SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)



_  Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934

or

x  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the fiscal year ended December 31, 2003

or

_  Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the transition period from _____ to _____



Commission File Number

0-29878





GENTRY RESOURCES LTD.

(Exact Name of Registrant as Specified in its Charter)



GENTRY RESOURCES LTD.

(Translation of Registrant's Name into English)



Federally Incorporated in Canada

(Jurisdiction of Incorporation or Organization)



101 6th Avenue S.W., Suite 2500, Calgary, Alberta, Canada T2P 3P4

(Address of Principal Executive Offices)

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

Title of Each ClassName of Each Exchange
on Which Registered______________N/A______________________________N/A_______________


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



Common Shares Without Par Value

(Title of Class)



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



N/A

(Title of Class)







---



Indicate the number of outstanding shares of each of the issuer's classes of capital stock as of December 31, 2003

27,352,508





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 X

NO





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



ITEM 17 X

ITEM 18



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



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



NOT APPLICABLE



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|         | TABLE OF CONTENTS                                                      |      | 
|-------- | ---------------------------------------------------------------------- | ---- | 
|        
|         |                                                                        |      | 
|PART I   |                                                                        | PAGE | 
|        
|         |                                                                        |      | 
|ITEM 1   | Identity of Directors, Senior Management and Advisors                  | 1    | 
|         |                                                                        |      | 
|ITEM 2   | Offer Statistics and Expected Timetable                                | 1    | 
|         |                                                                        |      | 
|ITEM 3   | Key Information                                                        | 1    | 
|         |                                                                        |      | 
|ITEM 4   | Information on the Company                                             | 6    | 
|         |                                                                        |      | 
|ITEM 5   | Operating and Financial Review and Prospects                           | 31   | 
|         |                                                                        |      | 
|ITEM 6   | Directors, Senior Management and Employees                             | 47   | 
|         |                                                                        |      | 
|ITEM 7   | Major Shareholders and Related Party Transactions                      | 57   | 
|         |                                                                        |      | 
|ITEM 8   | Financial Information                                                  | 60   | 
|         |                                                                        |      | 
|ITEM 9   | The Offer and Listing                                                  | 61   | 
|         |                                                                        |      | 
|ITEM 10  | Additional Information                                                 | 62   | 
|         |                                                                        |      | 
|ITEM 11  | Quantitative and Qualitative Disclosure about Market Risk              | 79   | 
|         |                                                                        |      | 
|ITEM 12  | Description of Securities Other than Equity Securities                 | 79   | 
|        
|         |                                                                        |      | 
|         |                                                                        |      | 
|PART II  |                                                                        | PAGE | 
|        
|         |                                                                        |      | 
|ITEM 13  | Defaults, Dividend Arrearages and Delinquencies                        | 79   | 
|         |                                                                        |      | 
|ITEM 14  | Material Modifications to the Rights of Security Holders and           |      | 
|         |                                                                        |      | 
|         | Use of Proceeds                                                        | 79   | 
|         |                                                                        |      | 
|ITEM 15  | Controls and Procedures                                                | 79   | 
|         |                                                                        |      | 
|ITEM 16  | [Reserved]                                                             | 80   | 
|         |                                                                        |      | 
|ITEM 16A | Audit Committee Financial Expert                                       | 80   | 
|         |                                                                        |      | 
|ITEM 16B | Code of Ethics                                                         | 89   | 
|         |                                                                        |      | 
|ITEM 16C | Principal Accountant Fees and Services                                 | 80   | 
|         |                                                                        |      | 
|ITEM 16D | Exemptions from the Listing Standards for Audit Committees             | 81   | 
|         |                                                                        |      | 
|ITEM 16E | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 81   | 
|        
|         |                                                                        |      | 
|         |                                                                        |      | 
|PART III |                                                                        | PAGE | 
|        
|         |                                                                        |      | 
|ITEM 17  | Financial Statements                                                   | 82   | 
|         |                                                                        |      | 
|ITEM 18  | Financial Statements                                                   | 82   | 
|         |                                                                        |      | 
|ITEM 19  | Exhibits                                                               | 83   | 



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Glossary



Terms used in this Annual Report on Form 20-F and not otherwise defined have the meanings set forth below:



"ABCA" means the Business Corporations Act (Alberta), R.S.A. 2000, c. B-9, as amended, and the regulations thereunder, and any successor laws or regulations thereto.



"API" means American Petroleum Institute.



"ARTC" means Alberta Royalty Tax Credit.



"CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended, and the regulations thereunder, and any successor laws or regulations thereto.



"Common Shares" means common shares in the share capital of the Company.



"Company" or
"Gentry" means Gentry Resources Ltd., a corporation amalgamated under the
CBCA.



"Martin" means Martin & Brusset Associates, an independent firm of petroleum consultants, Calgary, Alberta.



"Martin Report" means the independent consultants' evaluation of Gentry's oil and natural gas properties prepared by Martin dated March 18, 2004 and effective as of December 31, 2003.



"NGLs" means natural gas liquids, including condensate, propane, butane and pentane.



"overriding royalty interest" means an interest in the gross production of oil and gas under a lease, free of any expense for exploration, drilling, development, operating and other costs incident to the production and sale of oil and gas produced from the lease.



"property" or
"properties" means an oil and/or natural gas property or properties and related tangible equipment, including facilities for producing, gathering, storing, measuring, transporting or processing of oil and/or natural gas production from such property, as well as seismic data, if any.



"TSX"means the Toronto Stock Exchange.



Please see also
"Abbreviations and Conversion" and "Presentation of Gentry's Oil and Gas Natural Gas Reserves and Production Information" in the following sections.

i



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Abbreviations and Conversion



In this Annual Report on Form 20-F, the following abbreviations have the meanings set forth below.



|AECO                     | Alberta Energy Company interconnect with the Nova System, the Canadian benchmark for natural gas pricing purposes                                                                                                                                                                                                                                                                                           |       | GJ                                 | gigajoules                                                                                                                                                                                                                                         
|------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | ---------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Mbbls                    | one thousand barrels                                                                                                                                                                                                                                                                                                                                                                                       
|MBOE                     | one thousand barrels of oil equivalent                                                                                                                                                                                                                                                                                                                                                                     
|bbls                     | barrels, with each barrel representing 34.972 imperial gallons or 42 U.S. gallons                                                                                                                                                                                                                                                                                                                           |       | Mcf                                | one thousand cubic feet                                                                                                                                                                                                                            
|                         |                                                                                                                                                                                                                                                                                                                                                                                                             | Mcf/d | one thousand cubic feet per day   
|bbls/d

Bcf              | barrels per day

billion cubic feet                                                                                                                                                                                                                                                                                                                                                                         |       | Mmbbls                             | one million barrels                                                                                                                                                                                                                                
|MMBOE                    | one million barrels of oil equivalent                                                                                                                                                                                                                                                                                                                                                                      
|Bcf/d

BOE








BOE/d | billion cubic feet per day

barrels of oil equivalent converting 6 Mcf of natural gas to one barrel of oil equivalent and one barrel of natural gas liquids to one barrel of oil equivalent. The factor used to convert natural gas and natural gas liquids to oil equivalent is not based on either energy content or prices but is a commonly used industry benchmark.

barrels of oil equivalent per day |       | MMBTU

Mmcf

MMcf/d

MW

NGLs

WTI | one million British Thermal Units

one million cubic feet

one million cubic feet per day

megawatts of electricity

natural gas liquids

West Texas Intermediate at Cushing, Oklahoma, the benchmark for North American crude oil pricing purposes

In this Annual Report on Form 20F, unless otherwise indicated, all dollar amounts are in Canadian dollars and all references to
"$" are to Canadian dollars.



The following table sets forth certain standard conversions between Standard Imperial Units and the International System of Units (or metric units).



To Convert FromToMultiply ByMcfcubic metres28.317cubic metrescubic feet35.314bblscubic metres0.159cubic metresbbls6.290feetmetres0.305metresfeet3.281mileskilometres1.609kilometresmiles0.621acreshectares0.4047hectaresacres2.471


ii



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Presentation of Gentry's Oil and Natural Gas Reserves and Production Information



Disclosure of Information

In this Annual Report on Form 20-F, all estimates of oil and natural gas reserves and production are presented on a
"company interest" (as defined below) basis, unless indicated that they have been presented on a
"gross" or "net" basis.  The Company's actual oil and natural gas reserves and production will be greater than or less than the estimates provided in this Annual Report.  The estimated future net revenue from the production of the Company's oil and natural gas reserves do not represent the fair market value of the Company's reserves.



The Company has adopted the standard of 6 Mcf:1 BOE when converting natural gas to BOE.  BOEs may be misleading, particularly if used in isolation.  A BOE conversion ratio of 6 Mcf:1 BOE is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.



Note to Reader Regarding Oil and Natural Gas Information and National Instrument 51-101



The oil and natural gas operational and reserves information contained in this Annual Report contains the information required to be included in the Statement of Reserves Data and Other Oil and Gas Information pursuant to National Instrument 51-101 adopted by the Canadian securities regulatory authorities and is presented in accordance with Form 51-101F1.  Readers should also refer to the Report on Reserves Data by Martin and the Report of Management and Directors on Oil and Gas Disclosure as filed with the Company's Annual Information Form, dated May 19, 2004, on the SEDAR database (www.sedar.com).  The effective date for the Statement of Reserves Data and Other Oil and Gas Information contained in this Annual Report is December 31, 2003 and the information contained in the Annual Report has been prepared as of May 19, 2004.



Certain of the following definitions and guidelines have been prepared by the Standing Committee on Reserves Definitions of the CIM (Petroleum Society).  Further information is contained in Section 5.4 of Volume 1 of the COGE Handbook (First Edition, June 30, 2002).  Readers should consult the COGE Handbook for additional explanation and guidance.  Certain other terms used in this Annual Report have the meanings assigned to them in National Instrument 51-101 and accompanying Companion Policy 51-101CP, adopted by the Canadian securities regulatory authorities.



Interests in Reserves, Production, Wells and Properties

"company interest" means in relation to the Company's interest in production or reserves, its working interest (operating or non-operating) share before deduction of royalties and including any royalty interests of the Company.

iii



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"gross" means:



(i)

in relation to the Company's interest in production or reserves, its working interest (operating or non-operating) share in its reserves, before deduction of royalties and without including any royalty interests of the Company;

(ii)

in relation to wells, the total number of wells in which the Company has an interest; and

(iii)

in relation to properties, the total area of properties in which the Company has an interest.



"net" means:

(i)

in relation to the Company's interest in production or reserves, its working interest (operating or non-operating) share after deduction of royalty obligations, plus the Company's royalty interests in those production or reserves;

(ii)

in relation to the Company's interest in wells, the number of wells obtained by aggregating the Company's working interest in each of its gross wells; and

(iii)

in relation to the Company's interest in a property, the total area in which the Company has an interest multiplied by the working interest owned by the Company.



"working interest" means the percentage of undivided interest held by the Company in the oil and/or natural gas or mineral lease granted by the mineral owner, Crown or freehold, which interest gives the Company the right to
"work" the property (lease) to explore for, develop, produce and market the leased substances.



Reserves Categories

"Proved Reserves" are those reserves that can be estimated with a high degree of certainty to be recoverable.  It is likely that the actual remaining quantities recovered will exceed the estimated Proved Reserves.



"Probable Reserves" are those additional reserves that are less certain to be recovered than Proved Reserves.  It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable Reserves.



"Possible Reserves" are those additional reserves that are less certain to be recovered than Probable Reserves.  It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated Proved plus Probable plus Possible Reserves.



Development and Production Status

Each of the reserves categories (Proved, Probable and Possible) may be divided into developed and undeveloped categories:

iv

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"Developed Reserves" are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (for example, when compared to the cost of drilling a well) to put the reserves on production.  The developed category may be subdivided into Producing and Non-Producing.



- "Developed Producing Reserves" are those reserves that are expected to be recovered from completion intervals open at the time of the estimate.  These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
- 
- "Developed Non-Producing Reserves" are those reserves that either have not been on production, or have previously been on production, but are shut-in, and the date of resumption of production is unknown.
- 

"Undeveloped Reserves" are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production.  They must fully meet the requirements of the reserves classification (Proved, Probable, Possible) to which they are assigned.



Levels of Certainty for Reported Reserves

The qualitative certainty levels referred to in the definitions above are applicable to individual reserves entities (which refers to the lowest level at which reserves calculations are performed) and to reported reserves (which refers to the highest-level sum of individual entity estimates for which reserves estimates are presented).  Reported reserves should target the following levels of certainty under a specific set of economic conditions:



- at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated Proved Reserves;
- 
- at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated Proved plus Probable Reserves; and
- 
- at least a 10 percent probability that the quantities actually recovered will equal the sum of the estimated Proved plus Probable plus Possible Reserves.



Description of Price and Cost Assumptions

"Constant prices and costs" means prices and costs used in an estimate that are:



(i)

the Company's prices and costs as at December 31, 2003, held constant throughout the estimated lives of the properties to which the estimate applies; and

v



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(ii)

if, and only to the extent that, there are fixed or presently determinable future prices or costs to which the Company is legally bound by a contractual or other obligation to supply a physical product, including those for an extension period of a contract that is likely to be extended, those prices or costs rather than the prices or costs referred to in paragraph (i).



"Forecast prices and costs" means future prices and costs that are:



(i)

generally accepted as being a reasonable outlook of the future; and



(ii)

if, and only to the extent that, there are fixed or presently determinable future prices or costs to which the Company is legally bound by a contractual or other obligation to supply a physical product, including those for an extension period of a contract that is likely to be extended, those prices or costs rather than the prices or costs referred to in paragraph (i).



Calculation of Reserve Life Index

"Reserve Life Index" means the amount obtained by dividing the quantity of a particular category of reserves by the prior month's production for the corresponding reserve category.

vi



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Forward-Looking Statements



Certain statements contained in this Annual Report on Form 20-F constitute forward-looking statements. The use of any of the words
"anticipate", "continue", "estimate", "expect", "may", "will", "project", "should",
"believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this Annual Report should not be unduly relied upon. These statements speak only as of the date of this Annual Report.



In particular, this Annual Report contains forward-looking statements pertaining to the following:



- the quantity of oil and natural gas reserves;
- crude oil, natural gas and natural gas liquids production levels;
- capital expenditure programs;
- projections of market prices and costs;
- supply and demand for crude oil, natural gas and natural gas liquids;
- expectations regarding the ability of the Company and its subsidiaries to raise capital and to
    continually add to reserves through acquisitions and development; and
- treatment under governmental regulatory regimes and tax laws.



The actual results of the Company and its subsidiaries could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and elsewhere in this Annual Report:



- volatility in market prices for crude oil, natural gas and natural gas liquids;
- liabilities inherent in oil and natural gas operations;
- uncertainties associated with estimating oil and natural gas reserves;
- competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
- incorrect assessments of the value of acquisitions;
- geological, technical, drilling and processing problems; and
- the other factors discussed under
    "Risk Factors" in this Annual Report.



These factors should not be construed as exhaustive. Neither the Company nor its affiliates undertakes any obligation to publicly update or revise any forward-looking statements.

vii



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PART I



ITEM 1

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS





This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this Item.





ITEM 2

OFFER STATISTICS AND EXPECTED TIMETABLE





This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this Item.





ITEM 3

KEY INFORMATION





A.

Selected Financial Data



The following selected financial data should be read in conjunction with
"Item 5.  Operating and Financial Review and Prospects" and in conjunction with the consolidated financial statements attached as a part hereof.  The Company's consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles.  Except as described in Note 13 to the audited consolidated financial statements for the years ended December 31, 2003 and 2002, and Note 12 to the audited consolidated financial statements for the years ended December 31, 2002 and 2001 there are no material differences, for the purposes of these financial statements, between generally accepted accounting principles in Canada and the United States.



(Canadian Dollars in Thousands Except Per Share Amounts)

For the Years Ended December 31,20032002200120001999Financial results:Production revenue
(net of royalties)$19,613$15,130$13,469$10,079$5,004Interest, management fees and other revenue2851691488039Production expenses5,733(4,464)(4,415)(3,194)(1,715)General & admin. expenses2,529(2,060)(1,979)(1,486)(1,157)Interest on long-term debt484(407)(370)(319)(231)Depletion and depreciation(7,080)(4,273)(3,007)(2,118)(1,594)Net income3,0412,4361,7461,98745Net income per share$0.12$0.11$0.08$0.10$0.00




1



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For the Years Ended December 31,20032002200120001999Financial Position:Working capital (deficiency)$(13,443)$(7,225)$  (7,817)$   (735)$    108Total assets53,47336,42328,16819,05615,587Long-term debt---4,0154,995Shareholders' equity24,45916,61312,8438,8457,400




The Company has not declared or paid any dividends during the periods indicated.



(Amounts Restated in Accordance with U.S. GAAP;

Canadian Dollars in Thousands Except Per Share Amounts)



For the Years Ended December 31,200320022001Financial Results:Depletion and depreciation, including ceiling test writedown$(6,744)$(4,029)$(2,685)Net income2,8252,1071,848Net income per share$0.11$0.10$0.09200320022001Financial Position:Working capital (deficiency)(13,443)(7,459)(8,161)Total assets53,78433,43225,461Long-term debt---Shareholders' equity25,09614,89710,924






Currency and Exchange Rates



All dollar amounts set forth in this report are in Canadian dollars, except where otherwise indicated.



1.

On June 18, 2004, the noon buying rate in New York City for cable transfer in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York was $0.7329 U.S. = $1.00 Canadian.



All exchange rate calculations in #2 and #3 below are based on the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York.



2.

The following table sets forth the high and low exchange rates for each month during the previous six months.



MonthMay 2004Apr. 2004Mar. 2004Feb. 2004Jan. 2004Dec. 2003High Rate.7363.7637.7645.7629.7880.7738Low Rate.7158.7293.7418.7439.7496.7460




2



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3.

The following table sets forth the average exchange rates for each of the past 5 fiscal years, calculated by using the average of the exchange rates in effect on the last day of each month during the period indicated.



Year Ended December 31,20032002200120001999Average Rate During Period.7205.6370.6444.6725.6744




B.

Capitalization and Indebtedness



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



C.

Reasons for the Offer and Use of Proceeds



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



D.

Risk Factors



Investors should consider the following risk factors prior to making an investment in the Common Shares or other securities of the Company.



Investment in the Common Shares should be considered to be speculative and involve a degree of risk, including, but not necessarily limited to, the risk factors listed below.  Owners and prospective purchasers of the Common Shares should carefully consider, in addition to the other information in this Annual Report, the following risk factors inherent in and affecting the Company's business before making an investment decision.



Industry Risks



There are many risks inherent in the oil and gas industry which even a combination of experience, knowledge and careful evaluation may not be able to overcome.



The Company's success will depend on its ability to select and acquire suitable producing properties or undeveloped exploration prospects.  The marketability of any oil and natural gas acquired or discovered by the Company will be affected by numerous factors beyond the control of the Company.  These factors include market fluctuations, the world price of crude oil, the continental price of natural gas, the supply and demand for oil and natural gas, the proximity and capacity of oil and natural gas pipelines and processing equipment and government regulations, including regulations relating to prices, taxes, royalties, land tenure, allowable production, the import and export of oil and natural gas and environmental protection.  The effect of these factors cannot be accurately predicted.

3



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Hazards such as unusual or unexpected geological formations, pressures, blow-outs, fires or other conditions may be encountered in drilling and operating wells.  The Company will have the benefit of insurance maintained by it; however, the Company may become liable for damages arising from pollution, blowouts or other hazards against which it cannot insure or against which it may elect not to insure because of high premium costs or other reasons.  Oil and natural gas production operations are also subject to all of the risks typically associated with such operations, including premature decline of reservoirs and invasion of water into formations, which may hinder economic production.



Both oil and natural gas prices are unstable and are subject to fluctuation.  Any material drop in prices could result in a reduction of any future net production revenue of the Company.  The economics of producing from wells acquired or drilled by the Company may change as a result of lower commodity prices, which could result in a reduction in the volumes of economic reserves of the Company.  The Company might also elect not to produce from certain wells at lower prices.  Crude oil and natural gas prices are currently at very high levels and may be extremely volatile in the short term.  These factors could result in a material decrease in any future net production revenue of the Company, causing a reduction in the Company's oil and natural gas acquisition and development activities.



Regulation of Industry



The Company's activities are subject to complex and stringent energy, environmental and other governmental laws and regulations.  While management believes that the Company's business will be operated in accordance with applicable laws, the Company will remain subject to a varied and complex body of laws and regulations that both public officials and private individuals may seek to enforce.  Existing laws and regulations may be revised or new laws and regulations may become applicable to the Company that may have a negative effect on the Company's business and the results of operations. Environmental regulation is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing.  The Company expects that it will be able to fully comply with all regulatory requirements in this regard.



Possible Income Tax Changes



There can be no assurance that the income tax laws applicable to the Company or to the oil and natural gas industry generally will not be changed in a manner that adversely affects the Company or the holders of Common Shares.



Need for Future Financings



Additional financing for new development and operations may not be available on acceptable terms in the future.  Where additional financing is raised by the issuance of Common Shares or securities convertible into Common Shares from the Company's treasury, control of the

4

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Company may change and shareholders may suffer further dilution to their investment.  The issuance of debt may result among other things, in the encumbrance of certain of the Company's assets, impede the Company's ability to obtain additional bank financing, decrease the Company's liquidity and adversely affect the Company's ability to declare and pay dividends to its shareholders.



Property Title



Although title reviews will be done according to industry standards prior to the purchase of most oil and natural gas producing properties or the commencement of drilling wells, such reviews do not guarantee or certify that an unforeseen defect in the chain of title will not arise to defeat the claim of the Company, which could result in a reduction of the revenues received by the Company.



Recovery and Reserve Estimates



The recovery and reserve estimates of the Company's oil and natural gas reserves provided for herein are estimates only and there is no guarantee that the estimated reserves will be recovered. In general, estimates of economically recoverable oil and natural gas reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, all of which may vary considerably from actual results.  The Company's actual production, revenues, taxes and development and operating expenses and results will vary from estimates contained in the evaluations, and such variations could be material. Actual reserves may be greater or less than the estimates. The Company has used both constant and escalated price and costs assumptions in calculating reserve quantities as required by securities disclosure legislation and policies in Canada.  Actual future net cash flows will be affected by other factors such as actual production levels, supply and demand for oil and natural gas, curtailments or increases in consumption of oil and natural gas, changes in government regulation or taxation and the impact of inflation on costs, among others.



Competition



Competition could adversely affect the Company's performance.  The oil and natural gas industry is characterized by intense competition and the Company competes directly with other companies that have greater resources. The industry also competes with other industries who supply non-petroleum energy products.



Conflicts of Interest



Certain of the directors of the Company may be engaged and will continue to be engaged in certain business interests on their own behalf and on behalf of other companies, and situations may arise where the directors and officers may be in direct competition with the Company.  Conflicts of interest, if any, which arise will be subject to and governed by the procedures prescribed by the CBCA.

5



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Reliance on Management



Holders of securities of the Company must rely upon the experience and expertise of management.   The Company's continued success is dependent upon its ability to attract and retain experienced management.



Absence of Dividends



The Company does not anticipate that cash dividends will be paid on its Common Shares in the foreseeable future since the Company currently intends to retain any future earnings to finance the expansion and development of its business.  The declaration and payment in the future of any cash dividends will be at the discretion of the Company's board of directors and will depend upon the earnings, capital requirements and financial position of the Company, future loan covenants, general economic conditions and other pertinent factors.  No assurance can be given that the Company will pay any dividends in the future or with respect to the amount of any such dividends.



ITEM 4            
INFORMATION ON THE COMPANY





A.          
History and Development of the Company



Organization; Registered Office; Etc.



Gentry Resources Ltd. ("Gentry" or the
"Company") was amalgamated1 under the Canada Business Corporations Act on June 29, 1981 as Sasko Oil & Gas Limited. On October 29, 1990, the Company changed its name to Gentry Resources Ltd. and consolidated its Common Shares on the basis of one post-consolidation share for every five pre-consolidation shares.  The head office and registered office of the Company is located at Suite 2500, 101 - 6th Avenue S.W., Calgary, Alberta, T2P 3P4, Canada.  The Company is federally incorporated under the Canada Business Corporations Act and is extra-territorially incorporated in British Columbia, Alberta, Saskatchewan, and Manitoba.



On June 4, 1999, at the Company's Annual General and Special Meeting, the Company's shareholders approved a special resolution to amend the Company's Articles of Amalgamation respecting its share capital structure.  In summary, the Class
"A" shares, of which none were issued, were deleted; the Class "B" shares were reclassified to Common Shares having one vote per share (the
"Common Shares"); and the Preferred Shares, Series 1, of which none were issued, were deleted.  The Toronto Stock Exchange (the
"TSX"), where the Company's stock is listed for trading, approved the substitutional listing of the Common Shares, and to effect the change from Class
"B" to Common Shares, the Company's trading symbol was changed from "GNY.B" to "GNY".

1   Under Canadian law, two or more corporations, including holding and subsidiary corporations, may amalgamate (merge or combine) and continue as one corporation.  Each corporation proposing to amalgamate must enter into an agreement setting out the terms and means of effecting the amalgamation.

6



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General Development of the Business



Gentry is an independent Alberta oil and gas company which carries on the business of exploring, developing, acquiring, and producing petroleum and natural gas reserves in Alberta, Saskatchewan and Manitoba.  Gentry's focus is to find high quality long life reserves which management believes have significant potential for increased production through infill drilling and enhanced recovery programs.  Its strategy is to engage in low to medium risk exploration and development activities complimented by selective acquisitions in the western Canadian sedimentary basin.  Gentry also participates, through its investment in Stratic, in medium to higher risk international exploration projects.



Gentry's Development over the Last Three Years



Developments in 2001



On March 1, 2001, Gentry was amalgamated with Sloane Petroleums Inc. ("Sloane") and the amalgamated company continued to operate as Gentry Resources Ltd.  The amalgamation was approved by the shareholders of both Gentry and Sloane on February 28, 2001.  The addition of Sloane's assets resulted in an extra 619 MBOE of proven reserves and two MMcf/d of gas production accruing to Gentry as of March 1, 2001.  In order to complete the amalgamation, Gentry issued 498,118 common shares at a deemed price of $0.80 per share and paid $3,586,456 in cash for the total consideration of $3,984,950 paid to the shareholders of Sloane.  Holders of Gentry shares pre-amalgamation received one share of the amalgamated company in exchange for each pre-amalgamation share held.



In December, Gentry completed a private placement of 1,808,549 flow-through shares at $1.55 per share for gross proceeds of $2,803,250.  These funds were utilized to help fund the Company's 2002 capital exploration program.



Stratic-Related Developments



On September 17, 2001, Gentry participated in a special warrant financing by Stratic, acquiring 2,272,727 special warrants for a total subscription price of $1,250,000.  Once all the special warrants were converted into common shares in June of 2002, Gentry's ownership of Stratic increased from 37% to 40%.  Proceeds were used for Stratic's international exploration programs, including the drilling of a well in Gabon.



Summary of Stratic Energy (West Africa) Inc.("Stratic (West Africa)") Property Activity During 2001



- Côte d'Ivoire, West Africa



Stratic (West Africa), a wholly owned subsidiary of Stratic, holds an 11% working interest in the shallow water Block CI-102, and a 10% interest in the deeper-water Block CI-103, in the Abidjan Margin Basin.  Collection and interpretation of over 2,000 line kilometres of 2-

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dimensional and 600 km2 of 3-dimensional seismic data on these blocks continued throughout 2001.



- Gabon, West Africa



Stratic (West Africa) holds a 35% working interest in the Ofoubou block and drilled its first test well in September 2001.  It was deemed to be non-commercial and as a result the well was plugged and abandoned.



Developments in 2002



During 2002, Gentry concentrated its exploration efforts on four core areas
- Princess, Tide Lake, Sedalia and Whitecourt.  The first three areas are located in southeast Alberta, while Whitecourt is in the west central portion of Alberta.



In December 2002, Gentry completed a private placement of 1,000,000 flow-through shares at a price of $1.65 per share and 1,000,000 units at $1.40 per unit for gross proceeds of $3,050,000.  Each unit consisted of one common share and one-half of a share purchase warrant, with each whole warrant entitling the holder to acquire an additional common share at a price of $1.75 per share until June 17, 2004.  These funds were utilized to help fund the Company's 2003 capital exploration program.



Stratic-Related Developments



In November 2002, Stratic issued 7,272,727 common shares to acquire certain rights in Algeria and Syria.  Stratic acquired rights under bids submitted for production sharing contracts in three blocks in Syria. If the bids are successful and Stratic signs an agreement to acquire a block, Stratic will issue a further 7,090,909 common shares for one of the blocks and 6,181,818 common shares for each of the other two blocks.  Stratic also acquired rights under a bid submitted for a production sharing contract relating to an exploration block in Algeria.  The rights entitle Stratic to a 20% participating interest in the block.  If the bid is successful and Stratic acquires the block, Stratic will issue a further 8,545,455 common shares.



In December 2002, Stratic completed a special warrant financing for gross proceeds of $4,657,070 by way of issuance of 21,168,500 special warrants at a price of $0.22 per special warrant.  Each special warrant entitles the holder to acquire, for no additional consideration, one common share and one half of a share purchase warrant.  Each whole share purchase warrant entitled the holder to acquire an additional common share at a price of $0.40 per share until June 4, 2004.  Gentry participated in Stratic's financing for 909,090 special warrants for subscription proceeds of $200,000.  Once all the special warrants were converted into common shares in May 2003, Gentry's ownership of Stratic decreased to 19%.  Proceeds from the financing were used for Stratic's international exploration and acquisition programs and for general working capital purposes.

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Summary of Stratic (West Africa) Property Activity During 2002



- Côte d'Ivoire, West Africa



In 2002, the operator of CI-102 and CI-103 withdrew from blocks and assigned its interest to Stratic (West Africa).  As a result of this assignment and another partner converting to a carried interest, Stratic (West Africa) holds an 85.5% working interest in the shallow water CI-102, and an 87.5% interest in the deeper-water Block CI-103, in the Abidjan Margin Basin.  The current exploration periods of the blocks have been extended to August 12, 2004 and August 21, 2004 respectively to allow Stratic (West Africa) time to find a third party to assign a portion of its interests and assume the role of operator of the blocks.



- Gabon, West Africa



Stratic (West Africa) held a 35% working interest in the Ofoubou block.  In September, the operator withdrew from the block and Stratic (West Africa) followed suit in 2003.



Developments in 2003



During 2003, Gentry continued to concentrated its exploration efforts on four core areas
- Princess, Tide Lake, Sedalia and Whitecourt.  The first three areas are located in southeast Alberta, while Whitecourt is in the west central portion of Alberta.  In 2003, the Company participated in 55 gross wells (27.7 net) with a success rate of 71% (73% net).



On October 30, 2003, Gentry completed an equity offering of 3,000,000 common shares at a price of $1.75 per common share for total gross proceeds of $5,250,000.  The proceeds from this financing were utilized to fund the continued exploration and development of Gentry's oil and natural gas properties, including acquisitions, and proceeds were used to temporarily reduce indebtedness until required for those purposes.



During 2003, due to additions in management of Stratic and the reduction of the Company's ownership in Stratic to 19% ownership interest by the end of the year, the Company changed it's accounting for its investment in Stratic from equity accounting to cost basis of accounting for investments.

Significant Acquisitions



In the third quarter, the Company purchased the remaining 50% interest in a Nisku well and surrounding lands in the Princess area for $2.5 million from its industry partner.  This gave the Company 100% interest in the wells in the area, prior to the conversion of a royalty interest into a 50% working interest by royalty holder.

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Recent Developments



On April 28, 2004, Gentry announced an equity offering of 5,000,000 common shares at a price of $2.00 per common share and 1,000,000 flow through shares at a price of $2.50 for total gross proceeds of $12,500,000.  The proceeds from this financing will be utilized to fund the continued exploration and development of Gentry's oil and natural gas properties, including acquisitions, and proceeds are being used to temporarily reduce indebtedness until required for those purposes.  The financing was completed on May 18, 2004.



Principal Capital Expenditures/Divestitures Over Last Three Fiscal Years



The following table summarizes capital expenditures (net of incentives and net of certain proceeds, including capitalized general and administrative expenses) made by the Company during the periods indicated. (Canadian dollars in thousands).



($ thousands)200320022001Exploration and
    Development9,723.85,113.14,101.4Facilities and equipping4,208.41,298.41,429.7Acquisitions, net of dispositions2,503.6-2,131.9Land and seismic4,160.41,355.61,553.5Capitalized expenses848.0796.3756.0Other209.357.5119.7Total21,653.58,620.910,092.2




All expenditures were incurred in Canada.



Expenditures were financed through a combination of bank debt, cash flow and equity financings.  See
"Item 5.  Operating and Financial Review and Prospects -- B.  Liquidity and Capital Resources."



Current and Planned Capital Expenditures/Divestitures



As of May 31, 2004, the Company had incurred approximately $4,000,000 in capital expenditures, primarily in the Princess and Sedalia areas of southern Alberta, Canada.  These expenditures, as in previous years, are being financed through a combination of bank debt, cash flow and equity financings.



Public Takeover Offers



During the current and previous fiscal year, the Company has not received any public takeover offers from third parties nor has the Company made any such takeover offers.

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B.

Business Overview



Summary



The Company's principal properties are located in western Canada in the southern portions of Alberta, Saskatchewan, and Manitoba.  Gentry's strategy is two-fold: first, to find high quality, long life reserves which management believes have significant potential for increased production through infill drilling and enhanced recovery programs; and second, to engage in low to medium risk exploration and development activities complimented by selective acquisitions in the Western Canadian Sedimentary Basin.



Gentry maintains undeveloped acreage in the Gulf of St. Lawrence.  The acreage is non-operated and exploration is not anticipated in the near future.



Gentry holds a 16% interest in Stratic, which participates in oil and gas exploration and development activities in North and West Africa and the U.K. North Sea.



Applicable Government Regulation in Canada



The oil and natural gas industry is subject to extensive controls and regulation imposed by various levels of government. Regulatory approvals must be obtained before drilling wells or constructing facilities. Failure to obtain such approvals on a timely basis could result in delays or abandonment of projects and increased costs.  Although it is not expected that any of these controls or regulations will affect the Company's operations in a manner materially different than they would affect other Canadian oil and gas issuers of similar size, the controls and regulations should be considered carefully by investors in the oil and gas industry. All current legislation is a matter of public record and the Company is unable to predict what additional legislation or amendments may be enacted. Outlined below are some of the principal aspects of legislation, regulations and agreements governing the oil and gas industry in western Canada.



Pricing and Marketing - Oil



In Canada, producers of oil negotiate sales contracts directly with oil purchasers, with the result that the market determines the price of oil. The price depends, in part, on oil type and quality, prices of competing fuels, distance to market, the value of refined products and the supply/demand balance and other contractual terms. Oil exports may be made pursuant to export contracts with terms not exceeding one year in the case of light crude, and not exceeding two years in the case of heavy crude, provided that an order approving any such export has been obtained from the National Energy Board (the
"NEB").  Any oil export to be made pursuant to a contract of longer duration (to a maximum of 25 years) requires an exporter to obtain an export licence from the NEB and the issue of such a licence requires the approval of the Governor in Council.

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Pricing and Marketing - Natural Gas



In Canada, the price of natural gas sold in intraprovincial, interprovincial and international trade is determined by negotiation between buyers and sellers. Such price depends, in part, on natural gas quality, prices of competing natural gas and other fuels, distance to market, access to downstream transportation, length of contract term, weather conditions, the value of refined products and the supply/demand balance and other contractual terms.  Natural gas exported from Canada is subject to regulation by the NEB and the Government of Canada. Exporters are free to negotiate prices and other terms with purchasers, provided that the export contracts must continue to meet certain criteria prescribed by the NEB and the Government of Canada.  Natural gas exports for a term of less than two years or for a term of two to 20 years (in quantities of not more than 30,000 cubic metres per day), must be made pursuant to an NEB order. Any natural gas export to be made pursuant to a contract of longer duration (to a maximum of 25 years) or a larger quantity requires an exporter to obtain an export licence from the NEB and the issue of such a licence requires the approval of the Governor in Council.



The governments of Alberta, British Columbia and Saskatchewan also regulate the volume of natural gas which may be removed from those provinces for consumption elsewhere, based on such factors as reserve availability, transportation arrangements and market considerations.



The North American Free Trade Agreement ("NAFTA")



On January 1, 1994, NAFTA became effective among the governments of Canada, the United States of America and Mexico. In the context of energy resources, Canada continues to remain free to determine whether exports to the United States or Mexico will be allowed, provided that any export restrictions do not: (i) reduce the proportion of energy resource exported relative to domestic use (based upon the proportion prevailing in the most recent 36 month period); (ii) impose an export price higher than the domestic price; and (iii) disrupt normal channels of supply. All three countries are generally prohibited from imposing minimum export or import price requirements.



NAFTA contemplates the reduction of Mexican restrictive trade practices in the energy sector and prohibits discriminatory border restrictions and export taxes. NAFTA also contemplates clearer disciplines on regulators to ensure fair implementation of any regulatory changes and to minimize disruption of contractual arrangements, which is important for Canadian natural gas exports.



Provincial Royalties and Incentives



General



In addition to federal regulations, each province in Canada has legislation and regulations which govern land tenure, royalties, production rates, environmental protection and other matters. The royalty regime is a significant factor in the profitability of oil and natural gas

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production. Royalties payable on production from lands other than Crown-owned lands are determined by negotiations between the freehold mineral owner and the lessee. Crown royalties are determined by government regulation and are generally calculated as a percentage of the value of the gross production. The rate of royalties payable generally depends in part on prescribed reference prices, well productivity, geographical location, field discovery date and the type or quality of the petroleum product produced. Other royalties and royalty-like interests are from time to time carved out of the working interest owner's interest through non-public transactions.  These are often referred to as overriding royalties, gross overriding royalties or net profits or net carried interests.



From time to time, the federal and provincial governments in Canada have established incentive programs which have included royalty rate reductions (including far specific wells), royalty holidays and tax credits for the purpose of encouraging oil and natural gas exploration or enhanced planning projects, although the trend is toward eliminating these types of programs in favour of long term programs which enhance predictability for producers.  If applicable, oil and natural gas royalty holidays and reductions would reduce the amount of Crown royalties paid by oil and gas producers to the provincial governments and would increase the net income and funds from operations of such producers.



Alberta



Regulations made pursuant to the Mines and Minerals Act (Alberta) provide various incentives for exploring and developing oil reserves in Alberta. Oil produced from horizontal extensions commenced at least five years after the well was originally spudded may also qualify for a royalty reduction. A 24 month, 8,000 cubic metre exemption is available for production from a well that has not produced for a 12 month period, if resuming production after February 1, 1993. Additionally, oil production from eligible new field and new pool wildcat wells and deeper pool test wells spudded or deepened after September 30, 1992 is entitled to a 12 month royalty exemption (to a maximum of $1 million). Oil produced from low productivity wells, enhanced recovery schemes (such as injection wells) and experimental projects is also subject to royalty reductions.



In Alberta, the amount payable to the Alberta government as a royalty in respect of oil depends on the type of oil, the vintage of the oil, the quantity of oil produced in a month and the value of the oil. The vintage of oil is determined based on various criteria set out in the regulations, but is generally broken down into three categories being old oil, new oil and third tier oil (which is oil produced form pools discovered after September 30, 1992).  The royalty rate on old oil is between 10% and 35%, for new oil it is between 10% and 30%, and for third tier oil it is between 10% and 25%.



The royalty payable to the Alberta government in respect of natural gas is determined by a sliding scale based on a reference price (which is the greater of the amount obtained by the producer and a prescribed minimum price), the type of natural gas, the quantity produced in a given month and the vintage of the natural gas. The vintage of natural gas is based on various criteria set out in the regulations, but is generally determined based on when the natural gas pools

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were discovered and natural gas from such pools was recovered.  As an incentive for the production and marketing of natural gas which may have been flared, the royalty rate on natural gas produced in association with oil is less than non-associated natural gas. The royalty payable on natural gas varies between 15% and 30%, in the case of new natural gas, and between 15% and 35%, in the case of old natural gas. Natural gas produced from qualifying exploratory natural gas wells spudded or deepened after July 31, 1985 and before June 1, 1988 is eligible for a royalty exemption for a period of 12 months, up to a prescribed maximum amount.  Natural gas produced from qualifying intervals in eligible natural gas wells spudded or deepened to a depth below 2,500 meters is also subject to a royalty exemption, the amount of which depends on the depth of the well.



In Alberta, a producer of oil or natural gas is entitled to a credit against the royalties payable to the Crown by virtue of the ARTC program. The ARTC rate is based on a price-sensitive formula and varies between 75% for prices at or below the royalty tax credit reference price of $100 per cubic metre decreasing to 25% for prices above the royalty tax credit reference price of $210 per cubic metre. The ARTC rate will be applied to a maximum annual amount of $2,000,000 of Alberta Crown royalties payable for each producer or associated group of producers. Crown royalties on production from producing properties acquired from corporations claiming maximum entitlements to ARTC will generally not be eligible for ARTC. The rate is established quarterly based on the average
"par price", as determined by the Alberta Department of Energy for the previous quarterly period. On December 22, 1997, the Alberta Government announced that it would conduct a review of the ARTC program with the objective of setting out better-targeted objectives for a smaller program and to deal with administrative difficulties. On August 30, 1999, the Alberta Government announced that it would not be reducing the size of the program, but that it would introduce new rules to reduce the number of persons who qualify for the program. The new rules will preclude companies that pay less than $10,000 in royalties per year and non-corporate entities from qualifying from the program.



Saskatchewan



In Saskatchewan, the amount payable as a royalty in respect of oil depends on the vintage of the oil, the type of oil, the quantity of oil produced in a month and the value of the oil. The royalty rate payable for old oil is between 20% and 45%, and for new oil and third tier oil is between 10% and 35%. The royalty payable on natural gas in Saskatchewan is determined by a sliding scale based on a reference price (which is the greater of the amount obtained by the producer and a prescribed minimum price), the quantity produced in a given month, the type of natural gas and the vintage of the natural gas. As an incentive for the production and marketing of natural gas which may have been flared, the royalty rate on natural gas produced in association with oil is less than non-associated natural gas. The royalty rate payable for old gas is between 20% and 45%, and for new gas and third tier gas is between 15% and 35%.



Effective October 1, 2002, the Saskatchewan government revised its fiscal regime for the oil and gas industry. Some royalties on wells existing as of that date will remain unchanged and will therefore be subject to various periods of royalty/tax deduction. The changes include new lower royalty and tax structures applicable to both oil, natural gas and associated natural gas (natural gas produced from oil wells), a new system of volume incentives and a reduced corporation capital tax resource surcharge rate.

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The new fiscal regime for the Saskatchewan oil and gas industry provides an incentive to encourage exploration and development through a revised royalty/tax structure for oil and natural gas wells with a finished drilling date on or after October 1, 2002 or incremental oil production due to a new or expanded waterflood project with a commencement date on or after October 1, 2002. This
"fourth tier" Crown royalty rate, applicable to both oil and natural gas, is price sensitive and ranges from a minimum 5% at a base price to a maximum of 30% at a price above the base price. A fourth tier freehold tax structure, calculated by subtracting a production tax factor of 12.5 percentage points from the corresponding Crown royalty rates, has also been created which is applicable to conventional oil, incremental oil from new or expanded waterfloods and natural gas. The fourth tier royalty/tax structure is also applicable in respect of associated natural gas that is gathered for use or sale which is produced either from oil wells with a finished drilling date on or after October 1, 2002 and oil wells with a finished drilling date prior to October 1, 2002, where the individual oil well has a gas-oil production ratio in any month of more than 3,500 cubic metres of natural gas per cubic metre of oil. In addition, volume-based royalty/tax reduction incentives have been changed such that a maximum royalty of 2.5% now applies to various volumes of both oil and natural gas, depending on the depth and nature of the well (up to 16,000 cubic metres of oil in the case of deep exploratory wells and 25,000 cubic metres of natural gas produced from exploratory wells). The royalty/tax category with respect to re-entry and short sectional horizontal oil wells has been eliminated such that all horizontal oil wells with a finished drilling date on or after October 1, 2002 will receive fourth tier royalty/tax rates and incentive volumes. Further changes include the reduction of the corporation capital tax resource surcharge rate from 3.6% to 2.0% and, subject to certain restrictions, the expansion of the deep oil well definition to include oil wells producing from a zone deeper than 1,700 meters.



Land Tenure



Crude oil and natural gas located in the western Canadian provinces is owned predominantly by the respective provincial governments. Provincial governments grant rights to explore for and produce oil and natural gas pursuant to leases, licences and permits for varying periods and on conditions set forth in provincial legislation including requirements to perform specific work or make payments. Oil and natural gas located in such provinces can also be privately owned and rights to explore for and produce such oil and natural gas are granted by lease on such terms and conditions as may be negotiated.



Environmental Regulation



The oil and natural gas industry is currently subject to environmental regulation pursuant to provincial and federal legislation. Environmental legislation provides for restrictions and prohibitions on releases or emissions of various substances produced or utilized in association with certain oil and gas industry operations. In addition, legislation requires that well, pipeline and facility sites be abandoned and reclaimed to the satisfaction of provincial authorities. Compliance with such legislation can require significant expenditures.  A breach of such legislation may result in the imposition of material fines and penalties, the revocation of necessary licenses and authorizations and civil liability for pollution damage.

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In Alberta, environmental compliance is governed by the Environmental Protection and Enhancement Act (Alberta) and the Oil and Gas Conservation Act (Alberta), both of which impose certain environmental responsibilities on oil and natural gas operators and working interest holders in Alberta and impose penalties for violations. In Saskatchewan, environmental compliance is governed by the Environmental Management and Protection Act (Saskatchewan) and the Oil and Gas Conservation Act (Saskatchewan).



In 1994, the United Nations' Framework Convention on Climate Change came into force and three years later led to the Kyoto Protocol which will require participating countries, upon ratification, to reduce their emissions of carbon dioxide and other greenhouse gases.  Canada ratified the Kyoto Protocol in late 2002.  Although the Canadian federal government has not released details of any implementation plan, it has stated that it intends to limit the emission reduction targets for the industry and the cost of emission credits, which could result in increased capital expenditures and operating costs.



The Company believes that it is, and intends to continue to be, in material compliance with applicable environmental laws and regulations and is committed to meeting its responsibilities to protect the environment wherever it operates or holds working interests.  The Company anticipates that this compliance may result in increased expenditures of both a capital and expense nature as a result of increasingly stringent laws relating to the protection of the environment.  The Company believes that it is reasonably likely that the trend in environmental legislation and regulation will continue toward stricter standards.

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C.

Organizational Structure



Gentry currently has one wholly-owned active subsidiary, Gentry Resources (Saskatchewan) Ltd., and two wholly-owned inactive subsidiaries, Gentry Resources (West Africa) Inc. and Gentry Income Funds Inc., all of which were incorporated under the ABCA.  Gentry also owns a 16% interest in the outstanding common equity of Stratic Energy Corporation, a TSX Venture listed company which was continued under the Business Corporations Act (Yukon).  The following chart outlines the corporate structure of Gentry.



















At present, 100% of the Company's sales occur in the Canadian market.  As is standard in the oil and gas industry, the Company uses commercial oil and gas brokers, who market the petroleum and natural gas that the Company produces to various oil and gas suppliers.  The price of oil and gas is deregulated and is negotiated between the producers and suppliers based upon domestic and international economic and market factors (including supply and demand, oil quality, prices for competing oils, distance to market, and value of refined products).



D.

Property, Plant and Equipment



PRINCIPAL PRODUCING PROPERTIES



The following is a description of Gentry's principal producing oil and gas properties as of December 31, 2003.



Readers are directed to the definitions of
"company interest," "gross," "net" and other defined terms and disclosure regarding the Company's operations and resources under
"Presentation of Gentry's Oil and Natural Gas Reserves and Production Information" in this Annual Report.  In particular, unless otherwise indicated as
"gross" or "net," all estimates of oil and natural gas reserves and production are presented on a
"company interest" basis.

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Alberta



Bantry



The Bantry area is located approximately 9 kilometres north of Brooks in south eastern Alberta in Township 19, Range 14, West of the 4th Meridian.  Gentry owns a 50% interest in one well and a 38.67% interest in a second well.  Natural gas production for 2003 was approximately 108 Mcf/d.



Joffre



The Joffre area is located approximately 10 kilometres southeast of Red Deer in south central Alberta in Township 37, Range 26, West of the 4th Meridian.  Gentry owns interests varying between 10% to 40% in the area. Production from the area averaged 10 bbls/d and 185 Mcf/d in 2003.



Princess



The Princess lands are located approximately 30 kilometres east of Brooks, in southeast Alberta in Townships 18-20, Ranges 10 and 14, west of the Fourth Meridian.  Gentry owns interests ranging between 28% and 50%in the area. 2003 production averaged 202 bbls/d and 536 Mcf/d.



Red Rock



The Red Rock area is located approximately 50 kilometres south of Grande Prairie, in west central Alberta, in Township 63, Ranges 7 and 8 West of the Sixth Meridian.  Gentry owns a 3.35564% working interest in the Red Rock Chinook Unit No. 1 plus various working interests ranging from a 0.78125% working interest to a 25.0% working interest in non-unit lands in the Red Rock area.  The Red Rock Chinook Unit No. 1 and non-unit lands produced 8 bbls/d of crude oil and 90 Mcf/d of natural gas in 2003.



Red Willow



The Red Willow lands are located approximately 270 kilometres northeast of Stettler, in east central Alberta in Township 39, Range 16, west of the Fourth Meridian.  Gentry owns interests ranging between 23.56% and 100% the area.  2003 production averaged 1.56 MMcf/d.



Sedalia





The Sedalia lands are located approximately 25 kilometres west of Oyen, in southeast Alberta in Townships 28-30, Ranges 5 and 6, west of the Fourth Meridian.  Gentry owns interests ranging between 50% and 100% in the area.  Production in 2003 averaged 1.27 MMcf/d.

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Thornbury



The Thornbury area is located approximately 100 kilometres southwest of Fort McMurray in northeastern Alberta, in townships 80 and 81, Ranges 14 to 16, West of the fourth Meridian.  Gentry owns an 18.333% working interest in the area. Natural gas production for 2003 was approximately 237 Mcf/d.



West Provost Viking Gas Unit



The West Provost Viking Gas Unit is located approximately 20 kilometres southeast of Coronation in east central Alberta in Townships 35-37, Ranges 7-9, West of the 4th Meridian.  Gentry owns a 27.34% interest in the Unit. For 2003, production averaged 601 Mcf/d.



West Provost Non-Unit Lands



The West Provost Non-Unit Lands are located approximately 20 kilometres southeast of Coronation in east central Alberta, located at Townships 35-37, Ranges 7-9, West of the 4th Meridian.  Gentry owns interest varying between 18.275% to 39.990% in the area3. Production from the area was approximately 50 bbls/d in 2003.



Whitecourt



The Whitecourt lands are located west-central Alberta in Townships 59 to 61, Ranges 11, 12 and 14, west of the Fifth Meridian.  Gentry owns interests ranging between 20% and 50%.  Production in 2003 averaged 363 Mcf/d.



Saskatchewan



Baldwinton



The Baldwinton property is located approximately 70 kilometres southeast of Lloydminster, in Section 8, Township 44, Range 23, West of the 3rd Meridian.  Gentry holds a 30.5% working interest in the area. Production from this area was approximately 253 bbls/d of crude oil in 2003.



Benson



The Benson area is located approximately 160 kilometres southeast of Regina, in Township 6, Ranges 8 and 9, West of the Second Meridian.  Gentry has a 10.9153% working interest and a gross overriding royalty interest of 0.07% in the Benson Unit.Gentry also has royalty interests of 1.875% and 25% of 1/150 (5-15%) respectively in two wells just outside the Unit.  The wells in this Unit produce primarily from the Midale formation.  Production from this area in 2003 was approximately 82 bbls/d of crude oil.

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Dollard



The Dollard area is located approximately 300 kilometres west-southwest of Regina, in Township 7, Ranges 19 and 20, West of the Third Meridian.  Gentry has a 3.853% working interest in the Dollard Unit and a gross overriding royalty of approximately 1.5% in the East Dollard Voluntary Unit.  Production from these units averaged 87 bbls/d of crude oil in 2003.



Steelman



The Steelman area is located approximately 180 kilometres southeast of Regina in Townships 3, 4 and 5, Ranges 4, 5 and 6, West of the Second Meridian.  Gentry owns interests in three units in the Steelman area, being units 1A, 4 and 5.



In the Steelman Unit 1A, Gentry holds a 2.707% working interest in the Unit. Production from this unit in 2003 was approximately 15 bbls/d of crude oil and 10 Mcf/d of natural gas.



In the Steelman Unit 4, Gentry holds a 13.938% working interest in approximately the Unit.  Production from this unit was approximately 75 bbls/d of crude oil and 44 Mcf/d of natural gas in 2003.



In the Steelman Unit 5, Gentry holds a 19.927% working interest in the Unit. Production from this unit was 24 bbls/d of crude oil and 16 Mcf/d of natural gas in 2003.



Manitoba



Virden Roselea



The Virden Roselea area is located in southwestern Manitoba in Townships 9 and 10, Ranges 24, 25 and 26, West of the Prime Meridian.  Gentry owns a 10.629% working interest in the Virden Roselea Unit No. 1.  Production for the unit in 2003 was approximately 46 bbls/d of crude oil.

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SUMMARY OF PRODUCTION FROM PRINCIPAL PRODUCING PROPERTIES



During the year ended December 31, 2003, on a BOE basis, 65.0% of the Company's production was derived from Alberta, 32.4% from Saskatchewan and 2.6% from Manitoba.  The following table describes the Company's major properties and the averagedaily production from these properties during the year ended December 31, 2003.



[f20main002.jpg]





OIL AND NATURAL GAS RESERVES



In the Martin Report, Martin has evaluated all of the crude oil, NGLs and natural gas reserves associated with Gentry's properties effective as of December 31, 2003 in accordance with National Instrument 51-101 adopted by the Canadian securities regulatory authorities.



In preparing its report, Martin obtained basic information from Gentry, which included land data, well information, geological information, reservoir studies, estimates of on-stream dates, contract information, current hydrocarbon product prices, operating cost data, capital budget forecasts, financial data and future operating plans.  Other engineering, geological or economic data required to conduct the evaluation and upon which the Martin Report is based, was obtained from public records, other operators and from Martin's non-confidential files.  Information concerning the extent and character of ownership of Gentry's interests and the accuracy of all factual data supplied to Martin by third parties was accepted by Martin as represented.

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The following is a summary, as at December 31, 2003, of the crude oil, NGLs and natural gas reserves of Gentry and the net present value of the estimated future net revenue ascribed to such reserves as evaluated in the Martin Report, based on both forecast and constant price and cost assumptions. All future net revenues are stated prior to provision for interest, future site restoration and reclamation costs, income taxes, general and administrative expenses and indirect costs and after deduction of royalties and estimated future capital expenditures. It should not be assumed that the present worth of estimated future cash flows shown below is representative of the fair market value of the reserves. There is no assurance that such price and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of Gentry's  crude oil, NGLs and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein. Readers should review the definitions and information contained in
"Presentation of Gentry's Oil and Natural Gas Reserves and Production Information" in conjunction with the following tables and notes. Columns may not add due to rounding.



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Notes:

(1)

The Martin Report makes certain assumptions regarding future increases in the prices of oil and gas and takes into account inflation with respect to future operating and capital costs in the escalated price case.  Operating and capital costs were escalated by 2% per annum.  All oil prices have been adjusted from the reference price for quality and transportation and all gas prices have been adjusted for heating value.

(2)

Effective January 1, 1995, the ARTC program refunds a portion of eligible Crown royalties and varies from a maximum rate of refund of 75% of $2 million when the oil reference price is below $100 per cubic metre, to a minimum of 25% of $2 million when the oil price is above $210 per cubic metre.  The ARTC program was assumed to continue indefinitely.

(3)

The forecast price and cost case assumes the continuance of current laws and regulations, and any increase in selling prices also takes inflation into account.  The estimated future net revenue to be received from the production of the reserves was based on an inflation rate of 2.0% per year, an exchange rate of Cdn$1.00 = US$0.753 in 2004, Cdn$1.00 = US$0.751 in 2005 and Cdn$1.00 = US$0.748 thereafter and the following production price forecasts supplied by Martin:



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(4)

The constant price and cost case assumes the continuance of produce prices at December 31, 2003 and operating costs projected for 2004, and the continuance of current laws and regulations.  Product prices have not been escalated beyond this date nor have operating and capital costs been increased on an inflationary basis.  The future net revenue to be received from the production of the reserves was based on an exchange rate of Cdn$1.00 = US$0.753 and the following prices:



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(5)

The undiscounted total future net revenue by reserves categories as of December 31, 2003, using both constant and forecast prices and costs, is set forth below:



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(6)

The net present value of future net revenue by reserves category and production group as of December 31, 2003, using both constant and forecast prices and costs and discounted at 10% per year, is set forth below:



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(a)

Includes solution gas and other by-products.

(b)

Includes by-products but excludes solution gas from oil wells.



(7)

The volume of gross Proved plus Probable production estimated by Martin for 2004 in preparing the estimated net present values of future net revenue is as follows.

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(8)

The amount of development costs deducted in the estimated net present value of future net revenue is as follows:



Constant Prices and CostsForecast Prices and CostsProved ReservesProved ReservesProved Plus Probable ReservesYearUndiscountedDiscounted at 10% /yearUndiscountedDiscounted a 10%/yearUndiscountedDiscounted at 10%/year(in $ thousands)20042232233352005771771237320064094175652007004212008000Remaining009Total1,4031,1471,4111,1533,7032,981




(9)

As of December 31, 2003, the Company had no Proved plus Probable Reserves which were capable of production but which were not on production.



(10)

The extent and character of the Company's interests evaluated in the Martin Report and all factual data supplied by the Company to Martin were accepted by Martin as represented.  The crude oil and natural gas reserve calculations and any projections on which the Martin Report is based were determined with generally accepted petroleum engineering evaluation practices.



OIL AND NATURAL GAS WELLS AND UNPROVED PROPERTIES



The following table summarizes, as at December 31, 2003, Gentry's interests in producing wells and in non-producing wells which were not producing, but may be capable of production, along with Gentry's interests in Unproved properties.  Although many wells produce both oil and natural gas, a well is categorized as an oil well or a natural gas well based upon the proportion of oil or natural gas production.



Producing WellsNon-Producing WellsUnproved PropertiesOilNatural GasOilNatural Gas(thousand of acres)GrossNetGrossNetGrossNetGrossNetGrossNetAlberta589.511129.5106.23711.98948Saskatchewan120854.8001098.10083Manitoba606.40080.90000Total132670.711129.512715.23711.99751




Gentry expects its rights to explore and develop on approximately Nil net acres to expire prior to December 31, 2004.  Gentry has no material work commitments on such properties and, where Gentry determines appropriate, it can continue the leases by either making the necessary applications or performing the necessary work.

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EXPLORATION AND DEVELOPMENT ACTIVITIES



During 2003, Gentry participated in the drilling of 55 gross wells (27.7 net wells) with a 73% net well success rate.  The majority of Gentry's 2003 wells were drilled in Princess and Sedalia. The following table summarizes the number and type of wells that Gentry drilled or participated in the drilling of for the year ended December 31, 2003.



Number of Exploration WellsNumber of Development WellsTotal WellsCategory of WellGrossNetGrossNetGrossNetCrude oil wells30.972.5103.4Natural gas wells118.0105.22113.2Cased Wells42.541.083.5Dry and abandoned wells83.783.9167.6Total2615.12912.65527.7




Gentry currently intends to focus its development activities in the Western Canadian Sedimentary Basin.  Gentry's exploration and development activities are typically funded through debt, internally generated cash flow and issuances of Common Shares.





QUARTERLY PRODUCTION HISTORY



The following table sets forth Gentry's average daily production volumes, on a company interest basis, for each fiscal quarter in 2003 and for the entire year.



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QUARTERLY NETBACK HISTORY



The following tables set forth Gentry's average netbacks received for each fiscal quarter in 2003 and for the entire year (excluding any hedging gains or losses).  Netbacks are calculated on the basis of prices received before hedging on sales volumes, less related royalties and related production costs. For multiple product well types, production costs are entirely attributed to that well's principal product type.



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Note:

(1)

Production costs are costs incurred to operate and maintain wells and related equipment and facilities, including operating costs of support equipment used in oil and gas activities and other costs of operating and maintaining those wells and related equipment and facilities.  Examples of productions costs include items such as field staff labour costs, costs of materials, supplies and fuel consumed and supplies utilized in operating the wells and related equipment (such as power, chemicals and lease rentals), repairs and maintenance costs, property taxes,insurance costs, costs of work-overs, processing and treating fees, overhead fees, taxes (other than income and capital taxes) and other costs.

RECONCILIATION OF RESERVES



The following tables reconcile the Company's oil and natural gas reserves (on both a gross and net basis) from December 31, 2002 to December 31, 2003, using forecast prices and costs.



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RECONCILIATION OF CHANGES IN NET PRESENT VALUE OF FUTURE NET REVENUE



The following table sets forth a reconciliation of changes in the net present value of estimated future revenues associated with the Company's net Proved Reserves from December 31, 2002 to December 31, 2003 using constant prices and costs and discounted at 10% per year.



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Note:

(1)  The difference between forecast income taxes at beginning of period and forecast income taxes at end of period.

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HISTORICAL UNDEVELOPED RESERVES



The following table discloses the volumes of Undeveloped Reserves of the Company that were first attributed in 2003.



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Undeveloped reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable) to which they are assigned.  The Company anticipates that such expenditures will be incurred prior to 2005 for the above noted reserves.



ABANDONMENT AND RECLAMATION COSTS



The Company is liable for ongoing environmental obligations and for the ultimate abandonment and reclamation costs for its natural gas and petroleum properties (including surface leases, wells, facilities and pipelines) upon abandonment. The Company identifies obligations related to petroleum and natural gas properties by estimating the present value of expected future costs to reclaim and abandon these properties and the timing of the costs to be incurred in future periods.  These estimates are currently based on 99.2 net wells and no net facilities in respect of which the Company expects to incur such costs.  The Company anticipates the total amount of such costs to be approximately $2.4 million on an undiscounted basis and $1.3 million discounted at 10%.  Of this amount, the Company anticipates that approximately $233,000 will be incurred in the next three financial years.



Ongoing environmental obligations will generally be funded out of cash flow.



The estimates of total Proved Reserves associated with the Principal Producing Properties and the present worth of future net cash flows from such reserves contained in the Martin Report (based on forecast prices and costs on an undiscounted basis) include expenditures of approximately $1.6 million associated with the abandonment of current producing and future wells but do not include any provision for non-producing wells or facility abandonment and site restoration costs.



TAX HORIZON



The Company's wholly owned subsidiary Gentry Resources (Saskatchewan) Ltd. was required to pay income taxes in 2003.  It is anticipated that Gentry Resources (Saskatchewan) Ltd. will be liable for income taxes in 2004.  Based on a model of reinvesting cash flow at industry average efficiency rates, the Company anticipates it will be required to pay income taxes in 2004.

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ENVIRONMENTAL AND SAFETY MATTERS



The Company and its subsidiaries conduct their operations with a commitment to the health of their employees and the public, as well as the long-term enhancement and protection of the environment.  The Company intends to perform all work safely and to comply with all corporate and regulatory requirements. The Company intends to continue to operate in a manner consistent with and, where applicable, build on its existing comprehensive safety, health and environment program, which outlines responsibilities and corporate and regulatory standards, as well as provides tools to assist employees and contractors to work safely and to meet or exceed regulatory requirements.





INSURANCE



The Company carries suitable insurance policies to provide protection for its working interest in its natural gas and petroleum properties. Insurance policies cover property damage and general liability. The ongoing level, type and maintenance of insurance will be determined by the Company based upon the availability and cost of such insurance and the Company's perception of the risk of loss.  See
"Item 3.  Key Information -- D.  Risk Factors -- Environmental Concerns".



FUTURE COMMITMENTS



The Company does not currently use any type of financial instruments or fixed price physical sales contracts to manage the risk related to fluctuating commodity prices.  Absent such hedging activities, all of the Company's crude oil and NGLs and  natural gas production is sold into the open market at prevailing spot prices, which exposes the Company to the risks associated with commodity price fluctuations and foreign exchange rates.  See
 "Item 3.  Key Information  -- D.  Risk Factors -- Industry Risks".



The Company currently does not have any firm commitments for gathering, processing and transmission services that require the Company to deliver certain minimum quantities of crude oil and NGLs and natural gas to third parties or pay the corresponding tariffs. The Company utilizes interruptible processing and transportation arrangements either directly or through the oil and gas purchaser.



As part of the Company's flow-through share issue completed on May 18, 2004 (see
 "-- A.  History and Development of the Company -- Recent Developments"), the Company must expend $2.5 million on exploration expenditures prior to December 31, 2005.

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ITEM 5

OPERATING AND FINANCIAL REVIEW AND PROSPECTS







This discussion and analysis should be read in conjunction with the consolidated audited financial statements of the Company for the fiscal years ended December 31, 2003, 2002 and 2001, and related notes thereto included herewith and with the selected data set forth in Item 3 above.  The consolidated financial statements for the Company have been prepared in accordance with Canadian generally accepted accounting principles.  Except as described in Note 13 to the audited consolidated financial statements for the years ended December 31, 2003 and 2002, and Note 12 to the audited consolidated financial statements for the years ended December 31, 2002 and 2001, there are no material differences, for the purposes of these financial statements, between generally accepted accounting principles in Canada and the United States.



Where amounts are expressed on a barrel of oil equivalent (boe) basis, natural gas has been converted at a ratio of six thousand cubic feet of natural gas to one boe. This ratio is based upon an energy equivalent conversion method primarily applicable at the burner tip and does not represent economic equivalence at the wellhead or point of sale. Boe figures may be misleading, particularly if used in isolation.



Included in the discussion and analysis are references to financial measures commonly used in the oil and gas industry such as cash flow and cash flow per share. These measures have no standardized meaning, are not defined by Canadian generally accepted accounting principles, and accordingly are referred to as non-GAAP measures.  Cash flow and cash flow per share are used by the Company to assess operating results between years and between peer companies.  Gentry's reported amounts may not be comparable to similarly titled measures reported by other companies.  Cash flow should not be considered an alternative to, or more meaningful than, cash provided by operating, investing, and financing activities or net income as determined by Canadian GAAP as an indicator of the Company's performance or liquidity.



Effective January 1, 2003, the Company has adopted retroactively, with restatement of prior periods, the Canadian Institute of Chartered Accountants'new standard on Asset Retirement Obligations.  As a result, certain comparative figures have been restated in compliance with the new policy.  A summary of the effects of this new policy is contained in the
"New Accounting Standards for 2003 and 2004"section of Item 5B.



Certain disclosure in this Item 5 contains forward-looking statements that involve risks and uncertainties.  Such information, although considered reasonable by Gentry at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated in the statements made.  For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Such risks and uncertainties include, but are not limited to, risks associated with operations, loss of market, regulatory matters, commodity price risk, environmental risks, industry competition, and ability to access sufficient capital from internal and external sources.  See

"Forward-Looking Statements"at the beginning of this Annual Report.

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A.

Operating Results



Year Ended December 31, 2003 Compared to Year Ended December 31, 2002



Production and Pricing

With Gentry's shift to full-cycle exploration, the majority of its activities and a growing amount of its oil and gas production are from Alberta.  Previously, most of the Company's oil production had been derived from Saskatchewan and the majority of its gas production was generated in Alberta. Whereas the Saskatchewan crude varies from medium to light gravity in the southeast of the province to a heavier blend in the central area, the new Alberta crude is a medium to heavy gravity oil. Gentry's growth in gas production is coming largely from the southern portions of Alberta.



Oil and liquidsRevenueVolumePrice($thousands)(bbls/d)($/bbl)200311,860.489736.22200212,139.899135.5520019,984.193729.19




RevenueVolumePriceNatural gas($thousands)(mcf/d)($/mcf)200312,819.45,330.06.5920027,215.84,7414.1720016,236.33,2755.22




RevenueVolumePriceBoe($thousands)(boe/d)($/boe)200324,679.81,78537.87200219,355.61,78129.77200116,220.41,48329.97




Gross production revenue increased 28%, or $5.32 million, to $24.68 million from $19.36 million in 2002.  This substantial increase was due to higher commodity prices, primarily for natural gas, and a 12% increase in natural gas production, offset by a 9% decrease in the production of oil and liquids.

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Gentry's average natural gas price increased to $6.59/ mcf, up 58% from the 2002 average of $4.17/mcf.  This price rise added $4.71 million to 2003 revenues. Prices for oil and liquids showed a more moderate increase, up 8% to $36.22/bbl from $33.55/bbl in 2002, which had the effect of increasing revenues by $874 thousand.



Volume wise, the increased gas sales from 4,741 mcf/d to 5,330 mcf/d contributed $896 thousand to gross revenue.  This could not offset the $1.16 million lost due to reduced oil and liquids sales which fell from 991 bbls/d to $897 bbls/d.



In the above table, 2001 revenue includes a hedging gain.  The Company hedged 300 bbls/d of oil at a price of $43.69/bbl resulting in a gain of $391 thousand.



Gentry did not enter into any forward contracts in 2002 or 2003 and none are in place for 2004.



Royalties



Gentry's royalties, net of Alberta Royalty Tax Credit (ARTC), increased 20% to $5.07 million from $4.23 million in 2002.  Expressed as a percentage of production, oil royalties were 22.6% in 2003 versus 22.2% in 2002.  Gas royalties were 18.6% in 2003 compared with 21.2% in 2002.  On a boe basis, the percentages were 20.5% in 2003 and 21.8% in 2002.  The shift in production weighting from Saskatchewan to Alberta, which generally has a more favorable royalty regime for the Company's assets, is the primary reason for the overall decrease in royalties as a percentage of revenues.



($thousands)200320022001Crown royalties3054.72,225.31,575.3Freehold royalties1821.71,634.3828.3Overriding royalties502.2528.9464.3Total royalties5,378.64,388.52,867.9ARTC(311.5)(163.3)(116.2)Net royalties5,067.14,225.22,751.7As a percentage of production       revenue (prior to hedging)20.521.817.4




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Production Expenses



Gross production expenses increased 28% to $5.73 million from $4.46 million in 2002. The majority of the increase was attributable to a full, active year of production at Princess.  On a barrel of oil equivalent basis, costs increased 28% to $8.80/boe from $6.86/boe in 2002.  Production problems at Baldwinton, as well as interruptions associated with bringing on new pool production at Princess, were the two leading factors to this increase.  As the proportion of Baldwinton's contribution falls and as the Company's history, experience and production at Princess grows, production expenses should fall closer to the levels realized in 2002.



General and Administrative Expenses



Gentry's general and administrative expenses increased 23% to $2.53 million in 2003 from $2.06 million in 2002.  Just over half of this increase was due to additional staff and compensation requirements as the Company continued to expand its activities.  On a barrel of oil equivalent basis, general and administrative expenses increased 22% to $3.88/boe from $3.17/boe in 2002.  Going forward, moderate increases to gross administrative costs are expected, however, as production increases, it is anticipated that per unit costs will decline.



Included in general and administrative expenses was $113 thousand in stock-based compensation that was expensed as the Company prospectively adopted new standards with respect to accounting for stock option grants.  This figure represents the value, using the Black-Scholes option-pricing method, of stock options granted in 2003.



Interest Expense



Gentry's interest expense increased to $484 thousand in 2003 from $407 thousand in 2002.  This increase was due to greater use of the Company's credit facilities to fund its capital exploration programs.  During the first half of the year, Gentry paid interest on its outstanding loan balance at a rate of prime plus 3/4%.  For the latter half, the rate was reduced to prime in conjunction with the increase in line of credit from $12 million to $14 million.



Depletion and Depreciation



Depletion and depreciation charges for 2003 were $7.08 million compared with $4.27 million in the previous year. This trend is expected to continue as the Company increases its asset base through its capital programs. On a barrel of oil equivalent basis, costs increased to $10.86/boe versus $6.57/boe in 2002.



The Company's depletion rate grew to 14.54% in 2003 from 13.16% in 2002.  The depletion calculation was based on year end proved reserves estimates at constant prices and costs.  These reserves were 8% lower than the 2002 estimates, primarily as a result of changes to reserves definitions under National Instrument 51-101 and this accounted for the increased depletion rate.

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Income Taxes



Gentry was liable for $941 thousand in current taxes in 2003 which was a negligible decrease from $951 thousand in 2002. On a unit of production basis, current taxes were also similar, at $1.44/boe versus $1.46/boe in 2002. Future taxes declined substantially to $87 thousand in 2003 from $648 thousand in 2002.



This decrease was largely due to reductions in future federal and provincial income tax rates payable by the Company. On a unit of production basis, future taxes for 2003 equated to $0.13/boe versus $1.00/boe in 2002.



As a result of a flow-through financing in 2002, Gentry agreed to renounce $1.65 million of Canadian Exploration Expenditures. $106 thousand was incurred prior to year-end 2002 and the remaining $1.54 million was incurred in 2003.



At the end of 2003, Gentry had approximately $25.58 million of accumulated tax pools that are available for deduction against income in future years.



MaximumAvailableAnnual($ thousands)BalanceDeductionCanadian oil & gas property expense9,476.810%Canadian development expense3,259.530%Canadian exploration expense4,670.6100%Foreign exploration & development
expense436.410%Undepreciated capital cost7,149.220-100%Cumulative eligible capital68.87%Financing costs521.820%Total25,583.1




Cash Flow and Net Income



In 2003, cash flow from operations reached a record high of $10.39 million, an increase of 40% from $7.42 million in 2002.  This amounts to $0.42 per share ($0.40 diluted) versus $0.34 per share ($0.32 diluted) in 2002.  This increase was largely achieved from higher net production revenues as a result of increases in commodity prices.



Net income increased 25% to $3.04 million from $2.44 million in 2002.  On a per share basis, net income was $0.12 ($0.12 diluted) in 2003 compared to $0.11 ($0.10 diluted) in 2002.  In assessing the change in net income, the positive impact of the extra $2.97 million in cash flow, coupled with a comparative savings of $561 thousand in future taxes, were greatly reduced by the additional $2.81 million in depletion and depreciation charges.

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Netbacks



($/boe)200320022001Selling price37.8729.7729.97Royalties (net of ARTC)(7.78)(6.50)(5.08)Production expenses(8.80)(6.86)(8.16)Operating netbacks21.2916.4116.73Administration(3.88)3.17(3.66)Interest(0.74)(0.63)(0.68)Current taxes(1.44)(1.46)(1.08)Other income0.440.260.27Non-cash compensation0.27Cash flow15.9411.4111.58Depletion &    depreciation(10.86)(6.57)(5.55)Future taxes(0.13)(1.00)(1.12)Other items(0.01)(0.09)(1.69)Non-cash compensation(0.27)Net income4.673.753.22




Year Ended December 31, 2002 Compared to Year Ended December 31, 2001



Revenues



Gross production revenue increased $3.14 million, or 19% to $19.36 million in 2002 from $16.22 million in 2001.  The 6% rise in oil and liquids production from 937 bbls/d to 991 bbls/d contributed $0.58 million to this increase while gas production, which increased 45% from 3,275 mcf/d to 4,741 mcf/d, contributed $2.80 million to the revenue growth.



Changes in commodity pricing had a mixed effect on revenues.  Crude oil and liquids averaged $33.44/bbl versus $29.19/bbl in 2001, which had the effect of increasing revenues by $1.58 million.  Natural gas, on the other hand, sold for an average price of $4.17/mcf in 2002 compared with $5.22/mcf a year ago.  This lowered revenues by $1.82 million.



Included in the 2001 figures is Gentry's hedging gain.  The Company hedged 300 bbls/d of oil at a price of $43.69/bbl, resulting in a gain of $391 thousand.  Gentry did not enter into any forward contracts in 2002 and has not done so for 2003.

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Interest and Other Income



Interest and other income was $168,906 in 2002 compared to $147,980 in 2001.  The primary reason for the increase was the increased processing fees received from the facilities at Red Willow.



General and Administrative Expenses



Gentry's general and administrative expenses increased 4% to $2.06 million in 2002 from $1.98 million in 2001.  This increase was a result of additional staffing requirements.  On a barrel of oil equivalent basis, general and administrative expenses decreased 13% to $3.17/boe from $3.66/boe in 2001.  While the Company expects moderate increases to gross administrative costs, per unit costs will decrease as production increases.



Production Expenses



In spite of the Company's increased production volumes, gross production expenses remained flat - $4.46 million in 2002 versus $4.41 million in 2001.  On a unit basis, costs decreased to $6.86/boe from $8.16/boe a year earlier.  The primary reason for this decrease was a fall in the operating costs at Baldwinton and Red Willow, both of which saw a more reasonable level of expenses after experiencing high costs in 2001.



Royalties



Gentry's royalties, net of Alberta Royalty Tax Credit (ARTC), increased 54% to $4.23 million from $2.75 million in 2001.  Expressed as a percentage of production, oil royalties were 22.2% in 2002 versus 18.6% (before hedging) a year ago. Gas royalties were 21.2% in 2002 versus 15.5% in 2001. On a boe basis, the percentages were 21.8% in 2002 and 17.4% in 2001. Reasons for the increase are higher freehold royalties and the expiration of some crown royalty holiday volumes.



($000s)200220012000Crown Royalties2,225.31,575.31,684.5Freehold royalties1,634.3828.3918.0Overriding royalties528.9464.3576.9Total royalties4,388.52,867.93,179.4ARTC(163.3)(116.2)(106.9)Net royalties4,225.22,751.73,072.5As a  percentage of production revenue (prior to hedging)21.817.420.8




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Income Taxes



Gentry was liable for $951 thousand in current taxes in 2002 versus $584 thousand in 2001, while future taxes were relatively unchanged at $618 thousand compared with $605 thousand in the previous period.  The biggest reason for the increase in current taxes was due to the excess of tax deductions over accounting charges on capital assets being lower in 2002 than 2001.  On a unit of production basis, current taxes were $1.46/boe in 2002 and $1.08/boe in 2001.  Future taxes were $0.95/boe in the current year versus $1.12/boe in 2001.  As a result of a flow-through financing in the last month of 2002, Gentry agreed to renounce $1.65 million of Canadian Exploration Expenditures.  $106 thousand was incurred prior to the year-end and the remaining $1.54 million will be incurred in 2003.



Interest Expense



Gentry's interest expense increased to $407 thousand in 2002 from $370 thousand in 2001.  This increase is attributable to the greater utilization of the Company's credit facilities to fund its capital exploration programs.  In 2002, the Company paid an effective interest rate of 4.46% on an average outstanding loan balance of $9.12 million.  This compares with 5.67% on an average balance of $6.54 million in 2001.



Depletion, Depreciation and Site Restoration



Depletion and depreciation charges for 2002 totaled $4.27 million compared with $3.01 million the previous year.  This trend is expected to continue as the Company increases its asset base through its capital programs.  On a barrel of oil equivalent basis, costs increased to $6.57/boe compared with $5.55/boe the previous year as the depletion rate grew to 13.16% from 10.63% in 2001.  Gentry's site restoration and reclamation provision for 2002 amounted to $272 thousand compared with $228 thousand the previous year.



Net Income



Net income increased 39% to $2.44 million in 2002 from $1.75 million in 2001.  The per share numbers were $0.11 ($0.10 diluted) in 2002 versus $0.08 ($0.08 diluted) in 2001.  The primary factors in this increase relate to higher net production revenues and Gentry's equity investments.



Impact of Equity Investments on Results of Operations



During 2002, Gentry had a significant investment in Stratic. Gentry began the year owning 37% of Stratic's issued and outstanding shares, but ended the year at 19%, as Stratic issued additional shares pursuant to a financing in December.



As Gentry's equity income (loss) from its investments is recorded in Gentry's consolidated income statement on a one-line basis, the figures only affect Gentry's consolidated net income result and do not affect normal operating revenues, expenses, or cash flow from operations.

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Marketing and Risk Management Arrangements



In 2003, all of Gentry's sales occurred in the Canadian market.  The price of oil and gas is deregulated and is negotiated between the producers and suppliers based upon domestic and international economic and market factors (including supply and demand, oil quality, prices for competing oils, distance to market, and value of refined products).  Gentry utilizes the services and expertise of various oil and gas marketers to sell its production.  No production is contracted out on terms greater than one year.  Gentry may hedge a portion of its crude oil and/or natural gas production to manage its exposure to fluctuations in the price of the product, although it did not do so in 2003.  The Company does not currently have a hedging program in place for 2004.



Gentry's operations in Canada render it subject to foreign currency fluctuations, which may materially affect its financial position and results.  Oil is generally sold at prices stated in U.S. dollars, while costs incurred are paid in the currency of the country in which the activities are undertaken.  At the present time, the Canadian dollar trades at a discount to the U.S. dollar, but any change in the exchange ratio could affect profitability.  Gentry does not expect to engage in currency hedging to offset any risk of currency fluctuations.





B.

Liquidity and Capital Resources



Year Ended December 31, 2003 Compared to Year Ended December 31, 2002



Funds Flow



In 2003, cash flow from operations rose 40% to $10.39 million from $7.42 million the previous year.  This amounts to $0.42 per share ($0.40 diluted) in 2003 versus $0.34 per share ($0.32 diluted) during 2002.  Greater net production revenues enabled the Company to achieve this increase.



Funds flow from financing activities was $10.16 million versus $1.40 million in 2002.  The largest component of this change was the increase in bank debt of approximately $4.97 million (versus a decrease of $579 thousand in 2002).



Funds outflow from investing activities was $19.85 million in 2003 compared to $7.63 million in the previous year.  Petroleum and natural gas expenditures in 2003 amounted to $21.65 million compared to $8.62 million in 2002.



Liquidity and Capital Resources



On October 30, 2003, Gentry closed a bought deal financing with a syndicate of underwriters. Three million shares were issued at a price of $1.75 per share for gross proceeds of $5.25 million. The proceeds were initially applied to Gentry's bank indebtedness and then drawn on to fund capital commitments as required.

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Gentry began the year with 23,783,263 common shares issued and outstanding. During 2003, 3,000,000 shares were issued pursuant to the aforementioned financing; 350,000 and 585, 000 shares were issued on the exercised of previously issued share purchase warrants and incentive stock options ($1.75 and $0.52 per share respectively); 76,045 shares were issued pursuant to the Company's employee share purchase plan ($1.64 per share); and 441,800 shares were repurchased and cancelled pursuant to the Company's Normal Course Issuer Bid ($1.54 per share). As a result of these changes, Gentry ended the year with 27,352,508 common shares issued and outstanding.



Gentry's year end net debt (current liabilities in excess of current assets) was $13.44 million compared with $7.22 million at the end of 2002.  Gentry's credit limit stands at $14 million and is currently being reviewed based upon the Company's January 1, 2004 Reserves Report.



On May 18, 2004 Gentry issued 5,000,000 common shares at a price of $2.00 per share and 1,000,000 flow-through shares at a price of $2.50 per share for gross proceeds of $12,500,000.



Current Indebtedness



The Company currently has a $14,000,000 revolving operating facility with the Toronto Dominion Bank.  The facility was increased to that level as of June 24, 2003, from its previous level of $12,000,000 where it had been since November 2001.  The outstanding balance is due on demand and is secured by a general assignment of book debts, a $20,000,000 fixed and floating demand debenture against all assets and undertakings including fixed charges on certain property and equipment, a general security agreement covering all present and after acquired property, and a hypothecation and assignment of certain specific properties.  Interest on loan advances under the facility is payable monthly at the lender's prime rate.  The facility is subject to annual review and is subject to the following terms:



- The Company is required to maintain a current ratio of not less than one to one.  For the Bank's purposes, the undrawn portion of the facility may be added to cash.  In other words, the Bank allows Gentry to calculate its current ratio by adding the difference between the maximum revolving facility (in this case $14,000,000) and the amount actually outstanding and owing under the facility, to its cash position thereby effectively increasing its current ratio for the bank's reporting purposes.
- The Company may not incur any Term Debt in excess of $200,000 outstanding at any time.
- The Company may not dispose of its oil and gas assets with a value in excess of $1,000,000 per annum without the prior written consent of the Bank.

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Capital Expenditures



Net capital expenditures increased 151% in 2003 to $21.65 million from $8.62 million in 2002. The increase was due to a record level of activity for the Company as it continued to increase drilling in all of its core exploration areas; pursue an aggressive land acquisition program to facilitate further exploration activities; and to acquire and build additional infrastructure to bring new volumes on stream.



($thousands)200320022001Exploration and development9,723.85,113.14,101.4Facilities and equipment4,208.41,298.41,429.7Acquisitions,
net of dispositions2,503.6n/a2,131.9Land and seismic4,160.41,355.61,553.5Capitalized expenses848.0796.3756.0Other209.357.5119.7Total21,653.58,620.910,092.2




The Company participated in 55 gross wells (27.7 net) in 2003 for a success rate of 71% (73% net). This compares to 35 gross wells (12.6 net) and success rate of 89% (76% net) in 2002.



Contractual Obligations



In the normal course of business, Gentry has entered into the following contractual obligation and commitment:



Payments due in period($ thousands)20042005 to 2008TotalOffice lease174680854




Year Ended December 31, 2002 Compared to Year Ended December 31, 2001



Funds Flow



In 2002, cash flow from operations rose 18% to $7.42 million from $6.27 million the previous year.  This amounts to $0.34 per share ($0.32 diluted) in 2002 versus $0.30 per share ($0.29 diluted) during 2001.  Greater net production revenues enabled the Company to achieve this increase.



Funds flow from financing activities was $1,395,771 versus $5,493,080 in 2001.  The largest component of this change was the decrease in bank debt of approximately $579 thousand (versus an increase of $3.55 million in 2001).

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Funds flow from investing activities was $(7,716,287) in 2002 compared to $(10,424,220) in the previous year.  Petroleum and natural gas expenditures in 2002 amounted to $8,620,870 compared to $7,960,299 in 2001. In 2001, the Company also spent $1.73 million on the acquisition of Sloane and a further $1.25 million as an investment in Stratic.



Liquidity and Capital Resources



After the financing in December, which saw 1,000,000 common shares issued at $1.40 per share (with warrants to acquire 500,000 shares at $1.75 per share) and 1,000,000 flow-through shares issued at $1.65 per share, Gentry ended the year with 23,783,263 shares outstanding.  Other changes to share capital during the year included the issuance of 207,500 shares pursuant to the exercise of stock options ($0.51 per share) and the repurchase of 741,580 shares ($1.23 per share) pursuant to the Company's normal course issuer bid.



Gentry's net debt (bank debt less working capital) decreased to $7.22 million at the end of the year from $7.82 million at the start of the year.  Although capital expenditures were greater than cash flow, the year-end financing was responsible for lowering the debt.  Gentry's credit limit currently stands at $12 million and is reviewed annually.



Capital Expenditures



Net capital expenditures decreased 15% to $8.62 million from the $10.09 million incurred in the prior year.  The 2001 expenditures included $2.49 million associated with the acquisition of Sloane whereas the 2002 expenditures were focused more on exploration and development at Princess and Sedalia.



($thousands)200220012000Exploration and development6,411.55,531.12,279.2Acquisitions,
net of dispositions--2,131.9(59.6)Land and seismic1,355.61,553.5402.3Capitalized expenses796.3756.0601.5Other57.5119.795.9Total8,620.910,092.23,319.3




Critical Accounting Estimates



Gentry is required to make certain assumptions and estimates in the application of generally accepted accounting principles that may have a significant impact on the financial results of the Company. The following is a discussion of the estimates that are critical to Gentry's consolidated financial statements.

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Oil and Natural Gas Reserves and Full Cost Accounting



Gentry follows the full cost method of accounting for its oil and gas properties and equipment as prescribed by the Canadian Institute of Chartered Accountants (CICA).  Accordingly, all costs associated with the acquisition, development and exploration of oil and natural gas reserves are capitalized and then depleted using the unit-of-production method based on estimated proved reserves. A ceiling test keeps capitalized costs, less accumulated depletion and depreciation, future income taxes, and asset retirement obligations, from exceeding an amount equal to the estimated undiscounted value of future net revenues from proved reserves, less estimated future general and administrative expenses, asset retirement obligations, financing costs and income taxes.



Reserve estimates can have a significant impact on net income and the carrying value of property and equipment as they are the key component in the calculation of both depletion and depreciation and the ceiling test. Revisions to reserve estimates could result in a higher or lower depletion and depreciation expense being charged to net income while downward revisions to reserve estimates could result in a write down of property and equipment based on the ceiling test.



100% of Gentry's reserves are evaluated by the independent engineering firm of Martin & Brussett Associates. This evaluation requires significant estimates to be made on various engineering data as well as future production rates, capital expenditures, and commodity prices, all of which are subject to a number of uncertainties and various interpretations. The Company expects that over time its estimates of reserves will be revised, either upwards or downwards, based on future drilling, testing, production rates and commodity forecasts.



Asset Retirement Obligations



Gentry estimates the fair value of each asset retirement obligation. The obligation is based on current regulations, costs, technologies, and industry standards and is calculated using estimates for the timing of abandonment, inflation, and a credit-adjusted risk-free interest rate. The discounted obligation is initially capitalized as part of the carrying amount of the property and equipment and a corresponding liability is recognized. The increase in property and equipment is depleted and depreciated on the same basis as the remainder of the property and equipment. The liability is accreted against income, until it is settled or the property is sold, and is included as a component of depletion and depreciation expense.



Retirement obligations can have a material impact on both the consolidated balance sheets and consolidated statements of income of the Company. Revisions to any or all of the aforementioned factors and estimates used in calculating the obligation may result in a change to the carrying value of property and equipment and the related liability, as well as the depletion and depreciation expense charged to net income. The Company expects that over time its estimate of its asset retirement obligations will be revised, either upwards or downwards, based on future regulations, costs technologies, industry standards, timing of abandonments, and interest and inflation rates.

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Stock-based Compensation



Gentry follows the fair value method of accounting for its stock-based compensation arrangements relating to stock options grants. The Company recognizes a compensation expense based on the fair value of the options on the date of grant using the Black-Scholes option-pricing method and amortizes the expense over the vesting period of the options. The Black-Scholes method requires estimates for the volatility of the Company's stock, a risk-free interest rate, an expected dividend rate, and the expected life of the options. Changes in these estimates will change the fair value of the option and affect the compensation expense recorded in the consolidated financial statements.



Other Accounting Estimates



Gentry follows the accrual method of accounting which requires the Company to incorporate certain estimates in its financial and operating results. This includes estimates of revenues, royalties, production expenses and capital items for specific reporting periods for which actual results have not yet been received.



Gentry ensures that the personnel with the most knowledge of the relevant activities are responsible for the estimates which are then reviewed for reasonableness. Past estimates are also compared to actual results in order to make more informed decisions when accruing future amounts.



New Accounting Standards for 2003 and 2004



During the past year, a number of changes to financial reporting requirements have been introduced. The following outlines the most notable changes and those which have the greatest impact on Gentry.



Full Cost Accounting



Effective for fiscal years beginning on or after January 1, 2004, the CICA issued Accounting Guideline 16
 -"Oil and Gas Accounting -- Full Cost"which changes the calculation of the ceiling test. The new standard requires that impairment be recognized if the carrying value of a long-life asset can not be recovered from its undiscounted future cash flows. An impairment, if required, is then determined as the difference between the carrying value and the fair value of the asset, such fair value to be based on the present value of the expected future discounted cash flows. Gentry performed this ceiling test calculation as at December 31, 2003 and there was no impact on the Company under the new guideline.



Asset Retirement Obligations



The CICA has introduced handbook section 3110"Asset Retirement Obligations"which is effective January 1, 2004, although early adoption is encouraged. Under this section, the

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Company is required to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is first recorded, it is added at fair value to property and equipment. It is then amortized against income as a component of depletion and depreciation expense using the unit-of production method. The Company elected to adopt this policy effective January 1, 2003, with restatement of prior periods, and a summary of the effects of this new policy is contained in Note 3 of the Consolidated Financial Statements.



Stock-based Compensation



On October 1, 2003, and with effect from January 1, 2003, the Company prospectively adopted the CICA's new standard with respect to accounting for stock-based compensation arrangements relating to stock options granted to employees, officers and directors. Under the transitional provisions of the standard, stock options granted to employees, officers and directors after the effective date of January 1, 2003 are accounted for using the fair value method. As a result of this change, general and administrative expenses have increased by $113 thousand, property and equipment increased by $20 thousand and contributed surplus increased by $132 thousand.



A summary of the assumptions used in calculating the stock-based compensation expense are contained in Note 9(d) of the Consolidated Financial Statements.



Hedging Relationships



The CICA issued Accounting Guideline 13"Hedging Relationships", which is effective for the Company's fiscal year beginning January 1, 2004. The new standard requires the identification, designation, documentation and measurement of hedging relationships in order to apply hedge accounting. As Gentry had no hedges in place in 2003 and none for 2004, this policy currently has no effect on the Company.



Business Risks and Uncertainties



Gentry, like all companies in the oil and gas industry, operates in an environment subject to inherent risks. Many such uncertainties are beyond the ability of a company to control --particularly those associated with exploring for, and developing, economic quantities of hydrocarbons; volatile commodity prices; issues related to global supply and demand; governmental regulations; and environmental matters. The Company's business is affected by these risks to the same degree as any other participant in the upstream Canadian oil and gas industry.



Gentry has implemented risk protection through such means as maintaining a broad base of interests in core areas of the Western Canadian Sedimentary Basin that have long-term production and reserves. In addition, through its investment in Stratic, the Company participates in selected international exploration ventures of high potential that nonetheless add certain political and technical business risks. Such risks are mitigated by operating in politically and

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economically stable countries, and by aligning with joint venture companies that have significant international experience.

C.

Research and Development, Patents and Licenses



As the Company is an oil and gas exploration and production company, the information required by this section is inapplicable.



D.

Trend Information



During the first quarter of 2004, both crude oil and natural gas were in an upward trend in the commodity price cycle.  For crude oil, this upward pricing trend began in late 2002 with production disruptions in Venezuela, followed by the addition of a
 
 "war premium"from concerns over Iraqi production curtailments.  Tensions in the Middle East are continuing to put pressure on the market fundamentals of supply, demand and inventories.  While there appears to still be an abundant supply of oil in the world, it remains highly concentrated and therefore susceptible to the influence of organizations such as OPEC.  Rejuvenation and development of Iraqi reserves will take enormous capital, not to mention the capital required to increase non-OPEC production.  This in turn has implicit assumptions for potential returns on capital and hence, oil prices.  While crude prices will continue to cycle through pricing highs and lows in response to world events, and OPEC's response to those events, Company management believes that the basic market fundamentals remain strong.



North American gas markets are not tied to the geopolitical framework of OPEC and its production quotas and pricing policies.  Rather, market fundamentals in North America drive prices.  Over the past winter, prices remained strong due to continuing supply concerns in North America.  With a large amount of storage to be refilled this summer and continuing demand from the United States, Company management expects to see prices remain strong.  These positive market fundamentals and increased social and environmental awareness have led Gentry to focus its capital programs weighted toward a gas-driven strategy.



E.

Off-Balance Sheet Arrangements



The Company has no off-balance sheet arrangements required to be disclosed in this Annual Report on Form 20-F.



F.

Tabular Disclosure of Contractual Obligations



The required information is contained above under
 
"-- B.  Liquidity and Capital Resources -- Contractual Obligations."



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ITEM 6

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

















A.        
Directors and Senior Management



The following table sets forth the names and addresses of Directors and Officers of the Company, their positions and offices with the Company and the date of commencement of their terms.



Name and AddressPositions and Offices with the CompanyTerm in OfficeHugh G. Ross
Calgary, AlbertaPresident, Chief Executive Officer and DirectorPresident (Dec. 90 -- present); CEO (May 94 -- present); Director (June 88 -- present).Ketan Panchmatia
Calgary, AlbertaChief Financial Officer and Secretary/TreasurerChief Financial Officer (Apr. 96 -- present); Secretary/Treasurer (Dec. 90 -- present)R. Gordon McKay
Calgary, AlbertaVice-President, Exploration and Operations and Chief Operating OfficerVice President (June 96 -- present);
Chief Operating Officer (May 01 -- present)Michael Halvorson
Edmonton, AlbertaDirectorAug. 94 -- presentA. Bruce Macdonald
Calgary, AlbertaDirectorNov. 95 -- presentGeorge T. Hawes
Plandome, New YorkDirectorDec. 99 -- presentWalter O'Donoghue
Calgary, AlbertaDirectorMay 98 -- present




There are no arrangements or understandings between any directors or officers and any other person pursuant to which the director or officer was selected as a director or officer.



Management



Hugh G. Ross



Mr. Ross has served as President of the Company since December 1990, Chief Executive Officer of the Company since May 1994, and a Director of the Company since June 1988.  Mr. Ross earned a Bachelor of Arts degree in Political Science in 1980 from the University of Calgary, and shortly after graduating, joined Gentry's predecessor company.  Mr. Ross has held various positions within the Company, from Corporate Secretary and Junior Landman to Land Manager and Vice President.  Additionally, he has served as Chief Executive Officer of Sloane Petroleums Inc. (formerly known as Northwind Ventures Ltd.) since 1994, President since 1990, and a Director since 1987 all through to its amalgamation with Gentry in March 2001. He has served as President of Winslow Resources Inc. since 1990 and a Director of that corporation since 1986, and as President, Chief Executive Officer, and a Director of Stratic Energy Corporation since April 1999.

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Ketan Panchmatia



Mr. Panchmatia has served as Chief Financial Officer of the Company since April 1996.  After obtaining his Bachelor of Management degree from the University of Lethbridge in 1988, Mr. Panchmatia joined the national accounting firm of Deloitte & Touche, Chartered Accountants.  Mr. Panchmatia started with Gentry in March 1990 as Controller, and in December 1990 assumed the role of Secretary and Treasurer of the Company.  He earned his CMA (Certified Management Accountant) designation in October 1992.  Mr. Panchmatia has served as Secretary/Treasurer and Controller of both Sloane Petroleums Inc. (formerly known as Northwind Ventures Ltd. which, as Sloane, amalgamated with Gentry in March 2001) and Winslow Resources Inc. since 1990, and as Chief Financial Officer, Secretary and Treasurer of Stratic Energy Corporation since April 1999.



R. Gordon McKay



Mr. McKay has served as the Company's Vice President of Exploration and Operations since June 1996 and Chief Operating Officer since May 2001.  Mr. McKay holds a Bachelor of Environmental Studies degree from the University of Waterloo.  He is a member of the Society of Exploration Geophysicists and the Canadian Society of Petroleum Geologists.  Prior to joining the Company in June 1993 as a Senior Geophysicist, Mr. McKay was employed as a geophysicist with a seismic processing firm, then as a senior geophysicist with Petro-Canada Inc.



Directors



Michael Halvorson



Mr. Halvorson has served as a Director of the Company since August 1994.  Since 1980, he has been the President of Halcorp Capital Ltd., a private corporation specializing in the raising of investment capital in the resources industry.  Mr. Halvorson has also been involved in various aspects of the securities business since 1967.  He serves as a Director for Viceroy Resources Corporation and Trillion Resources Ltd., both of which focus on gold mining and exploration in North America and Africa, and was a Director of Sloane Petroleums Inc. (formerly known as Northwind Ventures Ltd.) until its amalgamation with Gentry in March 2001.



A. Bruce Macdonald



Mr. Macdonald has served as a Director of the Company since November 1995.  He has been the President of Stoneyfell Investments Inc., a private oil and gas management consulting firm, since July 1996.  Mr. Macdonald holds a Bachelor of Science degree in Petroleum Engineering from the Colorado School of Mines.  He has 40 years of experience in the oil and gas industry in Canada, the U.S. and Australia.  Previously, he served as Executive Vice President of Andex Oil Co. Ltd., and its successor.  Mr. Macdonald was also a Director of Sloane Petroleums Inc. (formerly known as Northwind Ventures Ltd.) until its amalgamation with Gentry and remains a Director of Stratic Energy Corporation.

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George T. Hawes



Mr. Hawes was appointed to the Board of Directors in December 1999.  Mr. Hawes obtained a B.B.A. in Accounting from the University of Notre Dame and has over thirty years business and financial experience.  He is currently the President of G.T. Hawes & Co., Inc., a private real estate brokerage firm based out of Plandome, New York.



Walter B. O'Donoghue



Mr. O'Donoghue was appointed to the Board of Directors in May 1998.  He has been an independent businessman since 2003.  Prior thereto, he was a partner of the law firm of Bennett Jones.  He sits on a number of Boards including Gibson Petroleum Company Limited, a mid-sized oil and gas company, and Athabasca Oil Sands Investments Inc., a mid-sized oil and gas limited partnership management company.



B.

Compensation



The following table sets forth the annual, long term and other compensation paid by the Company for each of the last three (3) financial years ended December 31, 2003, 2002 and 2001 to Hugh G. Ross, President and Chief Executive Officer, R. Gordon McKay, Vice President, Exploration and Operations and Chief Operating Officer, and Ketan Panchmatia, Vice President, Finance and Chief Financial Officer (the

"Named Executive Officers"):

Summary Compensation Table

Annual CompensationLong Term Compensation(1)AwardsPayoutsName and Principal PositionYearSalary
($)Bonus
($)Other Annual Compensation
($)Securities Under
Options Granted
(#)Restricted Common Shares or Restricted Share Units
($)LTIP
Payouts

($)All Other
Compensation
($)(3)Hugh G. Ross, President & CEO(2)2003$198,750$33,800$10,60950,000NilNil$9,9382002$190,250$38,000$8,174NilNilNilNil2001$175,650$35,000$10,13950,000NilNilNilR. Gordon McKay, Vice President, Exploration & Operations & COO2003$155,250$21,700$24250,000NilNil$7,7632002$148,500$26,000$837NilNilNilNil2001$135,500$25,000$36250,000NilNilNilKetan Panchmatia, Vice President, Finance & CFO2003$136,500$23,200$38450,000NilNil$6,8252002$129,000$23,000$636NilNilNilNil2001$114,000$20,000$17250,000NilNilNil


Notes:

(1)

The Company has not issued any stock appreciation rights, restricted Common Shares or restricted share units; does not have any long-term incentive plans ("LTIP") nor made any similar payments; and does not have any pension or retirement plans.

(2)

Mr. Ross, in his capacity as a director of the Company, also received certain director's fees during the financial years ended December 31, 2003, 2002 and 2001.  See"Compensation of Directors".

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(3)

Represents the value of the Company's contributions to the Employee Share Ownership Plan on behalf of the Named Executive Officer. See"-Employee Share Ownership Plan"below.





Options Granted During the Most Recently Completed Financial Year



The following Options were granted to Named Executive Officers by the Company during the fiscal year ended December 31, 2003:

NameCommon Shares Under Options Granted% of Total Options Granted to Employees in Financial YearExercise Price ($/Common Share)Market Value of Common Shares Underlying Options on the Date of Grant ($/Common Share)Expiration Date(1)Hugh G. Ross50,0006.9%$1.34$1.34April 24, 2008R. Gordon McKay50,0006.9%$1.34$1.34April 24, 2008Ketan Panchmatia50,0006.9%$1.34$1.34April 24, 2008




Note:

(1)

These Options were granted on April 24, 2003. 33% (16,667) of these Options vested on October 24, 2003, 33% (16,667) of these Options are scheduled to vest on October 24, 2004 and 33% (16,666) of these Options are scheduled to vest on October 24, 2005.



Aggregate Options Exercised During the Most Recently Completed Financial Year and Financial Year End Option Values

The following table sets forth information concerning options exercised during the financial year ended December 31, 2003 and the value of unexercised options as at December 31, 2003:

NameSecurities Acquired on Exercise
(#)Aggregate Value Realized
($)Unexercised
Options at
December 31, 2003
(#)
Exercisable/
UnexercisableValue of Unexercised in-the-money Options at December 31, 2003
($)
Exercisable/
UnexercisableHugh G. Ross200,000201,500374,167/33,333522,392/21,333R. Gordon McKay100,00084,000116,667/33,333145,917/21,333Ketan Panchmatia50,00042,000216,667/33,333291,917/21,333




The value of the unexercised options at December 31, 2003 was based on the closing price of the Common Shares on the Toronto Stock Exchange as at December 31, 2003, being $1.98.

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Employee Share Ownership Plan



The Company has instituted an Employee Share Ownership Plan ("ESOP") effective January 1, 2003 in which all employees of the Company resident in Canada, including the Named Executive Officers, are eligible to participate.  The Company matches the employee's contribution in an amount not exceeding 5% of the employee's annual salary from and after January 1, 2003, excluding any bonuses or other payments, perquisites or benefits.  Both the employee's and the Company's contributions are invested exclusively in treasury Common Shares of the Company thereby aligning the interests of employees with those of the shareholders. The value of the Company's contributions to the ESOP on behalf of the Named Executive Officers is disclosed in the
"All Other Compensation"column in the Summary Compensation Table above.



Termination of Employment, Change-in-Control and Employment Contracts



The Company has no employment contracts with any employees, including any Named Executive Officers, respecting the resignation, retirement or other termination of employment of any employees, including any Named Executive Officers, or a change-in-control of the Company.



The Company has implemented an Employment Termination Compensation Plan effective January 1, 2002 (the

"Plan") which provides that in the event of a change-in-control of the Company each employee of the Company, including Named Executive Officers, shall be entitled to specified compensation (which is a function of the annual regular salary and the number of years of service of an employee) for the termination of his employment by the Company without"just cause"(as defined in the Plan) or by the employee for
"good reason"(as defined in the Plan) within a period of six (6) months after the date of a change-in-control.



As used in the Plan,

"change-in-control"of the Company means any change in the registered holdings and/or beneficial ownership of the common shares of the Company as a result of which a person or a group of persons or persons acting jointly or in concert or persons associated or affiliated with any such person(s) or group(s) within the meaning of the Canada Business Corporations Act are in a position to exercise effective control of the Company, provided that any such person(s) or group(s) directly or indirectly holding and/or owning and/or controlling common shares of the Company in excess of the number that would entitle such person(s) to cast more than 50% of the votes attaching to all common shares of the Company that may be cast to elect directors of the Company shall be deemed to be in a position to exercise effective control of the Company.



Under the Plan, termination of employment includes the occurrence of the following after a change-in-control:



(a)

any material change in the employee's office or employment;

(b)

any material change in the nature or scope of duties;

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(a)

any requirement without the employee's agreement to change his place of employment;

(b)

any reduction in the employee's remuneration;

(e)

any withdrawal of benefits or privileges of employment; or

(f)

any exclusion from any incentive compensation plans in which employee was a participant.



The Plan is not in substitution for or replacement of any additional or other compensation to which an employee, including any Named Executive Officer, may be entitled under statute or common law and no legal rights of any employee, including any Named Executive Officer, are adversely affected by the Plan.



Pension Plans



The Company does not provide retirement benefits for directors or executive officers.



Compensation of Directors



The directors of the Company were paid an annual fee of $10,000 by the Company for services in their capacity as directors of the Company during the fiscal year ended December 31, 2003.  Directors also received $1,000 per board meeting, $500 per committee meeting for in-town directors and $1,000 per committee meeting for out-of-town directors.  Committee chairs received a further $250 per committee meeting.

Management Services Contracts

Hawkeye Resources Ltd. provides certain management services to the Company.  Pursuant to an Engineering Consulting Agreement with the Company effective January 1, 1999, as amended throughApril 1, 2003, Hawkeye Resources received consulting fees in the aggregate amounts of $72,133 and $75,500 during the fiscal years ended December 31, 2003 and 2002, respectively.

A. Bruce Macdonald, a director of the Company, is a shareholder, director and officer of Hawkeye Resources Ltd. It provides management advisory and consulting services to the Company and its officers and management including consulting on engineering matters relating to drilling prospects and property acquisitions in western Canada.  These management services are in addition to Mr. Macdonald's duties and responsibilities to the Company in his capacity  as a director of the Company.

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Stock Options Granted to and Exercised by Directors

The following stock options were granted to the directors of the Company during the fiscal year ended December 31, 2003:

Name of OptioneeSecurities under Options GrantedPercent of Total Options Granted to Employees in Financial YearExercise or
Base Price
($/Security)Market Value of Securities Underlying Options on the
Date of Grant
($/Security)Expiration DateHugh G. Ross50,0006.9%$1.34$1.34April 24, 2008A. Bruce Macdonald50,0006.9%$1.34$1.34April 24, 2008Michael Halvorson50,0006.9%$1.34$1.34April 24, 2008Walter O'Donoghue50,0006.9%$1.34$1.34April 24, 2008George Hawes50,0006.9%$1.34$1.34April 24, 2008




The following stock options were exercised by directors of the Company during the fiscal year ended December 31, 2003:



NameSecurities Acquired on Exercise
(#)Aggregate Value Realized
($)Unexercised Options at Financial Year End
(#)
Exercisable/UnexercisableValue of Unexercised in-the-money Options at Financial Year End ($)
Exercisable/UnexercisableHugh G. Ross200,000201,500374,167 / 33,333522,392 / 21,333A. Bruce Macdonald75,00063,000124,167 / 33,333151,142 / 21,333Michael Halvorson75,00063,000149,167 / 33,333193,892 / 21,333Walter O'Donoghue50,00074,00099,167 / 33,333120,892 / 21,333George HawesNilNil141,667 / 33,333185,917 / 21,333






C.

Board Practices



Tenure of Board of Directors



Directors are elected at each Annual General Meeting of Shareholders to hold office until the next Annual Meeting or until his successor is duly elected or appointed, unless his office is earlier vacated by death, removal or other cause in accordance with the Articles of the Company.



No director of the Company is currently party to a service contract with the Company or any of its subsidiaries that provides for benefits upon termination of employment.



Audit and Risk Management Committee



The Audit and Risk Management Committee is comprised of three directors, namely George T. Hawes, A. Bruce Macdonald and Michael Halvorson.  It monitors audit functions and

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the preparation of financial statements and discusses with management and the independent auditors all significant accounting matters.



The objectives of the Audit and Risk Management Committee are to help directors discharge their duties and responsibilities, especially accountability; to provide better communication between directors and the external auditor; to enhance the external auditor's independence; to ensure the credibility and objectivity of financial reports; and to strengthen the role of the external directors by facilitating in depth discussions between the Committee, senior management and the external auditor.  The Committee's duties include review and reporting to the Board, as appropriate, concerning matters including:  annual audited financial statements; Company disclosure documents; senior management reports about litigation or claims; Company insurance coverage; and Company safety, health and environmental compliance policies.



Compensation and Human Resources Committee



The Compensation and Human Resources Committee is comprised of two directors, namely, Michael Halvorson and A. Bruce Macdonald. The Committee annually reviews, considers and makes recommendations respecting the compensation philosophy and remuneration policy of the Company for consideration by the Board of Directors of the Company.  Among its specific responsibilities, the Committee reviews, considers and recommends for approval:



(a)

the compensation philosophies and remuneration policies of the Company;

(b)

the recommendations of senior management of the Company respecting the compensation, including salaries, stock option grants, benefits and perquisites, of the Named Executive Officers and other key employees of the Company;

(c)

the annual performance objectives for and the performance appraisal of the President and Chief Executive Officer of the Company;

(d)

any amendments to the provisions of the employee share ownership plan, the Option Plan and the benefit programs of the Company; and

(e)

the compensation of the Board of Directors and its committees, including the granting of stock options to directors of the Company.



D.

Employees



The breakdown of employees at the end of 2003, 2002, and 2001 was as follows:



Department200320022001Land222Accounting544Exploration855Administration333Total181414




All employees work in Calgary, Alberta.  No employees are members of labor unions.  The Company has only one temporary employee at the present time.

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E.

Share Ownership



The following table sets forth the share ownership of those persons listed (or whose compensation is otherwise disclosed) in subsection 6.B above and includes details of all options or warrants to purchase shares of the Company held by such persons:

Name
Number of Shares Beneficially Owned Directly or Indirectly and Percentage Ownership
of Shares (1)Number of Common
Shares
Subject
to OptionPurchase Price
(if any)Exercise
Price ($)Expiry DateHugh G. Ross, President & C.E.O.1,850,248 Direct
326,134 Indirect
324,167 (Options exercisable within 60 days)

7.4%275,000
32,500
50,000
50,000
407,500N/A$0.52
0.45
0.77
1.34July 8, 2004
Feb. 16, 2010
Mar. 13, 2011
Apr. 24, 2008A. Bruce Macdonald, Director190,500 Direct
57,500 Indirect
124,167 (Options exercisable within 60 days)

1.1%50,000
32,500
75,000
157,500N/A$1.34
0.45
0.77Apr. 24, 2008
Feb. 16, 2010
Mar. 13, 2011George T. Hawes, Director1,427,400 Direct
141,667 (Options exercisable within 60 days)

4.7%50,000
75,000
50,000
175,000N/A$1.34
0.45
0.77Apr. 24, 2008
Feb. 16, 2010
Mar. 13, 2011


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Michael Halvorson, Director416,300 Direct
169,133 Indirect
149,167 (Options exercisable within 60 days)

2.2%50,000
50,000
32,500
50,000
182,500N/A$0.52
1.34
0.45
0.77Sep. 22, 2004
Apr. 24, 2008
Feb. 16, 2010
Mar. 13, 2011Walter O'Donoghue, Director178,126 Direct
99,167 (Options exercisable within 60 days)

0.8%50,000
32,500
50,000
132,500N/A$1.34
0.45
0.77Apr. 24, 2008
Feb. 16, 2010
Mar. 13, 2011Ketan Panchmatia, Vice-President, Finance and C.F.O.123,840 Direct
10,660 Indirect
216,667 (Options exercisable within 60 days)

1.0%100,000
25,000
50,000
25,000
50,000
250,000N/A$0.52
0.52
1.34
0.45
0.77July 8, 2004
Sep. 22, 2004
Apr. 24, 2008
Feb. 16, 2010
Mar. 13, 2011R. Gordon McKay, Vice-President, Exploration and Operations204,453 Direct
116,667 (Options exercisable within 60 days)

1.0%25,000
50,000
25,000
50,000
150,000N/A$0.52
1.34
0.45
0.77Sep. 22, 2004
Apr. 24, 2008
Feb. 16, 2010
Mar. 13, 2011


(1)  Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.  In computing the number of shares owned by a person and the percentage ownership of that person, Common Shares subject to options and warrants held by that person that are currently exercisable or exercisable within 60 days of May 19, 2004, are deemed outstanding.  Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person.  This table has been prepared based on 33,376,716 Common Shares outstanding as of May 19, 2004.



Stock Option Plan



The Company has adopted a Stock Option Plan (the
 
 "Option Plan") for eligible employees, officers and directors of the Company.  The Option Plan, as most recently amended by the Company's Board of Directors and ratified by the Company's shareholders on May 28, 2004, permits the granting of options to purchase up to a maximum of 4,000,000 Common Shares.  The total number of Common Shares which may be granted to any optionee under the Option Plan may not exceed 5% of the outstanding Common Shares.  The maximum number of Common Shares which may be reserved for issuance to insiders of the Company under the Option Plan may not exceed 10% of the outstanding Common Shares, less the aggregate number of Common Shares reserved for issuance to insiders under any other share compensation arrangement.  The total number of Options which may be granted to the insiders of the Company, within a one year period, may not exceed 10% of the issued and outstanding Common Shares.

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The total number of Options which may be granted to any one insider and that insider's associates within a one year period shall not exceed 5% of the issued and outstanding Common Shares.  The Option Plan is administered by the Compensation and Human Resources Committee of the Board of Directors. This committee has the discretion to determine to whom Options will be granted, the number and exercise price of such Options and the terms and time frames in which the Options will be exercisable.  However, Options may be exercisable for a maximum of ten calendar years from the date of grant and the exercise price of such Options may not be lower than the market price of the Common Shares on the business day prior to the date of grant.



Subject to a resolution passed by the directors stating otherwise, an Option shall terminate immediately upon the optionholder ceasing to be a director, officer or employee of the Company.  Notwithstanding the foregoing, if the optionholder's employment by the Company is terminated without cause, the Options may be exercised by the optionholder within 90 days of the date of termination of employment or directorship, as long as the Options do not expire by such time and have vested in accordance with their terms.  If the optionholder's employment is terminated by the optionholder for
"Good Reason"(as defined in the Option Plan), or an optionholder retires, the Options may be exercised by such optionholder within 180 days of such termination or retirement, as long as the Options do not expire by such time and have vested in accordance with their terms. Upon the death of an optionholder, the options may be exercised by the optionholder's legal representative within one year after the date of death.  The Option Plan contains standard adjustment and anti-dilution provisions in the event of a merger, amalgamation, arrangement or sale of all or substantially all of the assets of the Company, or if there is a subdivision, consolidation or reclassification of the Common Shares.  Additionally, the Option Plan provides for the acceleration of the vesting period for any Options granted if a take-over bid is made for the Common Shares.



ITEM 7

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



A.

Major Shareholders



The following table sets forth the name of the only shareholder who, to the knowledge of management of the Company, as of May 19, 2004 beneficially owns more than five percent (5%) of any class of the Company's voting securities:



Name and AddressNumber of
Common Shares
Beneficially Owned (1)Percentage
of Class (1)Hugh G. Ross, President & CEO,
Calgary, A.B., Canada2,500,549 (2)7.4%




(1)  Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.  In computing the number of shares owned by a person and the percentage ownership of that person, Common Shares subject to options and warrants held by that person that are currently exercisable or exercisable within 60 days of May 19, 2004, are deemed outstanding.  Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person.  This table has been prepared based on 33,376,716 Common Shares outstanding as of May 19, 2004.

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(2)  Includes 324,167 shares which may be acquired upon the exercise of stock options that are exercisable within 60 days of May 19, 2004.



There has been no major change in ownership of Common Shares during the past three years.



No shareholder has special rights with respect to its Common Shares beyond those rights accorded all shareholders of the Company's Common Shares.



On May 31, 2004, 1,771,664 Common Shares were held by 22 registered holders in the United States.  The Company is not listed for trading on any securities exchange in the United States.



To the best of its knowledge, the Company is not directly or indirectly controlled by another corporation, a foreign government and no stockholder owns more than five percent (5%) of its voting stock except as set forth above.



The Company is not aware of any arrangements the operation of which may at a subsequent date result in a change of control of the Company.



B.

Related Party Transactions



Listed below are the only material transactions that were effected within the past three years (or are proposed) between the Company or any of its subsidiaries and:



(a)

enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the Company;

(b)

associates;

(c)

individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Company, and close members of any such individual's family;

(d)

key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors and senior management of companies and close members of such individuals'families; and

(e)

enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence including enterprises owned by directors or major shareholders of the Company and enterprises that have a member of key management in common with the Company.



1.

Sloane Petroleums Inc. Transaction

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On March 1, 2001, the Company amalgamated with Sloane following the approval of the shareholders of both companies on February 28, 2001.  At the time of the amalgamation Gentry owned approximately 37% of Sloane while insiders of Gentry owned another 18%.  All insiders and Gentry refrained from voting on the amalgamation.



Each Sloane shareholder received $0.72 cash and 0.1 common shares of Gentry at a deemed price of $0.80 per share, for each share of Sloane held.  See

"Item 4.  Information on the Company -- A.  History and Development of the Company -- Gentry's Development over the Last Three Years -- Developments in 2001."



2.

Hawkeye Resources Ltd. Engineering Consulting Agreement



The Company is a party to an Engineering Consulting Agreement with Hawkeye Resources Ltd., pursuant to which Hawkeye Resources provides certain management advisory and consulting services to the Company.  A. Bruce Macdonald, a director of the Company, is a controlling shareholder, director and officer of Hawkeye Resources.  For more information concerning this Agreement, see

"Item 6.  Directors, Senior Management and Employees of the Company -- B.  Compensation -- Management Services Contracts."



Conflicts of Interest



There are potential conflicts of interest to which the Directors and officers of the Company will be subject to in connection with the operations of the Company.  Some of the Directors may be or may become engaged in other oil and gas industry interests on their own behalf and on behalf of other corporations, and situations may arise where the Directors and officers will be in direct competition with the Company.  Conflicts, if any, will be subject to the procedures and remedies under the Canada Business Corporations Act  ("CBCA").



Certain Directors of the Company are associated with other oil and gas companies, which may give rise to conflicts of interest.  See

"Item 3.  Key Information -- D.  Risk Factors -- Conflicts of Interest".  In accordance with the CBCA, Directors who have a material interest in any person who is a party to a material contract or a proposed material contract with the Company are required, subject to certain exceptions, to disclose that interest and abstain from voting on any resolution to approve the contract.  In addition, the Directors are required to act honestly and in good faith with a view to the best interests of the Company.



Indebtedness of Directors and Senior Officers



None of the directors or officers of the Company are, or at any time since the beginning of the last completed financial year of the Company has been, indebted to the Company or any of its subsidiaries.

59





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C.

Interests of Experts and Counsel



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



ITEM 8

FINANCIAL INFORMATION





A.      
 Consolidated Statements and Other Financial Information



This Annual Report contains the following audited consolidated financial statements of the Company:  (i) as to the years ended December 31, 2003 and 2002 (the
 

 "2003 Financial Statements"), Auditors'Report dated March 25, 2004, Consolidated Balance Sheets as at December 31, 2003 and 2002, Consolidated Statements of Income for the Years Ended December 31, 2003 and 2002, Consolidated Statements of Retained Earnings for the Years Ended December 31, 2003 and 2002, and Consolidated Statements of Cash Flow for the Years Ended December 31, 2003 and 2002, as well as Notes to the Consolidated Financial Statements for the Years Ended December 31, 2003 and 2002; and (ii) as to the years ended December 31, 2002 and 2001 (the
 "2002 Financial Statements"), Auditors'Report dated March 14, 2003, Consolidated Balance Sheets as at December 31, 2002 and 2001, Consolidated Statements of Income and Retained Earnings (Deficit) for the Years Ended December 31, 2002 and 2001, and Consolidated Statements of Cash Flow for the Years Ended December 31, 2002 and 2001, as well as Notes to the Consolidated Financial Statements for the Years Ended December 31, 2002 and 2001.  The Company's consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles.  Except as described in Note 13 to the 2003 Financial Statements and Note 12 to the 2002 Financial Statements, there are no material differences, for the purposes of these financial statements, between accounting principles generally accepted in Canada and the United States.



Legal Proceedings



No material legal proceedings are pending to which the Company is a party or of which any of its properties is the subject.



Dividend Policy



The Company has not paid any dividends on its Common Shares and has no dividend policy with respect to the payment of dividends.



B.

Significant Changes



No significant change has occurred since the date of the annual financial statements included in this Annual Report on Form 20-F.

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ITEM 9 THE OFFER AND THE LISTING







A.

Offer and Listing Details



From November 13, 1995 to present, the Common Shares have been listed for trading on The Toronto Stock Exchange (the

"TSX".  The following table sets out the high and low closing prices and the total trading volumes for the indicated periods, as reported by the TSX.



The following table sets out the annual high and low market prices of the Common Shares on the TSX during the last five fiscal years:



HIGH (Cdn. $)LOW (Cdn. $)20032.141.3420021.481.0320011.500.6520000.950.2619990.640.22




The following table sets out the market price range of the Common Shares for the last two years by fiscal quarter on the TSX.



HIGH
(Cdn. $)LOW
(Cdn. $)2003First Quarter1.751.36Second Quarter1.651.34Third Quarter2.001.55Fourth Quarter2.141.662002First Quarter1.401.05Second Quarter1.371.03Third Quarter1.481.24Fourth Quarter1.481.25




The following table sets out the high and low market prices of the Common Shares on the TSX for the last six months:



HIGH
(Cdn.$)LOW
(Cdn.$)May 20042.142.00


April 20042.191.95March 20042.131.85February 20042.151.91January 20042.292.02December 20032.141.71




On June 23, 2004 the closing price of the Common Shares on the TSX was $2.10.



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B.

Plan of Distribution



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



C.

Markets



The Company's Common Shares are listed for trading on the Toronto Stock Exchange (the"TSX").



D.

Selling Shareholders



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



E.

Dilution



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



F.

Expenses of the Issue



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



ITEM 10       
 ADDITIONAL INFORMATION



A.       
Share Capital



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



B.

Memorandum and Articles of Association

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The Company's constituent documents corresponding to a memorandum and articles of association are its Articles of Amalgamation and By-Laws, respectively.



1.  The Company's objects and purposes as set forth in its Memorandum and Articles:



The Company's By-Laws and Articles are silent as to the Company's objects and purposes.



2.  Matters relating to Directors of the Company:



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



Section 4.19 of the Company's By-Laws state that,"A director of officer who is party to, or who is a director of officer of or has a material interest in any person who is a party to, a material contract or proposed material contract with the Corporation shall disclose the nature and extent of his interest at the time and in the manner provided by the Canada Business Corporations Act.  A director interested in a contract so referred to the board shall not vote on any resolution to approve the same except as provided by the Act."



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



Section 4.20 of the Company's By-Laws states that,"The directors shall be paid such remuneration for their services as the board may from time to time determine.  The directors shall also be entitled to be reimbursed for traveling and other expenses properly incurred by them in attending meetings of the board or any committee thereof."



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



Section 3.01 of the Company's By-Laws states that,"the board may from time to time on behalf of the Corporation, without authorization of the shareholders:



a) borrow money upon credit of the Corporation;



b) issue, reissue, sell or pledge bonds, debentures, notes or other evidences of indebtedness or guarantees of the Corporation, whether secured or unsecured;



c) to the extent permitted by the Act, give a guarantee on behalf of the Corporation to secure performance of any present or future indebtedness, liability or obligation of any person; and

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d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal, movable or immovable property of the Corporation, including book debts, rights, powers, franchises and undertakings, to secure any such bonds, debentures, notes or other evidences of indebtedness or guarantee or any other present or future indebtedness, liability or obligation of the Corporation."



Section 3.02 further provides that,
 
 "The board may from time to time delegate to such one or more of the directors and officers of the Corporation as may be designated by the board all or any of the powers conferred on the board by section 3.01 or by the Act to such extent and in such manner as the board shall determine at the time of each such delegation."



(d)  The Company's By-Laws and Articles are silent with regard to the retirement or non-retirement of directors under an age limit requirement.



(e)  The Company's By-Laws and Articles are silent with regard to the number of shares, if any, required for qualification.



3.  Rights, preferences and restrictions attaching to each class of shares:



(a)  Dividend rights, including time limit after which dividend entitlement lapses



According to Section Nine of the By-Laws of the Company, the board may declare dividends payable to shareholders according to their respective rights and interest in the Company.  Any dividend unclaimed after a period of 6 years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Company.



(b)  Voting rights; staggered re-election intervals; cumulative voting



According to the Articles and By-Laws of the Company, each Common Share of the Company entitles the holder to one vote at any Annual, General or Special Meeting of Shareholders of the Company.  The Company's By-Laws provide for election of directors each year at the Annual Meeting of Shareholders.  Shareholders of the Company do not have cumulative voting.



(c)  Rights to share in surplus in event of liquidation



In the event of liquidation, dissolution or winding-up of the Company or other distribution of its assets, the holders of Common Shares will be entitled to receive, on a pro rata basis, all of the assets remaining after the Company has paid out its liabilities.



(d)  Other

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There are no provisions discriminating against any existing or prospective holder of Common Shares of the Company as a result of such shareholder owning a substantial number of Common Shares.



4.  Actions necessary to change the rights of holders of the Company's stock:



The Articles and By-Laws of the Company are silent in this regard.



5.  Conditions governing manner in which annual general meetings and extraordinary general meetings of shareholders are convoked, including conditions of admission:





Annual Meeting



Section 10.01 of the By-Laws of the Company state,

"The annual meeting of shareholders shall be held at such time in each year and, subject to section 10.03, at such place as the board, the chairman of the board, the managing director or the president may from time to time determine, for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing directors, appointing an auditor and for the transaction of such other business as may properly be brought before the meeting."



Special Meeting



Section 10.02 of the By-Laws of the Company state,

"The board, the chairman of the board, the managing director or the president shall have power to call a special meeting of shareholders at any time."



6.  Limitations on rights to own securities of the Company:



The Investment Canada Act (the

"ICA"), enacted on June 20, 1985, requires prior notification to the Government of Canada on the"acquisition of control"of Canadian businesses by non-Canadians, as defined in the ICA.  Certain acquisitions of control, discussed below, are reviewed by the Government of Canada.  The term
"acquisition of control"is defined as any one or more non-Canadian persons acquiring all or substantially all of the assets used in the Canadian business, or the acquisition of the voting shares of a Canadian corporation carrying on the Canadian business or the acquisition of the voting interests of an entity controlling or carrying on the Canadian business.  The acquisition of the majority of the outstanding shares is deemed to be an"acquisition of control"of a corporation.  The acquisition of less than a majority, but one-third or more, of the voting shares of a corporation is presumed to be  an
"acquisition of control"of a corporation unless it can be established that the purchaser will not control the corporation.



Investments requiring notification and review are all direct acquisitions of Canadian businesses with assets of Cdn. $5,000,000 or more (subject to the comments below on WTO investors), and all indirect acquisitions of Canadian businesses (subject to the comments below

65



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on WTO investors) with assets of more than Cdn. $50,000,000 or with assets of between Cdn. $5,000,000 and Cdn. $50,000,000 which represent more than 50% of the value of the total international transaction.  In addition, specific acquisitions or new business in designated types of business activities related to Canada's cultural heritage or national identity could be reviewed if the Government of Canada considers that it is in the public interest to do so.



The ICA was amended with the implementation of the Agreement establishing the World Trade Organization ("WTO") to provide for special review thresholds for"WTO investors", as defined in the ICA."WTO investor"generally means:



(a)

an individual, other than a Canadian, who is a national of a WTO member (such as, for example, the United States), or who has the right of permanent residence in relation to that WTO member;



(b)

governments of WTO members; and



(c)

entities that are not Canadian controlled, but which are WTO investor controlled, as determined by rules specified in the ICA.



The special review thresholds for WTO investors do not apply, and the general rules described above do apply, to the acquisition of control of certain types of businesses specified in the ICA, including a business that is a
 
 "cultural business".  If the WTO investor rules apply, an investment in the shares of the Company by or from a WTO investor will be reviewable only if it is an investment to acquire control of the Company and the value of the assets of the Company is equal to or greater than a specified amount (the
 "WTO Review Threshold").  The WTO Review Threshold is adjusted annually by a formula relating to increases in the nominal gross domestic product of Canada.  The 2004 WTO Review Threshold was $237,000,000.



If any non-Canadian, whether or not a WTO investor, acquires control of the Company by the acquisition of shares, but the transaction is not reviewable as described above, the non-Canadian is required to notify the Canadian government and to provide certain basic information relating to the investment.  A non-Canadian, whether or not a WTO investor, is also required to provide a notice to the government on the establishment of a new Canadian business.  If the business of the Company is then a prescribed type of business activity related to Canada's cultural heritage or national identity, and if the Canadian government considers it to be in the public interest to do so, then the Canadian government may give a notice in writing within 21 days requiring the investment to be reviewed.



For non-Canadians (other than WTO investors), an indirect acquisition of control, by the acquisition of voting interests of an entity that directly or indirectly controls the Company, is reviewable if the value of the assets of the Company is then Cdn. $50,000,000 or more.  If the WTO investor rules apply, then this requirement does not apply to a WTO  investor, or to a person acquiring the entity from a WTO investor.  Special rules specified in the ICA apply if the value of the assets of the Company is more than 50% of the value of the entity so acquired.  By these special rules, if the non-Canadian (whether or not a WTO investor) is acquiring control of

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an entity that directly or indirectly controls the Company, and the value of the assets of the Company and all other entities carrying on business in Canada, calculated in the manner provided in the ICA and the regulations under the ICA, is more than 50% of the value, calculated in the manner provided in the ICA and the regulations under the ICA, of the assets of all entities, the control of which is acquired, directly or indirectly, in the transaction of which the acquisition of control of the Company forms a part, then the thresholds for a direct acquisition of control as discussed above will apply, that is, a WTO Review Threshold of Cdn. $237,000,000 (in 2004) for a WTO investor or threshold of Cdn. $5,000,000 for a non-Canadian other than a WTO investor.  If the value exceeds that level, then the transaction must be reviewed in the same manner as a direct acquisition of control by the purchase of shares of the Company.



If an investor is reviewable, an application for review in the form prescribed by the regulations is normally required to be filed with the Director appointed under the ICA (the

"Director") prior to the investment taking place and the investment may not be consummated until the review has been completed.  There are, however, certain exceptions.  Applications concerning indirect acquisitions may be filed up to 30 days after the investment is consummated and applications concerning reviewable investments in culture-sensitive sectors are required upon receipt of a notice for review.  In addition, the Minister (a person designated as such under the ICA) may permit an investment to be consummated prior to completion of the review, if he is satisfied that delay would cause undue hardship to the acquiror or jeopardize the operations of the Canadian business that is being acquired.  The Director will submit the application to the Minister, together with any other information or written undertakings given by the acquiror and any representation submitted to the Director by a province that is likely to be significantly affected by the investment.



The Minister will then determine whether the investment is likely to be of net benefit to Canada, taking into account the information provided and having regard to certain factors of assessment where they are relevant.  Some of the factors to be considered are:



(a)

the effect of the investment on the level and nature of economic activity in Canada, including the effect on employment, on resource processing, and on the utilization of parts, components and services produced in Canada;



(b)

the effect of the investment on exports from Canada;



(c)

the degree and significance of participation by Canadians in the Canadian business and in any industry in Canada of which it forms a part;



(d)

the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada;



(e)

the effect of the investment on competition within any industry or industries in Canada;

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(f)

the compatibility of the investment with national industrial, economical and cultural policies;



(g)

the compatibility of the investment with national industrial, economic and cultural policies taking into consideration industrial, economic and cultural objectives enunciated by the government or legislature of any province likely to be significantly affected by the investment; and



(h)

the contribution of the investment to Canada's ability to compete in world markets.



To ensure prompt review, the ICA sets certain time limits for the Director and the Minister.  Within 45 days after a completed application has been received, the Minister must notify the acquiror that he is satisfied that the investment is likely to be of net benefit to Canada, or that he is unable to complete his review, in which case he shall have 30 additional days to complete his review (unless the acquiror agrees to a longer period), or he is not satisfied that the investment is likely to be of net benefit to Canada.



Where the Minister has advised the acquiror that he is not satisfied that the investment is likely to be of net benefit to Canada, the acquiror has the right to make representations and submit undertakings within 30 days of the date of the notice (or any other further period that is agreed upon between the acquiror and the Minister).  On the expiration of the 30-day period (or the agreed extension), the Minister must quickly notify the acquiror that he is now satisfied that the investment is likely to be of net benefit to Canada or that he is not satisfied that the investment is likely to be of net benefit to Canada.  In the latter case, the acquiror may not proceed with the investment or, if the investment has already been consummated, must divest itself of control of the Canadian business.



The ICA provides civil remedies for non-compliance with any provision.  There are also criminal penalties for breach of confidentiality or providing false information.



Except as provided in the ICA, there are no limitations under the laws of Canada, the Province of British Columbia or in any constituent documents of the Company on the right of non-Canadians to hold or vote the common shares of the Company.



7.  Provisions of Company's articles, charter or by-laws that have the effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition, or corporate restructuring involving the Company:



There are no limitations in the By-Laws or Articles of the Company, but see discussion of the Company's shareholder rights plan, below.



Rights Plan

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Effective April 24, 1998, the Company adopted a shareholder rights plan (the

"Original Plan") that was ratified by the shareholders of the Company at the annual general and special meeting held on May 29, 1998 and was renewed for an additional three-year term upon confirmation by the shareholders at the annual general and special meeting held on May 25, 2001.  At the annual general and special meeting held on May 28, 2004, the shareholders approved and reconfirmed the Original Plan, as amended and restated (as so amended, the"Amended Plan"or the
"Rights Plan").  The Amended Plan is identical to the Original Plan in all material respects.



The primary objectives of the Amended Plan, as with the Original Plan, are to ensure that, in the context of a bid for control of the Company through an acquisition of the Company's Common Shares, the Board of Directors has sufficient time to explore and develop alternatives for maximizing shareholder value, to provide adequate time for competing bids to emerge, to ensure that shareholders have an equal opportunity to participate in such a bid and to give shareholders adequate time to properly assess the bid and lessen the pressure to tender typically encountered by a securityholder of an issuer that is subject to a bid.  Current legislation permits a hostile bid to be made in as little as 35 days, giving little time for competing bids to be made.  The Company is not aware of any pending or threatened take-over bid for the Company.



Under the Rights Plan, the Company issued, for no consideration, one Right in respect of each outstanding Common Share of the Company to all holders of record of Common Shares on April 24, 1998, the date of implementation of the Original Plan.  From that date, all Common Shares issued by the Company during the term of the Rights Plan will have one Right attached.  The Rights will trade together with the Common Shares of the Company and will be represented by the certificates representing the Common Shares of the Company.  The term of the Rights Plan is three years unless the Rights are earlier redeemed or exchanged.



If a party acquires 20% or more of the Company's Common Shares without complying with the Rights Plan, or without Board approval or waiver, each Right, other than Rights held by the acquiring party, will entitle shareholders other than the bidder to purchase Common Shares of the Company at a 50% discount to the market price at that time.  Under the Rights Plan as amended, the Company is not required to issue or deliver Rights, or securities upon the exercise of Rights, outside Canada or the United States where such issuance or delivery would be unlawful without registration of the relevant Persons or securities.



The Rights Plan is not triggered by a bid made to all shareholders, for all of the shares of the Company, that is open for at least 60 days.  If at least 50% of the outstanding shares have been tendered at the end of 60 days, the bidder may take up and pay for the shares, but must extend the bid for a further 10 days to allow other shareholders to tender to it.







8.  Provisions governing the ownership threshold above which shareholder ownership must be disclosed:

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The British Columbia, Alberta and Ontario Securities Acts provide that a person that has direct or indirect beneficial ownership of, control or direction over, or a combination of direct or indirect beneficial ownership of, and control or direction over, securities of the issuer carrying more than 10% of the voting rights attached to all the issuer's outstanding voting securities must, within 10 days of becoming an
"insider", file an insider report in the required form effective the date on which the person became an insider, disclosing any direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer.  The British Columbia, Alberta and Ontario Securities Acts also provide for the filing of a report by an
"insider"of a reporting issuer who acquires or transfers securities of the issuer.  This insider report must be filed within 10 days after the end of the month in which the change takes place.



The U.S. rules governing the ownership threshold above which shareholder ownership must be disclosed are more stringent than those discussed above.  Section 13 of the Exchange Act imposes reporting requirements on persons who acquire beneficial ownership (as such term is defined in the Rule 13d-3 under the Exchange Act) of more than 5 per cent of a class of an equity security registered under Section 12 of the Exchange Act.  In general, such persons must file, within 10 days after such acquisition, a report of beneficial ownership with the Securities and Exchange Commission containing the information prescribed by the regulations under Section 13 of the Exchange Act.  This information is also required to be sent to the issuer of the securities and to each exchange where the securities are traded.



9.  Significant differences between law applicable to the Company and law of the United States.



See 8, above.



C.

Material Contracts



The Company has not entered into any material contract, other than contracts entered into the ordinary course of business, to which the Company is a party, during the previous two fiscal years, except for the Engineering Consulting Agreement with Hawkeye Resources Ltd., pursuant to which Hawkeye Resources provides certain management advisory and consulting services to the Company.  A. Bruce Macdonald, a director of the Company, is a controlling shareholder, director and officer of Hawkeye Resources.  For more information concerning this Agreement, see


"Item 6.  Directors, Senior Management and Employees of the Company -- B.  Compensation -- Management Services Contracts."



D.

Exchange Controls



Canada has no system of exchange controls.  There are no exchange restrictions on borrowing from foreign countries nor on the remittance of dividends, interest, royalties and similar payments, management fees, loan repayments, settlement of trade debts or the repatriation of capital.

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E.

Taxation



CANADIAN FEDERAL INCOME TAX CONSIDERATIONS



The following summarizes the principal Canadian federal income tax considerations applicable to the holding and disposition of Common Shares of the Company by a holder of one or more Common Shares (the


"Holder") who is a resident in the United States and holds common shares solely as capital property.  This summary is based on the current provisions of the Income Tax Act (Canada), the regulations thereunder and all amendments to the Tax Act publicly proposed by the government of Canada to the date hereof (the
"Tax Act"), and on the current provisions of the Canada - U.S. Income Tax Convention, 1980 (the
"Treaty").  It has been assumed that all currently proposed amendments to the Tax Act will be enacted as proposed and that there is no other relevant change in any governing law.

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Every Holder is liable to pay a Canadian withholding tax on every dividend that is or is deemed to be paid or credited to the Holder on the Holder's Common Shares.  Under the Treaty, the rate of withholding tax is, if the Holder is a company that owns at least 10% of the voting stock of the Company and beneficially owns the dividend, 6% in 1996 and 5% thereafter, and in any other case 15%, of the gross amount of the dividend.



Pursuant to the Tax Act, a Holder will not be subject to Canadian capital gains tax on any capital gain realized on an actual or deemed disposition of a Common Share, including a deemed disposition on death, provided either that the Holder did not hold the Common Share as capital property used in carrying on a business in Canada, or that neither the Holder nor persons with whom the Holder did not deal at arm's length alone or together owned 25% or more of the issued shares of any class of the Company at any time in the five years immediately preceding the disposition.



Subject to certain limited exceptions, a Holder who otherwise would be liable for Canadian capital gains tax in consequence of an actual or deemed disposition of a Common Share will generally be exempted for Canadian tax under the Treaty.  Any holder who is a former resident of Canada may have different Canadian tax considerations and should obtain specific tax advice.



UNITED STATES FEDERAL INCOME TAX CONSEQUENCES



The following summary is a general discussion of the material United States Federal income tax considerations to U.S. holders of shares of the Company under current law. It does not discuss all the tax consequences that may be relevant to particular holders in light of their circumstances or to holders subject to special rules, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of shares of the Company is not effectively connected with the conduct of a trade or business in the United States, shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation, shareholders who hold their stock as ordinary assets and not capital assets and any other non-U.S. holders.



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.  This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. The following discussion is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of shares of the Company 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 shares of the Company should consult their own tax advisors about the Federal, state, local, estate and foreign tax consequences of purchasing, owning and disposing of shares of the Company.

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U.S. Holders



As used herein, a

"U.S. Holder"includes a holder of shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any entity that is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of shares of the Company is effectively connected with the conduct of a trade or busi­ness in the United States.  A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, nonresident alien individuals or foreign corporations whose ownership of shares of the Company is not effectively connected with conduct or trade or business in the United States, shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation and shareholders who hold their stock as ordinary assets and not as capital assets.



Distributions on Shares of the Company



U.S. Holders receiving dividend distributions (including constructive dividends) with respect to shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that the Company has current or accumulated earnings and profits as defined under U.S. Federal tax law, 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 United States Federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder's United States Federal taxable income by those who itemize deductions. (See more detailed discussion at"Foreign Tax Credit"below).  To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder's adjusted basis in the shares and thereafter as gain from the sale or exchange of the shares.  Preferential tax rates for net 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.



Dividends paid on the shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.  A U.S. Holder that is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a

"foreign personal holding company"or a"passive foreign investment company", as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company.  The availability of this deduction is subject to several complex limitations that are beyond the scope of this discussion.



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

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exchange for U.S. dollars, will be ordinary income or loss.  However, for tax years after 1997, an individual whose realized foreign exchange gain does not exceed U.S. $200 will not recognize that gain, to the extent that there are not expenses associated with the transaction that meet the requirement 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).



Foreign Tax Credit



A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of shares of the Company may be entitled, at-the option of the U.S. Holder, to either 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 Federal 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.  There are further limitations on the foreign tax credit for certain types of income such as
"passive income",
"high withholding tax interest",
"financial services income",
"shipping income", and certain other classifications of income.  The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of shares of the Company should consult their own tax advisors regarding their individual circumstances.



Disposition of Shares of the Company



A U.S. Holder will recognize a gain or loss upon the sale of shares of the Company 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 shares of the Company.  This gain or loss will be a capital gain or loss if the shares are a capital asset in the hands of the U.S. Holder, and will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder.  Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year.  Deductions for net capital losses are subject to significant limitations.  Corporate capital losses (other than losses of corporations electing under Subchapter S or the Code) are deductible to the extent of capital gains.  Non-corporate taxpayers may deduct net capital losses, whether short-term or long-term, up to U.S. $3,000 a year (U.S. $1,500 in the case of a married individual filing separately).  For U.S. Holders which are individuals, 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 which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

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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 shares of the Company:



Foreign Personal Holding Company



If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company's outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the United States and 60% (50% in subsequent years) or more of the Company's gross income for such year was derived from certain passive sources, the Company would be treated as a"foreign personal holding company".  In that event, U.S. Holders that hold shares of the Company (on the earlier of the last day of the Company's tax year or the last date on which the Company was a foreign personal holding company) would be required to include in gross income for such year their allowable portions of such passive income to the extent the Company does not actually distribute such income.



Foreign Investment Company



If 50% or more of the combined voting power or total value of the Company's outstanding shares are held, directly or indirectly, 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)), and the Company 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 Company might 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 shares of the Company to be treated as ordinary income rather than capital gain.



Passive Foreign Investment Company



As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company ("PFIC"), as defined in Section 1296 of the Code, if 75% or more of its gross income in a taxable year is passive income, or the average percentage of the Company's assets (by value) during the taxable year which produce passive income or which are held for production of same is at least 50%.  Passive income is generally defined to include gross income in the nature of dividends, interest, royalties, rents and annuities; excess of gains over losses from certain transactions in any commodities not arising inter alia from a PFIC whose business is actively involved in such commodities; certain foreign currency gains; and other similar types of income. U.S. Holders owning shares of a PFIC are subject to an additional tax and to an interest charge based on the value of deferral of tax for the period during which the shares of the PFIC are owned, in addition to treatment of any gain realized on the disposition of shares of the PFIC as ordinary income rather than as a capital gain.  However, if the U.S. Holder

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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 any 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.



Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders who hold, actually or constructively, marketable stock of a foreign corporation that qualifies as a PFIC may elect to mark such stock to the market (a


"mark-to-market election").  If such an election is made, such U.S. Holder will not be subject to the special taxation rules of PFIC described above for the taxable years for which the mark-to-market election is made.  A U.S. Holder who makes such an election will include in income for the taxable year an amount equal to the excess, if any, of the fair market value of the shares of the Company as of the close of such tax year over such U.S. Holder's adjusted basis in such shares.  In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder's adjusted tax basis in the shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any of (A) the mark-to-market gains for the shares in the Company included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior year but for Section 1291 interest on tax deferral rules discussed above with respect to a U.S. Holder, who has not made a timely QEF election during the year in which he holds (or is deemed to have held) shares in the Company and the Company is a PFIC ("Non-Electing U.S. Holder"), over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years.  A U.S. Holder's adjusted tax basis in the shares of the Company will be increased or decreased to reflect the amount included or deducted as a result of mark-to-market election.  A mark-to-market election will apply to the tax year for which the election is made and to all later tax years, unless the PFIC stock ceases to be marketable or the IRS consents to the revocation of the election.



The IRS has issued proposed regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by a Non-Electing U.S. Holder that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death.  Generally, in such cases, the basis of the Company's shares in the hands of the transferee and the basis of any property received in the exchange for those shares would be increased by the amount of gain recognized.  A U.S. Holder who has made a timely QEF election (as discussed below) will not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death.  The transferee's basis in this case will depend on the manner of the transfer.  The specific tax effect to the U.S. Holder and the transferee may vary based on the manner in which the shares of the Company are transferred.  Each U.S. Holder should consult a tax advisor with respect to how the PFIC rules affect their tax situation.



Shareholder Election



These adverse tax consequences may be avoided, if the U.S. Holder has elected to treat the PFIC as a qualified electing fund (a


"QEF") with respect to that U.S. Holder effective for

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each of the PFIC's taxable years beginning on or after January 1, 1987, which include any portion of the U.S. Holder's holding period.



The procedure a U.S. Holder must comply with in making an effective QEF election will depend on whether the year of election is the first year in the U.S. Holder's holding period in which the Company is a PFIC.  If the U.S. Holder makes a QEF election in such first year (i.e. a timely QEF election), then the U.S. Holder may make the QEF election by simply filing the appropriate documents at the time the U.S. Holder files his tax return for such first year.  If, however, the Company qualified as a PFIC in a prior year, then in addition to filing documents, the U.S. Holder must generally recognize gain as if it had sold the QEF stock on the first day of the taxable year in which the QEF election is made, if (i) the U.S. Holder holds stock in the PFIC on that day, and (ii) the U.S. Holder can establish the fair market value of the PFIC stock on that day.  The U.S. Holder will treat that deemed sale transaction as a disposition of PFIC stock and will, thereafter, be subject to the rules described below applicable to U.S. shareholders of a QEF.



In general, U.S. shareholders of a QEF are taxable currently on their pro rata share of the QEF's ordinary income 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.



Mark to Market Election



Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders who hold, actually or constructively, marketable stock of a foreign corporation that qualifies as a PFIC may elect to mark such stock to the market (a

"mark-to-market election").  If such an election is made, such U.S. Holder will not be subject to the special taxation rules of PFIC described above for the taxable years for which the mark-to-market election is made.  A U.S. Holder who makes such an election will include in income for the taxable year an amount equal to the excess, if any, of the fair market value of the shares of the Company as of the close of such tax year over such U.S. Holder's adjusted basis in such shares.  In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder's adjusted tax basis in the shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any of (A) the mark-to-market gains for the shares in the Company included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior year but for Section 1291 interest on tax deferral rules discussed above with respect to a U.S. Holder, who has not made a timely QEF election during the year in which he holds (or is deemed to have held) shares in the Company and the Company is a PFIC ("Non-Electing U.S. Holder"), over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years.  A U.S. Holder's adjusted tax basis in the shares of the Company will be increased or decreased to reflect the amount included or deducted as a result of mark-to-market election.  A mark-to-market election will apply to the tax year for which the election is made and to all later tax years, unless the PFIC stock ceases to be marketable or the IRS consents to the revocation of the election.

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The PFIC and QEF election rules are complex.  U.S. Holders should consult a tax advisor regarding the availability and procedure for making the QEF election as well as the applicable method for recognizing gains or earnings and profits under the foregoing rules.



Controlled Foreign Corporation



If more than 50% of the voting power of all classes of stock or the total value of the stock of the Company is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of stock of the Company ("United States shareholder"), the Company could be treated as a
"controlled foreign corporation"under Subpart F of the Code.  This classification would effect many complex results including the required inclusion by such United States shareholders in income of their pro rata share of
"Subpart F income"(as specially defined by the Code) of the Company. If the Company is both a PFIC and controlled foreign corporation. the company will generally not be treated as a PFIC with respect to United States shareholders of the controlled foreign corporation.  This rule generally will be effective for taxable years of the Company ending with or within such taxable years of United States shareholders.  In addition, under Section 1248 of the Code, a gain from the sale or exchange of shares by a U.S. Holder who 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 dividend income to the extent of earnings and profits of the Company attributable to the stock sold or exchanged.  Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to the U.S. Holders of shares of the Company, a more detailed review of these rules is outside of the scope of this discussion.



F.

Dividends and Paying Agents



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.





G.

Statement by Experts



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.



H.

Documents on Display



Copies of the Company's exhibits and documents are available for inspection at the Company's registered office located at 101 6th Avenue S.W., Suite 2500, Calgary, Alberta, Canada T2P 3P4.



I.

Subsidiary Information

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The information referred to in this section is not required for reports filed in the United States.





ITEM 11

QUANTITATIVE AND QUALITATIVE DISCLOSURES



ABOUT MARKET RISK





The Company is a

"Small Business Issuer"as such term is defined in Rule 12b-2 under the Exchange Act and, as such, there is no requirement to provide any information under this Item.





ITEM 12

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this Item.





PART II



ITEM 13

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES







There has not been a material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within thirty days, relating to indebtedness of the Company or any of its subsidiaries.  There are no payments of dividends by the Company in arrears, nor has there been any other material delinquency relating to any class of preference shares of the Company.



ITEM 14

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

HOLDERS AND USE OF PROCEEDS





Neither the Company nor any other person has (i) modified materially any instrument defining the rights of holders of any class of registered securities, (ii) modified materially or qualified the rights evidenced by any class of registered securities by issuing or modifying any other class of securities, or (iii) withdrawn or substituted a material amount of the assets securing any class of registered securities.  There has been no change in the trustees or paying agents for any of the Company's securities during the previous fiscal year.





ITEM 15

CONTROLS AND PROCEDURES



Disclosure Controls and Procedures.  As of December 31, 2003, an evaluation was carried out by the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as amended).  Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were adequate to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.





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Changes in Internal Control over Financial Reporting.  During the fiscal year ended December 31, 2003, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.



ITEM 16

[RESERVED]





ITEM 16A

AUDIT COMMITTEE FINANCIAL EXPERT





The Company has an Audit and Risk Management Committee (the


"Audit Committee") established by the Board of Directors.  The members of the Audit Committee are George T. Hawes, A. Bruce Macdonald and Michael Halvorson.  The Board has designated Mr. Hawes as the
"Audit Committee Financial Expert"as that term is defined under Section 407 of the Sarbanes-Oxley Act of 2002.  Mr. Hawes is
"independent"as that term is defined under the rules of the American Stock Exchange.



ITEM 16B

CODE OF ETHICS





The Company has adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees, including its Chief Executive Officer and Chief Financial Officer.  The Company's Code of Business Conduct and Ethics will be provided, without charge, to any individual who requests it.  A copy may be obtained from the Corporate Secretary by telephoning the Company at (403) 264-6161 or by writing the Company at 2500, 101-6th Ave SW, Calgary, Alberta, Canada T2P 3P4



ITEM 16C

PRINCIPAL ACCOUNTANT FEES AND SERVICES





The aggregate amounts billed by Collins Barrow Calgary LLP, Chartered Accountants ("CBC") to the Company for each of the fiscal years ended December 31, 2003 and 2002 for audit fees, audit-related fees, tax fees and all other fees are set forth below:



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Year Ended
December 31, 2003Year Ended
December 31, 2002Audit Fees (1)$55,000$51,400Audit-Related Fees (2)12,00010,415Tax Fees (3)5,0006,500All Other Fees (4)--3,200Totals$72,000$71,515


NOTES:



(1)  "Audit Fees"represent fees for the audit of the Company's annual financial statements, review of the Company's interim financial statements and review in connection with the Company's statutory and regulatory filings.



(2)  "Audit-Related Fees"represent fees for assurance and related services that are related to the performance of the audit, principally for US standards compliance.



(3)  "Tax Fees"represent fees for tax compliance, tax advice and tax planning.



(4)  "Other Fees"represent fees for accounting research on new accounting policies.



The Audit Committee has adopted procedures requiring Audit Committee review and approval in advance of all particular engagements for services provided by the Company's independent auditors.  Consistent with applicable laws, the procedures permit limited amounts of services, other than audit, review or attest services, to be approved by one or more members of the Audit Committee pursuant to authority delegated by the Audit Committee, provided the Audit Committee is informed of each particular service.  All of the engagements and fees for the year ended December 31, 2003 were approved by the Audit Committee.  The Audit Committee reviews with CBC whether the non-audit services to be provided are compatible with maintaining the auditors'independence.



ITEM 16D

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT

COMMITTEES





The information referred to in this section is not required as to the fiscal year ended December 31, 2003, which is the period covered by this Annual Report on Form 20-F.





ITEM 16E

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND

AFFILIATED PURCHASERS





The information referred to in this section is not required as to the fiscal year ended December 31, 2003, which is the period covered by this Annual Report on Form 20-F.

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ITEM 17

FINANCIAL STATEMENTS





The following financial statements are attached and incorporated herein:



Description of DocumentAuditors' Report dated March 25, 2004Consolidated Balance Sheets as at December 31, 2003 and 2002Consolidated Statements of Income for the Years Ended December 31, 2003 and 2002Consolidated Statements of Retained Earnings for the Years Ended December 31, 2003 and 2002Consolidated Statements of Cash Flows for the Years Ended December 31, 2003 and 2002Notes to Consolidated Financial Statements for the Years Ended December 31, 2003 and 2002Auditors' Report dated March 14, 2003Consolidated Balance Sheets as at December 31, 2002 and 2001Consolidated Statements of Income and Retained Earnings (Deficit) for the Years Ended December 31, 2002 and 2001Consolidated Statements of Cash Flows for the Years Ended December 31, 2002 and 2001Notes to Consolidated Financial Statements for the Years Ended December 31, 2002 and 2001




ITEM 18

FINANCIAL STATEMENTS





See Item 17.

82



---







---



GENTRY
RESOURCES LTD. CONSOLIDATED BALANCE SHEETS

DECEMBER
31, 2003 and 2002

__________________________________________

|                                               | ASSETS |                                      |            |                           |   |            | 
|---------------------------------------------- | ------ | ------------------------------------ | ---------- | ------------------------- | - | ---------- | 
|                                               |        |                                      | 2003       |                           |   | 2002       | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            | (Restated
      - Note 3)
|CURRENT                                        |        |                                      |            |                           |   |            | 
|Cash
      and cash equivalents                |        | $                                    | 194,119    |                           | $ | 175,915    | 
|Accounts
      receivable                      |        |                                      | 7,461,796  |                           |   | 5,356,504  | 
|Prepaid
      expenses                         |        |                                      | 210,387    |                           |   | 236,760    | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      | 7,866,302  |                           |   | 5,769,179  | 
|                                               |        |                                      |            |                           |   |            | 
|INVESTMENTS
      (Note 4)                     |        |                                      | 1,544,058  |                           |   | 1,561,111  | 
|                                               |        |                                      |            |                           |   |            | 
|PROPERTY AND
      EQUIPMENT (Note 5)          |        |                                      | 44,062,285 |                           |   | 29,092,384 | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        | $                                    | 53,472,645 |                           | $ | 36,422,674 | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            |                           |   |            | 
|LIABILITIES
      & SHAREHOLDERS' EQUITY       |        |                                      |            |                           |  
|                                               |        |                                      |            |                           |   |            | 
|CURRENT                                        |        |                                      |            |                           |   |            | 
|Accounts
      payable and accrued liabilities |        | $                                    | 8,866,288  |                           | $ | 5,599,989  | 
|Income
      taxes payable                     |        |                                      | 479,240    |                           |   | 403,822    | 
|Bank
      debt (Note 6)                       |        |                                      | 11,964,010 |                           |   | 6,990,027  | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      | 21,309,538 |                           |   | 12,993,838 | 
|                                               |        |                                      |            |                           |   |            | 
|ASSET
      RETIREMENT OBLIGATIONS (Note 7)    |        |                                      | 1,563,555  |                           |   | 1,299,681  | 
|                                               |        |                                      |            |                           |   |            | 
|FUTURE INCOME
      TAXES (Note 8)             |        |                                      | 6,140,992  |                           |   | 5,516,577  | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      | 29,014,085 |                           |   | 19,810,096 | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            |                           |   |            | 
|SHARE CAPITAL
      (Note 9)                   |        |                                      | 18,373,169 |                           |   | 13,262,522 | 
|CONTRIBUTED
      SURPLUS (Notes 9[b] and [d]) |        |                                      | 22,067     |                           |   | -          | 
|RETAINED
      EARNINGS                        |        |                                      | 6,063,324  |                           |   | 3,350,056  | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      | 24,458,560 |                           |   | 16,612,578 | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        | $                                    | 53,472,645 |                           | $ | 36,422,674 | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            |                           |   |            | 
|Please refer
      to the accompanying notes.  |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            |                           |   |            | 
|                                               |        |                                      |            |                           |   |            | 
|(signed)
      "A. Bruce Macdonald"            |        | (signed)
      "George T. Hawes"     |           
|A.
      Bruce Macdonald
      Director        |        | George
      T. Hawes
      Director |           



---



GENTRY
RESOURCES LTD.

CONSOLIDATED
STATEMENTS OF CASH FLOWS

FOR
THE YEARS ENDED DECEMBER 31, 2003 and 2002
__________________________________________

|                                                                         |   | 2003         |                          |   | 2002        | 
|------------------------------------------------------------------------ | - | ------------ | ------------------------ | - | ----------- | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   |              | (Restated -
      Note3)
|OPERATING ACTIVITIES                                                     |   |              |                          |   |             | 
|Net
      income                                                         | $ | 3,040,509    |                          | $ | 2,435,546   | 
|Add
      (deduct) items not requiring cash                              |   |              |                          |   |             | 
|Depletion
      and depreciation                                         |   | 7,079,953    |                          |   | 4,273,079   | 
|Non-cash
      compensation                                              |   | 174,947      |                          |   | -           | 
|Share
      of loss of affiliate                                         |   | 3,985        |                          |   | 349,520     | 
|Dilution
      gain on investments in affiliates                         |   | -            |                          |   | (295,072)   | 
|Loss
      on sale of investments                                        |   | -            |                          |   | 6,726       | 
|Future
      income taxes                                                |   | 86,795       |                          |   | 647,615     | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   | 10,386,189   |                          |   | 7,417,414   | 
|Changes
      in non-cash working capital items                          |   | (564,546)    |                          |   | (1,165,210) | 
|Asset
      retirement costs                                             |   | (112,643)    |                          |   | (90,362)    | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   | 9,709,000    |                          |   | 6,161,842   | 
|                                                                         |   |              |                          |   |             | 
|INVESTING ACTIVITIES                                                     |   |              |                          |   |             | 
|Capital
      expenditures                                               |   | (21,653,477) |                          |   | (8,620,870) | 
|Acquisition
      of investments, net                                    |   | -            |                          |   | (200,000)   | 
|Proceeds
      from sale of investments                                  |   | -            |                          |   | 45,830      | 
|Changes
      in non-cash working capital items                          |   | 1,799,810    |                          |   | 1,149,115   | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   | (19,853,667) |                          |   | (7,625,925) | 
|                                                                         |   |              |                          |   |             | 
|FINANCING ACTIVITIES                                                     |   |              |                          |   |             | 
|Proceeds
      on issuance of share capital, net of share issuance costs |   | 5,828,070    |                          |   | 2,930,802   | 
|Proceeds
      from bank debt, net                                       |   | 4,973,983    |                          |   | (579,096)   | 
|Redemption
      of share capital                                        |   | (679,785)    |                          |   | (910,871)   | 
|Changes
      in non-cash working capital items                          |   | 40,603       |                          |   | (45,064)    | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   | 10,162,871   |                          |   | 1,395,771   | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   |              |                          |   |             | 
|INCREASE (DECREASE) IN CASH                                              |   | 18,204       |                          |   | (68,312)    | 
|                                                                         |   |              |                          |   |             | 
|CASH AND CASH EQUIVALENTS,
      BEGINNING OF YEAR                       |   | 175,915      |                          |   | 244,227     | 
|                                                                         |   |              |                          |   |             | 
|CASH AND CASH EQUIVALENTS,
      END OF YEAR                             | $ | 194,119      |                          | $ | 175,915     | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   |              |                          |   |             | 
|Supplemental cash flows
      disclosure:                                |   |              |                          |   |             | 
|Interest
      paid                                                      | $ | 484,069      |                          | $ | 407,245     | 
|                                                                         |   |              |                          |   |             | 
|Income
      taxes paid                                                  | $ | 855,285      |                          | $ | 313,756     | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   |              |                          |   |             | 
|                                                                         |   |              |                          |   |             | 
|Please refer to the
      accompanying notes.                            |   |              |                          |   |             | 

---



---



GENTRY
RESOURCES LTD.

CONSOLIDATED
STATEMENTS OF INCOME

FOR
THE YEARS ENDED DECEMBER 31, 2003 and 2002
__________________________________________

|                                                         |   | 2003        |                           |   | 2002        | 
|-------------------------------------------------------- | - | ----------- | ------------------------- | - | ----------- | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             | (Restated
      - Note 3)
|REVENUE                                                  |   |             |                           |   |             | 
|Production                                               | $ | 24,679,805  |                           | $ | 19,355,614  | 
|Less:
      royalties, net of Alberta Royalty Tax Credit |   | (5,067,096) |                           |   | (4,225,170) | 
|Interest
      and other                                 |   | 285,457     |                           |   | 168,906     | 
|                                                         |   |             |                           |   |             | 
|                                                         |   | 19,898,166  |                           |   | 15,299,350  | 
|                                                         |   |             |                           |   |             | 
|EXPENSES                                                 |   |             |                           |   |             | 
|Depletion
      & depreciation                           |   | 7,079,953   |                           |   | 4,273,079   | 
|Production                                               |   | 5,732,584   |                           |   | 4,463,744   | 
|General
      & administrative                           |   | 2,529,486   |                           |   | 2,060,198   | 
|Interest
      on bank debt                              |   | 484,069     |                           |   | 407,245     | 
|                                                         |   |             |                           |   |             | 
|                                                         |   | 15,826,092  |                           |   | 11,204,266  | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|INCOME FROM OPERATIONS                                   |   | 4,072,074   |                           |   | 4,095,084   | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|OTHER INCOME (LOSS)                                      |   |             |                           |   |             | 
|Share of
      loss of affiliate                         |   | (3,985)     |                           |   | (349,520)   | 
|Dilution
      gain on investments in affiliates         |   | -           |                           |   | 295,072     | 
|Loss on
      sale of investments                        |   | -           |                           |   | (6,726)     | 
|                                                         |   |             |                           |   |             | 
|                                                         |   | (3,985)     |                           |   | (61,174)    | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|INCOME BEFORE INCOME TAXES                               |   | 4,068,089   |                           |   | 4,033,910   | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|INCOME TAXES (Note 8)                                    |   |             |                           |   |             | 
|Current                                                  |   | 940,785     |                           |   | 950,749     | 
|Future                                                   |   | 86,795      |                           |   | 647,615     | 
|                                                         |   |             |                           |   |             | 
|                                                         |   | 1,027,580   |                           |   | 1,598,364   | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|NET INCOME                                               | $ | 3,040,509   |                           | $ | 2,435,546   | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|NET INCOME PER SHARE                                     |   |             |                           |   |             | 
|Basic
      (Note 10)                                    | $ | 0.12        |                           | $ | 0.11        | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|Diluted
      (Note 10)                                  | $ | 0.12        |                           | $ | 0.10        | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|                                                         |   |             |                           |   |             | 
|Please refer to the
      accompanying notes.            |   |             |                           |   |             | 

---





---



GENTRY
RESOURCES LTD.

CONSOLIDATED
STATEMENTS OF RETAINED EARNINGS

FOR
THE YEARS ENDED DECEMBER 31, 2003 and 2002
__________________________________________

|                                                                            |   | 2003      |                 |   | 2002      | 
|--------------------------------------------------------------------------- | - | --------- | --------------- | - | --------- | 
|                                                                            |   |           |                 |   |           | 
|                                                                            |   |           | (Restated-Note3
|                                                                            |   |           |                 |   |           | 
|Retained earnings,
      beginning of year as previously stated             | $ | 2,867,417 |                 | $ | 1,048,182 | 
|Restatement on change in
      accounting policy (Note 3)                   |   | 482,639   |                 |   | 400,863   | 
|                                                                            |   |           |                 |   |           | 
|Retained earnings,
      beginning of year restated                         |   | 3,350,056 |                 |   | 1,449,045 | 
|                                                                            |   |           |                 |   |           | 
|Net income                                                                  |   | 3,040,509 |                 |   | 2,435,546 | 
|                                                                            |   |           |                 |   |           | 
|Less: Excess of cost of
      shares acquired over stated value (Note 9[b]) |   | (327,241) |                 |   | (534,535) | 
|                                                                            |   |           |                 |   |           | 
|Retained earnings, end of
      year                                        | $ | 6,063,324 |                 | $ | 3,350,056 | 
|                                                                            |   |           |                 |   |           | 
|                                                                            |   |           |                 |   |           | 
|                                                                            |   |           |                 |   |           | 
|Please refer to the
      accompanying notes.                               |   |           |                 |   |           | 

---





---



|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                









1.

Company
activities



The
Company's activities are the exploration for and development of petroleum and
natural gas properties in Canada.





2.

Summary
of significant accounting policies



These
financial statements have been prepared using accounting principles generally
accepted in Canada which include:



(a)

Principles
of consolidation



The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, Gentry Resources (Saskatchewan) Ltd., Gentry Income
Funds Inc. and Gentry Resources (West Africa) Inc.  Both Gentry Income
Funds Inc. and Gentry Resources (West Africa) Inc. are inactive and have no
production operations.



(b)

Cash
and cash equivalents



Cash
and cash equivalents consist of amounts on deposit with banks and broker
accounts.



(c)

Investments



During
2003, the Company ceased to exert significant influence on its investment in
Stratic Energy Corporation ("Stratic").



Prior
to October 1, 2003, the Company recorded its investment in Stratic using the
equity method of accounting, whereby the investment was initially recorded at
cost and the carrying value was adjusted thereafter to include the Company's
pro-rata share of earnings and losses.  Profit distributions received or
receivable were recorded as a reduction to the amount of the investment.



The
Company records its investment in Stratic subsequent to October 1, 2003, and its
other investment, using the cost method of accounting whereby the investment is
initially recorded at cost.  Earnings are recognized only to the extent
received or receivable.  The carrying value of the investment under the
equity method of accounting on the date that the Company ceased to exert
significant influence becomes its carrying value under the cost method of
accounting.



Where
there has been a permanent decline in value, the investments are stated at
estimated net realizable value.







---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











(d)

Petroleum
and natural gas exploration and development expenditures



The
Company follows the Canadian full cost method of accounting whereby all costs
related to the exploration for and the development of petroleum and natural gas
reserves are initially capitalized and accumulated in cost centres by country.
 Costs capitalized include land acquisition costs, geological and
geophysical expenditures, costs of drilling productive and non-productive wells,
together with overhead and interest directly related to exploration and
development activities and lease and well equipment.  Gains or losses are
not recognized upon disposition of petroleum and natural gas properties unless
such a disposition would significantly alter the related cost centre's rate of
depletion and depreciation.  A significant disposition is defined as
causing a change of 20% or more in the annual depletion rate.



Costs
capitalized are depleted and depreciated using the unit-of-production method by
cost centre based upon gross proven petroleum and natural gas reserves as
determined by independent engineers.  For purposes of the calculation,
petroleum and natural gas reserves are converted to a common unit of measure on
the basis of their relative energy content, whereby one barrel of oil is
equivalent to six thousand cubic feet of natural gas.



The
cost of significant unproved properties are excluded from the depletion and
depreciation base until it is determined whether proved reserves are
attributable to the properties, or impairment has occurred.



In
applying the full cost method, the Company performs a ceiling test which
restricts the capitalized costs less accumulated depletion and depreciation,
future income taxes and asset retirement obligations for each cost centre from
exceeding an amount equal to the estimated undiscounted value of future net
revenues from proved petroleum and natural gas reserves, based on current prices
and costs, and after deducting estimated future general and administrative
expenses, estimated asset retirement obligations, financing costs and income
taxes.



(e)

Depreciation



Other
assets are depreciated using the declining balance method at annual rates of 20%
to 100%.



(f)

Income
taxes



Income
taxes are accounted for using the liability method of income tax allocation.
 Under the liability method, income tax assets and liabilities are recorded
to recognize future income tax inflows and outflows arising from the settlement
or recovery of assets and liabilities at the carrying values.  Income tax
assets are also recognized for the benefits from tax losses and deductions that
cannot be identified with particular assets or liabilities, provided those
benefits are more likely than not to be realized.  Future income tax assets
and liabilities are determined based on the tax laws and rates that are
anticipated to apply in the year of realization.

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











(g)

Asset
retirement obligations



Effective
January 1, 2003, the Company has adopted retroactively, with restatement of
prior periods, the Canadian Institute of Chartered Accountants'new standard
on Asset Retirement Obligations.  This new section requires liability
recognition for retirement obligations associated with long-lived assets, which
would include abandonment of oil and natural gas wells, related facilities,
compressors and gas plants, removal of equipment from leased acreage and
returning such land to its original condition.



Under
the new standard, the estimated fair value of each asset retirement obligation
is recorded in the period a well or related asset is drilled, constructed or
acquired.  Fair value is estimated using the present value of the estimated
future cash outflows to abandon the asset at the Company's credit-adjusted
risk-free interest rate.  The obligation is reviewed regularly by Company
management based upon current regulations, costs, technologies and industry
standards.  The discounted obligation is initially capitalized as part of
the carrying amount of the related oil and natural gas properties and a
corresponding liability is recognized.  The increase in oil and natural gas
properties is depleted and depreciated on the same basis as the remainder of the
oil and natural gas properties.  The liability is accreted against income
until it is settled or the property is sold and is included as a component of
depletion and depreciation expense.  Actual restoration expenditures are
charged to the accumulated obligation as incurred.



Prior
to 2003, the Company estimated costs of dismantlement, removal and site
restoration and recorded them over the remaining life of the proved reserves on
the unit-of-production basis. The annual provision was included in depletion and
depreciation expense and was accrued as a site restoration liability on the
balance sheet.  Actual restoration expenditures were charged to the
accumulated obligation as incurred.



(h)

Flow-through
shares



The
Company, from time to time, issues flow-through shares to finance a portion of
its capital expenditure program.  Pursuant to the terms of the flow-through
share agreements, the tax deductions associated with the expenditures are
renounced to the subscribers.  Accordingly, share capital is reduced and a
future tax liability is recorded equal to the estimated amount of future income
taxes payable by the Company as a result of the renunciations, when the
expenditures are made.



















---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











(i)

Stock-based
compensation



The
Company has a stock option plan as described in Note 9(c).



On
October 1, 2003, the Company prospectively adopted the Canadian Institute of
Chartered Accountants'new standard with respect to accounting for stock-based
compensation arrangements relating to stock options granted to employees,
officers and directors.  Under the transitional provisions of the standard,
stock options granted to employees, officers and directors after the effective
date of January 1, 2003 are accounted for using the fair value method.  As
a result of this change, general and administrative expense increased by
$112,543, property and equipment increased by $19,861 and contributed surplus
increased by $132,404, all of which have been recorded in 2003, subsequent to
September 30, 2003.  The Company will continue to disclose the pro-forma
results for stock options issued to employees, officers and directors which were
issued in 2002 in Note 9(e).



Effective
January 1, 2002, the Company prospectively adopted the Canadian Institute of
Chartered Accountants'accounting standard with respect to accounting for
stock-based compensation arrangements.  Stock options granted to
non-employees are accounted for using the fair value method under which
compensation expense is recorded based on the estimated fair value of the
options at the date of grant.  The Company has elected to use the intrinsic
value-based method of accounting for its stock option plans, whereby no
compensation expense is recorded for stock options issued to directors, officers
and employees that have an exercise price equal to or greater than the fair
value of the stock at the date options are granted.  However, the pro-forma
results of using the fair value method, under which compensation expense is
recorded based upon the estimated fair value of the options, will be presented
only for the effects of options granted subsequent to January 1, 2002.



Any
consideration received by the Company on the exercise of stock options will be
credited to share capital.



(j)

Net
income per share



Diluted
net income per share is calculated using the treasury stock method, whereby it
is assumed that proceeds from the exercise of stock options and warrants are
used by the Company to repurchase Company shares at the weighted average market
price during the year.



(k)

Revenue
recognition



Revenue
from the sale of petroleum and natural gas is recognized based on volumes
delivered to customers at contractual delivery points and rates. The costs
associated with the delivery, including operating and maintenance costs,
transportation, and production based royalty expenses are recognized in the same
period in which the related revenue is earned and recorded.

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











(l)

Foreign
currency translation



The
Company follows the temporal method when translating foreign currency
transactions and the financial statements of its integrated subsidiaries.



Under
this method, foreign currency denominated assets and liabilities are translated
at the exchange rate prevailing at the balance sheet date for monetary items and
at the transaction date for non-monetary items.  Revenues and expenses,
except depletion and depreciation, are translated at average exchange rates for
the year.  Depletion and depreciation are translated at the same rate as
the related assets.  Exchange gains or losses on translation of current and
non-current monetary items are included in the determination of net income.



Effective
January 1, 2002, the Company adopted the Canadian Institute of Chartered
Accountants'amended accounting standard with respect to accounting for
exchange gains or losses on long-term monetary items, whereby such gains or
losses are no longer deferred and amortized over the remaining terms of the
related items.  All gains or losses on long-term monetary items are now
recognized in income in the period in which they occur.  There was no
effect to the consolidated financial statements for the year ended December 31,
2002 as a result of this change.



(m)

Joint
venture accounting



Substantially
all of the Company's exploration and production activities are conducted jointly
with others, and accordingly, these financial statements reflect only the
Company's proportionate interest in such activities.



(n)

Measurement
uncertainty



The
amounts recorded for depletion and depreciation, asset retirement costs and
obligations and the ceiling test are based on estimated proved reserves,
production rates, future oil and natural gas prices and future costs.  By
their nature, these estimates are subject to measurement uncertainty and the
effect of changes in such estimates in future periods could be significant.



The
amounts used to estimate fair values of stock options issued, and the resultant
pro-forma income effects (Notes 9[d] and [e]) are based on estimates of future
volatility of the Company's share price, expected lives of the options, expected
dividends to be paid by the Company and other relevant assumptions.  By
their nature, these estimates are subject to measurement uncertainty and the
effect of changes in such estimates on the financial statements of future
periods could be significant.







---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                





















3.

Change
in accounting policy



The
effects of the change in policy for asset retirement obligations for the years
ended December 31, 2003 and 2002 are as follows:



[finnotes002.jpg]



There
is no change in the basic or diluted net income per share for either year as a
result of these changes.





4.

Investments



[finnotes004.jpg]



At
December 31, 2003, the Company owned 18.99% (2002 -19.36%) of the common
shares and Special Warrants of Stratic.  The Company is related to Stratic
by virtue of common directors and officers.















---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                















5.

Property
and equipment



[finnotes006.jpg]



During
the year, the Company capitalized $848,043 (2002 - $796,265) of a total of
$3,377,529 (2002 - $2,856,463) in general and administrative expenses.  No
interest has been capitalized.



Costs
of unproven petroleum and natural gas properties amounting to $3,206,210 (2002 -
$1,569,091) have been excluded from the depletion calculation.





6.

Bank
debt



The
Company has an uncommitted demand revolving credit facility to a maximum of
$14,000,000.  The facility is available to the Company by way of prime rate
based loans, bankers acceptances and letters of credit.  Interest is
payable monthly at the bank's prime lending rate. The facility is secured by a
general assignment of book debts, a $20,000,000 fixed and floating demand
debenture against all assets and undertakings including fixed charges on certain
property and equipment, a general security agreement covering all present and
after acquired property, and a hypothecation and assignment of certain specific
properties.  The facility is subject to an annual review.



Effective
for the fiscal period commencing January 1, 2002, the Canadian Institute of
Chartered Accountants amended Canadian Generally Accepted Accounting Principles
to require all borrowings, where the lender has the right to demand repayment
within 12 months (other than in the event of default or breach of covenants) or
where the lender has the right to refuse to roll-over the borrowing for a
further lending period longer than 12 months, to be classified as current
liabilities.  While the nature of the Company's debt has not changed, the
accounting guidelines require that this loan must be classified as current.
 The Company is not in breach of any covenants under the credit facility.

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











The
credit facility is subject to review on a periodic basis.  The next review
will be undertaken before May 31, 2004.





7.

Asset
retirement obligations



The
following table summarizes changes in the asset retirement obligations for the
years ended December 31, 2003 and 2002:



[finnotes008.jpg]



The
undiscounted amount of the estimated future cash flows required to settle the
obligations is $2,411,686 (2002 - $1,987,111).  These obligations are
expected to be paid over the next several years with a weighted average life of
approximately 11 years.  The estimated future cash flows have been
discounted at the credit-adjusted risk free rate of 5.25% (2002 - 5.87%).





8.

Income
taxes



(a)

Significant
components of the future income tax liability are as follows:



[finnotes010.jpg]













---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                





















(b)

Income
taxes expense differs from that which would be expected from applying the
combined Canadian federal and provincial income tax rate of 42.52% (2002 -
45.01%) to income before income taxes.  The difference results from the
following:





[finnotes012.jpg]

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











9.

Share
capital



Authorized

Unlimited
number of voting common shares

Unlimited
number of non-voting preferred shares



Issued



[finnotes014.jpg]





(a)

During
the year ended December 31, 2003, the Company issued 3,000,000 common shares at
a price of $1.75 per share for gross proceeds of $5,250,000.



During
the year ended December 31, 2002, the Company issued 1,000,000 Units at a price
of $1.40 per Unit for total proceeds of $1,400,000.  Each Unit is
exchangeable, for no additional consideration, into one voting common share and
one half share purchase warrant.  Each whole purchase warrant will entitle
the holder to acquire one voting common share at a price of $1.75 per share
until June 18, 2004.  All Units were deemed to have been exercised on
December 18, 2002 into 1,000,000 voting common shares and 500,000 share purchase
warrants.  As at December 31, 2003, 350,000 share purchase warrants have
been exercised.



In
addition, during the year ended December 31, 2002, the Company issued 1,000,000
flow-through common shares at a price of $1.65 per share.  Income tax
exploration deductions in the amount of $1,650,000 were renounced to subscribers
effective December 31, 2002. Qualifying expenditures in the amount of $106,058
were incurred to December 31, 2002 and $1,543,942 in 2003.



---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











(b)

Pursuant
to Normal Course Issuer Bids, the Company acquired 441,800 (2002 -741,580)
common shares at an average price of $1.54 (2002 - $1.23) per share.  The
excess of cost of reacquisition over stated value of $110,337 (2002 - Nil) has
been charged against contributed surplus with the remaining $327,241 (2002 -
$534,535) charged to retained earnings.  At December 31, 2003, a maximum of
1,638,680 common shares may be acquired by the Company until August 26, 2004
under the present Normal Course Issuer Bid.



(c)

Stock
option plan



Under
the Company's stock option plan, the Company may grant options to its
directors, officers, employees, and consultants.  The maximum number of
shares which may be reserved for issuance under the plan is 4,300,000 common
shares.  The maximum number of shares which may be reserved for issuance to
any one person under the plan is 5% of the issued common shares.  The plan
also provides that the price at which options may be granted can not be less
than the market price of the common shares at the time the option is granted.
 Options granted under the plan will have a term not exceeding ten years.
 The vesting period is set by the Board of Directors at the time the
options are granted.



A
summary of the status of the Company's stock option plan, as of December 31,
2003 and 2002 and changes during the years then ending are as follows:



[finnotes016.jpg]

The
following table summarizes the stock options outstanding at December 31, 2003:



[finnotes018.jpg]

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                













(d)

Stock-based compensation expense



The
fair value of stock options granted during 2003 was estimated on the dates of
grant using the Black-Scholes option-pricing method with the following
assumptions:



Risk
free interest rate of 3.85%

Expected
life of options of 3.5 to 4.5 years

Expected
volatility of 59.19%

Expected
dividend rate of 0%

Fair
value per option granted of $0.66



Compensation
costs of $112,543 have been expensed and $19,860 has been capitalized, resulting
in the recognition of $132,404 of contributed surplus during 2003.



(e)

Pro-forma stock-based compensation expense



Had
compensation costs for the Company's stock option plan been determined using
the fair value method for options granted from January 1, 2002 to December 31,
2002, the Company's pro-forma net income and retained earnings for 2003 would
be reduced by $20,423 (2002 - $14,238).  There would be no change in net
income per share or diluted net income per share.



The
assumptions used to determine the fair value of each option granted on the date
of grant using the Black-Scholes option-pricing model are as follows:



Risk
free interest rate of 4.1%

Expected
life of options of 3.5 years

Expected
volatility of 65.50%

Expected
dividend rate of 0%

Fair
value per option granted of $0.60



(f)

Employee
share purchase plan



On
January 1, 2003, the Company initiated an employee share purchase plan (the 
"Plan"),
whereby the Company is authorized to match employees'purchases under the Plan
from a minimum of two percent to a maximum of five percent of the employees'regular gross earnings, through the issuance of common shares of the Company,
for all full-time employees.  Compensation expense is recognized when
shares are issued under the Plan and an equal amount is recorded as share
capital.  Shares are issued from Treasury to employees at the weighted
average market price for the month immediately preceding the date of purchase of
the Company's shares.



---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











10.

Income
per share



Net
income per share has been calculated based on the weighted average number of
common shares outstanding during the year of 24,564,151 (2002 - 22,075,233).



A
reconciliation of the denominators for the per share calculations is outlined
below:



[finnotes020.jpg]



There
is no change in the numerator in the calculation of diluted net income per share
for either year.



In
2002, 500,000 warrants with a weighted average exercise price of $1.75 per share
were excluded from the calculation of diluted weighted average shares as their
exercise would be anti-dilutive.  No warrants were excluded in the 2003
calculation.





11.

Financial
instruments



(a)

Fair
values



The
fair values of the Company's accounts receivable and accounts payable and
accrued liabilities approximate their carrying values due to the short-term
nature of these financial instruments.  The fair value of investments is
$3,833,014 at December 31, 2003.



The
fair value of bank debt approximates its carrying value as it bears interest at
market rates.



(b)

Credit
risk



Virtually
all of the Company's accounts receivables are with customers in the petroleum
and natural gas industry and are subject to normal industry credit risks.



(c)

Interest
rate risk



The
Company is exposed to interest rate cash flow risk to the extent that its bank
debt is at a floating rate of interest.



---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











12.

Commitments



The
Company has obligations under operating leases for office space which expire on
November 30, 2008 with annual minimum lease rentals, exclusive of operating
costs, of $173,525 per year.





13.

United
States accounting principles and reporting



The
Company's consolidated financial statements have been prepared in Canadian
dollars and in accordance with Canadian generally accepted accounting principles
("Canadian GAAP"), which in most respects conform to accounting
principles generally accepted in the United States ("U.S. GAAP").
 Significant differences between Canadian and U.S. GAAP are described in
this note:



(a)

Full
cost accounting



In
accordance with U.S. GAAP, a ceiling test is applied to ensure the unamortized
capitalized costs in each cost center do not exceed the sum of the present
value, discounted at 10 percent, of the estimated unescalated future net
operating revenue from proved reserves plus unimpaired unproved property costs
less future development costs, related production costs, asset retirement
obligations and applicable taxes.  Under Canadian GAAP, a similar ceiling
test calculation is performed with the exception that future revenues are
undiscounted and administrative and interest expenses are deducted from
revenues.



In
computing consolidated net income for U.S. GAAP purposes, the Company recorded
additional depletion in prior years as a result of the application of the
ceiling test.  These charges were not required under the Canadian GAAP
ceiling test.  As a result, the depletion base of unamortized capitalized
costs is less for U.S. GAAP purposes.  No ceiling test write-down is
required under Canadian GAAP or U.S. GAAP as at December 31, 2003 and 2002.



(b)

Income
taxes



Canadian
GAAP previously required the Company to record potential future taxes using the
deferral method.  However, the Canadian Institute of Chartered Accountants'accounting standard is now similar to U.S. GAAP.



Upon
implementation of the new Canadian standard, retained earnings was decreased for
temporary differences that had not previously been recognized.  Under U.S.
GAAP, these temporary differences would have already been reflected in property
and equipment, therefore further differences in depletion and depreciation
expense results in subsequent years.



Under
U.S. GAAP, enacted tax rates are used to calculate future taxes, whereas under
Canadian GAAP, substantively enacted tax rates are used.



---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                













(c)

Flow-through
shares



U.S.
GAAP requires the stated capital on flow-through share issuances to be equal to
the estimated fair market value of the shares on the date of issue.  The
difference between the gross proceeds received on the issuance of the shares and
the estimated fair market value of the shares is recorded as a liability ("the
Premium") until the renunciation of expenditures has occurred.  Under
Canadian GAAP, the gross proceeds received on flow-through share issuances are
initially recorded as share capital.  The Premium recorded as a current
liability under U.S. GAAP for 2003 is $Nil (2002 - $233,932).



When
the expenditures are incurred and the tax deductions are renounced to
subscribers, Canadian GAAP requires that the stated capital be reduced by and a
future tax liability be recorded for the estimated future income taxes payable
as a result of the renouncement. Under U.S. GAAP, the future tax liability is
recorded through a charge to income tax expense less the reversal of the Premium
previously reported.



(d)

Investments



On
October 1, 2003, the Company began accounting for its investment in Stratic
using the cost method (Note 2[c]).  Under U.S. GAAP, the carrying value of
the investment under the equity method of accounting becomes its carrying value
as of the date of loss of significant influence which is identical under
Canadian GAAP.



Additionally,
under U.S. GAAP, the Company must classify investments in equity securities that
have readily determinable fair values as either available for sale or trading.
 The Company's investments are classified as available for sale as they
were not acquired and are not held principally for the purposes of selling them
in the near term.  These available for sale investments are revalued at the
end of each period based on their fair values and any unrealized gain or loss is
recorded, net of tax effects, as a component of other comprehensive income in
the period.



(e)

Stock-based
compensation



Effective
January 1, 2003, the Company prospectively adopted the Canadian Institute of
Chartered Accountants'new standard with respect to accounting for stock-based
compensation arrangements relating to stock options granted to employees,
officers and directors.  Hence, under Canadian GAAP, compensation costs
have been recognized in the financial statements for stock options granted to
employees, officers and directors in 2003.  For the effect of stock-based
compensation on the financial results under Canadian GAAP in 2003, which would
be the same adjustment under U.S. GAAP, see Note 9(d).

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











U.S.
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting
for Stock-Based Compensation"establishes financial accounting and reporting
standards for stock-based employee compensation plans under U.S. GAAP.  The
Statement requires disclosure of the pro-forma net income and net income per
share as if the fair value based accounting method had been used to account for
stock-based compensation costs in advance of the equivalent Canadian standard.
 The effects of the fair value disclosures under U.S. GAAP are as follows:



[finnotes022.jpg]





The
fair value of the options issued by the Company during 2002 was estimated under
U.S. GAAP using the same assumptions as under Canadian GAAP, as disclosed in
Note 9(e).



(f)

Asset
retirement obligations



Effective
January 1, 2003, the Company early adopted the Canadian Institute of Chartered
Accountant's new standard on Asset Retirement Obligations (Note 2[g]).
 This standard is equivalent to U.S. SFAS No. 143,
"Accounting for Asset
Retirement Obligations", which is effective for fiscal periods beginning on or
after January 1, 2003.  Early adopting the Canadian standard eliminated a
U.S. GAAP reconciling item with respect to accounting for the obligations.
 However, differences in accounting methodology for changes in accounting
policies necessitate additional disclosures under U.S. GAAP.



U.S.
GAAP requires that the cumulative impact of a change in accounting policy be
presented in the current year Consolidated Statement of Income and prior periods
are not restated.



Net
income under U.S. GAAP for the year ended December 31, 2003 increased by
$446,346 due to the change in accounting policy.  The liability for asset
retirement obligations under US GAAP would have been $1,109,588 as at January 1,
2002 and $1,299,681 as at December 31, 2002 had the change in accounting policy
been applied retroactively with restatement.













The
pro-forma impacts on the Company's financial results under U.S. GAAP if the
prior periods had been restated are as follows:

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                













Consolidated
Balance Sheet



Asset
retirement obligations



January
1, 2002

$1,109,588

December
31, 2002

$1,299,681





Consolidated
Statement of Income



[finnotes024.jpg]



(g)

Recent
accounting pronouncements



(i)

Ceiling
Test



The
Canadian Institute of Chartered Accountants has issued a new standard for full
cost accounting for oil and gas properties which changes the calculation of the
ceiling test.  The Company will adopt this standard for the fiscal year
beginning on January 1,2004, which is the effective date of the new standard.
 Based on January 1, 2004 amounts of property and equipment and
undiscounted cash flows from proved reserves, it is estimated that the new
standard will not have a material impact on the valuation of property and
equipment upon adoption.



(ii)

Flow-Through
Shares



The
Canadian Institute of Chartered Accountants has issued a new standard effective
for all flow-through shares transactions initiated after March 19, 2004.
 Under the new standard, the future income tax liability is recognized, and
share capital is reduced, on the date that the Company renounces the tax credits
associated with the expenditures, provided there is reasonable assurance that
the expenditures will be made.  This standard will have no effect on the
Company until such time as there is an issuance of flow-through shares.













(iii)

Variable
Interest Entities

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                













In
December 2003, the Financial Accounting Standards Board ("FASB") in the U.S.
issued Interpretation Number 46R"Consolidation of Variable Interest Entities,
an interpretation of Accounting Research Bulletin No. 51".  This standard
requires variable interest entities to be consolidated by their primary
beneficiary.  The standard is effective the first reporting period ending
after March 15, 2004.  In Canada, the Accounting Standards Board ("AcSB")
has suspended the effective dates for Accounting Guideline 15,"Consolidation
of Variable Interest Entities"in order to amend the guideline to harmonize
with corresponding U.S. guidance.  The AcSB plans to issue an exposure
draft in the immediate future with an effective period beginning on or after
November 1, 2004.



At
December 31, 2003, the Company did not have any variable interests in
variable-interest entities.





Summary
of significant differences between U.S. GAAP and Canadian GAAP



Reconciliation
of Consolidated Net Income Under Canadian GAAP to U.S. GAAP



[finnotes026.jpg]

---

|GENTRY
      RESOURCES LTD.                     
|------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
|DECEMBER
      31, 2003 AND 2002                











Statements
of Comprehensive Income





[finnotes028.jpg]







Condensed
Consolidated Balance Sheets





[finnotes030.jpg]





---



[c:\filings\gentry\20f123102\auditor001.wpg]Collins Barrow Calgary LLP

1400 First Alberta Place

777 - 8th Avenue S.W.

Calgary, Alberta,  Canada

T2P 3R5



T. 403. 298.1500

F.403. 298.5814

email: calgary@collinsbarrow.com





AUDITORS' REPORT



---





To the Shareholders

Gentry Resources Ltd.



We have audited the consolidated balance sheets of Gentry Resources Ltd. as at December 31, 2002 and 
2001 and the consolidated statements of income and retained earnings and cash flows for the years then 
ended.  These financial statements are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, these consolidated financial statements present fairly, in all material respects, the financial 
position of the Company as at December 31, 2002 and 2001 and the results of its operations and cash 
flows for the years then ended in accordance with Canadian generally accepted accounting principles.



Canadian generally accepted accounting principles vary in certain significant respects from accounting 
principles generally accepted in the United States.  Application of accounting principles generally 
accepted in the United States would have affected results of operations for the years ended December 
31, 2002 and 2001 and shareholders'equity as at December 31, 2002 and 2001, to the extent 
summarized in note 12 to the consolidated financial statements.













CHARTERED ACCOUNTANTS

Calgary, Alberta

Canada

March 14, 2003



COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCES



In the United States, reporting standards for auditors require the addition of an explanatory paragraph 
(following the opinion paragraph) when there is a change in accounting principles that has a material 
effect on the comparability of the Company's financial statements, such as the changes described in 
Notes 2(h), 2(k) and 6 to the consolidated financial statements.  Our report to the shareholders dated 
March 14, 2003 is expressed in accordance with Canadian reporting standards which do not require a 
reference to such a change in accounting principles in the Auditors'report when the change is properly 
accounted for and adequately disclosed in the financial statements.











CHARTERED ACCOUNTANTS

Calgary, Alberta

Canada

March 14, 2003



F-1

---



GENTRY RESOURCES LTD.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2002 and 2001__________________________________________

|                                          | ASSETS |           |            |  |           |            | 
|----------------------------------------- | ------ | --------- | ---------- |  | --------- | ---------- | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           | 2002       |  |           | 2001       | 
|                                          |        |           |            |  |           |            | 
|CURRENT                                   |        |           |            |  |           |            | 
|Cash and cash equivalents                 |        | $         | 175,915    |  | $         | 244,227    | 
|Accounts receivable                       |        |           | 5,356,504  |  |           | 1,854,813  | 
|Income taxes recoverable                  |        |           | -          |  |           | 399,334    | 
|Prepaid expenses                          |        |           | 236,760    |  |           | 252,468    | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           | 5,769,179  |  |           | 2,750,842  | 
|                                          |        |           |            |  |           |            | 
|INVESTMENTS (Note 4)                      |        |           | 1,561,111  |  |           | 1,488,242  | 
|                                          |        |           |            |  |           |            | 
|PROPERTY AND EQUIPMENT (Note 5)           |        |           | 28,437,568 |  |           | 23,929,037 | 
|                                          |        |           |            |  |           |            | 
|                                          |        | $         | 35,767,858 |  | $         | 28,168,121 | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           |            |  |           |            | 
|LIABILITIES & SHAREHOLDERS' EQUITY        |        |           |            |  |          
|                                          |        |           |            |  |           |            | 
|CURRENT                                   |        |           |            |  |           |            | 
|Accounts payable and accrued liabilities  |        | $         | 5,599,989  |  | $         | 2,998,444  | 
|Income taxes payable                      |        |           | 403,822    |  |           | -          | 
|Bank debt (Note 6)                        |        |           | 6,990,027  |  |           | 7,569,123  | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           | 12,993,838 |  |           | 10,567,567 | 
|                                          |        |           |            |  |           |            | 
|FUTURE REMOVAL AND SITE RESTORATION COSTS |        | 1,374,535 |            |  | 1,192,700 |           
|                                          |        |           |            |  |           |            | 
|FUTURE INCOME TAXES (Note 7)              |        |           | 5,269,546  |  |           | 3,564,985  | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           | 19,637,919 |  |           | 15,325,252 | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           |            |  |           |            | 
|SHARE CAPITAL (Note 8)                    |        |           | 13,262,522 |  |           | 11,794,687 | 
|RETAINED EARNINGS                         |        |           | 2,867,417  |  |           | 1,048,182  | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           | 16,129,939 |  |           | 12,842,869 | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           |            |  |           |            | 
|                                          |        | $         | 35,767,858 |  | $         | 28,168,121 | 
|                                          |        |           |            |  |           |            | 
|Approved by the Board:                    |        |           |            |  |           |            | 
|                                          |        |           |            |  |           |            | 
|                                          |        |           |            |  |           |            | 
|Director: signed"Bruce Macdonald"         |        |           |            |  |           |            | 
|A. Bruce Macdonald                        |        |           |            |  |           |            | 
|                                          |        |           |            |  |           |            | 
|Director: signed"George Hawes"            |        |           |            |  |           |            | 
|George Hawes                              |        |           |            |  |           |            | 



F-2

---



GENTRY RESOURCES LTD.

CONSOLIDATED STATEMENTS OF INCOME & RETAINED EARNINGS

FOR THE YEARS ENDED DECEMBER 31, 2002 and 2001 __________________________________________



|                                                                      |   | 2002        |  |   | 2001        | 
|--------------------------------------------------------------------- | - | ----------- |  | - | ----------- | 
|                                                                      |   |             |  |   |             | 
|REVENUE                                                               |   |             |  |   |             | 
|Production                                                            | $ | 19,355,614  |  | $ | 16,220,430  | 
|Less: royalties, net of Alberta Royalty Tax Credit                    |   | (4,225,170) |  |   | (2,751,698) | 
|Interest and other                                                    |   | 168,906     |  |   | 147,980     | 
|                                                                      |   |             |  |   |             | 
|                                                                      |   | 15,299,350  |  |   | 13,616,712  | 
|                                                                      |   |             |  |   |             | 
|EXPENSES                                                              |   |             |  |   |             | 
|Production                                                            |   | 4,463,744   |  |   | 4,414,541   | 
|Depletion & depreciation                                              |   | 4,384,540   |  |   | 3,006,610   | 
|General & administrative                                              |   | 2,060,198   |  |   | 1,978,800   | 
|Interest on bank debt                                                 |   | 407,245     |  |   | 370,097     | 
|                                                                      |   |             |  |   |             | 
|                                                                      |   | 11,315,727  |  |   | 9,770,048   | 
|                                                                      |   |             |  |   |             | 
|INCOME FROM OPERATIONS                                                |   | 3,983,623   |  |   | 3,846,664   | 
|                                                                      |   |             |  |   |             | 
|OTHER INCOME (LOSS)                                                   |   |             |  |   |             | 
|Dilution gain (loss) on investments in affiliates                     |   | 295,072     |  |   | (70,926)    | 
|Share of loss of affiliate                                            |   | (349,520)   |  |   | (757,700)   | 
|Loss on disposal of investment in affiliates                          |   | (6,726)     |  |   | (84,045)    | 
|                                                                      |   |             |  |   |             | 
|                                                                      |   | (61,174)    |  |   | (912,671)   | 
|                                                                      |   |             |  |   |             | 
|                                                                      |   |             |  |   |             | 
|INCOME BEFORE INCOME TAXES                                            |   | 3,922,449   |  |   | 2,933,993   | 
|                                                                      |   |             |  |   |             | 
|INCOME TAXES (Note 7)                                                 |   |             |  |   |             | 
|Current                                                               |   | 950,749     |  |   | 583,557     | 
|Future                                                                |   | 617,930     |  |   | 604,724     | 
|                                                                      |   |             |  |   |             | 
|                                                                      |   | 1,568,679   |  |   | 1,188,281   | 
|                                                                      |   |             |  |   |             | 
|NET INCOME                                                            |   | 2,353,770   |  |   | 1,745,712   | 
|                                                                      |   |             |  |   |             | 
|RETAINED EARNINGS (DEFICIT), beginning of year                        |   | 1,048,182   |  |   | (127,314)   | 
|                                                                      |   |             |  |   |             | 
|LESS: Excess of cost of shares acquired over stated value (Note 8[b]) |   | (534,535)   |  |   | (570,216)   | 
|                                                                      |   |             |  |   |             | 
|RETAINED EARNINGS, end of year                                        | $ | 2,867,417   |  | $ | 1,048,182   | 
|                                                                      |   |             |  |   |             | 
|                                                                      |   |             |  |   |             | 
|                                                                      |   |             |  |   |             | 
|NET INCOME PER SHARE                                                  |   |             |  |   |             | 
|Basic (Note 9)                                                        | $ | 0.11        |  | $ | 0.08        | 
|                                                                      |   |             |  |   |             | 
|                                                                      |   |             |  |   |             | 
|Diluted (Note 9)                                                      | $ | 0.10        |  | $ | 0.08        | 
|                                                                      |   |             |  |   |             | 



F-3

---



GENTRY RESOURCES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002 and 2001 __________________________________________



|                                                                                       |   | 2002        |  |   | 2001         | 
|-------------------------------------------------------------------------------------- | - | ----------- |  | - | ------------ | 
|                                                                                       |   |             |  |   |              | 
|OPERATING ACTIVITIES                                                                   |   |             |  |   |              | 
|Net income                                                                             | $ | 2,353,770   |  | $ | 1,745,712    | 
|Add (deduct) items not requiring cash                                                  |   |             |  |   |              | 
|Depletion and depreciation                                                             |   | 4,384,540   |  |   | 3,006,610    | 
|Dilution (gain) loss on investments in affiliates                                      |   | (295,072)   |  |   | 70,926       | 
|Share of loss of affiliate                                                             |   | 349,520     |  |   | 757,700      | 
|Loss on disposal of investment in affiliates                                           |   | 6,726       |  |   | 84,045       | 
|Future income taxes                                                                    |   | 617,930     |  |   | 604,724      | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   | 7,417,414   |  |   | 6,269,717    | 
|Changes in non-cash working capital items                                              |   | (1,165,210) |  |   | (1,186,856)  | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   | 6,252,204   |  |   | 5,082,861    | 
|                                                                                       |   |             |  |   |              | 
|INVESTING ACTIVITIES                                                                   |   |             |  |   |              | 
|Capital expenditures                                                                   |   | (8,620,870) |  |   | (7,960,299)  | 
|Acquisition of investments, net                                                        |   | (154,170)   |  |   | (1,671,700)  | 
|Removal and site restoration costs                                                     |   | (90,362)    |  |   | (92,480)     | 
|Acquisition of Sloane Petroleums, net of cash acquired (Note 3)                        |   | -           |  |   | (1,728,845)  | 
|Proceeds from sale of investments                                                      |   | -           |  |   | 327,798      | 
|Proceeds on disposal of property and equipment                                         |   | -           |  |   | 361,216      | 
|Changes in non-cash working capital items                                              |   | 1,149,115   |  |   | 340,090      | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   | (7,716,287) |  |   | (10,424,220) | 
|FINANCING ACTIVITIES                                                                   |   |             |  |   |              | 
|Proceeds on issuance of share capital, net of share issuance costs                     |   | 2,930,802   |  |   | 2,818,149    | 
|Redemption of share capital                                                            |   | (910,871)   |  |   | (998,414)    | 
|Proceeds from (repayments of) bank debt, net                                           |   | (579,096)   |  |   | 3,553,672    | 
|Changes in non-cash working capital items                                              |   | (45,064)    |  |   | 119,673      | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   | 1,395,771   |  |   | 5,493,080    | 
|                                                                                       |   |             |  |   |              | 
|INCREASE (DECREASE) IN CASH                                                            |   | (68,312)    |  |   | 151,721      | 
|                                                                                       |   |             |  |   |              | 
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                           |   | 244,227     |  |   | 92,506       | 
|                                                                                       |   |             |  |   |              | 
|CASH AND CASH EQUIVALENTS, END OF YEAR                                                 | $ | 175,915     |  | $ | 244,227      | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   |             |  |   |              | 
|Supplemental cash flow disclosure:                                                     |   |             |  |   |              | 
|Interest paid                                                                          | $ | 407,245     |  | $ | 370,097      | 
|                                                                                       |   |             |  |   |              | 
|Income taxes paid                                                                      | $ | 313,756     |  | $ | 2,026,655    | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   |             |  |   |              | 
|The following non-cash transaction has been excluded from the statement of cash flows: |   |             |  |  
|The acquition of property and equipment in exchange for                                |   |             |  |   |              | 
|property and equipment                                                                 | $ | -           |  | $ | 110,000      | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   |             |  |   |              | 
|                                                                                       |   |             |  |   |              | 
|Cash flow per share                                                                    |   |             |  |   |              | 
|Basic                                                                                  | $ | 0.34        |  | $ | 0.30         | 
|                                                                                       |   |             |  |   |              | 
|Diluted                                                                                | $ | 0.32        |  | $ | 0.29         | 
|                                                                                       |   |             |  |   |              | 



F-4

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



|1. | Company activities
    The Company's activities are the exploration for and development of petroleum and natural gas properties in Canada.                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Summary of significant accounting policies
    These financial statements have been prepared using accounting principles generally accepted in Canada which include:
|   | (a)                                                                                                                                                                 
|   | (b)                                                                                                                                                                 
|   | (c)                                                                                                                                                                 
|   | (d)                                                                                                                                                                 



F-5

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



| |     | Costs capitalized are depleted and depreciated using the unit-of-production method by cost centre based upon gross proven petroleum and natural gas reserves as determined by independent engineers. For purposes of the calculation, petroleum and natural gas reserves are converted to a common unit of measure on the basis of their relative energy content, whereby one barrel of oil is equivalent to six thousand cubic feet of natural gas.
The cost of significant unproved properties are excluded from the depletion and depreciation base until it is determined whether proved reserves are attributable to the properties, or impairment has occurred.
Estimated future removal and site restoration costs are provided for over the life of the proven reserves on a unit-of-production basis. Costs which include the cost of production equipment removal and environmental clean-up are estimated each year by management based on current regulations, costs, technology and industry standards. The annual charge is included in the provision for depletion and depreciation and the actual restoration expenditures are charged to the accumulated provision account as incurred.
In applying the full cost method, the Company performs a ceiling test which restricts the capitalized costs less accumulated depletion and depreciation, future income taxes and future site restoration for each cost centre from exceeding an amount equal to the estimated undiscounted value of future net revenues from proven petroleum and natural gas reserves, based on current prices and costs, and after deducting estimated future general and administrative expenses, estimated future removal and site restoration costs, financing costs and income taxes.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e) | Depreciation
    Other assets are depreciated using the declining balance method at annual rates of 20% to 100%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (f) | Income taxesIncome taxes are accounted for using the liability method of income tax allocation. Under the liability method, income tax assets and liabilities are recorded to recognize future income tax inflows and outflows arising from the settlement or recovery of assets and liabilities at the carrying values. Income tax assets are also recognized for the benefits from tax losses and deductions that cannot be identified with particular assets or liabilities, provided those benefits are more likely than not to be realized. Future income tax assets and liabilities are determined based on the tax laws and rates that are anticipated to apply in the year of realization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (g) | Flow-through sharesThe Company, from time to time, issues flow-through shares to finance a portion of its capital expenditure program. Pursuant to the terms of the flow-through share agreements, the tax deductions associated with the expenditures are renounced to the subscribers. Accordingly, share capital is reduced and a future tax liability is recorded equal to the estimated amount of future income taxes payable by the Company as a result of the renunciations, when the expenditures are made.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-6

---





GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



| | (h) | Stock-based CompensationThe Company has a stock option plan as described in Note 8(c).Stock options granted to non-employees are accounted for using the fair value method under which compensation expense is recorded based on the estimated fair value of the options at the grant date.
No compensation expense is recognized when stock options are issued to officers, directors and employees. Any consideration received by the Company on exercise of stock options is credited to share capital.
Effective January 1, 2002, the Company adopted prospectively the Canadian Institute of Chartered Accountants'new accounting standard with respect to accounting for stock-based compensation arrangements.  The Company has elected to use the intrinsic value-based method of accounting for its stock option plans, whereby, no compensation expense is recorded for stock options issued to directors, officers and employees that have an exercise price equal to the fair value of the stock at the date options are granted. The Company disclosed in Note 8(d) the pro-forma results of using the fair value method, under which compensation expense is recorded based upon the estimated fair value of the options. Pro-forma results will be presented only for the effects of options granted subsequent to January 1, 2002.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) | Income per shareDiluted income per share is calculated using the treasury stock method, whereby it is assumed that proceeds from the exercise of stock options and warrants are used by the Company to repurchase Company shares at the weighted average market price during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (j) | Revenue recognitionRevenue from the sale of petroleum and natural gas is recognized based on volumes delivered to customers at contractual delivery points and rates. The costs associated with the delivery, including operating and maintenance costs, transportation and production based royalty expenses are recognized in the same period in which the related revenue is earned and recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



F-7

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



| | (k) | Foreign currency translationThe Company follows the temporal method when translating foreign currency transactions and the financial statements of its integrated subsidiaries.
    Under this method, foreign currency denominated assets and liabilities are translated at the exchange rate prevailing at the balance sheet date for monetary items and at the transaction date for non-monetary items. Revenues and expenses, except depletion and depreciation, are translated at average exchange rates for the year. Depletion and depreciation are translated at the same rate as the related assets. Exchange gains or losses on translation of current and non-current monetary items are included in the determination of net income.
Effective, January 1, 2002, the Company adopted the Canadian Institute of Chartered Accountants amended accounting standard with respect to accounting for exchange gains or losses on long-term monetary items, whereby such gains or losses are no longer deferred and amortized over the remaining terms of the related items.  All gains or losses on long-term monetary items are now recognized in income in the period in which they occur. There was no effect to the consolidated financial statements for the years ended December 31, 2002 and 2001 as a result of this change.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (l) | Joint venture accounting
    Substantially all of the Company's exploration and production activities are conducted jointly with others, and accordingly, these financial statements reflect only the Company's proportionate interest in such activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (m) | Risk management
    The Company, from time to time, enters into forward contracts and swap agreements to hedge its exposure to the risks associated with fluctuating petroleum and natural gas prices. The purpose of the hedge is to lock in the price for a portion of the Company's production. Gains and losses associated with risk management activities are recorded as adjustments to the production revenue at the time the related production is sold.
    The Company identifies all relationships between the hedging instruments and hedged production, as well as its risk management objective and strategy for undertaking various risk management transactions. The Company believes that the risk management activities are effective hedges, both at inception and over the term of the contracts. The contracts entered into are not speculative derivative transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (n) | Measurement uncertainty
    The amounts recorded for depletion and depreciation of exploration and development costs, the provision for future removal and site restoration costs and the ceiling test are based on estimated proven reserves, production rates, future oil and natural gas prices and future costs. By their nature, these estimates are subject to measurement uncertainty and the effect of changes in such estimates in future periods could be significant.
The amounts disclosed related to fair values of stock options issued, and the resultant pro-forma income effects (Note 8[d]) are based on estimates of future volatility of the company's share price, expected lives of the options, expected dividends to be paid by the Company and other relevant assumptions. By their nature, these estimates are subject to measurement uncertainty and the effect of changes in such estimates on the financial statements of future periods could be significant.                                                                                                                                                                                                                                                                                                                                                



F-8

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



|3. | Business combination
    Sloane Petroleums Inc.
    Effective March 1, 2001, the Company amalgamated with Sloane Petroleums Inc. ("Sloane"), such amalgamation having been approved by the shareholders of both the Company and Sloane on February 28, 2001. Prior to March 1, 2001, the Company owned 37.35% of the issued and outstanding common shares of
    Sloane. By virtue of the amalgamation, the Company effectively acquired the remaining 62.65% of Sloane's common shares for $3,586,456 cash and 498,118 common shares of the Company at an ascribed value of $398,494. The transaction has been accounted for using the purchase method with the results of Sloane's operations being included in the consolidated financial statements from March 1, 2001.
The Company has accounted for this business combination as if 100% of the issued and outstanding share capital of Sloane was acquired, whereby consideration is comprised of the Company's 38.35% investment in
Sloane, at equity, plus cash and share capital issued as stated below. Accordingly, the values of Sloane's identifiable assets and liabilities, except for property and equipment, are stated at 100% of their carrying values, which approximated their estimated fair values as at the date of acquisition. Property and equipment is stated at carrying value plus the related fair value increment calculated based upon the remaining 62.65% of Sloane acquired.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Consideration for the purchase consisted of:

|Cash                            |  |  |  |  | $ | 3,586,456 | 
|------------------------------- |  |  |  |  | - | --------- | 
|Share capital issued            |  |  |  |  |   | 398,494   | 
|Investment in Sloane, at equity |  |  |  |  |   | 1,110,107 | 
|                                |  |  |  |  |   |           | 
|                                |  |  |  |  | $ | 5,095,057 | 
|                                |  |  |  |  |   |           | 
|                                |  |  |  |  |   |           | 



F-9

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001





|The purchase price was allocated as follows: |             |           | 
|-------------------------------------------- | ----------- | --------- | 
|                                             |             |           | 
|                                             |             |           | 
|Cash                                         | $           | 1,857,611 | 
|                                             |             |           | 
|Non-cash working capital deficiency          |             | (391,024) | 
|                                             |             |           | 
|Investments                                  |             | 25,285    | 
|                                             |             |           | 
|Property and equipment                       |             | 5,004,670 | 
|                                             |             |           | 
|Future removal and site restoration costs    |             | (42,008)  | 
|                                             |             |           | 
|Future income taxes                          | (1,359,477) |          
|                                             |             |          
|                                             |             |           | 
|                                             | $           | 5,095,057 | 
|                                             |             |           | 
|                                             |             |           | 
|                                             |             |           | 



|4.      Investments                   |   |           |  |   |           |  | 
|------------------------------------- | - | --------- |  | - | --------- |  | 
|                                      |   |           |  |   |           |  | 
|                                      |   | 2002      |  |   | 2001      | 
|                                      |   |           |  |   |           | 
|Stratic Energy Corporation, at equity | $ | 1,543,111 |  | $ | 1,470,242 | 
|Other, at cost                        |   | 18,000    |  |   | 18,000    | 
|                                      |   |           |  |   |           |  | 
|                                      | $ | 1,561,111 |  | $ | 1,488,242 | 



During the year ended December 31, 2002, the Company acquired 909,090 Special Warrants of Stratic for $200,000. Each Special Warrant is exercisable, at no additional cost, into one common share and one-half share purchase warrant of Stratic. Each whole share purchase warrant entitles the holder to acquire one voting common share at $0.40 per share until June 4, 2004. The Special Warrants are exercisable at any time before the earlier of (i) five days following the date Stratic obtains a receipt for a prospectus and (ii) May 5, 2003.

Under the same financing, the Company swapped 6,165,000 common shares of Stratic for 6,165,000 Special Warrants and 1,432,500 share purchase warrants. The swap was not in the normal course of operations and the change in the ownership interest in the shares was not substantive. The swap transaction does not represent the culmination of the earnings process as the Company swapped similar assets, therefore, no gain or loss has been recorded and no amount was recorded to shareholders'equity.

No value has been assigned to the share purchase warrants.

During the year ended December 31, 2002, the Company disposed of 201,000 common shares of Stratic for net proceeds of $45,830.

During the year ended December 31, 2001, the Company acquired 2,272,727 Special Warrants of Stratic for $1,250,000. Each Special Warrant was exercisable into 1.1 common shares and 0.55 share purchase warrants of Stratic. During 2002, the Company converted the Special Warrants into 2,499,999 common shares and 1,249,000 share purchase warrants. Each share purchase warrant entitles the holder to acquire one voting common share at $0.75 per share until March 13, 2003. The share purchase warrants expired unexercised.

F-10

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



At December 31, 2002, the Company owned 19.36% (2002 -37.16%) of the common shares and Special Warrants of
Stratic. The Company is related to Stratic by virtue of common directors and officers.

5. Property and equipment

|                                               |   | 2002       |  |   | 2001       | 
|---------------------------------------------- | - | ---------- |  | - | ---------- | 
|Petroleum and natural gas properties including |   |            |  |   |            | 
|exploration and development thereon            | $ | 36,592,604 |  | $ | 29,327,598 | 
|Production equipment and facilities            |   | 7,607,576  |  |   | 6,309,169  | 
|Other                                          |   | 542,031    |  |   | 484,570    | 
|                                               |   |            |  |   |            | 
|                                               |   | 44,742,211 |  |   | 36,121,337 | 
|Accumulated depletion and depreciation         |   | 16,304,643 |  |   | 12,192,300 | 
|                                               |   |            |  |   |            | 
|                                               | $ | 28,437,568 |  | $ | 23,929,037 | 

During the year, the Company capitalized $796,265 (2001 - $756,026) of a total of $2,856,463 (2001 - $2,734,826) in general and administrative expenses. No interest has been capitalized.

Costs of unproven petroleum and natural gas properties amounting to $1,569,091 (2001 -$1,048,671) have been excluded from the depletion calculation.

Future removal and site restoration costs are estimated in aggregate to be $3,170,613 (2001 -$3,112,556) of which $272,197 (2001 - $228,354) has been charged to earnings in the current year.

|6. | Bank debtThe Company has a demand revolving production loan to a maximum of $12,000,000. The loan is available to the Company by way of prime rate loans, banker's acceptances and letters of credit. Interest is payable monthly at the bank's prime lending rate plus 3⁄4%. The facility is secured by a general assignment of book debts, a first floating charge demand debenture in the amount of $20,000,000 on all assets with a fixed charge on certain property and equipment, a general security agreement covering all present and after acquired property, and an assignment of certain specific properties. The facility is subject to an annual review. This review will include a borrowing base re-determination and a full assessment of the Company's financial position and operations.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Effective for the fiscal period commencing January 1, 2002, the Canadian Institute of Chartered Accountants amended Canadian Generally Accepted Accounting Principles to require all borrowings, where the lender has the right to demand repayment within 12 months (other than in the event of default or breach of covenants) or where the lender has the right to refuse to roll-over the borrowing for a further lending period longer than 12 months, to be classified as current liabilities. While the nature of the Company's debt has not changed, the accounting guidelines require that this loan must be classified as current. The bank loan at December 31, 2001 has been restated to conform with the current presentation. The Company is not in breach of any covenants under the production loan.



F-11

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



The direct revolving production loan is subject to review on a periodic basis. The next review will be undertaken before May 31, 2003.

|7. | Income taxes
|-- | ------------
|   | (a)         

|                                              |   | 2002      |  |   | 2001      | 
|--------------------------------------------- | - | --------- |  | - | --------- | 
|Temporary differences related to property and |   |           |  |   |           | 
|equipment and future site restoration         | $ | 5,529,244 |  | $ | 3,858,242 | 
|Share issuance and financing costs            |   | (122,125) |  |   | (84,857)  | 
|Temporary differences related to investments  |   | (137,573) |  |   | (208,400) | 
|                                              |   |           |  |   |           | 
|                                              | $ | 5,269,546 |  | $ | 3,564,985 | 

|    |                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Income taxes expense differs from that which would be expected from applying the combined Canadian federal and provincial income tax rates of 45.01% (2001 - 42.62%) to income before income taxes. The difference results from the following:

|                                           |   | 2002        |  |   | 2001      | 
|------------------------------------------ | - | ----------- |  | - | --------- | 
|                                           |   |             |  |   |           | 
|Expected tax provision                     | $ | 1,765,494   |  | $ | 1,250,468 | 
|Increases (decreases) resulting from:      |   |             |  |   |           | 
|Resource allowance                         |   | (1,187,485) |  |   | (849,701) | 
|Non-deductible crown payments, net of      |   |             |  |   |           | 
|Alberta Royalty Tax Credit                 |   | 778,486     |  |   | 778,609   | 
|Change in value of tax reserves due to tax |   |             |  |   |           | 
|reassessments and change in tax rates      |   | 120,851     |  |   | (154,876) | 
|Large corporation and capital taxes        |   | 40,552      |  |   | -         | 
|Reduced tax rates for resource allowance   |   |             |  |   |           | 
|and capital gains                          |   | 31,724      |  |   | (41,649)  | 
|Tax assets not previously recognized       |   | -           |  |   | 166,386   | 
|Saskatchewan Resource Surcharge            |   | -           |  |   | 35,589    | 
|Other                                      |   | 19,057      |  |   | 3,455     | 
|                                           |   |             |  |   |           | 
|                                           | $ | 1,568,679   |  | $ | 1,188,281 | 



F-12

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



|8. | Share capital
    
    Authorized
    Unlimited number of voting common shares
    Unlimited number of non-voting preferred shares
|-- | ----------------------------------------------------------------------------------------------------------------------------------

Issued

> 



|(a) | During the year ended December 31, 2002, the Company issued 1,000,000 (2001- 1,808,549) flow-through common shares at a price of $1.65 (2001 - $1.55) per share. Income tax exploration deductions in the amount of $1,650,000 were renounced to subscribers effective December 31, 2002 (2001 - $2,803,250). Qualifying expenditures in the amount of $106,058
    have been incurred to December 31, 2002
    (2001 - $103,250).  Additional qualifying
    expenditures in the amount of $1,543,942 must be incurred in 2003.
In addition, the Company issued 1,000,000 Units at a price of $1.40 per Unit for total proceeds of $1,400,000. Each Unit is exchangeable, for no additional consideration, into one voting common share and one half share purchase warrant. Each whole purchase warrant will entitle the holder to acquire one voting common share at a price of $1.75 per share until June 18, 2004. All Units were deemed to have been exercised on December 18, 2002 into 1,000,000 voting common shares and 500,000 share purchase warrants. As at December 31, 2002 no share purchase warrants were exercised.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Pursuant to Normal Course Issuer Bids, the Company acquired 742,600 (2001
    -962,754) common shares at an average price of $1.23 (2001 - $1.04) per share. The excess of cost of reacquisition over stated value of $534,535 (2001 - $570,216) was charged to retained earnings. At December 31, 2002, a maximum of 1,398,000 common shares may be acquired by the Company until August 9, 2003 under the present Normal Course Issuer Bid.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-13

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



|(c) | Stock option planUnder the Company's stock option plan, the Company may grant options to its directors, officers, employees, and consultants. The maximum number of shares which may be reserved for issuance under the plan is 4,300,000 common shares. The maximum number of shares which may be reserved for issuance to any one person under the plan is 5% of the issued common shares. The plan also provides that the price at which options may be granted can not be less than the market price of the common shares at the time the option is granted. Options granted under the plan will have a term not exceeding ten years. The vesting period is set by the Board of Directors at the time the options are granted. At December 31, 2002, 348,336 stock options that have been issued can not be exercised until certain regulatory conditions are satisfied.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A summary of the status of the Company's stock option plan, as of December 31, 2002 and 2001 and changes during the years then ending are as follows:

> 

F-14

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



No options were granted in 2002 with an exercise price that exceeded the market price on the grant date.

The weighted average fair value of options granted in 2002 was $0.60 (2001 - $0.37) per share and the weighted average exercise price of these options was $1.20 (2001 - $0.89) per share.

|(d) | Pro-Forma stock-based compensation expenseHad compensation costs for the Company's stock option plan been determined using the fair value method for options granted subsequent to January 1, 2002, the Company's pro-forma net income and retained earnings would be reduced by $14,238. There would be no change in net income per share or diluted income per share.The assumptions used to determine the fair value of each option granted on the date of grant using the
Black-Scholes option pricing model are as follows:
Risk free interest rate of 4.1%
Expected life of options of 3.5 years
Expected volatility of 65.50%
Expected dividend rate of 0%                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) | Employee share purchase plan
On January 1, 2003, the Company initiated an employee share purchase plan (the

"Plan"), whereby the Company is authorized to match employees'purchases under the plan from a minimum of two percent to a maximum of five percent of the employees'regular gross earnings, through the issuance of Common Shares of the Company, for all full-time employees. Compensation expense will be recognized when shares are issued under the Plan and an equal amount is charged to share capital. Shares will be issued from Treasury to employees at the weighted average market price for the month immediately preceding the date of purchase of the Company's shares.



|9. | Income per share
    Net income per share has been calculated based on the weighted average number of common shares outstanding during the year of 22,075,233 (2001 - 20,883,082).
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 | 2002       |  | 2001       | 
|-------------------------------- | ---------- |  | ---------- | 
|                                 |            |  |            | 
|Basic weighted average shares    | 22,075,233 |  | 20,883,082 | 
|Effect of dilutive stock options | 1,242,054  |  | 959,236    | 
|                                 |            |  |            | 
|Dilutive weighted average shares | 23,317,287 |  | 21,842,318 | 

A reconciliation of the denominators for the per share calculations is outlined below:

F-15

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GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



There is no change in to the numerator in the calculation of diluted income per share for either year.

At December 31, 2002, there were 500,000 warrants outstanding with a weighted average exercise price of $1.75 per share that have not been included in the calculation of diluted income per share as the effect would be anti-dilutive.

|10. | Financial instruments
|--- | ---------------------
|    | (a)                  
|    | (b)                  

|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                         | Credit risk
    Virtually all of the Company's accounts receivables are with customers in the petroleum and natural gas industry and are subject to normal industry credit risks.                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11. | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                         | The Company must expend $1,543,942 of exploration expenses in 2003 which were renounced to subscribers at December 31, 2002 (Note 8[a]).                                                                                                                                                                                                                                                                                                                                                          
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                         | The Company has obligations under operating leases for office space which expire on September 30, 2003 with annual minimum lease rentals, exclusive of operating costs of $118,471 in 2003.                                                                                                                                                                                                                                                                                                       
|12. | United States accounting principles and reporting
    The Company's consolidated financial statements have been prepared in Canadian dollars and in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). Significant differences between these principles, as they pertain to the Company's financial statements, and United States' generally accepted accounting principles ("U.S. GAAP") are as follows:
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                         | Full cost accounting
    In accordance with U.S. GAAP, a ceiling test is applied to ensure the unamortized capitalized costs in each cost center do not exceed the sum of the present value, discounted at 10 percent, of the estimated unescalated future net operating revenue from proved reserves plus unimpaired unproved property costs less future development costs, related production, site restoration and applicable taxes. Under Canadian GAAP, a similar ceiling test calculation is
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-16

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GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



| |     | performed with the exception that future revenues are undiscounted and administrative and interest expenses are deducted from revenues.
In computing its consolidated net income for U.S. GAAP purposes, the Company recorded additional depletion in prior years as a result of the application of the ceiling test. These charges were not required under the Canadian GAAP ceiling test. As a result, the depletion base of unamortized capitalized costs is less for U.S. GAAP purposes. No ceiling test write-down is required under Canadian GAAP or U.S. GAAP as at December 31, 2002 and 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Income taxesCanadian GAAP previously required the Company to record potential future taxes using the deferral method. However, the Canadian Institute of Chartered Accountants has issued an accounting standard which is now similar to U.S.
    GAAP. This standard will apply for fiscal years commencing on or after January 1, 2000.
    The Company adopted the new Canadian standard for the year ended December 31, 1999 retroactively without restatement. The recommendations resulted in an increase in deficit for December 31, 1999 representing temporary differences that had not previously been recognized. Under U.S.
    GAAP, these temporary differences would have already been reflected in property and equipment, therefore further differences in depletion and depreciation expense results in subsequent years.
Under U.S. GAAP, enacted tax rates are used to calculate future taxes, whereas Canadian GAAP uses substantively enacted tax rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (c) | Flow-through shares
    U.S. GAAP requires the stated capital on flow-through share issuances to be equal to the estimated fair market value of the shares on the date of issue. The difference between the gross proceeds received on the issuance of the shares and the estimated fair market value of the shares is treated as a liability ("the Premium") until the renunciation of expenditures has occurred. Under Canadian
    GAAP, the gross proceeds received on flow-through share issuances are initially recorded as share capital. The premium recorded as a current liability under U.S. GAAP for 2002 is $233,932 (2001 - $344,659).
When the expenditures are incurred and the tax deductions are renounced to subscribers, Canadian GAAP requires that the stated capital be reduced by and a future tax liability be recorded for the estimated future income taxes payable as a result of the renouncement. Under U.S.
    GAAP, the future tax liability is recorded through a charge to income tax expense less the reversal of the Premium previously reported.                                                                                                                                                                                                                                                                                                                                                                                                 
| | (d) | Investments
    Canadian GAAP requires investments that the company does not have a significant influence in to be recorded using the cost method of accounting whereby the investments are initially recorded at cost. Where there has been a permanent decline in value, the investments are stated at estimated net realizable value.
Under U.S. GAAP, the Company's investments would be classified as
    "Available-For-Sale"using the cost method of accounting and require that the securities be recorded at fair market value.  As the difference between cost and fair market value has not been realized, any unrealized holding gains or losses would be reported as other comprehensive income (as a separate component of shareholders'equity) until realized. As at December 31, 2002, there are no differences between cost and fair market value of the investments held at cost.
Under U.S. GAAP, equity accounting is generally required when and investor's ownership interest is equal to or greater than 20% of the investee's total voting securities. In situations where the ownership is less than 20%, equity accounting may be appropriate if significant influence exists as the result of other contractual relationships and board representation. The Company's 19.6% interest in Stratic has been accounted for under the equity method for U.S. GAAP due to the Company's representation on the Board of Directors and by virtue of common officers.



F-17

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GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



Net income under U.S. GAAP

If the consolidated financial statements had been prepared in accordance with U.S. GAAP, the following adjustments would be required:

|                                         |   | 2002      |  |   | 2001      | 
|---------------------------------------- | - | --------- |  | - | --------- | 
|                                         |   |           |  |   |           | 
|Net income under Canadian GAAP           | $ | 2,353,770 |  | $ | 1,745,712 | 
|U.S. GAAP adjustments                    |   |           |  |   |           | 
|Depletion and depreciation               |   | 355,226   |  |   | 321,946   | 
|Future tax expense on flow-through share |   |           |  |   |           | 
|renouncements                            |   | (821,184) |  |   | (30,826)  | 
|Future income tax                        |   | 203,533   |  |   | (195,204) | 
|Interest capitalized                     |   | 15,607    |  |   | 6,331     | 
|                                         |   |           |  |   |           | 
|Net income under U.S. GAAP               | $ | 2,106,952 |  | $ | 1,847,959 | 
|                                         |   |           |  |   |           | 
|Income per share using U.S. GAAP         |   |           |  |   |           | 
|Basic                                    | $ | 0.10      |  | $ | 0.09      | 
|                                         |   |           |  |   |           | 
|Diluted                                  | $ | 0.09      |  | $ | 0.08      | 

The adjustments using U.S. GAAP would result in the following changes to the consolidated balance sheets of the Company:

|                                          |   | 2002       |  |   |            | 2001 |   |           
|----------------------------------------- | - | ---------- |  | - | ---------- | ---- | - | ----------
|                                          |   | Canadian   |  |   |            |      |   | Canadian  
|U.S. GAAP GAAP U.S. GAAP GAAP             |  
|Assets                                    |   |            |  |   |            |      |   |           
|Current assets                            | $ | 5,769,179  |  | $ | 5,769,179  |      | $ | 2,750,842 
|Investments                               |   | 1,561,111  |  |   | 1,561,111  |      |   | 1,488,242 
|Property and equipment                    |   | 28,437,568 |  |   | 26,101,695 |      |   | 23,929,037
|                                          |   |            |  |   |            |      |   |           
|                                          | $ | 35,767,858 |  | $ | 33,431,985 |      | $ | 28,168,121
|                                          |   |            |  |   |            |      |   |           
|Liabilities and Shareholders' Equity      |   |            |  |   |            |      |   |           
|Current liabilities                       | $ | 12,993,838 |  | $ | 13,227,770 |      | $ | 10,567,567
|Future removal and site restoration costs |   | 1,374,535  |  |   | 1,374,535  |      |   | 1,192,700 
|Future income taxes                       |   | 5,269,546  |  |   | 3,933,169  |      |   | 3,564,985 
|Shareholders' equity                      |   | 16,129,939 |  |   | 14,896,511 |      |   | 12,842,869
|                                          |   |            |  |   |            |      |   |           
|                                          | $ | 35,767,858 |  | $ | 33,431,985 |      | $ | 28,168,121

Non-cash working capital under U.S. GAAP:

F-18

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



|                                         |   |             |  |   |           | 
|---------------------------------------- | - | ----------- |  | - | --------- | 
|                                         |   | 2002        |  |   | 2001      | 
|Cash provided by (used for)              |   |             |  |   |           | 
|Accounts receivable                      | $ | (3,501,691) |  | $ | 721,437   | 
|Prepaid expenses                         |   | 15,708      |  |   | (110,801) | 
|Income taxes recoverable                 |   | 399,334     |  |   | (399,334) | 
|Accounts payable and accrued liabilities |   | 2,490,818   |  |   | (331,922) | 
|Income taxes payable                     |   | 403,822     |  |   | (606,473) | 
|                                         |   |             |  |   |           | 
|Changes in non-cash working capital      | $ | (192,009)   |  | $ | (727,093) | 

Additional U.S. GAAP Disclosures

Stock Option Plan

Statement of Financial Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation" establishes financial accounting and reporting standards for stock-based employee compensation plans. The Statement encourages a fair value based method of accounting for stock options, but permits a company to continue to measure compensation costs for those plans using the intrinsic value based method of accounting as prescribed by Accounting Principles Board Opinion No. 25. The Company has elected to follow the intrinsic value method of accounting. No compensation expense has been recognized in the financial statements. The following table provides pro forma net income and net income per share amounts as if the fair value based accounting method had been used to account for stock-based compensation costs:

|                             |   | 2002        |  |   |           | 2001 |             |          
|---------------------------- | - | ----------- |  | - | --------- | ---- | ----------- | ---------
|                             |   | As Reported |  |   | Pro Forma |      | As Reported |          
|                             |   |             |  |   |           |      |             |          
|Net income                   | $ | 2,106,952   |  | $ | 2,011,832 |      | $           | 1,847,959
|Net income per share - Basic | $ | 0.10        |  | $ | 0.09      |      | $           | 0.09     
|-Diluted                     | $ | 0.09        |  | $ | 0.09      |      | $           | 0.08     

The fair value of the Company's options was estimated using the
Black-Scholes model assuming a 3.5 year expected hold period of options prior to exercise, 66% (2001 - 53%) volatility in the price of the Company's shares, and a risk-free interest rate of 4.1% (2001
-1.8%). No future dividend payments were assumed in estimating the fair value of the options.

The weighted average fair market value of options granted in 2002 with an exercise price that exceeded the market price on grant date was Nil (2001 - $0.27) per share, and the weighted average exercise price of these options is Nil (2001 - $0.71). The weighted average fair market value of options granted in 2002 with an exercise price equal to the market price on grant date was $0.60 (2001 - $0.37) per share, and the weighted average exercise price of these options is $1.20 (2001 -$0.89) per share.

Effective January 1, 2002, Canadian GAAP requires similar accounting and reporting standards for stock-based employee compensation. Under Canadian GAAP this accounting standard has been applied prospectively, as described in Note 2(h), therefore, the fair value difference under U.S. GAAP
relate to options granted prior to January 1, 2002.

F-19

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



Risk Management

Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" (as amended by SFAS No. 137 and 138), establishes accounting and reporting standards for derivative instruments and for hedging activities.  The Statement requires a company recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The Statement is effective for the Company's 2001 fiscal year end and the Company has adopted the standard January 1, 2001 prospectively. As at December 31, 2002 and 2001, the Company has no outstanding derivative financial instruments designated as hedges.

New Standards

Accounting for asset retirement obligations

Statement of Financial Accounting Standards No. 143 "Accounting for Asset Retirement Obligations"requires that an obligation associated with the retirement of tangible long-lived assets and the associated asset retirement costs be recognized as a liability when incurred. Upon initial recognition of a liability for an asset retirement obligation, an entity would capitalize that cost by recognizing an increase in the carrying amount of the related long-lived asset by the same amount as the liability. An entity would subsequently allocate that asset retirement cost to expense by depleting and depreciating the related asset over its remaining useful life. The Company will adopt SFAS No. 143 for its fiscal year beginning on January 1, 2003.

Management is currently evaluating the impact of this standard. In the opinion of management, the adoption of SFAS No. 143 will not have a material impact on the Company's operating results or financial position as the Company currently provides for future removal and site restoration costs on property and equipment (Notes 2 (d) and 5).

The Canadian Institute of Chartered Accountants ("CICA") issued an exposure draft"Asset Retirement Obligations", which would harmonize Canadian GAAP with SFAS No. 143. The Canadian standard will be effective for fiscal years beginning on or after January 1, 2004.

Hedging Relationships

The CICA issued Accounting Guideline 13 
"Hedging Relationships"which deals with the identification, designation, documentation and effectiveness of hedging relationships for the purpose of applying hedge accounting. The guideline is effective for fiscal years beginning on or after July 1, 2003. Management is currently evaluating the impact of this standard.

Stock-based Compensation

In December 2002 the CICA issued an exposure draft for

"Stock-Based Compensation and Other Stock-Based Payments". The new standard proposes to recognize stock-based compensation expense for all stock-based compensation transactions and eliminate the option to disclose fair value pro-forma earnings .

F-20

---



GENTRY RESOURCES LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001



Costs Associated with Exit or Disposal Activities

Statement of Financial Accounting Standards No. 146 
"Accounting for Costs Associated with Exit or Disposal Activities"requires that liabilities for exit or disposal activity be recognized and measured at fair value when the liability is incurred. This standard is effective for disposal activities initiated after December 31, 2002.

|13. | Comparative figures
    The presentation of certain amounts from the previous year has been changed to conform with the presentation adopted for the current year.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-21

---



ITEM 19

EXHIBITS





The following exhibits are attached and incorporated herein:



Exhibit1.1Articles of Amalgamation(1)1.2By-Laws of the Company(1)4.1Engineering Consulting Agreement, dated as of April 1, 2002, as amended April 1, 2003, between the Company and Hawkeye Resources Ltd.(2)4.2Amended and Restated Stock Option Plan of the Company effective as of May 28, 20044.3Amended and Restated Shareholder Rights Plan of the Company, effective as of May 28, 20048Subsidiaries of the Company(1)12.1Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended12.2Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended13.1Certification of Chief Executive Officer Pursuant to 18
    U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2Certification of Chief Financial Officer Pursuant to 18
    U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(1)

Incorporated by reference to the Company's Annual Report on Form 20-F for the Year Ended December 31, 2000, filed with the Commission on June 29, 2001.

(2)

Incorporated by reference to the Company's Annual Report on Form 20-F for the Year Ended December 31, 2002, filed with the Commission on June 30, 2003.



83



---



SIGNATURES



Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.



GENTRY RESOURCES LTD.

Registrant







By: (signed)


 "Ketan Panchmatia"



Name:  Ketan Panchmatia

Title:

Vice President, Finance and

Chief Financial Officer



Date:

June 28, 2004







84