nil                                     | $1,800                                 
|                          |                                         |                                        
|(d)  All Other Fees       | Nil                                     | Nil                                    
|                          |                                         |                                        



At an Audit Committee meeting
held in March 2015, the Audit Committee pre-approved all services to be performed by the auditors including certain non-audit services
requested by management for the 2015 fiscal year until the next Audit Committee meeting concerning the financial statements for
the year ended December 31, 2015, which services are not prohibited services under the independence requirements of the Securities
and Exchange Commission or professional standards in Canada or the United States.





16.D Exemptions from the Listing Standards for Audit Committees



Not applicable.





16.E Purchases of Equity Securities by the Registrant and
Affiliated Purchasers



127Canarc Resource Corp.Form 20-F





None.





16.F Change in Registrant’s Certifying Accountant



In the two most recent fiscal
years 2013 and 2014, there was no change in the Registrant’s certifying accountant.





16.G Corporate Governance



The Registrant is listed on the
TSX and, under Canadian security laws and regulations, is required to report annually to its shareholders on its corporate governance
practices and policies with reference to National Policy 58-201, Corporate Governance Guidelines and National Instrument
58-101, Disclosure of Corporate Governance Practices. The Registrant’s corporate governance practices meet all mandated
requirements and are not, in the opinion of management, materially different from other junior resource companies listed on the
TSX. Item 6.C provides further details.





16.H Mine Safety Disclosure



The Registrant currently does not have any operating
mines.







128Canarc Resource Corp.Form 20-F





PART III





ITEM 17. FINANCIAL STATEMENTS



Not Applicable





ITEM 18. FINANCIAL STATEMENTS



The consolidated financial statements
of the Company have been prepared in accordance with IFRS as issued by the IASB, and all dollar amounts are expressed in United
States dollars unless otherwise indicated.



The
following financial statements and related schedules are included in this Item:



|Financial Statements                                                                                                                                                                                                                                                   | Page # in Sequential Numbering System
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------
|1.1	Report of Independent Registered Public Accounting Firm dated March 24, 2015                                                                                                                                                                                       | 86                                   
|1.2
      Consolidated statements of financial position as at December 31, 2014 and 2013 together with the consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for each of the years ended December 31, 2014, 2013 and 2012. | 87-91                                





129Canarc Resource Corp.Form 20-F







ITEM 19. EXHIBITS





|Exhibits  | Page # in Sequential Numbering System
|--------- | -------------------------------------
|Exhibit # |                                      
|1-1       |                                      
|1-2       |                                      
|8-1       |                                      
|12-1      |                                      
|12-2      |                                      
|13-1.     |                                      
|13-2      |                                      
|15-1      |                                      
|15-2      |                                      
|15-3      |                                      
|15-4      |                                      







130Canarc Resource Corp.Form 20-F











SIGNATURE



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



DATED at Vancouver, British Columbia, Canada, as of
April 24, 2015.



CANARC RESOURCE CORP.

Per:



/s/ Catalin
Chiloflischi



Catalin
Chiloflischi, Chief Executive Officer





131Canarc Resource Corp.Form 20-F







EXHIBIT 12.1



CERTIFICATIONS



I, Catalin Chiloflischi,
certify that:



| | 1. | I have reviewed this annual report on Form 20-F of Canarc Resource Corp.;
| | -- | -------------------------------------------------------------------------



| | 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary 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 report;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as
of, and for, the periods presented in this report;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | The Company’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in 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 Company 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 Company, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this 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 Company’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

132Canarc Resource Corp.Form 20-F





by this report based on such
evaluation; and



| | d. | Disclosed in this report any change in the Company’s internal control over financial reporting
that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | The Company’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 Company’s ability to record, process, summarize
and report financial information; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Company’s internal control over financial reporting.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------





DATED at Vancouver, British Columbia, Canada, as of
April 24, 2015.





/s/ Catalin
Chiloflischi



Catalin
Chiloflischi, Chief Executive Officer



133Canarc Resource Corp.Form 20-F







EXHIBIT 12.2



CERTIFICATIONS



I, Philip Yee, certify that:



| | 1. | I have reviewed this annual report on Form 20-F of Canarc Resource Corp.;
| | -- | -------------------------------------------------------------------------



| | 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary 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 report;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as
of, and for, the periods presented in this report;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | The Company’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in 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 Company 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 Company, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this 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 Company’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

134Canarc Resource Corp.Form 20-F





by this report based on such
evaluation; and



| | d. | Disclosed in this report any change in the Company’s internal control over financial reporting
that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | The Company’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 Company’s ability to record, process, summarize
and report financial information; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Company’s internal control over financial reporting.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------





DATED at Vancouver, British Columbia, Canada, as of
April 24, 2015.





/s/ Philip Yee



Philip Yee, Chief Financial Officer



135Canarc Resource Corp.Form 20-F



































Consolidated Financial Statements
of



CANARC RESOURCE CORP.



(expressed in United States
dollars)





Years ended December 31, 2014
and 2013









136Canarc Resource Corp.Form 20-F













INDEPENDENT AUDITORS’
REPORT



TO THE SHAREHOLDERS OF CANARC
RESOURCE CORP.



We have audited the accompanying
consolidated financial statements of Canarc Resource Corp., which comprise the consolidated statements of financial position as
at December 31, 2014 and 2013, and the consolidated statements of comprehensive loss, changes in shareholders’ equity and
cash flows for the years ended December 31, 2014, 2013 and 2012, and a summary of significant accounting policies and other explanatory
information.



Management's Responsibility
for the Consolidated Financial Statements

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



Auditors’ Responsibility

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



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.





137Canarc Resource Corp.Form 20-F









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



Opinion

In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of Canarc Resource Corp. as at December 31,
2014 and 2013, and its financial performance and its cash flows for the years ended December 31, 2014, 2013 and 2012 in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board.



Emphasis of Matter

Without qualifying our opinion,
we draw attention to Note 1 in the consolidated financial statements, which describes matters and conditions that indicate the
existence of material uncertainties that cast substantial doubt about the Company’s ability to continue as a going concern.



“SmytheRatcliffe LLP”
(signed)



Chartered Accountants



Vancouver, Canada

March 24, 2015



138Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Consolidated Statements of Financial Position

(expressed in thousands of United States dollars)







|                                           |  |       |  |                        |  |                        
|------------------------------------------ |  | ----- |  | ---------------------- |  | -----------------------
|                                           |  |       |  | December 31,          
|                                           |  | Notes |  | 2014                   |  | 2013                   
|                                           |  |       |  |                        |  |                        
|ASSETS                                     |  |       |  |                        |  |                        
|                                           |  |       |  |                        |  |                        
|CURRENT ASSETS                             |  |       |  |                        |  |                        
|Cash                                       |  |       |  | $                  675 |  | $                    50
|Receivables and prepaids                   |  | 13    |  | 83                     |  | 105                    
|Total Current Assets                       |  |       |  | 758                    |  | 155                    
|                                           |  |       |  |                        |  |                        
|NON-CURRENT ASSETS                         |  |       |  |                        |  |                        
|Mineral property interests                 |  | 6     |  | 11,804                 |  | 12,330                 
|Equipment                                  |  | 7     |  | 2                      |  | 3                      
|Total Non-Current Assets                   |  |       |  | 11,806                 |  | 12,333                 
|Total Assets                               |  |       |  | $             12,564   |  | $             12,488   
|                                           |  |       |  |                        |  |                        
|LIABILITIES AND SHAREHOLDERS' EQUITY       |  |       |  |                        |  |                        
|                                           |  |       |  |                        |  |                        
|CURRENT LIABILITIES                        |  |       |  |                        |  |                        
|Accounts payable and accrued liabilities   |  | 13    |  | $                  914 |  | $                  945 
|Notes payable                              |  | 9     |  | -                      |  | 131                    
|Total Liabilities                          |  |       |  | 914                    |  | 1,076                  
|                                           |  |       |  |                        |  |                        
|SHAREHOLDERS' EQUITY                       |  |       |  |                        |  |                        
|Share capital                              |  | 11    |  | 62,912                 |  | 60,178                 
|Reserve for share-based payments           |  |       |  | 681                    |  | 590                    
|Accumulated other comprehensive loss       |  |       |  | (1,624)                |  | (702)                  
|Deficit                                    |  |       |  | (50,319)               |  | (48,654)               
|Total Shareholders' Equity                 |  |       |  | 11,650                 |  | 11,412                 
|Total Liabilities and Shareholders' Equity |  |       |  | $             12,564   |  | $             12,488   
|                                           |  |       |  |                        |  |                        



Refer to the accompanying notes
to the consolidated financial statements.

Approved on behalf of the Board:



/s/	Bradford Cooke	                                                   /s/	Martin
Burian



Director	                                                                      Director





139Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Consolidated Statements of Comprehensive Loss

(expressed in thousands of United States dollars,
except per share amounts)



|                                                                |  |              |   |                              |   |                              |     |                             
|--------------------------------------------------------------- |  | ------------ | - | ---------------------------- | - | ---------------------------- | --- | ----------------------------
|                                                                |  |              |   | Years ended December 31,    
|                                                                |  | Notes        |   | 2014                         |   | 2013                         |     | 2012                        
|                                                                |  |              |   |                              |   |                              |     |                             
|Expenses:                                                       |  |              |   |                              |   |                              |     |                             
|Amortization                                                    |  |              |   | $                          1 |   | $                          1 |     | $                          2
|Corporate development                                           |  | 12           |   | 345                          |   | 19                           |     | 26                          
|Employee and director remuneration                              |  | 13           |   | 514                          |   | 452                          |     | 521                         
|General and administrative                                      |  | 12 and 13    |   | 290                          |   | 223                          |     | 289                         
|Shareholder relations                                           |  |              |   | 227                          |   | 111                          |     | 227                         
|Share-based payments                                            |  | 11(c) and 13 |   | 209                          |   | 72                           |     | 168                         
|                                                                |  |              |   |                              |   |                              |     |                             
|Loss before the undernoted                                      |  |              |   | (1,586)                      |   | (878)                        |     | (1,233)                     
|                                                                |  |              |   |                              |   |                              |     |                             
|Interest and other income                                       |  |              |   | 20                           |   | -                            |     | -                           
|Derecognition of accounts payable                               |  | 10           |   | -                            |   | 99                           |     | -                           
|Derecognition of flow-through obligations                       |  | 10           |   | -                            |   | 213                          |     | -                           
|Gain from disposition of available-for-sale securities          |  |              | - |                              | - |                              | 77 
|Interest and finance charges                                    |  | 9 and 10     |   | (1)                          |   | (17)                         |     | (56)                        
|Foreign exchange gain                                           |  |              |   | 11                           |   | 4                            |     | 33                          
|Write-down of long term investments                             |  | 8            |   | -                            |   | (91)                         |     | -                           
|Write-off of receivable and tax recoveries                      |  | 13           |   | -                            |   | (54)                         |     | -                           
|Write-off of promissory notes receivable                        |  | 15           |   | (275)                        |   | -                            |     | -                           
|Write-off of mineral property interests, net of recoveries      |  | 6            |   | -                            |   | (653)                        |     | (27)                        
|                                                                |  |              |   |                              |   |                              |     |                             
|Net loss for the year                                           |  |              |   | (1,831)                      |   | (1,377)                      |     | (1,206)                     
|                                                                |  |              |   |                              |   |                              |     |                             
|Other comprehensive (loss) income:                              |  |              |   |                              |   |                              |     |                             
|Items that may be reclassified into profit or loss:             |  |              |   |                              |   |                              |     |                             
|Unrealized (loss) gain on available-for-sale securities         |  |              | - |                              | - |                              | (4)
|Realized gain from disposition of available-for-sale securities |  | -            |   | -                            |   | (77)                        
|Items that will not be reclassified into profit or loss:        |  |              |   |                              |   |                              |     |                             
|Foreign currency translation adjustment                         |  |              |   | (922)                        |   | (764)                        |     | 197                         
|                                                                |  |              |   |                              |   |                              |     |                             
|Comprehensive loss for the year                                 |  |              |   | $                (2,753)     |   | $                  (2,141)   |     | $                  (1,090)  
|                                                                |  |              |   |                              |   |                              |     |                             
|                                                                |  |              |   |                              |   |                              |     |                             
|Basic and diluted loss per share                                |  |              |   | $                  (0.01)    |   | $                    (0.01)  |     | $                    (0.01) 
|                                                                |  |              |   |                              |   |                              |     |                             
|Weighted average number of common shares outstanding            |  | 148,771,663  |   | 113,830,108                  |   | 97,408,679                  





Refer to the accompanying notes
to the consolidated financial statements.





140Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Consolidated Statements of Changes in Shareholders’
Equity

(expressed in thousands of United States dollars)





|                                                 |               |  |                 |  |                   |  |                            |  |                 |  |                  
|------------------------------------------------ | ------------- |  | --------------- |  | ----------------- |  | -------------------------- |  | --------------- |  | -----------------
|                                                 |               |  |                 |  |                   |  | Accumulated                |  |                 |  |                  
|                                                 | Share Capital |  | Reserve for     |  | Other             |  |                            |  |                
|                                                 | Number of     |  |                 |  | Share-Based       |  | Comprehensive              |  |                 |  |                  
|                                                 | Shares        |  | Amount          |  | Payments          |  | Income (Loss)              |  | Deficit         |  | Total            
|                                                 |               |  |                 |  |                   |  |                            |  |                 |  |                  
|Balance, December 31, 2011                       | 94,096,171    |  | $        58,258 |  | $          1,081  |  | $                     (54) |  | $      (46,815) |  | $          12,470
|                                                 |               |  |                 |  |                   |  |                            |  |                 |  |                  
|Private placement, net of share issue costs      | 15,800,000    |  | 1,460           |  | -                 |  | -                          |  | -               |  | 1,460            
|Exercise of stock options                        | 346,000       |  | 61              |  | (25)              |  | -                          |  | -               |  | 36               
|Share-based payments                             | -             |  | -               |  | 168               |  | -                          |  | -               |  | 168              
|Expiry of stock options                          | -             |  | -               |  | (489)             |  | -                          |  | 489             |  | -                
|Finders fee warrants                             | -             |  | (97)            |  | 97                |  | -                          |  | -               |  | -                
|Other comprehensive income:                      |               |  |                 |  |                   |  |                            |  |                 |  |                  
|Unrealized loss on available-for-sale securities | -             |  | -               |  | -                 |  | (4)                        |  | -               |  | (4)              
|Realized gain on available-for-sale securities   | -             |  | -               |  | -                 |  | (77)                       |  | -               |  | (77)             
|Foreign currency translation adjustment          | -             |  | -               |  | 4                 |  | 197                        |  | 6               |  | 207              
|Net loss for the year                            | -             |  | -               |  | -                 |  | -                          |  | (1,206)         |  | (1,206)          
|Balance, December 31, 2012                       | 110,242,171   |  | 59,682          |  | 836               |  | 62                         |  | (47,526)        |  | 13,054           
|                                                 |               |  |                 |  |                   |  |                            |  |                 |  |                  
|Private placement, net of share issue costs      | 1,600,000     |  | 155             |  | -                 |  | -                          |  | -               |  | 155              
|Property acquisition                             | 2,000,000     |  | 196             |  | -                 |  | -                          |  | -               |  | 196              
|Exercise of stock options                        | 769,000       |  | 116             |  | (40)              |  | -                          |  | -               |  | 76               
|Exercise of share appreciation rights            | 207,024       |  | 29              |  | (34)              |  | -                          |  | 5               |  | -                
|Share-based payments                             | -             |  | -               |  | 72                |  | -                          |  | -               |  | 72               
|Expiry of stock options                          | -             |  | -               |  | (236)             |  | -                          |  | 236             |  | -                
|Other comprehensive income:                      |               |  |                 |  |                   |  |                            |  |                 |  |                  
|Foreign currency translation adjustment          | -             |  | -               |  | (8)               |  | (764)                      |  | 8               |  | (764)            
|Net loss for the year                            | -             |  | -               |  | -                 |  | -                          |  | (1,377)         |  | (1,377)          
|Balance, December 31, 2013                       | 114,818,195   |  | 60,178          |  | 590               |  | (702)                      |  | (48,654)        |  | 11,412           
|                                                 |               |  |                 |  |                   |  |                            |  |                 |  |                  
|Private placement, net of share issue costs      | 42,618,110    |  | 2,780           |  | -                 |  | -                          |  | -               |  | 2,780            
|Share-based payments                             | -             |  | -               |  | 209               |  | -                          |  | -               |  | 209              
|Expiry of stock options                          | -             |  | -               |  | (168)             |  | -                          |  | 168             |  | -                
|Finders fee warrants                             | -             |  | (46)            |  | 46                |  | -                          |  | -               |  | -                
|Other comprehensive income:                      |               |  |                 |  |                   |  |                            |  |                 |  |                  
|Foreign currency translation adjustment          | -             |  | -               |  | 4                 |  | (922)                      |  | (2)             |  | (920)            
|Net loss for the year                            | -             |  | -               |  | -                 |  | -                          |  | (1,831)         |  | (1,831)          
|Balance, December 31, 2014                       | 157,436,305   |  | $        62,912 |  | $             681 |  | $                (1,624)   |  | $      (50,319) |  | $          11,650





Refer to the accompanying notes
to the consolidated financial statements.



141Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Consolidated Statements of Cash Flows

(expressed in thousands of United States dollars)





|                                                           |  |       |                          |     |                       |       |                     
|---------------------------------------------------------- |  | ----- | ------------------------ | --- | --------------------- | ----- | --------------------
|                                                           |  |       | Years ended December 31,
|                                                           |  |       | 2014                     |     | 2013                  |       | 2012                
|                                                           |  |       |                          |     |                       |       |                     
|Cash provided from (used by):                              |  |       |                          |     |                       |       |                     
|                                                           |  |       |                          |     |                       |       |                     
|Operations:                                                |  |       |                          |     |                       |       |                     
|Net loss for the year                                      |  |       | $          (1,831)       |     | $            (1,377)  |       | $            (1,206)
|Items not involving cash:                                  |  |       |                          |     |                       |       |                     
|Accrued interest                                           |  |       | (15)                     |     | 17                    |       | 10                  
|Amortization                                               |  |       | 1                        |     | 1                     |       | 2                   
|Share-based payments                                       |  |       | 209                      |     | 72                    |       | 168                 
|Derecognition of accounts payable                          |  |       | -                        |     | (99)                  |       | -                   
|Derecognition of flow-through obligations                  |  |       | -                        |     | (213)                 |       | -                   
|Gain on disposition of available-for-sale securities       |  |       | -                        |     | -                     |       | (77)                
|Unrealized currency translation gain                       |  |       | -                        |     | -                     |       | (53)                
|Write-down of long term investment                         |  |       | -                        |     | 91                    |       | -                   
|Write-off of promissory notes receivable                   |  |       | 275                      |     | -                     |       | -                   
|Write-off of mineral property interest                     |  |       | -                        |     | 653                   |       | 27                  
|Write-off of receivable and tax recoveries                 |  |       | -                        |     | 54                    |       | -                   
|                                                           |  |       | (1,361)                  |     | (801)                 |       | (1,129)             
|Changes in non-cash working capital items:                 |  |       |                          |     |                       |       |                     
|Receivables and prepaids                                   |  |       | 22                       |     | 11                    |       | (78)                
|Accounts payable and accrued liabilities                   |  |       | (26)                     |     | 322                   |       | 196                 
|Cash used by operating activities                          |  |       | (1,365)                  |     | (468)                 |       | (1,011)             
|                                                           |  |       |                          |     |                       |       |                     
|Financing:                                                 |  |       |                          |     |                       |       |                     
|Issuance of common shares, net of share issuance costs     |  | 2,780 |                          | 231 |                       | 1,496
|Proceeds from demand loans                                 |  |       | -                        |     | 126                   |       | 358                 
|Repayment of demand loans                                  |  |       | (128)                    |     | -                     |       | (450)               
|Cash provided from financing activities                    |  |       | 2,652                    |     | 357                   |       | 1,404               
|                                                           |  |       |                          |     |                       |       |                     
|Investing:                                                 |  |       |                          |     |                       |       |                     
|Promissory notes receivables                               |  |       | (260)                    |     | -                     |       | -                   
|Proceeds from disposition of available-for-sale securities |  | -     |                          | -   |                       | 92   
|Mineral property interests, net of recoveries              |  |       | (402)                    |     | (9)                   |       | (360)               
|Cash used by investing activities                          |  |       | (662)                    |     | (9)                   |       | (268)               
|                                                           |  |       |                          |     |                       |       |                     
|Increase (decrease) in cash                                |  |       | 625                      |     | (120)                 |       | 125                 
|Cash, beginning of year                                    |  |       | 50                       |     | 170                   |       | 45                  
|                                                           |  |       |                          |     |                       |       |                     
|Cash, end of year                                          |  |       | $               675      |     | $                  50 |       | $                170





Refer to the accompanying notes
to the consolidated financial statements.





142Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Consolidated Statements of Cash Flows

(expressed in thousands of United States dollars)



|                                                             |  |           |  |                          |  |                      |  |                        
|------------------------------------------------------------ |  | --------- |  | ------------------------ |  | -------------------- |  | -----------------------
|                                                             |  |           |  | Years ended December 31,
|                                                             |  | Notes     |  | 2014                     |  | 2013                 |  | 2012                   
|                                                             |  |           |  |                          |  |                      |  |                        
|                                                             |  |           |  |                          |  |                      |  |                        
|Non-cash financing and investing activities:                 |  |           |  |                          |  |                      |  |                        
|                                                             |  |           |  |                          |  |                      |  |                        
|Issuance of shares for mineral property interests            |  | 6(a)(iii) |  | $                    -   |  | $                196 |  | $                     -
|                                                             |  |           |  |                          |  |                      |  |                        
|Fair value allocated to common shares issued on exercise of: |  |           |  |                          |  |                     
|Stock options                                                |  |           |  | -                        |  | 40                   |  | 25                     
|Share appreciation rights                                    |  |           |  | -                        |  | 29                   |  | -                      
|                                                             |  |           |  |                          |  |                      |  |                        
|Expiration of stock options                                  |  |           |  | 168                      |  | 236                  |  | 489                    
|                                                             |  |           |  |                          |  |                      |  |                        
|Fair value of finder's fee warrants                          |  |           |  | 46                       |  | -                    |  | 97                     
|                                                             |  |           |  |                          |  |                      |  |                        
|                                                             |  |           |  |                          |  |                      |  |                        
|Income taxes paid                                            |  |           |  | -                        |  | -                    |  | -                      
|                                                             |  |           |  |                          |  |                      |  |                        
|Interest received                                            |  |           |  | 5                        |  | -                    |  | -                      
|Interest paid                                                |  |           |  | 7                        |  | -                    |  | 51                     
|                                                             |  |           |  |                          |  |                      |  |                        







Refer to the accompanying notes
to the consolidated financial statements.











143Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|1. |  | Nature of Operations and Going Concern
|-- |  | --------------------------------------



Canarc Resource Corp. (the
“Company”), a company incorporated under the laws of British Columbia on January 22, 1987, is in the mineral exploration
business and has not yet determined whether its mineral property interests contain reserves. The recoverability of amounts capitalized
for mineral property interests is dependent upon the existence of reserves in its mineral property interests, the ability of the
Company to arrange appropriate financing and receive necessary permitting for the exploration and development of its mineral property
interests, and upon future profitable production or proceeds from the disposition thereof. The address of the Company’s registered
office is #1040 – 999 West Hastings Street, Vancouver, BC, Canada, V6C 2W2.



The Company has no operating
revenues, has incurred significant net losses of $1.8 million for the year ended December 31, 2014 (2013 - $1.4 million and 2012
- $1.2 million), and has a deficit of $50.3 million as at December 31, 2014 (2013 - $48.7 million and 2012 - $47.5 million). Furthermore,
the Company has a working capital deficiency of $156,000 (2013 - $921,000). These consolidated financial statements have been prepared
on a going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of business.
The Company’s ability to continue as a going concern is dependent on the ability of the Company to raise debt or equity financings,
and the attainment of profitable operations. Management would need to raise the necessary capital to meet its planned business
objectives and continues to seek financing opportunities. There can be no assurance that management’s plans will be successful.
These matters indicate the existence of material uncertainties that cast substantial doubt about the Company’s ability to
continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification
of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern, and such adjustments could be material.





|2. |  | Basis of Presentation
|-- |  | ---------------------



144Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|(a) |  | Statement of compliance:
|--- |  | ------------------------



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



|(b) |  | Approval of consolidated financial statements:
|--- |  | ----------------------------------------------



These consolidated financial
statements were approved by the Company’s Board of Directors on March 24, 2015.



|(c) |  | Basis of presentation:
|--- |  | ----------------------



These consolidated financial
statements have been prepared on a historical cost basis except for certain financial instruments which are measured at fair value,
as disclosed in Note 5.







145Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|2. |  | Basis of Presentation (continued)
|-- |  | ---------------------------------



|(d) |  | Functional currency and presentation currency:
|--- |  | ----------------------------------------------



The Company’s functional
currency is the Canadian dollar, and accounts denominated in currencies other than the Canadian dollar have been translated as
follows:



| |  | Monetary assets and liabilities at the exchange rate at the consolidated statement of financial
position date;
| | - | --------------------------------------------------------------------------------------------------------------

| |  | Non-monetary assets and liabilities at the historical exchange rates, unless such items are carried
at fair value, in which case they are translated at the date when the fair value was determined;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Shareholders equity items at historical exchange rates; and
| | - | ------------------------------------------------------------

| |  | Revenue and expense items at the rate of exchange in effect on the transaction date.
| | - | ------------------------------------------------------------------------------------



The Company’s presentation
currency is the United States dollar. For presentation purposes, all amounts are translated from the Canadian dollar functional
currency to the United States dollar presentation currency for each period using the exchange rate at the end of each reporting
period.



Exchange gains and losses
arising from translation to the Company’s presentation currency are recorded as cumulative translation adjustment, which
is included in accumulated other comprehensive income (loss).



|(e) |  | Critical accounting estimates and judgements:
|--- |  | ---------------------------------------------



146Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



The preparation of financial
statements in accordance with IFRS requires management to make estimates, assumptions and judgements that affect the application
of accounting policies and the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements along with the reported amounts of revenues and expenses during the period. Actual
results may differ from these estimates and, as such, estimates and judgements and underlying assumptions are reviewed on an ongoing
basis. Revisions are recognized in the period in which the estimates are revised and in any future periods affected.



Significant areas requiring
the use of management estimates relate to determining the recoverability of promissory notes receivable, mineral property interests,
receivables and long-term investments; the determination of accrued liabilities; accrued site remediation; amount of flow-through
obligations and recognition of deferred income tax liability; the variables used in the determination of the fair value of stock
options granted and finder’s fees warrants issued; recoverability of receivables and long-term investments; and the recoverability
of deferred tax assets. While management believes the estimates are reasonable, actual results could differ from those estimates
and could impact future results of operations and cash flows.



The Company applies judgment
in assessing the functional currency of each entity consolidated in these financial statements.



The Company applies judgment
in assessing whether material uncertainties exist that would cast substantial doubt as to whether the Company could continue as
a going concern.





147Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|2. |  | Basis of Presentation (continued)
|-- |  | ---------------------------------



|(f) |  | New accounting standards and recent pronouncements:
|--- |  | ---------------------------------------------------



The Company has reviewed
new and amended accounting pronouncements that have been issued by the IASB. All of the new and revised standards described below
may be early adopted.



(i)
IFRS 9 Financial
Instruments (2014) (“IFRS 9”)



This is a finalized version
of IFRS 9, which contains accounting requirements for financial instruments, replacing IAS 39 Financial Instruments: Recognition
and Measurement. The standard contains requirements in the following areas:



| | · | Classification and measurement. Financial
assets are classified by reference to the business model within which they are held and their contractual cash flow characteristics.
The 2014 version of IFRS 9 introduces a “fair value through other comprehensive income” category for certain debt instruments.
Financial liabilities are classified in a similar manner to under IAS 39; however, there are differences in the requirements applying
to the measurement of an entity's own credit risk.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Impairment. The 2014 version of IFRS 9 introduces
an “expected credit loss” model for the measurement of the impairment of financial assets, so it is no longer necessary
for a credit event to have occurred before a credit loss is recognized.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Hedge accounting. Introduces a new hedge
accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging
financial and non-financial risk exposures.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Derecognition. The requirements for the
derecognition of financial assets and liabilities are carried forward from IAS 39.
| | - | --------------------------------------------------------------------------------------------------------------------------



IFRS 9 is applicable to annual
periods beginning on or after January 1, 2018.

148Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|2. |  | Basis of Presentation (continued)
|-- |  | ---------------------------------



|(f) |  | New accounting standards and recent pronouncements: (continued)
|--- |  | ---------------------------------------------------------------



| | (ii) | Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to IAS 16 and
IAS 38)
| | ---- | ------------------------------------------------------------------------------------------------------



Amends IAS 16 Property,
Plant and Equipment and IAS 38 Intangible Assets to:



| | · | clarify that a depreciation method that
is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and
equipment;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | introduce a rebuttable presumption that
an amortization method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate,
which can only be overcome in limited circumstances where the intangible asset is expressed as a measure of revenue, or when it
can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | add guidance that expected future reductions
in the selling price of an item that was produced using an asset could indicate the expectation of technological or commercial
obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The amendments to IAS 16 and
IAS 38 are applicable to annual periods beginning on or after July 1, 2016.











149Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|2. |  | Basis of Presentation (continued)
|-- |  | ---------------------------------



|(f) |  | New accounting standards and recent pronouncements: (continued)
|--- |  | ---------------------------------------------------------------



(iii)	Annual Improvements
2010-2012 Cycle



Makes amendments to the following standards:



| | · | IFRS 2 — Amends the definitions of
“vesting condition” and “market condition” and adds definitions for “performance condition”
and “service condition”.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | IFRS 3 — Require contingent consideration
that is classified as an asset or a liability to be measured at fair value at each reporting date.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------

| | · | IFRS 8 — Requires disclosure of the
judgments made by management in applying the aggregation criteria to operating segments, clarify reconciliations of segment assets
only required if segment assets are reported regularly.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | IFRS 13 — Clarify that issuing IFRS
13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and payables on an undiscounted
basis (amends basis for conclusions only).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | IAS 16 and IAS 38 — Clarify that the
gross amount of property, plant and equipment is adjusted in a manner consistent with a revaluation of the carrying amount.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | IAS 24 — Clarify how payments to entities
providing management services are to be disclosed.
| | - | --------------------------------------------------------------------------------------------



The amendments are applicable
to annual periods beginning on or after July 1, 2014.



(iv)	Annual Improvements
2011-2013 Cycle



Makes amendments to the following
standards:



| | · | IFRS 1 — Clarify which versions of IFRS can be used on initial
adoption (amends basis for conclusions only)
| | - | -----------------------------------------------------------------------------------------------------------

| | · | IFRS 3 — Clarify that IFRS 3 excludes from its scope the accounting
for the formation of a joint arrangement in the financial statements of the joint arrangement itself
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | IFRS 13 — Clarify the scope of the portfolio exception in paragraph
52
| | - | ----------------------------------------------------------------------

| | · | IAS 40 — Clarifying the interrelationship of IFRS 3 and IAS 40
when classifying property as investment property or owner-occupied property.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------





These amendments are applicable
to annual periods beginning on or after July 1, 2014.





150Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|2. |  | Basis of Presentation (continued)
|-- |  | ---------------------------------



|(f) |  | New accounting standards and recent pronouncements: (continued)
|--- |  | ---------------------------------------------------------------



(v)	Annual Improvements
2012-2014 Cycle

Makes
amendments to the following standards:



| | · | IFRS 5 — Adds specific guidance in
IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in
which held-for-distribution accounting is discontinued.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | IFRS 7 — Additional guidance to clarify
whether a servicing contract is continuing involvement in a transferred asset, and clarification on offsetting disclosures in condensed
interim financial statements.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | IAS 9 — Clarify that the high quality
corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as
the benefits to be paid.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | IAS 34 — Clarify the meaning of “elsewhere
in the interim report” and require a cross-reference.
| | - | ------------------------------------------------------------------------------------------------



The amendments are applicable
to annual periods beginning on or after July 1, 2016.





|3. |  | Significant Accounting Policies
|-- |  | -------------------------------



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



|(a) |  | Basis of consolidation:
|--- |  | -----------------------



These consolidated financial
statements include the accounts of the Company and its subsidiaries including New Polaris Gold Mines Ltd. (100%). All significant
intercompany transactions and balances are eliminated on consolidation.



151Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|3. |  | Significant Accounting Policies (continued)
|-- |  | -------------------------------------------



|(b) |  | Financial instruments: (continued)
|--- |  | ----------------------------------



(i)	Financial assets:



The Company classifies its
financial assets in the following categories: fair value through profit or loss (“FVTPL”), loans and receivables, held-to-maturity
(“HTM”) and available-for-sale (“AFS”). The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of financial assets at recognition.



Financial
assets at FVTPL



Financial assets at FVTPL
are initially recognized at fair value with changes in fair value recorded through profit or loss. Cash and cash equivalents, if
any, are included in this category of financial assets.







152Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|3. |  | Significant Accounting Policies (continued)
|-- |  | -------------------------------------------



|(b) |  | Financial instruments: (continued)
|--- |  | ----------------------------------



(i)	Financial assets:
(continued)

Loans
and receivables



Loans and receivables are
non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified
as current assets or non-current assets based on their maturity date. Loans and receivables are carried at amortized cost less
any impairment. Loans and receivables comprise trade and other receivables and promissory notes receivable.



Held to maturity



These assets are non-derivative
financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive
intention and ability to hold to maturity. HTM investments are initially recognized on their trade-date at fair value, and subsequently
are measured at amortized cost using the effective interest rate method. If there is objective evidence that the investment is
impaired, determined by reference to external credit ratings and other relevant indicators, the financial asset is measured at
the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses,
are recognized in profit or loss.



Available-for-sale
financial assets



AFS financial assets are non-derivatives
that are either designated as available-for-sale or not classified in any of the other financial asset categories. Changes in the
fair value of AFS financial assets are recognized as other comprehensive income (loss) and classified as a component of equity.
AFS assets include investments in equities of other entities.



Management assesses the carrying
value of AFS financial assets at least annually and any impairment charges are also recognized in profit or loss. When financial
assets classified as AFS are sold, the accumulated fair value adjustments recognized in other comprehensive income (loss) are
included in profit or loss.

153Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|3. |  | Significant Accounting Policies (continued)
|-- |  | -------------------------------------------



|(b) |  | Financial instruments: (continued)
|--- |  | ----------------------------------



(ii)	Financial liabilities:

The Company classifies its
financial liabilities in the following categories: FVTPL, other financial liabilities, and derivative financial liabilities.



Financial
liabilities at FVTPL



Financial liabilities at FVTPL
are initially recognized at fair value with changes in fair value recorded through profit or loss. The Company has no financial
liabilities at FVTPL.



Other financial liabilities



Other financial liabilities
are non-derivatives and are recognized initially at fair value, net of transaction costs, and are subsequently measured at amortized
cost using the effective interest method. Any difference between the amounts originally received, net of transaction costs, and
the redemption value is recognized in profit or loss over the period to maturity using the effective interest method.



Other financial liabilities
are classified as current or non-current based on their maturity date. Financial liabilities include trade accounts payable, notes
payable and other payables.



Derivatives



Derivatives are initially
recognized at their fair value on the date the derivative contract is entered into and are subsequently re-measured at their fair
value at each reporting period with changes in the fair value recognized in profit or loss. Derivatives include warrants denominated
in a currency other than the Company’s functional currency.



(iii)	Fair value hierarchy:



The Company
categorizes financial instruments measured at fair value at one of three levels according to the reliability of the inputs used
to estimate fair values. The fair value of financial assets and financial liabilities included in Level 1 are determined by reference
to quoted prices in active markets for identical assets and liabilities. Financial assets and liabilities in Level 2 are valued
using inputs other than quoted prices for which all significant inputs are based on observable market data. Level 3 valuations
are based on inputs that are not based on observable market data.



154Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|3. |  | Significant Accounting Policies (continued)
|-- |  | -------------------------------------------



|(b) |  | Financial instruments: (continued)
|--- |  | ----------------------------------

(iv)	Impairment of financial
assets:



The Company
assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
An evaluation is made as to whether a decline in fair value is “significant” or “prolonged” based on indicators
such as significant adverse changes in the market, economic or legal environment.



Impairment
losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and
the decrease can be related objectively to an event occurring after the impairment was recognized.



(v)	Derecognition of
financial assets and liabilities:



Financial
assets are derecognized when the investments mature or are sold, and substantially all the risks and rewards of ownership have
been transferred. A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.
Gains and losses on derecognition are recognized within other income and finance costs.



|(c) |  | Mineral property interests:
|--- |  | ---------------------------



All costs related to investments
in mineral property interests are capitalized on a property-by-property basis. Such costs include mineral property acquisition
costs and exploration and development expenditures, net of any recoveries. The costs related to a mineral property from which there
is production, together with the costs of mining equipment, will be amortized using the unit-of-production method. When there is
little prospect of further work on a property being carried out by the Company or its partners or when a property is abandoned
or when the capitalized costs are not considered to be economically recoverable, the related property costs are written down to
the amount recoverable.



From time to time, the Company
may acquire or dispose of a mineral property interest pursuant to the terms of a property option agreement. As the property options
are exercisable entirely at the discretion of the optionee, the amounts payable or receivable are not recorded. Property option
payments are recorded as property costs or recoveries when the payments are made or received. Proceeds received on the sale or
property option of the Company’s property interest is recorded as a reduction of the mineral property cost. The Company recognizes
in income those costs that are recovered on mineral property interests when amounts received or receivable are in excess of the
carrying amount.



The amounts shown for mineral
property interests represent costs incurred to date and include advance net smelter return (“NSR”) royalties, less
recoveries and write-downs, and are not intended to reflect present or future values.





155Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|3. |  | Significant Accounting Policies (continued)
|-- |  | -------------------------------------------



|(d) |  | Equipment:
|--- |  | ----------



Equipment is recorded at
cost and, for equipment subject to amortization, the Company uses the declining balance method at a rate of 30% annually.



|(e) |  | Proceeds on unit offerings:
|--- |  | ---------------------------



Proceeds received on the
issuance of units, consisting of common shares and warrants, are first allocated to the fair value of the common shares with any
residual value then allocated to warrants.



|(f) |  | Non-monetary transactions:
|--- |  | --------------------------



Common shares issued for
consideration other than cash are valued at their quoted market price at the date of issuance.



|(g) |  | Flow-through common shares:
|--- |  | ---------------------------



The Company will from time
to time, issue flow-through common shares to finance a significant portion of its exploration program. Pursuant to the terms of
the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors.
On issuance, the Company bifurcates the flow-through shares into: (i) a flow-through share premium, equal to the estimated premium,
if any, investors pay for the flow-through feature, which is recognized as a liability and (ii) share capital. Upon expenses being
incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amount of tax reduction renounced
to the shareholders. The premium is recognized as other income and the related deferred tax is recognized as a tax provision.



Proceeds received from the
issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures with a two-year
period. The portion of the proceeds received but not yet expended at the end of the Company’s period is disclosed separately
as flow-through share proceeds.



The Company may also be
subject to a Part XII.6 tax on flow-through proceeds renounced under the Look-back Rule, in accordance with the Government of Canada
flow-through regulations. When applicable, this tax is accrued as a financial expense until paid.



156Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|3. |  | Significant Accounting Policies (continued)
|-- |  | -------------------------------------------



|(h) |  | Share-based payments:
|--- |  | ---------------------



The Company has a stock
option plan that is described in Note 11(c). Share-based payments to employees are measured at the fair value of the instruments
issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods
or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services
cannot be reliably measured, and are recorded at the date the goods or services are received. The offset to the recorded cost is
to the reserve for share-based payments. Consideration received on the exercise of stock options is recorded as share capital and
the related reserve for share-based payments is transferred to share capital. Upon expiry, the recorded fair value is transferred
from reserve for share-based payments to deficit.



The Company has a share appreciation
rights plan, which provides stock option holders the right to receive the number of common shares that are equal in value to the
intrinsic value of the stock options at the date of exercise. Amounts transferred from the reserve for share-based payment to share
capital are based on the ratio of shares actually issued to the number of stock options originally granted. The remainder is transferred
to deficit.



|(i) |  | Environmental rehabilitation:
|--- |  | -----------------------------



TheCompany recognizes liabilities
forstatutory, contractual,constructive orlegal obligationsassociated with the retirement
of mineral property interests andequipment,when those obligations
result from
the acquisition,construction,development
or normal operation of the assets. The net present value of future
rehabilitation
cost estimates arising from the decommissioning
of plant and other site preparation
workis capitalized
to mining
assets along witha corresponding increase in the rehabilitation
provision in
the period incurred.
Discount
rates using a pre-taxrate that reflect the time
value of money are used to calculatethe net present value. The rehabilitation asset is
depreciated on the same basis
as mining
assets.



TheCompany’s estimates of reclamation
costs could change asa result of changes
in regulatory requirements,discount rates and assumptions regarding
the amount and timing of thefuture expenditures.
These changes are recorded
directly to mining
assets with acorresponding
entry to the rehabilitation
provision.
The Company’s estimates are reviewed
annuallyfor changes
in regulatory requirements,
discount rates, effectsofinflation
and changes in estimates.



Changesin the net present value,
excluding changes in
the Company’s estimates of reclamation
costs, are charged to profit or loss
forthe period.



Thenet present value of restoration
costs arising from
subsequent site damage that is
incurred on an ongoing basis
during production are charged to profit
or loss in the periodincurred.



Thecosts of rehabilitation
projects thatwere included
in the rehabilitation
provision
are recordedagainst the provision
asincurred.
The cost of ongoing current programs to
prevent and controlpollutionis charged against
profit orloss
as incurred.





157Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|3. |  | Significant Accounting Policies (continued)
|-- |  | -------------------------------------------



|(j) |  | Earnings (loss) per share:
|--- |  | --------------------------



Basic earnings (loss) per
share is computed by dividing the net income (loss) for the period by the weighted average number of common sharesoutstanding
during the period. The treasury stock method is used to calculate diluted earnings (loss) per common share amounts. Under the treasury
stock method, the weighted average number of common shares outstanding used for the calculation of the diluted per

common share amount assumes
that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at
the average market price during the period. In the Company’s case, diluted loss per share presented is the same as basic
loss per share as the effect of outstanding options and warrants in the loss per common share calculation would be anti-dilutive.



|(k) |  | Provisions:
|--- |  | -----------



Provisions
are recorded
when a present
legalor constructive obligation
existsas a result
ofpast events where
itis
probable
that an outflow ofresources embodying
economic benefits will be required to settle
the obligation, and areliable estimate of the amount
of the obligation can be made.



Theamount recognized as a provisionis the best estimate of the consideration
required to settle the present obligation
atthe statement of financial
positiondate, takinginto
account the risks and uncertainties
surrounding the obligation.Where a provision ismeasured using the cash flows estimated
to settle the present obligation,
its carrying amount is
thepresent value of those cash flows.
When some or allof the economic
benefits required
to settle a provision
are expected to be recovered from a third
party,the receivable
is recognized
as an assetif it isvirtuallycertain that reimbursement
willbe
received and the amount receivable
can be measured reliably.



|(l) |  | Income taxes:
|--- |  | -------------



The Company follows the
asset and liability method for accounting for income taxes. 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 losses carried forward. Deferred tax assets and liabilities are measured using
substantively 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 profit
or loss in the period that includes the substantive enactment date. Deferred tax assets are recognized to the extent that recovery
is considered probable.





158Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|4. |  | Management of Capital
|-- |  | ---------------------



The Company is an exploration
stage company and this involves a high degree of risk. The Company has not determined whether its mineral property interests contain
reserves of ore and currently has not earned any revenues from its mineral property interests and, therefore, does not generate
cash flows from operations. The Company’s primary source of funds comes from the issuance of share capital and proceeds from
notes payable. The Company is not subject to any externally imposed capital requirements.



The Company defines
its capital as debt and share capital. Capital requirements are driven by the Company’s exploration activities on its
mineral property interests. To effectively manage the Company’s capital requirements, the Company has a planning and
budgeting process in place to ensure that adequate funds are available to meet its strategic goals. The Company monitors
actual expenses to budget on all exploration projects and overhead to manage costs, commitments and exploration
activities.



The Company has in the past
invested its capital in liquid investments to obtain adequate returns. The investment decision is based on cash management to ensure
working capital is available to meet the Company’s short-term obligations while maximizing liquidity and returns of unused
capital.



Although the Company has
been successful at raising funds in the past through the issuance of share capital, it is uncertain whether it will be able to
continue this financing in the future. The Company will continue to rely on debt and equity financings to meet its commitments
as they become due, to continue exploration work on its mineral property interests, and to meet its administrative overhead costs
for the coming periods.



There were no changes in
the Company’s approach to capital management during the year ended December 31, 2014.





159Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|5. |  | Management of Financial Risk
|-- |  | ----------------------------



The Company has classified
its cash as financial assets at FVTPL; long-term investments as AFS financial assets; receivables and prepaids and promissory note
receivables as loans and receivables; and accounts payable and accrued liabilities and notes payable as other financial liabilities.



The Company’s long-term
investment in shares of Aztec Metals Corp. (“Aztec”), a company sharing two common directors, is classified as AFS
but does not have a quoted market price in an active market and is therefore measured at cost, net of any write-downs.



The fair values of the Company’s
receivables, accounts payable and accrued liabilities, and notes payable approximate their carrying values due to the short terms
to maturity. Cash is measured at fair values using Level 1 inputs.



The Company is exposed in
varying degrees to a variety of financial instrument related risks, including credit risk, liquidity risk and market risk which
includes foreign currency risk, interest rate risk and other price risk. The types of risk exposure and the way in which such exposure
is managed are provided as follows.





160Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|5. |  | Management of Financial Risk (continued)
|-- |  | ----------------------------------------



|(a) |  | Credit risk:
|--- |  | ------------



Credit risk is the risk
of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations.



The Company's credit risk
is primarily attributable to its liquid financial assets including cash. The Company limits exposure to credit risk on liquid
financial assets through maintaining its cash with high-credit quality Canadian financial institutions.



Management has reviewed
the items comprising the accounts receivable balance which include amounts receivable from certain related parties, provincial
tax credit for qualified mineral expenditures, and goods and services tax refunds due from the government, and determined that
all accounts are collectible; accordingly, there has been no allowance for doubtful accounts recorded.



|(b) |  | Liquidity risk:
|--- |  | ---------------



Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they become due.



The Company ensures that
there is sufficient capital in order to meet short-term business requirements, after taking into account the Company's holdings
of cash and its ability to raise equity financings. As at December 31, 2014, the Company has a working capital deficiency of $156,000
(2013 - $921,000). The Company will require significant additional funding to meet its short-term liabilities and administrative
overhead costs, and to maintain its mineral property interests in 2015.



Accounts payable and accrued
liabilities are due in less than 90 days, and the notes payable, if any, are due on demand.



|(c) |  | Market risk:
|--- |  | ------------



The significant market risk
exposures to which the Company is exposed are foreign currency risk, interest rate risk and other price risk.



(i)	Foreign currency
risk:



The Company’s mineral
property interests and operations are in Canada. A certain portion of its operating expenses are incurred in Canadian dollars,
and fluctuations in U.S. dollars would impact the cumulative translation adjustment of the Company’s assets and liabilities
as its consolidated financial statements are presented in U.S. dollars.



161Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|5. |  | Management of Financial Risk (continued)
|-- |  | ----------------------------------------



|(c) |  | Market risk: (continued)
|--- |  | ------------------------



(i)	Foreign currency
risk: (continued)



The Company is exposed to
currency risk for its U.S. dollar equivalent of assets and liabilities denominated in currencies other than U.S. dollars as follows:



| |                                          |  |  |  |  |                  |  |                   
| | ---------------------------------------- |  |  |  |  | ---------------- |  | ------------------
| |                                          |  |  |  |  | December 31,    
| |                                          |  |  |  |  | 2014             |  | 2013              
| |                                          |  |  |  |  | (Held in CAD$)  
| |                                          |  |  |  |  |                  |  |                   
| | Cash                                     |  |  |  |  | $            643 |  | $               48
| | Accounts receivable                      |  |  |  |  | 10               |  | -                 
| | Accounts payable and accrued liabilities |  |  |  |  | (799)            |  | (852)             
| |                                          |  |  |  |  |                  |  |                   
| | Net assets (liabilities)                 |  |  |  |  | $          (146) |  | $           (804) 





Based upon the above net exposure
as at December 31, 2014 and assuming all other variables remain constant, a 10% depreciation or appreciation of the U.S. dollar
relative to the Canadian dollar could result in a decrease (increase) of approximately $14,600 (2013 - $80,400) in the cumulative
translation adjustment in the Company’s shareholders’ equity.



The Company has not entered
into any agreements or purchased any instruments to hedge possible currency risks at this time.



(ii)	Interest rate risk:



In respect of financial assets,
the Company's policy is to invest excess cash at floating rates of interest in cash equivalents, in order to maintain liquidity,
while achieving a satisfactory return. Fluctuations in interest rates impact on the value of cash equivalents. Interest rate risk
is not significant to the Company as it has no cash equivalents at period-end and the promissory notes receivable and notes payable,
if any, are stated at fixed interest rates.



| | (iii) | Other price risk:
| | ----- | -----------------



Other price risk is the risk
that the value of a financial instrument will fluctuate as a result of changes in market prices.



The Company’s other
price risk includes equity price risk, whereby investments in marketable securities are subject to market price fluctuations. The
Company held no marketable securities at December 31, 2014 and 2013.





162Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|6. |  | Mineral Property Interests
|-- |  | --------------------------





|                                        |  |                           |                      |                |                        |  |               
|--------------------------------------- |  | ------------------------- | -------------------- | -------------- | ---------------------- |  | --------------
|                                        |  | British Columbia (Canada) |                      | Yukon (Canada) |                        | 
|                                        |  | New Polaris               | Windfall Hills       |                | Tay-LP                 |  | Total         
|                                        |  | (Note 6(a)(i))            | (Note 6(a)(ii))      |                | (Note 6(a)(iii))       |  |               
|                                        |  |                           |                      |                |                        |  |               
|Acquisition Costs:                      |  |                           |                      |                |                        |  |               
|                                        |  |                           |                      |                |                        |  |               
|Balance, December 31, 2012              |  | $              3,905      | $                210 |                | $                174   |  | $        4,289
|Additions                               |  | -                         | 212                  |                | -                      |  | 212           
|Foreign currency translation adjustment |  | (13)                      | (14)                 |                | (11)                   |  | (38)          
|Write-off                               |  | -                         | -                    |                | (163)                  |  | (163)         
|Balance, December 31, 2013              |  | 3,892                     | 408                  |                | -                      |  | 4,300         
|Additions                               |  | -                         | 27                   |                | -                      |  | 27            
|Foreign currency translation adjustment |  | (16)                      | (34)                 |                | -                      |  | (50)          
|Balance, December 31, 2014              |  | $              3,876      | $                401 |                | $                    - |  | $        4,277
|                                        |  |                           |                      |                |                        |  |               
|Deferred Exploration Expenditures:      |  |                           |                      |                |                        |  |               
|                                        |  |                           |                      |                |                        |  |               
|Balance, December 31, 2012              |  | $              8,643      | $                117 |                | $                495   |  | $        9,255
|Additions                               |  | 17                        | (18)                 |                | 10                     |  | 9             
|Foreign currency translation adjustment |  | (722)                     | (7)                  |                | (32)                   |  | (761)         
|Write-off                               |  | -                         | -                    |                | (473)                  |  | (473)         
|Balance, December 31, 2013              |  | 7,938                     | 92                   |                | -                      |  | 8,030         
|Additions, net of recoveries            |  | 23                        | 352                  |                | -                      |  | 375           
|Foreign currency translation adjustment |  | (871)                     | (7)                  |                | -                      |  | (878)         
|Balance, December 31, 2014              |  | $              7,090      | $                437 |                | $                    - |  | $        7,527
|                                        |  |                           |                      |                |                        |  |               
|Mineral property interests:             |  |                           |                      |                |                        |  |               
|Balance, December 31, 2013              |  | $            11,830       | $                500 |                | $                    - |  | $      12,330 
|Balance, December 31, 2014              |  | 10,966                    | 838                  |                | -                      |  | 11,804        
|                                        |  |                           |                      |                |                        |  |               





|(a) |  | Canada:
|--- |  | -------



(i)	New Polaris:



The New Polaris
property, which is located in the Atlin Mining Division, British Columbia, is 100% owned by the Company subject to a 15% net
profit interest which may be reduced to a 10% net profit interest within one year of commercial production by issuing 150,000
common shares to Rembrandt Gold Mines Ltd.
Acquisition costs at December 31, 2014 include a reclamation bond for $217,000 (2013 - $237,000).

163Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|6. |  | Mineral Property Interests (continued)
|-- |  | --------------------------------------



|(a) |  | Canada: (continued)
|--- |  | -------------------



(i)	New Polaris: (continued)



On February 24, 2015,
the Company entered into a Pre-Development and Earn-In Binding Agreement with PanTerra Gold (British Columbia) Limited, a
wholly-owned subsidiary of PanTerra Gold Limited, (“PanTerra”). PanTerra has a 30-month option to earn a 50%
interest in the New Polaris project by spending a total of CAD$10 million in three stages of predevelopment activities
including metallurgical test work, drilling, detailed mine planning, tailings dam design, environmental permitting, and
completion of a definitive feasibility study. In Stage One, PanTerra shall spend CAD$500,000 for laboratory production of
flotation concentrate followed by test work through the Glencore Technology Albion pilot plant, and for comprehensive
technical and economic review and commencement of environmental baseline data collection required for permitting. In Stage
Two, PanTerra can earn a 20% interest in the New Polaris project by spending CAD$3.5 million in predevelopment expenditures
which would include 10,000 metres drilling program and engineering and completion of field data required for environmental
permitting. In Stage Three, PanTerra can earn an additional 30% interest in the project for a total interest of 50% by
spending CAD$6 million in predevelopment expenditures which would primarily focus on the completion of a definitive
feasibility study and would include further 10,000 metres of infill drilling, additional metallurgical test work, and
preliminary engineering. PanTerra can increase its interest in the New Polaris project to 51% by purchasing 1% from the
Company within six months of completion of the definitive feasibility study at a cost of 1% of the net present
value established by the definitive feasibility study using a 10% discount rate.



(ii)	Windfall Hills:



In April 2011, the Company
entered into two property option agreements to purchase 100% interests in two adjacent gold properties located in British Columbia.
In April 2011, the Company entered into a property option agreement with Atna Resources Ltd. (“Atna”) whereby the Company
can acquire a 100% interest in the Uduk Lake properties by making $750,000 in cash payments over a four year period of which $125,000
has been paid, honouring a pre-existing 1.5% NSR production royalty that can be purchased for CAD$1 million, and granting the vendor
a 2% NSR production royalty. In March 2012, the Company amended the property option agreement in which the option payment of $100,000
due on April 21, 2012 was payable in 12 monthly installments of $8,333 over a twelve month period beginning April 21, 2012. Property
option payments of $25,000 were paid in 2013 (2012 - $75,000). In April 2013, the Company entered into a property purchase agreement
with Atna whereby the Company acquired a 100% undivided interest in the Uduk Lake properties by the issuance of 1,500,000 common
shares at a value of CAD$0.10 per share, honouring a pre-existing 1.5% NSR production royalty that can be purchased for CAD$1 million,
and granting Atna a 3% NSR production royalty.











164Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|6. |  | Mineral Property Interests (continued)
|-- |  | --------------------------------------



|(a) |  | Canada: (continued)
|--- |  | -------------------



(ii)	Windfall Hills:
(continued)



In April 2011, the Company
entered into a property option agreement with a vendor whereby the Company can acquire a 100% interest in the Dunn properties by
making CAD$250,000 in cash payments over a four year period, and a final bonus payment based on all gold resources estimated in
an independent National Instrument 43-101 Standards of Disclosure for Mineral Projects technical report. The formula for
the bonus payment is $30 per oz for measured resources, $20 per oz for indicated resources, and $10 per oz for inferred resources.
In March 2012, the Company amended the property option agreement in which the option payment of CAD$25,000 due on April 20, 2012
was payable in three monthly installments of CAD$8,333 over a three month period beginning April 21, 2012 which were paid. In April
2013, the Company entered into a property purchase agreement whereby the Company acquired a 100% undivided interest in the Dunn
properties by the issuance of 500,000 common shares at a value of CAD$0.10 per share and granting the vendor a 2% NSR royalty which
can be reduced to 1% NSR royalty for $500,000.



(iii)	Tay-LP:



On August 24, 2009, the Company
entered into a property option agreement with Ross River Minerals Inc. and Ross River Gold Ltd. to acquire up to 100% interest
in the Tay-LP gold property, located in Yukon, by paying CAD$1 million in cash and/or shares and spending CAD$1.5 million on exploration
over a three-year period which can occur in two stages. In September 2011 and October 2012, the agreement was amended. The Company
decided not to proceed with any further expenditure on the Tay LP property which was written off in 2013.



|(b) |  | Expenditure options:
|--- |  | --------------------



As at December 31, 2014,
to maintain the Company’s interest and/or to fully exercise the options under various property agreements covering its properties,
the Company must make payments to the optionors as follows:





| |                                          |          
| | ---------------------------------------- | ---------
| |                                          | Number of
| |                                          | Shares   
| |                                          |          
| | New Polaris (Note 6(a)(i)):              |          
| | Net profit interest reduction or buydown | 150,000  
| |                                          |          
| |                                          | 150,000  
| |                                          |          





These amounts may be reduced
in the future as the Company determines which mineral property interests to continue to explore and which to abandon.





165Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|6. |  | Mineral Property Interests (continued)
|-- |  | --------------------------------------



|(c) |  | Title to mineral property interests:
|--- |  | ------------------------------------



The Company has diligently
investigated rights of ownership of all of its mineral property interests/concessions and, to the best of its knowledge, all agreements
relating to such ownership rights are in good standing. However, all properties and concessions may be subject to prior claims,
agreements or transfers, and rights of ownership may be affected by undetected defects.



|(d) |  | Realization of assets:
|--- |  | ----------------------



The Company’s
investment in and expenditures on its mineral property interests comprise a significant portion of the Company’s assets.
Realization of the Company’s investment in these assets is dependent on establishing legal ownership of the mineral properties,
on the attainment of successful commercial production or from the proceeds of their disposal. The recoverability of the amounts
shown for mineral property interests is dependent upon the existence of reserves, the ability of the Company to obtain necessary
financing to complete the development of the properties, and upon future profitable production or proceeds from the disposition
thereof.



|(e) |  | Environmental:
|--- |  | --------------



Environmental legislation
is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future
environmental legislation of the Company’s operation may cause additional expenses and restrictions.



If the restrictions adversely
affect the scope of exploration and development on the mineral properties, the potential for production on the property may be
diminished or negated.



The Company is subject to
the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating
to property reclamation, discharge of hazardous materials and other matters. The Company may also be held liable should environmental
problems be discovered that were caused by former owners and operators of its current properties and former properties in which
it has previously had an interest. The Company is not aware of any existing environmental problems related to any of its current
or former mineral property interests that may result in material liability to the Company.



166Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|7. |  | Equipment
|-- |  | ---------





| |                                         |  |  |     |   |                 |                 |                
| | --------------------------------------- |  |  | --- | - | --------------- | --------------- | ---------------
| |                                         |  |  |     |   |                 | Accumulated     | Net Book       
| |                                         |  |  |     |   | Cost            | Amortization    | Value          
| |                                         |  |  |     |   |                 |                 |                
| | Balance, December 31, 2012              |  |  |     |   | $           10  | $           (5) | $             5
| | Additions                               |  |  |     |   | -               | (1)             | (1)            
| | Foreign currency translation adjustment |  |  | (1) | - | (1)            
| | Balance, December 31, 2013              |  |  |     |   | 9               | (6)             | 3              
| | Additions                               |  |  |     |   | -               | (1)             | (1)            
| | Foreign currency translation adjustment |  |  | -   | - | -              
| | Balance, December 31, 2014              |  |  |     |   | $             9 | $           (7) | $             2







|8. |  | Long-Term Investments
|-- |  | ---------------------

As at December 31, 2014,
the Company had an interest of 7% in Aztec (2013 – 7%).



There is no separately quoted
market value for the Aztec shares and the fair value cannot be reliably determined. Therefore they were recorded at cost, net of
any write-downs, in 2014.



In 2013, the Company wrote-down
its investment in Aztec to a nominal value of CAD$100. In October 2014, the Company received 358,000 shares from Aztec in settlement
of debt owed to the Company which the Company had written off in 2013.



167Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)







|9. |  | Notes Payable
|-- |  | -------------





| |                                         |                     
| | --------------------------------------- | --------------------
| |                                         |                     
| | Balance, December 31, 2012              | $                  -
| |                                         |                     
| | Add:                                    |                     
| | Proceeds from demand loans              | 126                 
| | Accrued interest during the period      | 6                   
| | Foreign currency translation adjustment | (1)                 
| |                                         | 131                 
| |                                         |                     
| | Balance, December 31, 2013              | 131                 
| |                                         |                     
| | Add:                                    |                     
| | Interest during the period              | 1                   
| |                                         |                     
| | Less:                                   |                     
| | Repayment of:                           |                     
| | Principal                               | 121                 
| | Interest                                | 7                   
| | Foreign currency translation adjustment | 4                   
| |                                         | 132                 
| |                                         |                     
| | Balance, December 31, 2014              | $                  -



In fiscal 2013, the Company
received demand loans of $126,000 from two directors of the Company, which were repayable on demand and bore an interest rate of
12% compounded monthly with interest payable semi-annually. In January 2014, the Company repaid all principal and interest in full
settlement of outstanding demand loans.



168Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|10. |  | Derecognition of Liabilities
|--- |  | ----------------------------



Pursuant to an audit by
the Canada Revenue Agency (the “CRA”) in 2010, CRA disallowed certain exploration expenditures incurred in 2007 as
Canadian exploration expenditures (“CEE”) for flow-through purposes in which the Company recognized a provision for
flow through indemnification. In 2011, the Company paid CAD$37,900 including interest for indemnities relating to ineligible CEE
for flow-through purposes. At December 31, 2012, the Company accrued liabilities of approximately CAD$146,300 for estimated indemnities
related to the disqualified CEE for flow-through purposes and CAD$62,100 in accrued interest related to the indemnities. In 2013,
the Company determined that it was improbable that any further cash outlays would be required, and therefore the Company derecognized
the provision for flow through indemnification.



In 2013, the Company also
derecognized a provision of $99,000 by writing off certain liabilities related to an exploration project which was written off
in 2008.

169Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|11. |  | Share Capital
|--- |  | -------------



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



The authorized share capital
of the Company is comprised of an unlimited number of common shares without par value.



|(b) |  | Issued:
|--- |  | -------



| | (i) | On January 31, 2014, the Company closed a private placement for 18 million units at a price of
CAD$0.05 per unit for gross proceeds of CAD$900,000. Each unit was comprised of one common share and one-half of one common share
purchase warrant; each whole warrant is exercisable to acquire one common share at an exercise price of CAD$0.10 per share until
January 31, 2016. Finder’s fees of CAD$22,500 were paid for the private placement.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In March and April 2014, the
Company closed a private placement in two tranches totalling 19.6 million units at a price of CAD$0.10 per unit for gross proceeds
of CAD$1.96 million with each unit comprised of one common share and one-half of one common share purchase warrant; each whole
warrant is exercisable to acquire one common share at an exercise price of CAD$0.15 per share for a three year period. On March
18, 2014, the Company closed the first tranche for 10.6 million units for CAD$1.06 million, and paid CAD$66,170 in cash and issued
661,718 in warrants as finders’ fees. On April 3, 2014, the Company closed the second tranche for 9 million units for CAD$900,000,
and paid CAD$6,070 in cash and issued 60,725 in warrants as finders’ fees. The finders’ fee warrants have the same
terms as the underlying warrants in the unit private placement.



On July 9, 2014, the Company
closed a private placement for 5 million units at CAD$0.08 per unit for gross proceeds of CAD$400,000. Each unit was comprised
of one flow-through common share and one-half of one common share purchase warrant; each whole warrant is exercisable to acquire
one non-flow through common share at an exercise price of CAD$0.15 per share until July 9, 2016. Funds of CAD$382,900 were expended
for flow through purposes as at December 31, 2014.

170Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|11. |  | Share Capital (continued)
|--- |  | -------------------------



|(b) |  | Issued: (continued)
|--- |  | -------------------



| | (ii) | In May 2013, the Company issued 2 million shares at a value of CAD$0.10 per share for the acquisition
of 100% interests in the Windfall Hills properties. Note 6(a)(iii) provides further details.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In 2013, stock options for
769,000 common shares were exercised, and stock options for 700,000 common shares were cancelled for the exercise of share appreciation
rights for 207,024 common shares.



| | (iii) | On September 28, 2012, the Company closed a brokered private placement for 11.3 million units at
a price of CAD$0.10 per unit for gross proceeds of CAD$1.13 million, with each unit comprised of one common share and one transferrable
common share purchase warrant. Each whole warrant is exercisable for a period of 36 months at a price of CAD$0.15 per share during
the initial period of 24 months until September 28, 2014, and at $0.20 per share for the remaining 12 months until September 28,
2015. The warrants are subject to an accelerated expiry whereby if after January 29, 2013, the volume weighted average trading
price as traded on the Toronto Stock Exchange (the “TSX”) equals or exceeds CAD$0.30 per share for a period of 10 consecutive
trading days, the Company will have the right, within five business days, to accelerate the expiry date of the warrants by giving
not fewer than 30 days written notice to the warrant holder whereby the warrants shall expire 30 days after such date of the notice.
Agent’s fees are comprised of a cash commission of CAD$90,400 plus 904,000 agent’s warrants with the identical terms
as the underlying warrants in the unit private placement and a corporate finance fee of CAD$37,500.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In December 2012 and January
2013, the Company closed a non-brokered private placement in three tranches totaling 6.1 million units at a price of CAD$0.11 per
unit for gross proceeds of CAD$671,000 with each unit comprised of one common share and one common share purchase warrant. The
first tranche closed on December 19, 2012 for 4.5 million units, and the second tranche on January 11, 2013 for 600,000 units,
and the final tranche on January 18, 2013 for 1 million units. Each whole warrant is exercisable for a period of 36 months at a
price of CAD$0.15 per share during the initial period of 24 months until December 19, 2014 for 4.5 million warrants, until January
11, 2015 for 600,000 warrants and until January 18, 2015 for 1 million warrants, at $0.20 per share for the remaining 12 months
until December 19, 2015 for 4.5 million warrants and until January 11, 2016 for 600,000 warrants and until January 18, 2016 for
1 million warrants. The warrants are subject to an accelerated expiry whereby if after the four month plus one day hold period
from the closing date of each tranche of the private placement, the volume weighted average trading price as traded on the TSX
equals or exceeds CAD$0.30 per share for a period of 10 consecutive trading days, the Company will have the right, within five
business days, to accelerate the expiry date of the warrants by giving not fewer than 30 days written notice to the warrant holder
whereby the warrants shall expire 30 days after such date of the notice.







171Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|11. |  | Share Capital (continued)
|--- |  | -------------------------



|(c) |  | Stock option plan:
|--- |  | ------------------



The Company has a stock
option plan that allows it to grant stock options to its directors, officers, employees, and consultants to acquire up to 18,888,434
common shares, of which stock options for 10,130,000 common shares are outstanding as at December 31, 2014. The exercise price
of each stock option cannot be lower than the last recorded sale of a board lot on the TSX during the trading day immediately preceding
the date of granting or, if there was no such date, the high/low average price for the common shares on the TSX based on the last
five trading days before the date of the grant. Stock options have a maximum term of ten years and terminate 30 days following
the termination of the optionee’s employment, except in the case of death, in which case they terminate one year after the
event. Vesting of options is made at the discretion of the board at the time the options are granted.



At the discretion of the
board, certain stock option grants provide the holder the right to receive the number of common shares, valued at the quoted market
price at the time of exercise of the stock options, that represent the share appreciation since granting the stock options.



The continuity
of outstanding stock options for the years ended December 31, 2014, 2013 and 2012 is as follows:





|                                        |           |                |          |           |                |          |            |               |         
|--------------------------------------- | --------- | -------------- | -------- | --------- | -------------- | -------- | ---------- | ------------- | --------
|                                        |           | 2014           |          | 2013      |                | 2012    
|                                        |           |                | Weighted |           |                | Weighted |            |               | Weighted
|                                        |           |                | average  |           |                | average  |            |               | average 
|                                        |           |                | exercise |           |                | exercise |            |               | exercise
|                                        |           | Number         | price    |           | Number         | price    |            | Number        | price   
|                                        |           | of Shares      | (CAD$)   |           | of Shares      | (CAD$)   |            | of Shares     | (CAD$)  
|                                        |           |                |          |           |                |          |            |               |         
|Outstanding balance, beginning of year  | 8,325,000 | $0.11          |          | 9,999,000 | $0.15          |          | 10,115,000 | $0.24        
|Granted                                 |           | 4,550,000      | $0.09    |           | 2,000,000      | $0.08    |            | 2,860,000     | $0.12   
|Exercised                               |           | -              | -        |           | (769,000)      | $0.10    |            | (346,000)     | $0.10   
|Cancelled for share appreciation rights | -         | -              |          | (700,000) | $0.10          |          | -          | -            
|Forfeited                               |           | (175,000)      | $0.10    |           | (160,000)      | $0.12    |            | (145,000)     | $0.13   
|Expired                                 |           | (2,570,000)    | $0.11    |           | (2,045,000)    | $0.25    |            | (2,485,000)   | $0.49   
|Outstanding balance, end of year        |           | 10,130,000     | $0.10    |           | 8,325,000      | $0.11    |            | 9,999,000     | $0.15   
|                                        |           |                |          |           |                |          |            |               |         
|Exercise price range (CAD$)             |           | $0.05 - $0.145 |          |           | $0.08 - $0.145 |          |            | $0.10 - $0.29 |         







172Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|11. |  | Share Capital (continued)
|--- |  | -------------------------



|(c) |  | Stock option plan: (continued)
|--- |  | ------------------------------



The following
table summarizes information about stock options exercisable and outstanding at December 31, 2014:





|         |  |                     |  |                     |  |          |  |                |  |                   |  |         
|-------- |  | ------------------- |  | ------------------- |  | -------- |  | -------------- |  | ----------------- |  | --------
|         |  | Options Outstanding |  | Options Exercisable
|         |  |                     |  | Weighted            |  | Weighted |  |                |  | Weighted          |  | Weighted
|         |  |                     |  | Average             |  | Average  |  |                |  | Average           |  | Average 
|Exercise |  | Number              |  | Remaining           |  | Exercise |  | Number         |  | Remaining         |  | Exercise
|Prices   |  | Outstanding at      |  | Contractual Life    |  | Prices   |  | Exercisable at |  | Contractual Life  |  | Prices  
|(CAD$)   |  | Dec 31, 2014        |  | (Number of Years)   |  | (CAD$)   |  | Dec 31, 2014   |  | (Number of Years) |  | (CAD$)  
|         |  |                     |  |                     |  |          |  |                |  |                   |  |         
|$0.10    |  | 1,445,000           |  | 0.69                |  | $0.10    |  | 1,445,000      |  | 0.69              |  | $0.10   
|$0.135   |  | 1,365,000           |  | 1.51                |  | $0.135   |  | 1,365,000      |  | 1.51              |  | $0.135  
|$0.145   |  | 1,070,000           |  | 2.46                |  | $0.145   |  | -              |  | -                 |  | -       
|$0.08    |  | 1,750,000           |  | 3.49                |  | $0.08    |  | 1,400,000      |  | 3.49              |  | $0.08   
|$0.05    |  | 500,000             |  | 4.04                |  | $0.05    |  | 200,000        |  | 4.04              |  | $0.05   
|$0.10    |  | 4,000,000           |  | 4.54                |  | $0.10    |  | 800,000        |  | 4.54              |  | $0.10   
|         |  | 10,130,000          |  | 3.16                |  | $0.10    |  | 5,210,000      |  | 2.38              |  | $0.10   



During the year ended December
31, 2014, the Company recognized share-based payments of $209,000 (2013 - $72,000 and 2012 - $168,000), net of forfeitures, based
on the fair value of options that were earned by the provision of services during the period. Share-based payments are segregated
between directors and officers, employees and consultants, as applicable, as follows:





| |                        |                   |  |                    |  |                   
| | ---------------------- | ----------------- |  | ------------------ |  | ------------------
| |                        | December 31,     
| |                        | 2014              |  | 2013               |  | 2012              
| |                        |                   |  |                    |  |                   
| | Directors and officers | $             205 |  | $               76 |  | $               95
| | Employees              | 4                 |  | 5                  |  | 7                 
| | Consultants            | -                 |  | (9)                |  | 66                
| |                        |                   |  |                    |  |                   
| |                        | $             209 |  | $               72 |  | $             168 















173Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|11. |  | Share Capital (continued)
|--- |  | -------------------------

|(c) |  | Stock option plan: (continued)
|--- |  | ------------------------------



The weighted average fair
value of stock options granted and the weighted average assumptions used to calculate share-based payments for stock option grants
are estimated using the Black-Scholes option pricing model as follows:





|                                            |           |  |           |  |          
|------------------------------------------- | --------- |  | --------- |  | ---------
|                                            | 2014      |  | 2013      |  | 2012     
|                                            |           |  |           |  |          
|Number of stock options granted             | 4,550,000 |  | 2,000,000 |  | 2,860,000
|Fair value of stock options granted (CAD$)  | $0.08     |  | $0.06     |  | $0.09    
|                                            |           |  |           |  |          
|Market price of shares on grant date (CAD$) | $0.09     |  | $0.08     |  | $0.14    
|Pre-vest forfeiture rate                    | 5.29%     |  | 3.54%     |  | 1.03%    
|Risk-free interest rate                     | 1.38%     |  | 1.71%     |  | 1.17%    
|Expected dividend yield                     | 0%        |  | 0%        |  | 0%       
|Expected stock price volatility             | 118%      |  | 117%      |  | 113%     
|Expected option life in years               | 4.48      |  | 4.52      |  | 2.93     





Expected stock price volatility
is based on the historical price volatility of the Company’s common shares.



In March 2012, the Company
granted 1,400,000 stock options to directors, officers, employees and consultants with an exercise price of CAD$0.10 and an expiry
date of March 23, 2013, and which were subject to vesting provisions in which 25% of the options vest immediately on the grant
date and 25% vest every three months thereafter.



In June 2012, the Company
granted 1,460,000 stock options to directors, officers and employees with an exercise price of CAD$0.145 and an expiry date of
June 18, 2017. These stock options will only vest when the Company consummates a major transaction or at the discretion of its
Board of Directors, and such stock options have not vested as at December 31, 2014.



In June 2013, the Company
granted 2,000,000 stock options to directors, officers and employees with an exercise price of CAD$0.08 and an expiry date of June
26, 2018, and which are subject to vesting provisions in which 20% of the options vest immediately on the grant date and 20% vest
every six months thereafter.



In 2013, stock options for
769,000 common shares were exercised, and stock options for 700,000 common shares were cancelled for the exercise of share appreciation
rights for 207,024 common shares.



In January 2014, the Company
granted 500,000 stock options to an officer with an exercise price of CAD$0.05 and an expiry date of January 14, 2019, and which
are subject to vesting provisions in which 20% of the options vest immediately on the grant date and 20% vest every six months
thereafter.



In July 2014, the Company
granted 4,050,000 stock options to directors, officers and employees with an exercise price of CAD$0.10 and an expiry date of July
17, 2019, and which are subject to vesting provisions in which 20% of the options vest immediately on the grant date and 20% vest
every six months thereafter.

174Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|11. |  | Share Capital (continued)
|--- |  | -------------------------



|(d) |  | Warrants:
|--- |  | ---------



At December 31, 2014, the Company had outstanding
warrants as follows:





|         |                             |                   |            |           |         |                  
|-------- | --------------------------- | ----------------- | ---------- | --------- | ------- | -----------------
|Exercise |                             |                   |            |           |         |                  
|Prices   |                             | Outstanding at    |            |           |         | Outstanding at   
|(CAD$)   | Expiry Dates                | December 31, 2013 | Issued     | Exercised | Expired | December 31, 2014
|         |                             |                   |            |           |         |                  
|$0.20    | September 28, 2015 (1)      | 11,300,000        | -          | -         | -       | 11,300,000       
|         |                             |                   |            |           |         |                  
|$0.20    | September 28, 2015 (1), (2) | 904,000           | -          | -         | -       | 904,000          
|         |                             |                   |            |           |         |                  
|$0.20    | December 19, 2015(1)        | 4,500,000         | -          | -         | -       | 4,500,000        
|         |                             |                   |            |           |         |                  
|$0.15 /  | until January 11, 2015      | 600,000           | -          | -         | -       | 600,000          
|$0.20    | expiry January 11, 2016(1)  |                   |            |           |         |                  
|         |                             |                   |            |           |         |                  
|$0.15 /  | until January 18, 2015      | 1,000,000         | -          | -         | -       | 1,000,000        
|$0.20    | expiry January 18, 2016(1)  |                   |            |           |         |                  
|         |                             |                   |            |           |         |                  
|$0.10    | January 31, 2016            | -                 | 9,000,000  | -         | -       | 9,000,000        
|         |                             |                   |            |           |         |                  
|$0.15    | March 18, 2017              | -                 | 5,309,055  | -         | -       | 5,309,055        
|         |                             |                   |            |           |         |                  
|$0.15    | March 18, 2017 (3)          | -                 | 661,718    | -         | -       | 661,718          
|         |                             |                   |            |           |         |                  
|$0.15    | April 3, 2017               | -                 | 4,500,000  | -         | -       | 4,500,000        
|         |                             |                   |            |           |         |                  
|$0.15    | April 3, 2017 (4)           | -                 | 60,725     | -         | -       | 60,725           
|         |                             |                   |            |           |         |                  
|$0.15    | July 9, 2016                | -                 | 2,500,000  | -         | -       | 2,500,000        
|         |                             |                   |            |           |         |                  
|         |                             | 18,304,000        | 22,031,498 | -         | -       | 40,335,498       



| | (1) | The warrants are subject to an accelerated expiry whereby if after the four month plus one day
hold period from the closing date of the private placement, the volume weighted average trading price as traded on the TSX equals
or exceeds CAD$0.30 per share for a period of 10 consecutive trading days, the Company will have the right, within five business
days, to accelerate the expiry date of the warrants by giving not fewer than 30 days written notice to the warrant holder whereby
the warrants shall expire 30 days after such date of the notice.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | As these warrants are agent’s warrants, a fair value of $97,470 was recorded as share issuance
expense as applied to share capital with a corresponding credit to reserve for share-based payments calculated using the Black-Scholes
option pricing model with the following assumptions: volatility 107%, risk-free rate 1.14%, expected life 3 years, and expected
dividend yield 0%.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



175Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|11. |  | Share Capital (continued)
|--- |  | -------------------------



|(d) |  | Warrants: (continued)
|--- |  | ---------------------



| | (3) | As these warrants are agent’s warrants, a fair value of $43,120 was recorded as share issuance
expense as applied to share capital with a corresponding credit to reserve for share-based payments calculated using the Black-Scholes
option pricing model with the following assumptions: volatility 120%, risk-free rate 1.17%, expected life 3 years, and expected
dividend yield 0%.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | As these warrants are agent’s warrants, a fair value of $3,335 was recorded as share issuance
expense as applied to share capital with a corresponding credit to reserve for share-based payments calculated using the Black-Scholes
option pricing model with the following assumptions: volatility 121%, risk-free rate 1.27%, expected life 3 years, and expected
dividend yield 0%.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At December 31, 2013, the Company had outstanding
warrants as follows:





|         |                                    |                   |           |           |         |                  
|-------- | ---------------------------------- | ----------------- | --------- | --------- | ------- | -----------------
|Exercise |                                    |                   |           |           |         |                  
|Prices   |                                    | Outstanding at    |           |           |         | Outstanding at   
|(CAD$)   | Expiry Dates                       | December 31, 2012 | Issued    | Exercised | Expired | December 31, 2013
|         |                                    |                   |           |           |         |                  
|$0.15 /  | until September 28, 2014           | 11,300,000        | -         | -         | -       | 11,300,000       
|$0.20    | expiry September 28, 2015(1)       |                   |           |           |        
|         |                                    |                   |           |           |         |                  
|$0.15 /  | until September 28, 2014           | 904,000           | -         | -         | -       | 904,000          
|$0.20    | expiry September 28, 2015 (1), (2) |                   |           |           |        
|         |                                    |                   |           |           |         |                  
|$0.15 /  | until December 19, 2014            | 4,500,000         | -         | -         | -       | 4,500,000        
|$0.20    | expiry December 19, 2015(1)        |                   |           |           |        
|         |                                    |                   |           |           |         |                  
|$0.15 /  | until January 11, 2015             | -                 | 600,000   | -         | -       | 600,000          
|$0.20    | expiry January 11, 2016(1)         |                   |           |           |         |                  
|         |                                    |                   |           |           |         |                  
|$0.15 /  | until January 18, 2015             | -                 | 1,000,000 | -         | -       | 1,000,000        
|$0.20    | expiry January 18, 2016(1)         |                   |           |           |         |                  
|         |                                    |                   |           |           |         |                  
|         |                                    | 16,704,000        | 1,600,000 | -         | -       | 18,304,000       



| | (1) | The warrants are subject to an accelerated expiry whereby if after the four month plus one day
hold period from the closing date of the private placement, the volume weighted average trading price as traded on the TSX equals
or exceeds CAD$0.30 per share for a period of 10 consecutive trading days, the Company will have the right, within five business
days, to accelerate the expiry date of the warrants by giving not fewer than 30 days written notice to the warrant holder whereby
the warrants shall expire 30 days after such date of the notice.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





176Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|11. |  | Share Capital (continued)
|--- |  | -------------------------



|(d) |  | Warrants: (continued)
|--- |  | ---------------------



| | (2) | As these warrants are agent’s warrants, a fair value of $97,470 was recorded as share issuance
expense as applied to share capital with a corresponding credit to reserve for share-based payments calculated using the Black-Scholes
option pricing model with the following assumptions: volatility 107%, risk-free rate 1.14%, expected life 3 years, and expected
dividend yield 0%.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At December 31, 2012, the Company had outstanding
warrants as follows:





|         |                                    |                   |            |           |             |                  
|-------- | ---------------------------------- | ----------------- | ---------- | --------- | ----------- | -----------------
|Exercise |                                    |                   |            |           |             |                  
|Prices   |                                    | Oustanding at     |            |           |             | Oustanding at    
|(CAD$)   | Expiry Dates                       | December 31, 2011 | Issued     | Exercised | Expired     | December 31, 2012
|         |                                    |                   |            |           |             |                  
|$0.22    | June 13, 2012                      | 4,250,000         | -          | -         | (4,250,000) | -                
|         |                                    |                   |            |           |             |                  
|$0.15 /  | until September 28, 2014           | -                 | 11,300,000 | -         | -           | 11,300,000       
|$0.20    | expiry September 28, 2015(1)       |                   |            |           |            
|         |                                    |                   |            |           |             |                  
|$0.15 /  | until September 28, 2014           | -                 | 904,000    | -         | -           | 904,000          
|$0.20    | expiry September 28, 2015 (1), (2) |                   |            |           |            
|         |                                    |                   |            |           |             |                  
|$0.15 /  | until December 19, 2014            | -                 | 4,500,000  | -         | -           | 4,500,000        
|$0.20    | expiry December 19, 2015(1)        |                   |            |           |            
|         |                                    |                   |            |           |             |                  
|         |                                    | 4,250,000         | 16,704,000 | -         | (4,250,000) | 16,704,000       



| | (1) | The warrants are subject to an accelerated expiry whereby if after the four month plus one day
hold period from the closing date of the private placement, the volume weighted average trading price as traded on the TSX equals
or exceeds CAD$0.30 per share for a period of 10 consecutive trading days, the Company will have the right, within five business
days, to accelerate the expiry date of the warrants by giving
not fewer than 30 days written notice to the warrant holder whereby the warrants shall expire 30 days after such date of the notice.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | As these warrants are agent’s warrants, a fair value of $97,470 was recorded as share issuance
expense as applied to share capital with a corresponding credit to reserve for share-based payments calculated using the Black-Scholes
option pricing model with the following assumptions: volatility 107%, risk-free rate 1.14%, expected life 3 years, and expected
dividend yield 0%.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





177Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|11. |  | Share Capital (continued)
|--- |  | -------------------------



|(e) |  | Common shares reserved for issuance at December 31, 2014:
|--- |  | ---------------------------------------------------------



| |                            |                 
| | -------------------------- | ----------------
| |                            | Number of Shares
| |                            |                 
| | Stock options (Note 11(c)) | 10,130,000      
| | Warrants (Note 11(d))      | 40,335,498      
| |                            |                 
| | Balance, December 31, 2014 | 50,465,498      





|(f) |  | Shareholder rights plan:
|--- |  | ------------------------



On May 31, 2005, the shareholders
of the Company approved a shareholder rights plan (the “Plan”) that became effective on April 30, 2005. The Plan is
intended to ensure that any entity seeking to acquire control of the Company makes an offer that represents fair value to all shareholders
and provides the board of directors with sufficient time to assess and evaluate the offer, to permit competing bids to emerge,
and, as appropriate, to explore and develop alternatives to maximize value for shareholders. Under the Plan, each shareholder at
the time of the Plan’s adoption was issued one Right for each common share of the Company held. Each Right entitles the registered
holder thereof, except for certain “Acquiring Persons” (as defined in the Plan), to purchase from treasury one common
share at a 50% discount to the prevailing market price, subject to certain adjustments intended to prevent dilution. The Rights
are exercisable after the occurrence of specified events set out in the Plan generally related to when a person, together with
affiliated or associated persons, acquires, or makes a take-over bid to acquire, beneficial ownership of 20% or more of the outstanding
common shares of the Company. The Rights expire on April 30, 2015.





178Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)







|12. |  | Corporate Development and General and Administrative
|--- |  | ----------------------------------------------------





| |                             |  |                          |  |                      |  |                       
| | --------------------------- |  | ------------------------ |  | -------------------- |  | ----------------------
| |                             |  | Years ended December 31,
| |                             |  | 2014                     |  | 2013                 |  | 2012                  
| |                             |  |                          |  |                      |  |                       
| | Corporate Development:      |  |                          |  |                      |  |                       
| | Geology                     |  | $                   3    |  | $                 18 |  | $                    -
| | Legal                       |  | 118                      |  | -                    |  | -                     
| | Metallurgy                  |  | 25                       |  | -                    |  | -                     
| | Salaries and remuneration   |  | 106                      |  | -                    |  | -                     
| | Sundry                      |  | 5                        |  | -                    |  | 1                     
| | Travel and transportation   |  | 88                       |  | 1                    |  | 25                    
| |                             |  | $               345      |  | $                 19 |  | $                 26  
| |                             |  |                          |  |                      |  |                       
| | General and Administrative: |  |                          |  |                      |  |                       
| | Accounting and audit        |  | $                 24     |  | $                 24 |  | $                 67  
| | Legal                       |  | 79                       |  | 30                   |  | 32                    
| | Office and sundry           |  | 77                       |  | 54                   |  | 51                    
| | Regulatory                  |  | 70                       |  | 58                   |  | 73                    
| | Rent                        |  | 40                       |  | 57                   |  | 66                    
| |                             |  | $               290      |  | $               223  |  | $               289   





179Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)





|13. |  | Related Party Transactions
|--- |  | --------------------------



Key management includes
directors (executive and non-executive) and senior management. The compensation paid or payable to key management is disclosed
in the table below.



Except as disclosed elsewhere
in the consolidated financial statements, the Company had the following general and administrative costs with related parties during
the years ended December 31, 2014, 2013 and 2012:





|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|------------------------------------------------------------------------------------------------------------------------------- | ------------------------ |  | ------------------ |  | ------------------ |  | -------------------------------- |  | -----------------
|                                                                                                                                |                          |  |                    |  |                    |  | Net balance receivable (payable)
|                                                                                                                                | Years ended December 31, |  | as at December 31,
|                                                                                                                                | 2014                     |  | 2013               |  | 2012               |  | 2014                             |  | 2013             
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Key management compensation:                                                                                                    |                          |  |                    |  |                    |  |                                  |  |                  
|Executive salaries and remuneration(1)                                                                                          | $             441        |  | $             428  |  | $             592  |  | $           (203)                |  | $           (222)
|Severance                                                                                                                       | 136                      |  | -                  |  | -                  |  | (4)                              |  | -                
|Directors fees                                                                                                                  | 18                       |  | 29                 |  | 35                 |  | (198)                            |  | (201)            
|Share-based payments                                                                                                            | 205                      |  | 76                 |  | 89                 |  | -                                |  | -                
|                                                                                                                                | $             800        |  | $             533  |  | $             716  |  | $           (405)                |  | $           (423)
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Legal fees incurred to a law firm in which a senior officer of the Company is a partner(2)                                      | $             102        |  | $               67 |  | $               82 |  | $           (172)                |  | $           (158)
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Net office, sundry, rent and salary allocations recovered from (incurred to) company(ies) sharing certain common director(s)(3) | (74)                     |  | 59                 |  | 36                 |  | (141)                            |  | (108)            
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Write-down of long-term investments(4)                                                                                          | -                        |  | 91                 |  | -                  |  | -                                |  | -                
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  
|Write-off of receivables(5)                                                                                                     | -                        |  | 54                 |  | -                  |  | -                                |  | -                
|                                                                                                                                |                          |  |                    |  |                    |  |                                  |  |                  



| | (1) | Includes key management compensation which is included in mineral property interests and corporate
development.
| | --- | ---------------------------------------------------------------------------------------------------------------



(2)	Includes
legal fees which are included in share issuance expenses.



| | (3) | The company(ies) include Aztec, BYG Ventures Ltd. (“BYG”) and Endeavour Silver Corp.
which share certain common director(s), and Caza Gold Corp. which shared a common director until December 17, 2013.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | The Company wrote-down its investment in Aztec to a nominal value of CAD$100 in 2013. Note 8 provides
further details.
| | --- | ----------------------------------------------------------------------------------------------------------------------



| | (5) | The Company wrote-off receivables from Aztec and BYG in 2013. Note 8 provides further details.
| | --- | ----------------------------------------------------------------------------------------------



The above transactions are
incurred in the normal course of business. Note 9 provides disclosures regarding demand loans with certain related parties.



180Canarc Resource Corp.Form 20-F







CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|14. |  | Segment Disclosures
|--- |  | -------------------



The Company has one operating
segment, being mineral exploration, with all assets located in Canada.





|15. |  | Other Corporate Transactions
|--- |  | ----------------------------



| | (a) | In February 2014, the Company signed a Letter of Intent (the “LOI”) with Pan American
Goldfields Ltd. (“Pan American”) with respect to a business combination whereby the Company may acquire all of the
outstanding common shares of Pan American. Funds of $40,000 were advanced to Pan American in April 2014 which bore an interest
rate of 1% per month but was written off in September 2014 as collectability was doubtful. In May 2014, as a result of its due
diligence, the Company terminated the LOI with Pan American.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | On July 15, 2014, the Company and Santa Fe Gold Corporation (“Santa Fe”) entered
                                                           into a Share Exchange Agreement (the “Agreement”) pursuant to which Santa Fe was to issue 66,000,000 shares of
                                                           its common stock to the Company, and
the Company was to issue 33,000,000 of its common shares to Santa Fe (the "Share Exchange"). Pursuant to the Agreement,
in July 2014, the Company advanced a promissory note loan of $200,000 to Santa Fe, which bore an interest rate of 12% per annum
compounded monthly; both the principal and interest were due and payable on January 15, 2015, and any past due principal and interest
shall bear an interest rate of 14%. In September 2014, further funds of $20,000 were advanced to Santa Fe. On October 15, 2014,
the conditions precedent set forth in the Agreement were not satisfied and the Agreement terminated on that date. The promissory
note receivable from Santa Fe along with accrued interest was determined to be impaired as collectability was doubtful, and was
written off at December 31, 2014. In 2015, demand notices for repayment have been submitted by the Company to Santa Fe, as the
Company maintains its legal rights relative to the promissory note loan.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

181Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|16. |  | Deferred Income Taxes
|--- |  | ---------------------



| | (a) | A reconciliation of income tax provision computed at Canadian statutory rates to the reported income
tax provision is provided as follows:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------





|                                                              |  |                              |  |                             
|------------------------------------------------------------- |  | ---------------------------- |  | ----------------------------
|                                                              |  |                              |  |                             
|                                                              |  | 2014                         |  | 2013                        
|                                                              |  |                              |  |                             
|                                                              |  |                              |  |                             
|Net loss for the year                                         |  | $                 (1,831)    |  | $                 (1,377)   
|Canadian statutory tax rate                                   |  | 26.0%                        |  | 26.0%                       
|                                                              |  |                              |  |                             
|Income tax benefit computed at statutory rates                |  | $                    (476)   |  | $                    (358)  
|Temporary differences                                         |  | 220                          |  | 11                          
|Items non-deductible for income tax purposes                  |  | 49                           |  | 19                          
|Unused tax losses and tax offsets not recognized in tax asset |  | 207                          |  | 437                         
|Effect of change in tax rate                                  |  | -                            |  | (109)                       
|                                                              |  |                              |  |                             
|Deferred income tax recovery                                  |  | $                          - |  | $                          -
|                                                              |  |                              |  |                             





Effective January 1, 2013,
the Canadian federal corporate tax rate is 15% and the British Columbia provincial tax rate is 11% for a total Canadian statutory
tax rate of 26%.

182Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)



|16. |  | Deferred Income Taxes (continued)
|--- |  | ---------------------------------



| | (b) | The tax effected items that give rise to significant portions of the deferred income tax assets
and deferred income liabilities at December 31, 2014 and 2013 are presented below:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|                         |                                                    |                      |                    |                      |                     
|------------------------ | -------------------------------------------------- | -------------------- | ------------------ | -------------------- | --------------------
|                         |                                                    |                      |                    |                      |                     
|                         |                                                    |                      | December 31,      
|                         |                                                    |                      | 2014               |                      | 2013                
|                         |                                                    |                      |                    |                      |                     
|                         |                                                    |                      |                    |                      |                     
|Deferred tax assets      |                                                    |                      |                    |                     
|                         | Non-capital losses carried forward                 |                      | $               38 |                      | $                  -
|                         | Tax value over book value of equipment             |                      | -                  |                      | -                   
|Deferred tax assets      |                                                    | 38                   |                    | -                   
|                         |                                                    |                      |                    |                      |                     
|Deferred tax liabilities |                                                    |                      |                    |                     
|                         | Book value over tax value of marketable securities |                      | -                  |                      | -                   
|                         | Book value over tax value of mineral properties    |                      | (38)               |                      | -                   
|Deferred tax liabilities |                                                    | (38)                 |                    | -                   
|                         |                                                    |                      |                    |                      |                     
|Net deferred tax assets  |                                                    | $                  - |                    | $                  -





| | (c) | The Company recognizes tax benefits on losses or other deductible amounts where the probable criteria
for the recognition of deferred tax assets have been met. The Company’s unrecognized deductible temporary differences and
unused tax losses for which no deferred tax asset is recognized consist of the following amounts:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                |  |                   |              |                   |     
|----------------------------------------------- |  | ----------------- | ------------ | ----------------- | ----
|                                                |  |                   |              |                   |     
|                                                |  |                   | December 31,
|                                                |  |                   | 2014         |                   | 2013
|                                                |  |                   |              |                   |     
|                                                |  |                   |              |                   |     
|Non-capital losses                              |  | $           8,748 |              | $           8,754
|Capital losses                                  |  | 8                 |              | 10               
|Available for sale securities                   |  | 50                |              | 55               
|Share issue costs                               |  | 228               |              | 190              
|Tax value over book value of mineral properties |  | 482               |              | 959              
|Tax value over book value of equipment          |  | 1,434             |              | 1,560            
|Unrecognized deductible temporary differences   |  | $         10,950  |              | $         11,528 





183Canarc Resource Corp.Form 20-F





CANARC RESOURCE CORP.

Notes to the Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(tabular dollar amounts expressed in thousands of United States dollars, except per share amounts)







|16. |  | Deferred Income Taxes (continued)
|--- |  | ---------------------------------



|(c) |  | (continued)
|--- |  | -----------



As at December 31, 2014,
the Company’s unrecognized unused non-capital losses have the following expiry dates:





|     |  |                      
|---- |  | ---------------------
|     |  |                      
|2015 |  | $                  75
|2026 |  | 672                  
|2027 |  | 1,481                
|2028 |  | 679                  
|2029 |  | 1,442                
|2030 |  | 817                  
|2031 |  | 751                  
|2032 |  | 978                  
|2033 |  | 513                  
|2034 |  | 1,341                
|     |  |                      
|     |  |                      
|     |  | $             8,749  
|     |  |                      





184Canarc Resource Corp.Form 20-F







EXHIBIT 8-1



LIST OF MATERIAL SUBSIDIARIES





The Registrant carries on its
business in large part through its subsidiaries. The Registrant has a number of direct or indirect wholly or majority owned subsidiaries
as follows:



Benzdorp Gold N.V. was incorporated
under the laws of Suriname on February 4, 2004 when Suriname presidential assent was received. The Registrant owns 40% of the voting
shares of this company with the right to acquire an additional 40%.



Canarc (Barbados) Mining Ltd.
is a company duly incorporated under the laws of Barbados on July 26, 1993. The Registrant owns 100% of the issued and outstanding
shares.



Canarc Suriname (Barbados) Ltd.
is a company duly incorporated under the laws of Barbados on January 26, 1994. The Registrant owns 100% of the issued and outstanding
shares.



Canarc van Suriname N.V. is a
company duly incorporated under the laws of Suriname on November 10, 1995. The Registrant owns 100% of the issued and outstanding
shares.



New Polaris Gold Mines Ltd. (formerly
Golden Angus Mines Ltd. - name change effective April 21, 1997) is a corporation formed through the amalgamation of 2820684 Canada
Inc. (“2820684”), a former wholly-owned subsidiary of the Registrant incorporated under the Canada Business Corporation
Act on May 13, 1992, and Suntac Minerals Inc. The Registrant owns 100% of the issued and outstanding shares.











185Canarc Resource Corp.Form 20-F







EXHIBIT 13.1



Certification of Chief Executive
Officer pursuant to

Title 18, United States Code,
Section 1350, as adopted pursuant to

Section 906 of The Sarbanes-Oxley
Act of 2002



I, Catalin
Chiloflischi, Chief Executive Officer of Canarc Resource Corp. ("Canarc"), certify, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:



| | 1. | The Annual Report on Form 20-F of Canarc Resource Corp. for the year ended December 31, 2014 (the
"Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(a) or 78o(d)); and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of Canarc.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------





|                                                 |  |  | /s/ Catalin
        Chiloflischi                    
|------------------------------------------------ |  |  | ----------------------------------------------------
|Vancouver, Canada
        April
        24, 2015 |  |  | Catalin Chiloflischi
        Chief Executive Officer



A signed original of this written
statement required by Section 906 has been provided to Canarc and will be retained by Canarc and furnished to the Securities and
Exchange Commission or its staff upon request.





EXHIBIT 13.2



186Canarc Resource Corp.Form 20-F









EXHIBIT 13.1

Certification of Chief Financial
Officer pursuant to

Title 18, United States Code,
Section 1350, as adopted pursuant to

Section 906 of The Sarbanes-Oxley
Act of 2002



I, Philip Yee, Chief Financial Officer of Canarc Resource
Corp. ("Canarc"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to
the best of my knowledge:



| | 1. | The Annual Report on Form 20-F of Canarc Resource Corp. for the year ended December 31, 2014 (the "Report") fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of Canarc.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------



|                                                 |  | by: | /s/ Philip Yee                            
|------------------------------------------------ |  | --- | ------------------------------------------
|Vancouver, Canada
        April
        24, 2015 |  |     | Philip Yee
        Chief Financial Officer



A signed original of this written
statement required by Section 906 has been provided to Canarc and will be retained by Canarc and furnished to the Securities and
Exchange Commission or its staff upon request.



187Canarc Resource Corp.Form 20-F