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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934

For the Month of May 2008

Commission file number…001-31819

GOLD RESERVE INC.

Address of Principal Executive Offices: ...................926 West Sprague Avenue
                                                                      Suite 200
                                                                      Spokane, Washington 99201

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F __ Form 40-F X.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(7): ___

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also
thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934: Yes __  No X .

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-
2(b):

Filed with this Form 6-K are the following, which are incorporated herein by reference:

99.1      Notice of Annual and Special Meeting of Shareholders and Information Circular
 
99.2      Form of Proxy
 
99.3      Annual Report
 

Certain statements included herein, including those that express management's expectations or estimates of our future performance or concerning the Brisas Project or the Choco 5 exploration project, constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies. We caution that such forward-looking statements involve known and unknown risks, uncertainties and other risks that may cause the actual financial results, performance, or achievements of Gold Reserve Inc. to be materially different from our estimated future results, performance, or achievements expressed or implied by those forward-


looking statements. Numerous factors could cause actual results to differ materially from those in the forward-looking statements, including without limitation, concentration of operations and assets in Venezuela; corruption and uncertain legal enforcement; requests for improper payments; regulatory, political and economic risks associated with Venezuelan operations (including changes in previously established legal regimes, rules or processes); the ability to obtain or maintain the necessary permits or additional funding for the development of the Brisas Project; in the event any key findings or assumptions previously determined by us or our experts in conjunction with our 2005 bankable feasibility study (as updated or modified from time to time) significantly differ or change as a result of actual results in our expected construction and production at the Brisas Project (including capital and operating cost estimates); risk that actual mineral reserves may vary considerably from estimates presently made; impact of currency, metal prices and metal production volatility; fluctuations in energy prices; changes in proposed development plans (including technology used); our dependence upon the abilities and continued participation of certain key employees; and risks normally incident to the operation and development of mining properties. This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements. Investors are cautioned not to put undue reliance on forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this notice. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GOLD RESERVE INC.
             (Registrant) 
 
By:    s/ Robert A. McGuinness 
       Vice President – Finance & CFO 
       May 13, 2008 

Exhibit Index

The following are filed as exhibits to this Form 6-K:

Exhibit     
Number                                                                             Description 
99.1    Notice of Annual and Special Meeting of Shareholders and Information Circular 
99.2    Form of Proxy 
99.3    Annual Report 


Exhibit 99.1 Notice of Annual and Special Meeting of Shareholders and Information Circular


GOLD RESERVE INC.

926 W. Sprague Avenue, Suite 200,
Spokane, WA 99201

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that an Annual and Special Meeting (the “Meeting”) of the holders of Class A common shares and Class B common shares (collectively, the “Shareholders”) of GOLD RESERVE INC. (the “Company”) will be held at the Spokane Club, located at 1002 W. Riverside, Spokane, Washington USA, on Tuesday, the 10th day of June, 2008 at 9:30 a.m. (Pacific daylight time) for the following purposes:

1)      To elect directors of the Company to hold such positions until the next annual meeting of Shareholders or until their successors are elected and have qualified;
 
2)      To appoint auditors of the Company and to authorize the directors of the Company to fix their remuneration;
 
3)      To approve the issuance of 100,000 Class A common shares of the Company for purchase by the KSOP Plan;
 
4)      To consider and, if deemed advisable approve, with or without variation, a resolution approving the adoption of the Venezuelan Equity Incentive Plan (the “Venezuelan Plan”);
 
5)      To receive the financial statements of the Company for the year ended December 31, 2007, together with the report of the auditors thereon; and
 
6)      To conduct any other business as may properly come before the meeting or any adjournment thereof.
 

Shareholders who are unable to attend the Meeting or any adjournment or postponement thereof in person and who wish to ensure that their shares will be voted are requested to complete, sign and mail the enclosed form of proxy to Proxy Services, C/O Computershare Trust Company N.A., P.O. Box 43102, Providence, RI 02940-5068 not later than the close of business on the business day immediately preceding the Meeting or any adjournment thereof. A form of proxy, management information circular and a copy of the Company’s Annual Report accompany this notice. The specific details of the matters proposed to be put before the Meeting are set forth in the accompanying Information Circular.

The Board of Directors has fixed the close of business on May 2, 2008 as the record date for the determination of Shareholders entitled to notice of the meeting and any adjournment or postponement thereof.

  DATED this 23rd day of April, 2008

BY ORDER OF THE DIRECTORS

Rockne J. Timm
Chief Executive Officer


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GOLD RESERVE INC.

INFORMATION CIRCULAR

(Containing information as of April 23, 2008)

MANAGEMENT SOLICITATION OF PROXIES

This Management Information and Proxy Circular is furnished in connection with the solicitation of proxies by the management of GOLD RESERVE INC. (the “Company”) to be voted at the Annual and Special Meeting of Shareholders of the Company (the “Meeting”) to be held on Tuesday, the 10th day of June, 2008 at 9:30 a.m. (Pacific daylight time), at the Spokane Club located at 1002 W. Riverside, Spokane, Washington and at any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual and Special Meeting of Shareholders. The solicitation of proxies will be primarily by mail but proxies may also be solicited personally or by telephone by employees of the Company. Employees will not receive any extra compensation for such activities. The Company may pay brokers, nominees or other persons holding shares of the Company in their name for others for their reasonable charges and expenses in forwarding proxies and proxy materials to beneficial owners of such shares, and obtaining their proxies. The Company may also retain independent proxy solicitation agents to assist in the solicitation of proxies for the Meeting. The cost of all solicitations of proxies will be borne by the Company. Except where otherwise stated, the information contained herein is given as of the 23rd day of April, 2008.

Unless otherwise indicated, all currency amounts referred to herein are stated in U.S. dollars.

APPOINTMENT AND REVOCATION OF PROXIES

The individuals named in the enclosed form of proxy are directors or officers of the Company. A Shareholder submitting a proxy has the right to appoint a person or company, who need not be a Shareholder, to represent the Shareholder at the Meeting other than the persons designated in the form of proxy furnished by the Company. To exercise this right, the Shareholder may insert the name of the desired representative in the blank space provided in the proxy or may submit another appropriate form of proxy.

The completed proxy must be deposited at the office of Proxy Services, C/O Computershare Trust Company N.A., P.O. Box 43102, Providence, RI 02940-5068, not later than the close of business on the business day preceding the day of the Meeting or any adjournment or postponement thereof, or with the Chairman of the Meeting immediately prior to the commencement of the Meeting or any adjournment or postponement thereof, otherwise the instrument of proxy will be invalid.

You may revoke or change your proxy at any time before it is exercised at the Meeting. In the case of Shareholders appearing on the registered shareholder records of the Company, a proxy


may be revoked at any time prior to its exercise by sending or depositing a written notice of revocation or another signed proxy bearing a later date to the Secretary of the Company at its principal executive office located at 926 W. Sprague Avenue, Suite 200, Spokane, Washington 99201. You may also revoke your proxy by giving notice or by voting in person at the Meeting.

Shareholders appearing in the name of a bank, broker or other nominee should follow the instructions provided by their bank, broker or nominee in revoking their previously voted shares.

EXERCISE OF DISCRETION BY PROXIES

The shares represented by the proxy will be voted or withheld from voting in accordance with the instructions of the Shareholder on any ballot that may be called for and, if the Shareholder specifies a choice with respect to any matter to be acted upon, the shares will be voted accordingly. In the absence of such choice being specified, such shares will be voted “for” the matters specifically identified in the Notice of Annual and Special Meeting of Shareholders accompanying this management information circular (the “Information Circular”).

The enclosed form of proxy confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the Notice of Annual and Special Meeting of Shareholders and with respect to other matters which may properly be brought before the Meeting. At the time of printing this Information Circular, the management of the Company knows of no such amendments, variations or other matters to come before the Meeting other than the matters referred to in the Notice of Annual and Special Meeting of Shareholders.

In February 1999, the Gold Reserve Corporation became a subsidiary of the Company, the successor issuer. For the purposes of disclosure in this Information Circular, references to the Company prior to February 4, 1999 are references to Gold Reserve Corporation.

VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS

The Company’s issued and outstanding shares consist of Class A common shares (each, a “Class A Share”) and Class B common shares (each, a “Class B Share”). Unless otherwise noted, references to Common Shares in this Information Circular include both Class A Shares and Class B Shares. Holders of Common Shares (collectively, the “Shareholders”) are entitled to one vote per share and will vote as a single class on all matters to be considered and voted upon at the Meeting or any adjournment thereof. As of April 23, 2008, there were 55,761,192 issued and outstanding Class A Shares and 1,071,599 issued and outstanding Class B Shares for a total of 56,832,791 Common Shares eligible to vote.

The Company has set the close of business on May 2, 2008 as the record date for the Meeting. The Company will prepare a list of Shareholders of record at such time. Shareholders will be entitled to vote the shares then registered in their name at the Meeting except to the extent that (a) the holder has transferred the ownership of any of his shares after that date, and (b) the transferee of those shares produces properly endorsed share certificates, or otherwise establishes that he owns the shares, and demands, not later than 10 days before the Meeting, that the transferee’s name be included in the list of persons entitled to vote at the Meeting, in which case the transferee will be entitled to vote his shares at the Meeting or any adjournment thereof.

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To the knowledge of the directors and senior officers of the Company, as of April 23, 2008, the only person, firm or corporation that beneficially owned, directly or indirectly, or exercised control or direction over more than 10% of the voting rights attached to the Common Shares was:

    Number of    Percentage of Shares 
Shareholder Name    Common Shares Held (1)    Issued (2) 
 
Tradewinds Global Investors    10,472,572    17.2% 

(1)      Information as to shareholdings has been provided to the Company by the Shareholder as of March 31, 2008.
 
(2)      As of March 31, 2008 Tradewinds Global Investors held 6,329,866 Class A Common Shares and upon conversion of the convertible notes an additional 4,142,706 Class A Common Shares would be issued.
 

A quorum for the transaction of business at any meeting of the Shareholders shall be holders of at least one-third (1/3) of the outstanding Common Shares present in person or represented by proxy. Except as otherwise stated in this Information Circular, the affirmative vote of the holders of a majority of the Common Shares present at the Meeting, in person or by proxy, is required to approve all items presented in this Information Circular.

VOTING BY NON-REGISTERED SHAREHOLDERS

Only registered Shareholders or the persons they designate as their proxies are permitted to vote at the Meeting. In many cases, however, the Common Shares owned by a person (a “non-registered holder”) are registered either: (a) in the name of an intermediary (an “Intermediary”) that the non-registered holder deals with in respect of the Common Shares (Intermediaries include, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered registered savings plans, registered retirement income funds, registered education savings plans and similar plans); or (b) in the name of a clearing agency (such as The Canadian Depository for Securities Limited) of which the Intermediary is a participant.

In accordance with the requirements of National Instrument 54-101 of the Canadian Securities Administrators, the Company has distributed copies of this Information Circular and the accompanying notice of meeting and form of proxy (collectively, the “Meeting Materials”) to the clearing agencies and Intermediaries for onward distribution to non-registered holders of Common Shares.

Intermediaries are required to forward the Meeting Materials to non-registered holders unless a non-registered holder has waived the right to receive them. Very often, Intermediaries will use service companies to forward the Meeting Materials to non-registered holders. Generally, non-registered holders who have not waived the right to receive the Meeting Materials will either:

(a)      be given a form of proxy which has already been signed by the Intermediary (typically by a facsimile stamped signature), which is restricted as to the number and class of securities beneficially owned by the non-registered holder but which is not otherwise completed. Because the Intermediary has already signed the form of proxy, this form of proxy is not required to be signed by the non- registered holder when submitting the proxy. In this case, the non-registered
 

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  holder who wishes to vote by proxy should otherwise properly complete the form of proxy and deliver it as specified above under the heading “Appointment and Revocation of Proxies”; or
 
(b)      be given a form of proxy which is not signed by the Intermediary and which, when properly completed and signed by the non-registered holder and returned to the Intermediary or its service company, will constitute voting instructions (often called a “Voting Instruction Form”) which the Intermediary must follow.
 
  Typically, the non-registered holder will also be given a page of instructions which contains a removable label containing a bar code and other information. In order for the form of proxy to validly constitute a Voting Instruction Form, the non-registered holder must remove the label from the instructions and affix it to the Voting Instruction Form, properly complete and sign the Voting Instruction Form and submit it to the Intermediary or its services company in accordance with the instructions of the Intermediary or its service company.
 

In either case, the purpose of this procedure is to permit non-registered holders to direct the voting of the Common Shares they beneficially own. Should a non-registered holder who receives either form of proxy wish to vote at the Meeting in person, the non-registered holder should strike out the persons named in the form of proxy and insert the non-registered holder’s name in the blank space provided. Non-registered holders should carefully follow the instructions of their Intermediary, including those regarding when and where the form of proxy or Voting Instruction Form is to be delivered.

BUSINESS OF THE MEETING

Item 1 – Election of Directors

The articles of the Company provide that the Board of Directors (the “Board”) shall consist of a minimum of 3 and a maximum of 15 directors, with the actual number of directors to be determined from time to time by the Board. The Company’s Board presently consists of seven members.

The Board held 4 formal meetings during 2007 at which attendance, in person or by phone, averaged 89%. Various matters were considered and approved by written resolution during the year. The Board also held several informal meetings throughout the year.

The by-laws of the Company provide that each director shall be elected to hold office until the next annual meeting of the Company’s Shareholders or until their qualified successors are elected. All of the current directors’ terms expire the date of the Meeting and it is proposed by management that each of them be re-elected to serve another term.

The following table and notes thereto states the names of each person proposed to be nominated by management for election as a director, the province or state and country in which he is ordinarily resident, his age, all offices of the Company now held by him, his principal occupation, the period of time for which he has been a director of the Company and the number of Common Shares beneficially owned by him, directly or indirectly, or over which he exercises control or direction, as at the date hereof.

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The persons named in the accompanying form of proxy intend to vote for the election of these nominees unless otherwise directed. Management does not contemplate that the nominees will be unable to serve as directors.

                Number of 
                Common 
                Shares 
Proposed Nominee and            Director    Beneficially 
Position in the Company    Age    Principal Occupation    Since    Owned as of 
                April 23, 
                2008(1) 





Rockne J. Timm (2) (3) (6)    62    Chief Executive Officer of the    March 1984    1,621,251 
Washington, USA        Company. Mr. Timm is also a         
Chief Executive Officer        Director and President of both MGC         
and Director        Ventures, Inc. and Great Basin         
        Energies, Inc.         





A. Douglas Belanger (2)    54    President of the Company. Mr.    August 1988    1,943,636 
(3) (6)        Belanger is also a Director and         
Washington, USA        Executive Vice President of both         
President and Director        Great Basin Energies, Inc. and MGC         
        Ventures, Inc.         





James P. Geyer    56    Senior Vice President of the    June 1997    445,823 
Washington, USA        Company. Mr. Geyer is also a         
Senior Vice-President        Director of Thompson Creek Metals         
and Director        Company Inc.         





James H. Coleman, Q.C.    57    Senior Partner of the law firm of    February    352,050 
(2) (3) (6)        Macleod Dixon LLP of Calgary,    1994     
Alberta, Canada        Alberta. He is also a Director of         
Non-Executive        various public companies including         
Chairman and Director        Great Basin Energies, Inc. and MGC         
        Ventures, Inc.         





Patrick D. McChesney (2)    58    Controller of Foothills Auto Group.    August 1988    161,157 
(3)(5)        He is also a Director of Great Basin         
Washington, USA        Energies, Inc. and MGC Ventures,         
Director        Inc.         





Chris D. Mikkelsen (2) (3)    56    Principal in McDirmid, Mikkelsen &    June 1997    374,041 
(4) (5)        Secrest, P.S. (a certified public         
Washington, USA        accounting firm). Mr. Mikkelsen is         
Director        also a Director of Great Basin         
Energies, Inc. and MGC Ventures,
        Inc.         





Jean Charles Potvin (4) (5)    54    Director, Chairman and Chief    November    220,604 
Ontario, Canada        Executive Officer of Tiomin    1993     
Director        Resources Inc.         






(1) Includes Common Shares issuable pursuant to options exercisable as of April 23, 2008 or exercisable within 60 days of April 23, 2008 as follows: Mr. Timm, 532,500; Mr. Belanger, 492,500; Mr. Geyer, 204,168; Mr. Coleman, 205,000; Mr. McChesney, 130,000; Mr. Mikkelsen, 130,000; and Mr. Potvin, 130,000. These numbers also include unvested, restricted shares held by each of the directors that carry full voting rights as follows: Mr. Timm 102,500 shares, Mr. Belanger 92,500 shares, Mr. Geyer 61,875 shares, Mr. Coleman 12,000 shares, Mr.McChesney 12,000 shares, Mr. Mikkelsen 12,000 shares, and Mr. Potvin 12,000 shares.

(2) Messrs. Timm, Belanger, Coleman, McChesney, and Mikkelsen are directors of Great Basin Energies, Inc., which owns 491,192 Common Shares, or 0.9% of the outstanding Common Shares. The foregoing individuals beneficially own 10.3%, 7.3%, 2.9%, 2.3%, and 1.8%, respectively, of the outstanding common shares of Great Basin Energies, Inc. and may be deemed indirectly to have an interest in the Company through their respective

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  management positions and/or ownership interests in Great Basin Energies, Inc. Each of the foregoing individuals disclaims any beneficial ownership of the Common Shares owned by Great Basin Energies, Inc.
 
(3)      Messrs. Timm, Belanger, Coleman, McChesney, and Mr. Mikkelsen are directors of MGC Ventures, Inc., which owns 258,083 Common Shares, or 0.5% of the outstanding Common Shares. The foregoing individuals beneficially own 11.5%, 11.7%, 4.8%, 3.8%, and 2.9%, respectively, of the outstanding common shares of MGC
 
  Ventures, Inc. and may be deemed indirectly to have an interest in the Company through their respective management positions and/or ownership interests in MGC Ventures, Inc. Each of the foregoing individuals disclaims any beneficial ownership of the Common Shares owned by MGC Ventures, Inc.
 
(4)      Member of the Compensation Committee.
 
(5)      Member of the Audit Committee.
 
(6)      Member of the Executive Committee.
 

Each of the foregoing nominees has held his present principal occupation with his current employer or other positions with the same firm throughout the last five years, with the exception of Mr. McChesney, who in addition to assuming his current position with Foothills Auto Group, was controller for Remtech, Inc. in 2004 and 2005, and was president of LMO Test Systems, Inc. from March 1996 until December 2005.

If you complete and return the attached form of proxy, your representative at the Meeting, or any adjournment or postponement thereof, will vote your shares FOR the election of the nominees set out herein unless you specifically direct that your vote be withheld.

Item 2 – Appointment of Auditors

It is proposed that the firm of PricewaterhouseCoopers LLP be re-appointed by the Shareholders as independent certified public accountants to audit the financial statements of the Company for the year ending December 31, 2008 and that the Board be authorized to fix the auditors’ remuneration. PricewaterhouseCoopers LLP were first appointed auditors of the Company in 1992.

Unless such authority is withheld, the persons named in the accompanying proxy intend to vote FOR the re-appointment of PricewaterhouseCoopers LLP as auditors of the Company until the next annual meeting of the Company’s Shareholders, or until their successors are duly appointed, at a remuneration to be fixed by the Board.

Item 3 – Approval of the Purchase of Class A Shares by the KSOP Plan

The Company’s subsidiary, Gold Reserve Corporation, maintains a retirement plan, the KSOP Plan, for eligible employees. The annual contribution to the KSOP Plan participants is formula-driven based on a percentage of compensation and is used to allocate Class A Shares purchased by the KSOP Plan. For a more detailed description of the KSOP Plan, see “Executive Compensation – KSOP Plan”.

As of December 31, 2007, 22,246 Class A Shares remained in the KSOP Plan to be allocated to KSOP Plan participants, representing less than 0.04% of the issued and outstanding Common Shares of the Company at that time.

On March 12, 2008, the Board approved, subject to Shareholder approval, the issuance of 100,000 Class A Shares for purchase by the KSOP Plan at a price of US $4.95 (Cdn. $4.93) per

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Class A Share, which represented the closing market price on the Toronto Stock Exchange (the “TSX”) (converted to US $) on March 11, 2008 of the Class A Shares.

Assuming the resolution approving the purchase of Class A Shares by the KSOP Plan is approved, 122,246 Class A Shares, representing approximately 0.2% of the issued and outstanding Common Shares, would be available for allocation to KSOP Plan participants.

In order for the acquisition of Class A Shares by the KSOP Plan to comply with certain requirements of the TSX, this resolution must be approved by a majority of the votes cast on such resolution, other than votes attaching to Common Shares beneficially owned by insiders of the Company eligible to participate in the KSOP Plan or associates of such insiders. In the event this resolution is approved by the holders of at least a majority of the votes cast on this resolution at the Meeting, in person or by proxy by disinterested Shareholders, it will be deemed approved but will remain subject to the policy limitations of the TSX with respect to the number of Class A Shares that may be allocated to directors and executive officers.

As of April 23, 2008, based on the information available to the Company, a total of 3,116,722 Common Shares, or 5.5% of the Company, were held by insiders or their associates eligible to participate in the KSOP Plan.

Approval of this resolution in compliance with the rules of the TSX will enable the allocation of Class A Shares pursuant to the employee stock ownership component of the KSOP Plan to eligible participants in compliance with the TSX’s limitations on awards to such persons pursuant to share compensation arrangements.

The following resolution in respect of the issuance of Class A Shares for the KSOP Plan will be proposed at the Meeting:

  “BE IT RESOLVED THAT:

1.      The issuance of 100,000 Class A Shares for purchase by the KSOP Plan at a price of US $4.95 (Cdn. $4.93) be and is hereby approved, and
 
2.      Any officer or director of the Company be and is hereby authorized for and on behalf of the Company to execute and deliver all such instruments and documents and to perform and do all such other acts and things as may be deemed advisable in such individual’s discretion for the purpose of giving effect to this resolution.”
 

The Board has determined that the issuance to the KSOP Plan of 100,000 Class A Shares is in the best interests of the Company and recommends that the Shareholders vote in favor of the resolution authorizing such issuance.

The persons named in the accompanying proxy intend to vote FOR the approval of the authorization to issue 100,000 Class A Shares to the KSOP Plan unless otherwise directed.

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Item 4 – Adoption of the Venezuelan Equity Incentive Plan

At the Meeting, Shareholders will be asked to consider, and if deemed advisable approve, with or without variation, a resolution approving the adoption of the Venezuelan Equity Incentive Plan (the “Venezuelan Plan”) for employees and consultants of the Company’s subsidiaries. The Venezuelan Plan permits the grant of stock options, stock appreciation rights and restricted stock.

The purpose of the Venezuelan Plan is to advance the interests of the Company and its subsidiaries and promote continuity of management by encouraging and providing its employees and consultants in Venezuela with the opportunity to acquire an equity interest in the Company and to participate in the increase in shareholder value as reflected in the growth in the price of the Company’s shares and by enabling the Company’s subsidiaries to attract and retain the services of employees, and consultants upon whose judgment, interest, skills, and special effort the successful conduct of its operations is largely dependent.

On April 10, 2008, the Board approved the Venezuelan Plan (subject to Shareholder and stock exchange approvals) whereby options are granted at the current fair market value of the underlying shares of the Company. The total number of shares subject to issuance under the Venezuelan Plan, whether in the form of restricted stock, options, or stock appreciation rights, or any combination thereof, shall be 10% of the Corporation’s outstanding shares, from time to time. The Venezuelan Plan is administered by the Board and the committee of the Board to which it may delegate authority. As at April 23, 2008, no options have been granted under the Venezuelan Plan.

Insiders of the Company and its subsidiaries are not eligible to participate in the Venezuelan Plan.

As of April 23, 2008, employees and consultants who would be considered eligible to participate in the Venezuelan Plan held 1,056,947 stock options in the Company’s 1997 Equity Incentive Plan, as amended in 2006. If the Venezuelan Plan is approved these options would be transferred, retaining their current status, to the Venezuelan Plan.

Options, stock appreciation rights (“SARs”) and restricted stock granted under the Venezuelan Plan are generally granted at the fair market value of the Class A Shares. The fair market value is defined as: “subject to any applicable stock exchange rules, the volume weighted average trading price, expressed in the United States Dollar equivalent of the Stock, calculated by dividing the total value by the total volume of Stock on the principal market for the five trading days immediately preceding the relevant date…”

The principal market is the stock exchange where the majority of the trading volume and value of the Stock occurs over the last twelve-month period.

A SAR entitles the holder of the related option, upon exercise of the SAR, to surrender such option or any portion thereof to the extent unexercised, and to receive payment of an amount determined by multiplying (i) the excess of the Fair Market Value of the Class A Shares immediately preceding the date of exercise of such SAR over the option price under the related option, by (ii) the number of shares as to which such SAR has been exercised. Notwithstanding the foregoing, the agreement evidencing the SAR may limit in any manner the amount payable with respect to any SAR. Payment may be made by the Company in the form of Class A common shares, cash or a combination of Class A common shares and cash. Each option grant is

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limited to a maximum duration of 10 years from the time it is granted and the vesting period is discretionary.

Restricted shares issued under the Venezuelan Plan may be subject to restrictions imposed by the Board, including restrictions on the sale, transfer, pledge or assignment of such shares. During the period of restriction, persons holding restricted shares granted pursuant to the Venezuelan Plan may exercise full voting rights and be entitled to all dividends and other distributions paid with respect to such shares.

The Venezuelan Plan provides the following for termination of employment with regard to the options outstanding at the date of termination:

Retirement. Any then outstanding and vested options under the Venezuelan Plan may be exercised at any time prior to the earlier of the expiration date of the outstanding options or 12 months after the date of retirement.

For Cause. Any then outstanding options become null and void.

Involuntary Termination of Employment. Any then outstanding options that are vested at the time of termination may be exercised at any time prior to the earlier of the expiration date of the vested outstanding options or 30 days after the date of termination.

Voluntary Termination of Employment. Any then outstanding options that are vested at the time of termination may be exercised at any time prior to the earlier of the expiration date of the vested outstanding options or 90 days after the date of termination.

The Board may, at any time and from time to time, modify, amend, suspend or terminate the Venezuelan Plan without Shareholder approval in any respect. Amendments to the Venezuelan Plan shall be subject to stockholder approval to the extent required to comply with any rules and regulations of any stock exchange on which the Shares are listed.

The full text of the resolution approving the amendment is attached to this Information Circular as found below. To be effective, the approval of the Venezuelan Plan must be given by resolution of the Shareholders. In order to be effective, the resolution must receive the affirmative vote of a majority of the votes cast by Shareholders present in person or represented by proxy at the Meeting.

The Board recommends that Shareholders vote in favor of the resolution approving the Venezuelan Plan.

Unless such authority is withheld, it is the intention of the persons named in the accompanying proxy to vote the shares represented thereby in favor of approval of the Venezuelan Plan.

9


The following resolution in respect of the approval of the Venezuelan Plan will be proposed at the Meeting:

“BE IT RESOLVED THAT:

1.      The Venezuelan Equity Incentive Plan be approved effective April 10, 2008; and
 
2.      Any officer or director of the Company be and is hereby authorized for and on behalf of the Company to execute and deliver all such instruments and documents and to perform and do all such other acts and things as may be deemed advisable in such individual’s discretion for the purpose of giving effect to this resolution.”
 

Item 5 – Consolidated Financial Statements

A copy of the consolidated financial statements of the Company for the year ended December 31, 2007 and the report of the auditors on the consolidated financial statements are included in the Annual Report and will be submitted to the Meeting. Copies of the consolidated financial statements can also be obtained on www.sedar.com .

10


EXECUTIVE COMPENSATION

  Summary Compensation Table

The following table sets forth the compensation paid by the Company to the Chief Executive Officer, the Chief Financial Officer and to each of the next three most highly compensated executive officers of the Company who were serving in such capacities at December 31, 2007 (the “Named Executive Officers”).

                             Long Term Compensation     


                   Annual Compensation                   Awards    Payouts     




                        Restricted         
                    Securities    Shares         
                Other    Under    Or         
                Annual    Options/    Restricted         
                Compensa-    SARs    Share    LTIP    All Other 
Name and Principal        Salary    Bonus    tion    Granted    Units    Payouts    Compensation 
Position    Year       $ $    ($)    (#) (2)    ($)    ($)    ($)(3) 








Rockne J. Timm    2007    250,000    395,308(1)    -    300,000    -    -    44,995 








Chief Executive    2006    250,000    100,700)    -    250,000    -    -    38,763 








Officer    2005    250,000    80,000    -    -    -    -    42,000 









Robert A. McGuinness    2007    140,000    134,579(1)    -    62,500    -    -    44,995 








Vice President Finance    2006    140,000    57,500    -    100,000    -    -    34,800 








and CFO    2005    140,000    47,500    -    -    -    -    37,500 









A. Douglas Belanger    2007    225,000    364,108(1)    -    275,000    -    -    44,995 








President    2006    225,000    96,525    -    250,000    -    -    38,763 








    2005    225,000    62,500    -    -    -    -    42,000 









James P. Geyer    2007    200,000    272,955(1)    -    200,000    -    -    44,995 








Senior Vice President    2006    200,000    74,025    -    150,000    -    -    38,763 








    2005    200,000    55,000    -    -    -    -    42,000 









Douglas E. Stewart    2007    149,000    169,772(1)    -    75,000    -    -    44,995 








Vice President –    2006    139,833    47,500    -    50,000    -    -    33,007 








Project Development    2005    126,000    40,000    -    40,000    -    -    33,200 










(1)      Consists of cash bonus and shares of stock, respectively as follows: Mr. Timm: $125,075 and 60,000 shares; Mr. McGuinness: $37,575 and 20,500 shares; Mr. Belanger: $115,075 and 55,000 shares; Mr. Geyer: $100,075 and 37,500 shares; and Mr. Stewart: $50,075 and 25,625 shares. In December 2007, the Board approved the grant of Class A common shares to the Named Executive Officers’ as follows: Mr. Timm 150,000 shares; Mr. McGuinness 12,500 shares; Mr. Belanger 135,000 shares; Mr. Geyer 90,000 shares; and Mr. Stewart 60,000 shares. The shares vest in equal installments starting the date of the original grant as follows: In the case of Messrs. Timm, Belanger, Geyer and Stewart, the shares vest over a two year period; one third vest immediately, one-third vest in November of 2008 and one-third vest in November of 2009. In the case of Mr. McGuinness, the shares were vested immediately.
 
(2)      Options for Common Shares granted during the year.
 
(3)      Consists of the dollar value of the following number of Class A Shares purchased under the Company’s KSOP Plan and allocated to the account of each Named Executive Officer during 2007, 2006, and 2005, respectively as follows: Mr. Timm: 9,043, 18,318, and 14,483; Mr. McGuinness: 9,043, 16,445, and 12,931; Mr. Belanger: 9,043, 18,318, and 14,483; Mr. Geyer: 9,043, 18,318, and 14,483; and Mr. Stewart: 9,043, 15,598, and 11,448.
 

11


Options Granted For Class A Shares of the Company to the Named Executive Officers During the Year Ended December 31, 2007.

The following table sets forth information concerning grants of stock options to acquire Class A Shares to the Named Executive Officers pursuant to the rules and policies of the TSX and the regulations of the American Stock Exchange (the “AMEX”) during the fiscal year ended December 31, 2007:

        % of Total        Market Value     
        Options        of Securities     
    Securities    Granted to        Underlying     
       Under    Employees    Exercise or    Options on     
    Options    in Fiscal    Base Price    Date of Grant     
                     Name    Granted    year    ($/Security)    ($/Security) (1)    Expiration Date 





Rockne J. Timm    50,000    2.4%    $4.834    $4.834    Nov. 27, 2008 
    50,000    2.4%    $4.834    $4.834    May 27, 2009 
    50,000    2.4%    $4.834    $4.834    Nov. 27, 2009 
    50,000    2.4%    $4.834    $4.834    May 27, 2010 
    50,000    2.4%    $4.834    $4.834    Nov. 27, 2010 
    50,000    2.4%    $4.834    $4.834    May 27, 2011 


                                             Total    300,000    14.4%             






 
Robert A. McGuinness    10,417    0.5%    $4.834    $4.834    Nov. 27, 2008 
    10,417    0.5%    $4.834    $4.834    May 27, 2009 
    10,417    0.5%    $4.834    $4.834    Nov. 27, 2009 
    10,417    0.5%    $4.834    $4.834    May 27, 2010 
    10,416    0.5%    $4.834    $4.834    Nov. 27, 2010 
    10,416    0.5%    $4.834    $4.834    May 27, 2011 


                                             Total    62,500    3.0%             






 
A. Douglas Belanger    45,834    2.2%    $4.834    $4.834    Nov. 27, 2008 
    45,834    2.2%    $4.834    $4.834    May 27, 2009 
    45,833    2.2%    $4.834    $4.834    Nov. 27, 2009 
    45,833    2.2%    $4.834    $4.834    May 27, 2010 
    45,833    2.2%    $4.834    $4.834    Nov. 27, 2010 
    45,833    2.2%    $4.834    $4.834    May 27, 2011 


                                             Total    275,000    13.2%             






 
James P. Geyer    33,334    1.6%    $4.834    $4.834    Nov. 27, 2008 
    33,334    1.6%    $4.834    $4.834    May 27, 2009 
    33,333    1.6%    $4.834    $4.834    Nov. 27, 2009 
    33,333    1.6%    $4.834    $4.834    May 27, 2010 
    33,333    1.6%    $4.834    $4.834    Nov. 27, 2010 
    33,333    1.6%    $4.834    $4.834    May 27, 2011 


                                             Total    200,000    9.6%             






 
Douglas E. Stewart    12,500    0.6%    $4.834    $4.834    Nov. 27, 2008 
    12,500    0.6%    $4.834    $4.834    May 27, 2009 
    12,500    0.6%    $4.834    $4.834    Nov. 27, 2009 
    12,500    0.6%    $4.834    $4.834    May 27, 2010 
    12,500    0.6%    $4.834    $4.834    Nov. 27, 2010 
    12,500    0.6%    $4.834    $4.834    May 27, 2011 





                                             Total    75,000    3.6%             







12


(1) Based on the volume weighted average price on the Principal Market (AMEX) for the five trading days immediately preceding the grant date.

Aggregated Option Exercises During the Year Ended December 31, 2007 and Option Values as of December 31, 2007.

The following table sets forth all options exercised during 2007 and values for all options granted to the Named Executive Officers as of December 31, 2007.

                Value of 
                Unexercised in-the- 
            Unexercised    Money 
            Options/SARs at    Options/SARs at 
    Securities        FY-End    FY-End 
    Acquired on        (#)    ($) (2) 
    Exercise    Aggregate Value    Exercisable/    Exercisable/ 
Name    (#)    Realized (1)    Unexercisable    Unexercisable 
        ($)         





Rockne J. Timm    -    -    470,000 / 125,000    304,785 / 113,535 





Robert A. McGuinness    -    -    93,084 / 85,166    93,157 / 63,457 





A. Douglas Belanger    -    -    430,000 / 125,000    218,071 / 63,121 





James P. Geyer    -    -    168,043 / 206,957    94,326 / 70,698 





Douglas E. Stewart    14,633    63,445    127,250 / 68,750    149,065 / 37,238 






(1)      The “Aggregate Value Realized”, if applicable, was calculated by determining the difference between the market value of the securities acquired on the date of exercise (based on the closing price on the American Stock Exchange on the date of exercise, which approximates the closing price on the TSX also on the date of exercise) less the exercise price of the options exercised.
 
(2)      The “Value of Unexercised in-the-Money Options at FY-End” was calculated by determining the difference between the market value of the securities underlying the option at the end of the financial year and the exercise price of such options. At December 31, 2007, the closing price of the Class A Shares on the American Stock Exchange was $5.20.
 

Equity Incentive Plan

Employees, directors and consultants of the Company and its subsidiaries are eligible to receive grants under the Equity Incentive Plan (the “Plan”), as amended in 2006. The Board or a committee of the Board is responsible for the administration of the Plan. The Plan provides for the issuance of up to a rolling 10% of the outstanding shares of the Company, through the grant of “incentive stock options” and “non–statutory options” to purchase Class A Shares, stock appreciation rights (“SARs”) and restricted stock. Pursuant to TSX requirement the Plan must be re-approved every three years.

As of April 23, 2008, options for the purchase of 4,257,839 Class A Shares remained outstanding and 744,119 Class A Shares remained available for grant under the Plan. Since inception, 1,707,850 shares of restricted stock have been granted from the Plan and no SARs have been granted.

Options, stock appreciation rights (“SARs”) and restricted stock granted under the Plan are generally granted at the Fair Market Value of the Class A Shares defined as follows:

“subject to any applicable Exchange rules, the volume weighted average trading price or the United States Dollar equivalent of the Stock calculated by dividing the total value by the total volume of Stock on the Exchange where the majority of the trading volume and

13


value of the Stock occurs, for the five trading days immediately preceding the relevant date;...”

A SAR entitles the holder of the related option, upon exercise of the SAR, to surrender such option or any portion thereof to the extent unexercised, and to receive payment of an amount determined by multiplying (i) the excess of the Fair Market Value of the Class A Shares immediately preceding the date of exercise of such SAR over the option price under the related option, by (ii) the number of shares as to which such SAR has been exercised. Notwithstanding the foregoing, the agreement evidencing the SAR may limit in any manner the amount payable with respect to any SAR.

The maximum number of shares of Class A Shares issuable to insiders:

a) at any time, under all security based compensation arrangements, cannot exceed 10% of the outstanding shares of stock of the Company on the date of grant; and

b) within any one year period, under all security based compensation arrangements, cannot exceed 10% of the outstanding common shares on the date of grant.

Each option grant is limited to a maximum duration of 10 years from the time it is granted, except that an incentive stock option granted to a ten percent Shareholder shall have a maximum duration of five years from the time it is granted and the vesting period is discretionary.

All Options shall be exercisable, during the Optionee’s lifetime, only by the Optionee or by the guardian or legal representative of the Optionee or its alternative payee pursuant to such qualified domestic relations order, it being understood that the terms “holder” and “optionee” include the guardian and legal representative of the Optionee named in the Option Agreement and any person to whom an Option is transferred by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order or a gift permitted by the Plan. Notwithstanding the above, incentive stock options shall only be transferable by will or by the laws of descent and distribution.

The Plan provides the following for termination of employment with regard to the options outstanding at the date of termination:

Retirement. Any then outstanding options under the Plan may be exercised at any time prior to the earlier of the expiration date of the outstanding options or 12 months after the date of retirement.

For Cause. Any then outstanding options become null and void.

Involuntary Termination of Employment. Any then outstanding options that are vested at the time of termination may be exercised at any time prior to the earlier of the expiration date of the vested outstanding options or 30 days after the date of termination.

Voluntary Termination of Employment. Any then outstanding options that are vested at the time of termination may be exercised at any time prior to the earlier of the expiration date of the vested outstanding options or 90 days after the date of termination.

The Board may, at any time and from time to time, modify, amend, suspend or terminate the Plan in any respect. Amendments to the Plan shall be subject to stockholder approval to the extent

14


required to comply with any exemption to the short swing-profit provisions of Section 16 (b) of the U.S. Securities Exchange Act of 1934, as amended pursuant to rules and regulations promulgated thereunder, with the exclusion for performance-based compensation under Code Section 162 (m), or with the rules and regulations of any securities exchange on which the Shares are listed.

Equity Compensation Plan Information

The following table sets forth the information regarding the Equity Incentive Plan as of December 31, 2007:

            Number of securities 
    Number of securities to    Weighted-average    remaining available for 
    be issued upon exercise    exercise price of    future issuance under 
    of outstanding options,    outstanding options,    equity compensation 
           Plan Category    warrants and rights    warrants and rights    plans 




Equity compensation             
plans approved by             
securityholders    4,445,139    $4.14    1,169,464 




Equity compensation             
plans not approved by             
securityholders    -    -    - 




Total    4,445,139    $4.14    1,169,464 





KSOP Plan

The Company’s subsidiary, Gold Reserve Corporation, maintains a retirement plan, the KSOP Plan for the benefit of eligible employees. The KSOP Plan consists of two components– a salary reduction component (401(k)) and stock ownership component (ESOP). Eligible employees are those who have been employed for a period in excess of one year and who have worked at least 1,000 hours during the year in which any allocation is to be made.

Employee contributions to the 401(k) component of the KSOP Plan are limited in each year to the total amount of salary reduction the employee elects to defer during the year, which is limited in 2008 to $15,500 ($20,500 limit for participants who are 50 or more years of age, or who turn 50 during 2008).

Employer contributions, stated as a percentage of eligible compensation, are determined each year by the Board of Directors and allocations are made in the form of Class A Shares or by cash. The number of Class A Shares released for allocation is determined by multiplying the total eligible compensation by the contribution percentage approved by the Board of Directors and dividing that number by the average price of the Class A Shares remaining in the KSOP Plan for distribution. For KSOP Plan year 2008 the Company has adopted a “Safe Harbor” contribution of 3% of eligible compensation. As of December 31, 2007, 22,246 Class A Shares remained in the KSOP Plan to be allocated to KSOP Plan participants, representing less than 0.01% of the issued and outstanding Common Shares of the Company at that time.

Total employer and employee annual contributions to an employee participating in both the 401(k) and ESOP components of the KSOP Plan are limited (in 2008) to a maximum of $46,000

15


($51,000 limit for participants who are 50 or more years of age or who turn 50 during 2008). The annual dollar limit is an aggregate limit which applies to all contributions made under this plan or any other cash or deferral arrangements.

Distributions from the KSOP Plan are not permitted before the participating employee reaches the age of 59, except in the case of death, disability, termination of employment by the Company or financial hardship. The employee stock ownership component of the KSOP Plan is qualified under Sections 421 and 423 of the U.S. Internal Revenue Code of 1986, as amended.

Allocated contributions to eligible KSOP Plan participants for plan years 2007, 2006, and 2005 were $386,930 (77,765 Class A Shares), $272,412 (128,731 Class A Shares), and $280,074 (96,578 Class A Shares), respectively. The aggregate number of Class A Shares for the three-year period is 303,074, which represents 0.5% of the current issued and outstanding Common Shares.

Retention Units

On October 19, 2006 the Board authorized the director and employee retention plan (the “Retention Plan”). Under the Retention Plan, the Board or the Compensation Committee of the Board may grant retention units (the “Units”) to directors and certain key employees of the Company or its subsidiaries. Under this arrangement, a participant would (subject to vesting requirements, the occurrence of certain major corporate milestones, including successfully financing the Brisas project and placing the project into production, or a change of control) receive a cash payment equal to the fair market value of one Class A Common Share per Unit. Any Units unvested at the time of termination of employment or service with the Company or its subsidiaries shall be forfeited and no payment will be made with respect to such Units.

An aggregate of 612,500 Units were granted in 2007 to Named Executive Officers and Directors as follows: Rockne J. Timm 100,000, A. Douglas Belanger 100,000, James P. Geyer 75,000, Robert A. McGuinness 37,500 and Douglas E. Stewart 100,000. Messrs. Coleman, McChesney, Mikkelsen, and Potvin were each granted 50,000 Units.

The cumulative Units granted to Named Executive Officers and Directors are as follows: Rockne J. Timm 350,000, A. Douglas Belanger 350,000, James P. Geyer 225,000, Robert A. McGuinness 137,500 and Douglas E. Stewart 150,000. Messrs. Coleman, McChesney, Mikkelsen, and Potvin each hold 100,000 Units.

16


Report on Re-pricing of Options in Last Ten Completed Fiscal Years (2000 and 2001)

During the last ten years the Shareholders approved two re-pricings of certain options held by the Named Executive Officers. The first re-pricing, dated April 3, 2000 and approved on June 2, 2000, was re-priced at a 25% premium to the market price of the Company’s shares. The second re-pricing, dated December 20, 2000 and approved June 8, 2001, was re-priced at a 50% premium to the market price of the Company’s shares and fifty-percent of all vested options, or immediately exercisable options, were unvested for the following twelve-month period. All repriced options have five-year lives from the date of approval by Shareholders. The following table details the re-pricing information for options held by Named Executive Officers for the last ten years:

                                         10-YEAR TABLE OF OPTIONS AND SAR RE-PRICINGS     


 
        Securities    Market            Length of 
         Under    Price of            Original 
        Options/    Securities at    Exercise Price        Option Term 
           SARs    Time of Re-    at Time of        Remaining at 
        Re-priced    pricing or    Re-pricing or    New Exercise    Date of Re- 
    Date of Re-         or    Amendment    Amendment    Price    pricing or 
Name    pricing    Amended    ($/Security)    ($/Security)    ($/Security)    Amendment 
             (#)                 







Rockne J. Timm    June 2, 2000    209,833    0.73    3.75    1.00    2.8 years 






    June 8, 2001    27,200    0.47    1.13    0.72    1.7 years 
        40,000    0.47    1.50    0.72    3.1 years 
        50,000    0.47    2.59    0.72    2.2 years 
        125,000    0.47    3.25    0.72    2.3 years 
        244,667    0.47    3.75    0.72    2.2 years 







Robert A. McGuinness    June 2, 2000    92,207    0.73    3.75    1.00    2.8 years 






    June 8, 2001    30,000    0.47    1.50    0.72    3.1 years 
        68,417    0.47    2.59    0.72    2.2 years 
        115,998    0.47    3.75    0.72    2.2 years 







A. Douglas Belanger    June 2, 2000    172,652    0.73    3.75    1.00    2.8 years 






    June 8, 2001    26,000    0.47    1.13    0.72    1.7 years 
        30,000    0.47    1.50    0.72    3.1 years 
        65,000    0.47    2.59    0.72    2.2 years 
        50,000    0.47    3.25    0.72    2.3 years 
        230,303    0.47    3.75    0.72    2.2 years 







James P. Geyer    June 2, 2000    84,736    0.73    3.75    1.00    2.8 years 






    June 8, 2001    30,000    0.47    1.50    0.72    3.1 years 
        64,209    0.47    2.59    0.72    2.2 years 
        5,000    0.47    2.88    0.72    7.0 years 
        100,264    0.47    3.75    0.72    2.2 years 







Douglas E. Stewart    June 8, 2001    79,367    0.47    1.50    0.72    3.1 years 

17


Termination of Employment, Change in Responsibilities and Employment Contracts

At this time, there are no written contracts of employment between the Company and the Named Executive Officers.

The Company does maintain Change of Control Agreements with each of the Named Executive Officers, which were implemented by the Board to induce the Named Executive Officers to remain with the Company in the event of a change of control. The Board believes these individuals’ familiarity and long-standing involvement with the Brisas project are important assets to the Company and, as such, their continued involvement in the on-going development of the Brisas project is important. The loss of their continued services could have a detrimental impact on future operations of the Company.

In the event of a change in control of the Company, each Named Executive Officer is entitled to, among other things, continue employment with the Company and, if his employment is terminated within twelve months following such change in control (other than for cause, disability, retirement or death) or if the Named Executive Officer terminates his employment for good reason (as defined in the agreements) at any time within twelve months following the change of control, such individual will be entitled to receive, among other things, two or three times his annual salary and KSOP contributions, an amount equal to any bonuses received during the twelve months prior to the change of control, a payment of two times the monthly premium for maintenance of health and insurance benefits for a period of 36 months and on the election of the Named Executive Officer, the buy-out of the cash value of any unexercised stock options.

Composition of the Compensation Committee

The Company’s compensation program was administered during 2007 by the Compensation Committee of the Board (the “Compensation Committee”), composed of Mr. Mikkelsen and Mr. Potvin. The function of the Compensation Committee was to evaluate the Company’s performance and the performance of its executive officers, approve the cash and equity-based compensation of such executive officers and submit such approvals to the full Board for ratification. Compensation matters relating to the directors were administered by the full Board of Directors.

Report on Executive Compensation

The goal of the compensation program is to attract, retain and reward employees and other individuals who contribute to both the immediate and the long-term success of the Company. Contributions are largely measured subjectively, and are rewarded through cash and equity-based compensation vehicles.

The Company evaluates the extent to which strategic and business goals are met and measures individual performance, albeit subjectively, against development objectives and the degree to which teamwork and Company objectives are promoted. The Company strives to achieve a balance between the compensation paid to a particular individual and the compensation paid to other employees and executives having similar responsibilities within the Company. The Company also strives to ensure that each employee understands the components of his or her salary, and the basis upon which it is determined and adjusted.

18


The components of executive compensation are as follows:

Base Salary. The administration of the program requires the Compensation Committee to review annually the base salary of each executive officer of the Company and to consider various factors, including individual performance, experience, time in position, future potential, responsibility, and the executive’s current salary in relation to the executive salary range at other mining companies. These factors are considered subjectively and none are accorded a specific weight.

Bonuses. In addition to base salary, the Compensation Committee from time-to-time recommends to the Board payments of discretionary bonuses to executives and selected employees. Such bonuses are based on the same criteria and determined in a similar fashion as described above.

Equity. The Compensation Committee from time-to-time recommends to the Board grants of options and/or restricted stock awards to executives and selected employees. In addition, the Compensation Committee annually determines the contribution to the KSOP Plan for allocation to individual participants. Participation in the KSOP Plan by individual employees, including officers, is governed by the terms of the KSOP Plan.

Chief Executive Officer’s Compensation

It is the responsibility of the Compensation Committee to review and recommend the compensation package for the Chief Executive Officer based on the same factors as those used in determining the base salaries for the other Named Executive Officers listed above.

The Compensation Committee has not developed specific quantitative or qualitative performance measures or other specific criteria for determining the compensation of the Company’s Chief Executive Officer, primarily because the Company does not yet have a producing mine or other operations from which such quantitative data can be derived. As a consequence, the determination of the Chief Executive Officer’s compensation in 2007 was largely subjective, and was based on the approval of the Brisas Environmental and Social Impact Assessment, the Permit to Affect, achievement of financing goals, advancement of the Brisas Project and identifying and analyzing new corporate opportunities.

  Report submitted by Compensation Committee of the Board
s/ Chris D. Mikkelsen
s/ Jean Charles Potvin

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Performance Graph

The following chart compares the total cumulative shareholder return (assuming re-investment of dividends) for $100 invested in shares of the Company with the cumulative total return of the Nasdaq Market and the S & P Gold and Precious Metals Mining Index for the period commencing on December 31, 2002 and ending on December 31, 2007.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Gold Reserve Corporation, The NASDAQ Composite Index And The S&P Gold Index

* $100 invested on 12/31/02 in stock or index-including reinvestment of dividends. Fiscal year ending December 31.

Copyright © 2008, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm

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Compensation of Directors

Consistent with the Board’s intent to have both directors and management hold shares of the Company, non-employee directors, Messrs. Coleman, McChesney, Mikkelsen and Potvin, were each granted 2,500 Class A Shares in January 2007, and 4,000 Class A Shares each in June, July and October 2007 for services during the fiscal year ended December 31, 2007. The value of each share was US $3.99, $5.82, $5.40 and $4.75, respectively.

Mr. Coleman was also paid approximately $97,629 for services related to his position as director of the Company, during the fiscal year ended December 31, 2007.

Directors of the Company received no additional compensation for serving on Board committees or for attendance at the Board or committee meetings.

The following table sets forth information concerning grants of stock options to acquire Class A Shares to the non-employee directors pursuant to the rules and policies of the TSX and the regulations of the AMEX during the fiscal year ended December 31, 2007:

        % of Total        Market Value     
        Options        of Securities     
    Securities    Granted to        Underlying     
    Under    Employees    Exercise or    Options on     
    Options    in Fiscal    Base Price    Date of Grant     
Name    Granted    year    ($/Security)     ($/Security) (1)    Expiration Date 






James H. Coleman    13,334    0.6%    $4.834    $4.834    Nov. 27, 2008 
    13.334    0.6%    $4.834    $4.834    May 27, 2009 
    13,333    0.6%    $4.834    $4.834    Nov. 27, 2009 
    13,333    0.6%    $4.834    $4.834    May 27, 2010 
    13,333    0.6%    $4.834    $4.834    Nov. 27, 2010 
    13,333    0.6%    $4.834    $4.834    May 27, 2011 


Total    80,000    3.8%             






Patrick D. McChesney    13,334    0.6%    $4.834    $4.834    Nov. 27, 2008 
    13.334    0.6%    $4.834    $4.834    May 27, 2009 
    13,333    0.6%    $4.834    $4.834    Nov. 27, 2009 
    13,333    0.6%    $4.834    $4.834    May 27, 2010 
    13,333    0.6%    $4.834    $4.834    Nov. 27, 2010 
    13,333    0.6%    $4.834    $4.834    May 27, 2011 


Total    80,000    3.8%             






Chris D. Mikkelsen    13,334    0.6%    $4.834    $4.834    Nov. 27, 2008 
    13.334    0.6%    $4.834    $4.834    May 27, 2009 
    13,333    0.6%    $4.834    $4.834    Nov. 27, 2009 
    13,333    0.6%    $4.834    $4.834    May 27, 2010 
    13,333    0.6%    $4.834    $4.834    Nov. 27, 2010 
    13,333    0.6%    $4.834    $4.834    May 27, 2011 


Total    80,000    3.8%             






J.C. Potvin    13,334    0.6%    $4.834    $4.834    Nov. 27, 2008 
    13.334    0.6%    $4.834    $4.834    May 27, 2009 
    13,333    0.6%    $4.834    $4.834    Nov. 27, 2009 
    13,333    0.6%    $4.834    $4.834    May 27, 2010 
    13,333    0.6%    $4.834    $4.834    Nov. 27, 2010 
    13,333    0.6%    $4.834    $4.834    May 27, 2011 


Total    80,000    3.8%             







21


(1) Based on the volume weighted average price on the Principal Market (AMEX) for the five trading days immediately preceding the grant date.

The following sets forth information concerning the exercise of stock options by the non-employee directors during the fiscal year ended December 31, 2007:

                Value of 
                Unexercised in- 
            Unexercised    the-Money 
            Options/SARs at    Options/SARs at 
    Securities        FY-End    FY-End 
    Acquired on        (#)    ($) (2) 
    Exercise    Aggregate Value    Exercisable/    Exercisable/ 
Name    (#)    Realized (1)    Unexercisable    Unexercisable 





James H. Coleman    69,444    321,526    205,000 / -    169,452 /- 





Patrick D. McChesney    -    -    130,000 / -    79,780 / - 





Chris D. Mikkelsen    -    -    180,000 / -    261,780 / - 





J. C. Potvin    -    -    130,000 / -    79,780 / - 






(1)      The “Aggregate Value Realized”, if applicable, was calculated by determining the difference between the market value of the securities acquired on the date of exercise (based on the closing price on the American Stock Exchange on the date of exercise, which approximates the closing price on the TSX also on the date of exercise) less the exercise price of the options exercised.
 
(2)      The “Value of Unexercised in-the-Money Options at FY-End” was calculated by determining the difference between the market value of the securities underlying the option at the end of the financial year and the exercise price of such options. At December 31, 2007, the closing price of the shares of common stock on the American Stock Exchange was $5.20.
 

Aggregate Compensation of Officers and Directors

For the financial year ended December 31, 2007, the aggregate remuneration paid and payable by the Company and by each of its subsidiaries to the directors of the Company in their capacity as directors of the Company and any of its subsidiaries was $393,049 and, separately, to the officers of the Company who received in their capacity as officers or employees of the Company and any of its subsidiaries aggregate remuneration in excess of Cdn. $40,000 in that year was $2,719,839.

Directors and Officers Insurance

The Company carries directors and officers liability insurance which is subject to a total aggregate limit of $25,000,000 and deductibles of up to $250,000 for each claim. The premium for the latest policy period is $233,500.

22


INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS OTHER THAN SECURITIES PURCHASE PROGRAMS

No director, executive officer or senior officer, or associate or affiliate of any such director, executive officer or senior officer, is or at any time since the beginning of the most recently completed financial year of the Company was indebted to the Company.

INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS

None of the directors, officers of the Company, nor any person or corporation owning more than 10% or any class of voting securities of the Company, nor any associates or affiliates of any of them, had or has any material interest in any transaction since the commencement of the Company’s last financial year or in any proposed transaction which has materially affected or would materially affect the Company or any of its subsidiaries.

AUDIT COMMITTEE INFORMATION

Audit Committee Charter

The Audit Committee of the Board of Directors operates within a written mandate, as approved by the Board of Directors, which describes the Committee’s objectives and responsibilities. The full text of the Audit Committee Charter is attached as Appendix A to this Information Circular.

Composition of the Audit Committee

The Audit Committee is composed of the following 3 directors:

  Chris D. Mikkelsen (Chair)
Jean Charles Potvin
Patrick D. McChesney

The Board of Directors has determined each member of the Audit Committee to be “independent” and “financially literate” as such terms are defined under Canadian securities laws. In addition, the Chair of the Committee, Mr. Mikkelsen, is considered by the Board to qualify as an “audit committee financial expert” as defined by the U.S. Securities and Exchange Commission. The Board has made these determinations based on the education and experience of each member of the Committee, as outlined below.

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Relevant Education and Experience

The following is a description of the education and experience of each member of the Audit Committee that is relevant to the performance of his responsibilities as a member of the Audit Committee: Mr. Mikkelsen is a Principal in McDirmid, Mikkelsen & Secrest, P.S., a certified public accounting firm. Mr. Mikkelsen has a Professional Accounting degree from Eastern Washington University. After working for a national accounting firm, he left in 1976 to form McDirmid, Mikkelsen and Secrest, P.S. He has extensive technical audit and accounting experience related to a variety of industries. Mr. Mikkelsen has been Chair of, and a member of, this Committee since August 1998.

Mr. Potvin is Chief Executive Officer of Tiomin Resources Inc., a company involved in the development of several large titanium-bearing mineral sands deposits in Kenya. Mr. Potvin holds a Bachelor of Science degree in Geology from Carleton University and an MBA from the University of Ottawa. He spent nearly 14 years as a mining investment analyst for a large Canadian investment brokerage firm (Burns Fry Ltd., now BMO Nesbitt Burns Inc.). He is also a member of the audit committee of Polaris Energy Corporation, a publicly-listed geothermal-based power producer and of Azimut Exploration Ltd also a publicly listed mineral exploration company. Mr. Potvin has been a member of this Committee since August 2003.

Mr. McChesney is the Controller of Foothills Auto Group, an operator of franchised auto dealerships, where he is responsible for the financial statements. He was President of LMO Test Systems, Inc., a manufacturer of automated test equipment for the semiconductor industry, from March 1996 until December 2005. Mr. McChesney graduated from the University of Portland, with a Bachelor degree in Accounting. For his entire 32 year working career, he has prepared and analyzed financial statements in the mining, public accounting, retail, electronics and construction industries. Mr. McChesney has been a member of this Committee since August 1998.

External Auditor Service Fees

Fees paid or payable to the Company’s independent external auditor, PricewaterhouseCoopers LLP, are detailed in the following table:

    Year Ended 2007    Year Ended 2006 
Fee category    (Cdn.$)    (Cdn.$) 



Audit    $ 236,235    $ 68,892 



Audit related    130,200    92,192 



Tax    14,305    137,917 



All other fees         



Total    $380,740    $299,001 




The nature of the services provided by PricewaterhouseCoopers LLP under each of the categories indicated in the table is described below.

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Audit Fees

Audit fees were for professional services rendered by PricewaterhouseCoopers LLP for the audit of the Company’s annual financial statements.

Audit-related Fees

Audit-related fees were for the review of the Company’s quarterly financial statements and services provided in respect of other regulatory-required auditor attest functions associated with government audit reports, registration statements, prospectuses, periodic reports and other documents filed with securities regulatory authorities or other documents issued in connection with securities offerings.

Tax Fees

Tax fees were for services outside of the audit scope and represented consultations for tax compliance and advisory services relating to common forms of domestic and international taxation.

All Other Fees

None.

Pre-approval Policies and Procedures

The Company’s Audit Committee has adopted policies and procedures for the pre-approval of services performed by the Company’s external auditors, with the objective of maintaining the independence of the external auditors. The Company’s policy requires that the Audit Committee pre-approve all audit, audit-related, tax and other permissible non-audit services to be performed by the external auditors, including all engagements of the external auditors with respect to the Company’s subsidiaries. Prior approval of engagements for services other than the annual audit may, as required, be approved by the Chair of the Committee with the provision that such approvals be brought before the full Committee at its next regular meeting. The Company’s policy sets out the details of the permissible non-audit services consistent with the independence requirements of the United States Sarbanes-Oxley Act of 2002 and the Canadian independence standards for auditors. The Chief Financial Officer presents the details of any proposed assignments of the external auditor for consideration by the Audit Committee. The procedures do not include delegation of the Audit Committee’s responsibilities to management of the Company.

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CORPORATE GOVERNANCE

The TSX requires listed corporations to disclose their approach to corporate governance. The Company’s disclosure in this regard is set out in Appendix B to this Information Circular.

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

Other than as set forth in this Information Circular, no person who has been a director or senior officer of the Company at any time since the beginning of the last financial year, nor any associate or affiliate of any of the foregoing, has any material interest, directly or indirectly, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon.

ANY OTHER MATTERS

Management of the Company knows of no matters to come before the Meeting other than those referred to in the Notice of Annual and Special Meeting of Shareholders accompanying this Information Circular. However, if any other matters properly come before the Meeting, it is the intention of the persons named in the form of proxy accompanying this Information Circular to vote the same in accordance with their best judgment of such matters.

ADDITIONAL INFORMATION

Additional information about the Company may be found on the SEDAR website at www.sedar.com, on the U.S. Securities and Exchange Commission’s website at www.sec.gov and on the Company’s website at www.goldreserveinc.com. Additional financial information is provided in the Company’s comparative financial statements and management’s discussion and analysis for its year ended December 31, 2007, as contained in the 2007 Annual Report. A copy of this document and other public documents of the Company are available upon request to:

Gold Reserve Inc.
Attention: Robert A. McGuinness
926 W. Sprague Avenue, Suite 200
Spokane, Washington 99201
Phone: (509) 623-1500
Fax: (509) 623-1634

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APPROVAL AND CERTIFICATION

The contents and the sending of this Information Circular have been approved by the Board.

The forgoing contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it is made.

Dated at Spokane, Washington, this 23rd day of April, 2008

Rockne J. Timm

Chief Executive Officer

Robert A. McGuinness

Vice President Finance and Chief Financial Officer


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APPENDIX A

CHARTER OF THE
AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS

Purpose

The primary purposes of the Audit Committee (the “Committee”) are to oversee on behalf of the Board of Directors (“Board”) of Gold Reserve Inc. (the “Company”):

The Committee also has the purpose of preparing the financial report that rules of the U.S. Securities and Exchange Commission (the “SEC”) or the Ontario Securities Commission (the “OSC”) require the Company to include in its annual proxy or information statement and Form 20-F filed with the SEC and/or its equivalent filed with the OSC.

The Committee’s function is one of oversight only and does not relieve management of its responsibilities for preparing financial statements that accurately and fairly present the Company’s financial results and condition, nor the independent auditors of their responsibilities relating to the audit or review of financial statements.

Organization

The Committee shall consist of at least three directors. The Board shall designate a Committee member as the chairperson of the Committee, or if the Board does not do so, the Committee members shall appoint a Committee member as chairperson by a majority vote of the authorized number of Committee members.

All Committee members shall be “independent,” as defined and to the extent required in the applicable SEC and OSC rules and American Stock Exchange (“AMEX”) and Toronto Stock Exchange (“TSX”) listing standards and applicable laws and regulations, as they may be amended from time to time (collectively, such SEC and exchange requirements are referred to as the “listing standards”), for purposes of audit committee membership.

Notwithstanding the foregoing, one director who is not independent as defined by the AMEX listing standards, but who satisfies the requirements of Rule 10A-3 under the Securities Exchange Act of 1934, and is not a current officer or employee or an immediate family member of such officer or employee, may be appointed to the Committee if the Board, under exceptional and limited circumstances, determines that membership on the Committee by the individual is in the best interests of the Company and its Shareholders, and the Board discloses, in the next periodic filing made with the SEC subsequent to such determination, the nature of the relationship and the reasons for that determination; provided, however, that any such non-independent Committee member may only serve on

28


the Committee for two (2) years and may not serve as the chairperson of the Committee. Each Committee member shall be able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement, and cashflow statement upon appointment to the Committee. At all times there shall be at least one member of the Committee who, in the Board’s business judgment, is an audit committee “financial expert” as defined in the SEC rules and is “financially sophisticated” as defined in the AMEX listing standards.

Subject to the requirements of the listing standards, the Board may appoint and remove Committee members in accordance with the Company’s by-laws. Committee members shall serve for such terms as may be fixed by the Board, and in any case at the will of the Board whether or not a specific term is fixed.

Independent Auditors and Their Services

The Committee shall have the sole authority and direct responsibility for the appointment, compensation, retention, termination, evaluation and oversight of the work of the independent auditors engaged by the Company for purposes of preparing or issuing an audit report or related work or performing other audit, review or attest services for the Company. The independent auditors shall report directly to the Committee. The Committee’s authority includes the resolution of disagreements between management and the auditors regarding financial reporting. The Committee shall pre-approve all audit, review, attest and permissible non-audit services to be provided to the Company or its subsidiaries by the independent auditors. The Committee may establish pre-approval policies and procedures in compliance with applicable listing standards. The Committee shall obtain and review, at least annually, a report by the independent auditors describing:

In addition, the Committee’s annual review of the independent auditors’ qualifications shall also include the review and evaluation of the lead partner of the independent auditors for the Company’s account, and evaluation of such other matters as the Committee may consider relevant to the engagement of the auditors, including views of company management and internal finance employees, and whether the lead partner or auditing firm itself should be rotated.

Annual Financial Reporting

As often and to the extent the Committee deems necessary or appropriate, but at least annually in connection with the audit of each fiscal year’s financial statements, the Committee shall:

1.      Review and discuss with appropriate members of management the annual audited financial statements, related accounting and auditing principles and practices, and (when required of management under the applicable listing standards) management’s assessment of internal control over financial reporting.
 
2.      Timely request and receive from the independent auditors the report required (along with any required update thereto) pursuant to applicable listing standards prior to the filing of an audit report, concerning:
 

29


 
  • all critical accounting policies and practices to be used;
     
     
  • all alternative treatments of financial information within generally accepted accounting principles for policies and practices relating to material items that have been discussed with company management, including ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent auditors; and
     
     
  • other material written communications between the independent auditors and company management, such as any management letter or schedule of unadjusted differences.
     
    3.      Discuss with the independent auditors the matters required to be discussed by AICPA Statement on Auditing Standards No. 61, including such matters as:
     
     
  • the quality and acceptability of the accounting principles applied in the financial statements;
     
     
  • new or changed accounting policies, and significant estimates, judgments, uncertainties or unusual transactions;
     
     
  • the selection, application and effects of critical accounting policies and estimates applied by the Company;
     
     
  • issues raised by any “management” or “internal control” letter from the auditors, problems or difficulties encountered in the audit (including any restrictions on the scope of the work or on access to requested information) and management’s response to such problems or difficulties, significant disagreements with management, or other significant aspects of the audit; and
     
     
  • any off-balance sheet transactions, and relationships with any unconsolidated entities or any other persons, which may have a material current or future effect on the financial condition or results of the Company and are required to be reported under SEC rules.
     
    4.      Review and discuss with appropriate members of management the Company’s intended disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (or equivalent disclosures) to be included in the Company’s annual report on Form 20-F filed with the SEC and its equivalent filed with the OSC.
     
    5.      Receive from the independent auditors a formal written statement of all relationships between the auditors and the Company consistent with Independence Standards Board Standard No. 1.
     
    6.      Actively discuss with the independent auditors any disclosed relationships or services that may impact their objectivity and independence, and take any other appropriate action to oversee their independence.
     

    Quarterly Financial Reporting

    The Committee’s quarterly review shall normally include:

    1.      Review and discuss the quarterly financial statements of the Company and the results of the independent auditors’ review of these financial statements with appropriate members of management.
     
    2.      Review and discuss with Company management and, if appropriate, the independent auditors, significant matters relating to:
     

    30


     
  • the quality and acceptability of the accounting principles applied in the financial statements;
     
     
  • new or changed accounting policies, and significant estimates, judgments, uncertainties or unusual transactions;
     
     
  • the selection, application and effects of critical accounting policies and estimates applied by the Company; and
     
     
  • any off-balance sheet transactions and relationships with any unconsolidated entities or any other persons which may have a material current or future effect on the financial condition or results of the Company and are required to be reported under SEC rules.
     
    3.      Review and discuss with appropriate members of management the Company’s intended disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (or equivalent disclosures) to be included in the Company’s quarterly reports prepared in accordance with Canadian requirements and filed on Form 6-K with the SEC and its equivalent filed with the OSC.
     

    Other Functions

    The Committee shall review and assess the adequacy of this charter annually, recommend any proposed changes to the full Board and, to the extent required by the listing standards, certify annually to any AMEX, TSX or other listing market that the Committee reviewed and assessed the adequacy of the charter.

    The Committee shall discuss with management earnings press releases (including the type and presentation of information to be included, paying particular attention to any use of “pro forma” or “adjusted” non-GAAP information), and financial information and earnings guidance provided to analysts and rating agencies. This may be conducted generally as to types of information and presentations, and need not include advance review of each release or other information or guidance.

    The Committee, to the extent it deems necessary or appropriate, shall periodically review with management the Company’s disclosure controls and procedures, internal control over financial reporting and systems and procedures to promote compliance with applicable laws.

    The Committee shall periodically:

    The Committee shall conduct any activities relating to the Company’s code(s) of conduct and ethics as may be delegated, from time to time, to the Committee by the Board.

    The Committee shall establish and maintain procedures for:

    31


    If the Committee so determines, the confidential, anonymous submission procedures may also include a method for interested parties to communicate directly with non-management directors. It is the Company’s policy that the Company shall not enter into transactions required to be disclosed under item 404 of the Securities and Exchange Commission’s Regulation S-K or other applicable Canadian requirements unless the Committee first reviews and approves such transactions.

    The Committee shall review and take appropriate action with respect to any reports to the Committee from internal or external legal counsel engaged by the Company concerning any material violation of securities law or breach of fiduciary duty or similar violation by the Company, its subsidiaries or any person acting on their behalf.

    The Committee shall, from time to time as necessary, review the effect of regulatory and accounting initiatives on the financial statements of the Company. In addition, the Committee, as it considers appropriate, may consider and review with the full Board, company management, internal or external legal counsel, the independent auditors or any other appropriate person any other topics relating to the purposes of the Committee which may come to the Committee’s attention.

    The Committee may perform any other activities consistent with this charter, the Company’s corporate governance documents and applicable listing standards, laws and regulations as the Committee or the Board considers appropriate.

    Meetings, Reports and Resources

    The Committee shall meet as often as it determines is necessary, but not less than quarterly. The Committee shall meet separately with management and independent auditors. In addition, the Committee may meet with any other persons, as it deems necessary.

    The Committee may establish its own procedures, including the formation and delegation of authority to subcommittees, in a manner not inconsistent with this charter, the by-laws or the listing standards. The chairperson or a majority of the Committee members may call meetings of the Committee. A majority of the authorized number of Committee members shall constitute a quorum for the transaction of Committee business, and the vote of a majority of the Committee members present at a meeting at which a quorum is present shall be the act of the Committee, unless in either case a greater number is required by this charter, the by-laws or the listing standards. The Committee shall keep written minutes of its meetings and deliver copies of the minutes to the corporate secretary for inclusion in the Company’s corporate records.

    The Committee shall prepare any audit committee report required to be included in the Company’s annual meeting proxy or information statement, and report to the Board on the other matters relating to the Committee or its purposes, as required by the listing standards. The Committee shall also report to the Board annually the overall results of its annual review of the independent auditors’ qualifications, performance and independence. The Committee shall also report to the Board on the major items covered by the Committee at each Committee meeting, and provide additional reports to the Board as the Committee may determine to be appropriate, including review with the full Board of any issues that arise from time to time with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the independent auditors.

    The Committee is at all times authorized to have direct, independent and confidential access to

    32


    the independent auditors and to the Company’s other directors, management and personnel to carry out the Committee’s purposes. The Committee is authorized to conduct or authorize investigations into any matters relating to the purposes, duties or responsibilities of the Committee.

    As the Committee deems necessary to carry out its duties, it is authorized to select, engage (including approval of the fees and terms of engagement), oversee, terminate, and obtain advice and assistance from outside legal, accounting, or other advisers or consultants. The company shall provide for appropriate funding, as determined by the Committee, for payment of:

    Nothing in this charter is intended to preclude or impair the protection provided under corporation law for good faith reliance by members of the Committee on reports or other information provided by others.

    33


    APPENDIX B

    STATEMENT OF CORPORATE GOVERNANCE PRACTICES

    In this Appendix are the Company’s corporate governance practices in accordance with National Instrument 58-101 “Disclosure of Corporate Governance Practices” (“NI 58-101”), and National Policy 58-201 “Corporate Governance Guidelines” (“NP 58-201”), which came into force in Canada on June 30, 2005. The Company’s Board has reviewed this disclosure of the Company’s corporate governance practices.

        Disclosure Requirement under                 
        Form 58-101F1        Company’s Governance Practices 




     
    1. (a)             Disclose the identity of directors    The Board of Directors (the “Board”) of 
                 who are independent.        the Company believes that Messrs. 
                        Coleman, McChesney, Mikkelsen, and 
                        Potvin are “independent” within the 
                        meaning of section 1.4 of Multilateral 
                        instrument 52-110 “Audit Committees” 
                        (“MI 52-110”) and section 1.2 of NI 58- 
                        101, as none of them is, or has been 
                        within the last three years, an executive 
                        officer or employee of the Company or 
                        party to any material contract with the 
                        Company and none of them receive 
                        remuneration from the Company in 
                        excess of directors’ fees and grants of 
                        stock options. The Board believes that 
                        the four Directors are free from any 
                        interest and any business or other 
                        relationship that could, or could 
                        reasonably be perceived to, materially 
                        interfere with their ability to act 
                        independently from management or to 
                        act as a director with a view to the best 
                        interests of the Company, other than 
                        interests and relationships arising from 
                        shareholdings.         
     
       (b)             Disclose the identity of directors    Three Directors,  Messrs.  Timm, 
                 who are  not  independent,  and    Belanger and Geyer, are employees of 
                 describe the basis for  that    the Company and therefore not 
                 determination.            considered independent.     
     
       (c)             Disclose whether or not a majority    Four of seven, approximately 57.1% of 
                 of directors are independent. If a    the Company’s current Directors, are 
                 majority of directors are not    independent.         
                 independent, describe what the             
                 board of directors (the board) does             
                 to facilitate  its exercise  of             
                 independent judgement in carrying             

    34


        Disclosure Requirement under                     
        Form 58-101F1        Company’s Governance Practices 




     
                 out its responsibilities.                         
     
    (d)             If a director is presently a director of    Such  other directorships have been 
                 any other issuer that is a reporting    disclosed in “Item 1 - Election of 
                 issuer (or the equivalent) in a    Directors” section of this Information 
                 jurisdiction or a foreign jurisdiction,    Circular.             
                 identify both the director and the                     
                 other issuer.                         
     
    (e)             Disclose  whether or  not the    The Board has not adopted a formal 
                 independent directors hold regularly    policy for the independent Directors to 
                 scheduled meetings at which non-    meet  without  management  present 
                 independent directors and members    before       and  after each  regularly 
                 of management are  not in    scheduled meeting of the Board. 
                 attendance. If the independent    Without management present, the 
                 directors  hold such  meetings, 
             disclose  the number of  meetings 
      independent Directors met on six 
          occasions, in person or by telephone 
                 held since the beginning of the    during 2007 and are expected to 
                 issuer's most recently completed    continue to meet on a regular basis. 
                 financial  year. If the independent    These sessions are of no fixed duration 
                 directors do not hold such meetings,    and  participating Directors  are 
                 describe what the board does to    encouraged to raise and discuss any 
                 facilitate open and candid discussion    issues of concern.         
                 among its independent directors.                     
     
    (f)             Disclose whether or not the chair of    The Board has appointed James H. 
                 the board is an independent director.    Coleman as its Chairman. Mr. Coleman 
                 If the board has a chair or lead    is an  independent director  of the 
                 director who is an independent    Company. One of his responsibilities is 
                 director, disclose the identity of the    to oversee the Board processes so that it 
                 independent chair or lead director,    operates efficiently and effectively in 
                 and describe his or her role and    carrying out its duties and to act as 
                 responsibilities. If the board has    liaison  between the Board and 
                 neither a chair that is independent    management.             
                 nor a  lead director  that is                     
                 independent, describe what the                     
                 board does to provide leadership for                     
                 its independent directors.                         
     
    (g)             Disclose  the attendance  record of    The Board held four (4) meetings during 
                 each director for all board meetings    2007 at which attendance, in person or 
                 held since the beginning of the    by phone, averaged 89%.  Various 
                 issuer’s most recently  completed    matters were considered and approved 
                 financial year.        by written resolution during the year. 
                    Messrs. Belanger, Geyer, Mikkelsen, 
                    McChesney, and Timm attended all four 
                    meetings. Mr. Mr. Coleman and Mr. 

    35


        Disclosure Requirement under     
        Form 58-101F1    Company’s Governance Practices 



     
            Potvin each attended three of the four 
            meetings. 
     
    2.             Disclose the text of the board’s    The Board is responsible for supervising 
                 written mandate. If the board does    the conduct of the Company’s affairs 
                 not have a written mandate, describe    and the management of its business. To 
                 how the board delineates its role and    assist the Board in implementing key 
                 responsibilities.    policies, the Board delegates some of its 
            responsibility to committees. Although 
            the Board has delegated to management 
            responsibility for the day-to-day 
            operations of the Company, the Board 
            has ultimate responsibility for the 
            stewardship of the Company. 
            Strategic planning is at the forefront of 
            deliberations at meetings of the Board. 
            Management is responsible for the 
            development of overall corporate 
            strategies. These strategies are under 
            constant review by the Board and senior 
            management. 
            The Board’s duties include overseeing 
            strategic planning, reviewing and 
            assessing principal risks to the 
            Company’s business and approving risk 
            management strategies. 
            The Board ensures that an appropriate 
            risk assessment process is in place to 
            identify, assess and manage the 
            principal risks of the Company’s 
            business. Management reports regularly 
            to the Board in relation to principal 
            risks, which potentially could affect the 
            Company’s business activities. 
            The Board reviews and approves, for 
            release to shareholders, quarterly and 
            annual reports on the performance of the 
            Company. It seeks to ensure that the 
            Company communicates effectively 
            with its Shareholders, respective 
            investors and the public, including 
            dissemination of information on a timely 
            basis. Through its officers, the 
            Company responds to questions and 
            provides information to individual 
            Shareholders, institutional investors, 

    36


        Disclosure Requirement under                 
        Form 58-101F1        Company’s Governance Practices 




     
                        financial analysts and the media.     
                        The Board’s duties include supervising 
                        and evaluating management, authorizing 
                        significant expenditures, and overseeing 
                        the Company’s internal controls and 
                        information systems.     
     
    3. (a)             Disclose whether or not the board    The Board has not developed a written 
                 has developed written position    position description for the Chair. The 
                 descriptions for the chair and the    responsibilities of the Chair include 
                 chair of each board committee. If    presiding over Board meetings, 
                 the board has not developed written    assuming principal responsibility for the 
                 position descriptions for the chair    Board’s operation and functioning, and 
                 and/or the chair of each board    ensuring that Board functions are 
                 committee, briefly describe how the    effectively carried out.     
                 board delineates  the role  and    The Board has not developed written 
                 responsibilities of  each  such    position descriptions for the chair of any 
                 position.                committee of the Board.     
                        The responsibilities of committee chairs 
                        include presiding over committee 
                        meetings, ensuring that the committee is 
                        properly organized and effectively 
                        discharges its duties, reporting to the 
                        Board with respect to the activities of 
                        the committee, and leading the 
                        committee in reviewing and assessing 
                        on an annual basis, the adequacy of the 
                        committee’s  mandate and  its 
                        effectiveness in fulfilling its mandate. 
     
    (b)             Disclose whether or not the board    The board has not developed a written 
                 and CEO have developed a written    position description for the CEO.     
                 position description for the CEO. If    The CEO reports to the Board and has 
                 the board and CEO have not    general supervision and control over the 
                 developed  such  a position    business and affairs of the Company. 
                 description, briefly describe how the    The CEO’s responsibilities include: 
                 board delineates  the role  and             
                 responsibilities of the CEO.        (a) fostering a corporate culture that 
                                 promotes  ethical practices, 
                                    encourages individual integrity and 
                                 fulfills social responsibility;     
     
                        (b) developing and recommending to 
                                 the Board a long-term strategy and 
                                 vision for the Company that leads to 
                                 creation of Shareholder value;     

    37


                       Disclosure Requirement under     
        Form 58-101F1            Company’s Governance Practices 





     
                        (c) developing and recommending to 
                                 the Board annual business plans and 
                                 budgets that support the Company’s 
                                 long-term strategy; and 
     
                        (d) consistently striving to achieve the 
                                 Company’s financial and operating 
                                 goals and objectives. 
     
    4. (a)    Briefly describe what measures the    Due to its current size, the Board does 
        board takes to orient new directors    not currently provide an orientation and 
        regarding the role of the board, its    education program for specifically 
        committees and its directors, and the    training new recruits to the Board. 
        nature and operation of the issuer's     
        business.             
     
    (b)    Briefly describe what measures, if    Due to its current size, the Board does 
        any, the board takes to provide    not provide a continuing education 
        continuing education for  its    program for its Directors. All Directors 
        directors. If the board does not    are given direct access to management, 
        provide  continuing  education,    which is encouraged to provide 
        describe how the board ensures that    information on the Company and its 
        its directors maintain the skill and    business and affairs to Directors. The 
        knowledge necessary to meet their    Board believes that each of its Directors 
        obligations as directors.        maintain the skills and knowledge 
                        necessary to meet their obligations as 
                        Directors. 
     
    5. (a) (i)    Disclose whether or not the board    The Board has adopted the Gold 
        has adopted a written code for the    Reserve Inc. Code of Conduct and 
        directors, officers and employees. If    Ethics (the “Code”), which can be found 
        the board has adopted a written    at www.goldreserveinc.com and is 
        code, disclose how a person or    available in print to any Shareholder 
        company may obtain a copy of the    who requests it. 
        code.                 
     
    (a) (ii)    Describe how the board monitors    The Compliance Officer, as well as 
        compliance with its code, or if the    other officers, Directors and the 
        board does not monitor compliance,    Company’s legal and other advisors, 
        explain whether and how the board    have the full power and authority to 
        satisfies itself regarding compliance    investigate any evidence of improper 
        with its code.            conduct, violations of laws, rules, 
                        regulations or the Code, and to 
                        determine what steps, if any, should be 
                        taken to resolve the problem and avoid 
                        the likelihood of its recurrence. 
     
    (a) (iii)    Provide a cross-reference to any    The Company has not filed any material 

    38


        Disclosure Requirement under                     
            Form 58-101F1            Company’s Governance Practices 






     
                 material change report filed since    change reports since the beginning of 
                 the beginning of the issuer's most    the 2007 financial year that pertains to 
                 recently completed financial year    any conduct of a Director or executive 
                 that pertains to any conduct of a    officer of the Company that constitutes a 
                 director or executive officer that    departure from the Code.         
                 constitutes a departure from the                 
                 code.                             
     
    (b)             Describe any steps the board takes    Each Director must possess and exhibit 
                 to  ensure  directors  exercise    the highest degree  of integrity, 
                 independent  judgement  in    professionalism and values, and must 
                 considering  transactions  and    never be in a conflict of interest with the 
                 agreements in respect of which a    Company. A Director who has a conflict 
                 director or executive officer has a    of interest regarding any particular 
                 material interest.            matter under consideration must advise 
                            the Board, refrain from debate on the 
                            matter and abstain from any vote 
                            regarding it.             
                            All Company employees, including 
                            officers, and Directors are expected to 
                            use sound judgment to help maintain 
                            appropriate compliance procedures and 
                            to carry out the Company’s business 
                            with honesty and in compliance with 
                            laws and high ethical standards. Each 
                            employee and Director is expected to 
                            read the Code and demonstrate personal 
                            commitment to the standards set forth in 
                            the Code.             
     
    (c)             Describe any other steps the board    The Company will  not tolerate 
                 takes to encourage and promote a    retaliation against an  employee or 
                 culture of ethical business conduct.    Director for reporting in good faith any 
                            violations of the Code, and any such 
                            retaliation is against Company policy. 
                            Employees and Directors who violate 
                            the Code may be subject to disciplinary 
                            action, including  termination  of 
                            employment.             
                            Knowledge of a violation and failure to 
                            promptly report or correct the violation 
                            may also subject an employee or 
                            Director to disciplinary action up to and 
                            including immediate discharge from 
                            employment.             

    39


        Disclosure Requirement under             
            Form 58-101F1            Company’s Governance Practices 






     
    6. (a)             Describe the process by which the    In considering and identifying new 
                 board identifies new candidates for    candidates for Board nomination, the 
                 board nomination.            Board, where relevant:     
                                (a) addresses succession and planning 
                                issues;     
                                (b) identifies the mix of expertise and 
                                qualities required for the Board;     
                                (c) assesses the attributes new directors 
                                should have for the appropriate mix to 
                                be maintained;     
                                (d) arranges for each candidate to meet 
                                with the Board Chair and the CEO;     
                                (e) recommends to the Board as a whole 
                                proposed nominee(s) and arranges for 
                                their introduction to as many Board 
                                members as practicable; and     
                                (f) encourages diversity in  the 
                                composition of the Board.     
     
    (b)             Disclose whether or not the board    Due to its current size, the Board does 
                 has a  nominating  committee    not currently have a separate committee 
                 composed  entirely of  independent    for identifying new candidates for Board 
                 directors. If the board does not have    nomination. The size and composition 
                 a nominating committee composed    of the Board is subject to periodic 
                 entirely of independent directors,    review by the Board as a whole.  The 
                 describe what steps the board takes    Board as a whole bears  this 
                 to  encourage  an  objective    responsibility.     
                 nomination process.                 
     
    (c)             If the board has a nominating    The Board does not currently have a 
                 committee,    describe  the    nominating committee.     
                 responsibilities,  powers  and         
                 operation  of  the  nominating         
                 committee.                         
     
    7. (a)             Describe the process by which the    The Board reviews from time to time the 
                 board determines the compensation    compensation paid to Directors in order 
                 for the  issuer's directors  and    to ensure that they are being adequately 
                 officers.                    compensated for the duties performed 
                                and the obligations they assume. The 
                                Board as a whole is responsible for 
                                determining the compensation paid to 
                                the Directors.     
                                The Board considers evaluations 

    40


        Disclosure Requirement under             
            Form 58-101F1        Company’s Governance Practices 





     
                        submitted by the Compensation 
                        Committee evaluating the Company’s 
                        performance and the performance of its 
                        executive officers, and ratifies the cash 
                        and equity-based compensation of such 
                        executive officers approved by the 
                        Compensation Committee. 
                        The Company evaluates the extent to 
                        which strategic and business goals are 
                        met  and measures individual 
                        performance, albeit subjectively, against 
                        development objectives and the degree 
                        to which teamwork and Company 
                        objectives are promoted. The Company 
                        strives to achieve a balance between the 
                        compensation paid to a particular 
                        individual and the compensation paid to 
                        other employees and executives having 
                        similar responsibilities within the 
                        Company. The Company also strives to 
                        ensure that each employee understands 
                        the components of his or her salary, and 
                        the basis upon which it is determined 
                        and adjusted. 
     
    (b)             Disclose whether or not the board    The Compensation Committee, which 
                 has a compensation committee    met seven times during 2007 in person 
                 composed entirely of independent    and by phone, consists of Messrs. 
                 directors. If the board does not have    Mikkelsen (Chair) and Potvin, both of 
                 a  compensation committee    whom are independent directors. 
                 composed entirely of independent         
                 directors, describe what steps the         
                 board takes to ensure an objective         
                 process for  determining  such         
                 compensation.                 
     
    (c)             If the board has a compensation    The function of the Compensation 
                 committee,  describe  the    Committee is to evaluate the Company’s 
                 responsibilities,         powers  and    performance and the performance of its 
                 operation of  the compensation    executive officers, approve the cash and 
                 committee.            equity-based compensation of such 
                        executive officers and submit such 
                        approvals to the full Board for 
                        ratification. 
                        The Compensation Committee has not 
                        developed specific quantitative or 
                        qualitative performance measures or 

    41


        Disclosure Requirement under                     
            Form 58-101F1    Company’s Governance Practices 




     
                        other specific criteria for determining 
                        the compensation of the Company’s 
                        CEO, primarily because the Company 
                        does not yet have a producing mine or 
                        other operations from which such 
                        quantitative data can be derived. As a 
                        consequence, the determination of the 
                        CEO’s compensation in 2007 was 
                        largely subjective, and based on the 
                        Company’s progress in addressing its 
                        more immediate concerns, continued 
                        exploration,  and  identifying  and 
                        analyzing new corporate opportunities. 
     
       (d)             If a compensation consultant or    A compensation consultant has not been 
                 advisor has, at any time since the    engaged by the Company since the 
                 beginning of the issuer's most    beginning of the Company’s most recent 
                 recently  completed financial year,    financial year to assist in determining 
                 been  retained to assist in    compensation for the Directors or 
                 determining compensation for any    officers of the Company.         
                 of the issuer's directors and officers,                     
                 disclose  the identity of the                     
                 consultant or advisor and briefly                     
                 summarize the mandate for which                     
                 they have been retained. If the                     
                 consultant or advisor has been                     
                 retained to perform any other work                     
                 for the issuer, state that fact and                     
                 briefly describe the nature of the                     
                 work.                             
     
    8.             If  the  board has standing    The Executive Committee, which is 
                 committees other than the audit,    comprised of Messrs. Coleman, Timm 
                 compensation  and nominating    and Belanger, meets in person or by 
                 committees, identify the committees    phone on a regular basis. Mr. Coleman 
                 and describe their function.    is considered an independent director. 
                        Messrs. Timm and Belanger are not 
                        considered independent directors within 
                        the definition in MI 52-110.     
                        The Executive Committee facilitates the 
                        Company’s  activities  from an 
                        administrative perspective, but does not 
                        supplant the full Board in the 
                        consideration of significant issues facing 
                        the Company. The Audit Committee, 
                        the Compensation Committee and the 
                        Executive Committee are the only 

    42


        Disclosure Requirement under         
        Form 58-101F1        Company’s Governance Practices 




     
                    committees of the Board. 
     
    9.             Disclose whether or not the board,    Due to its current size, the Board does 
                 its committees  and individual    not currently have a separate committee 
                 directors are regularly assessed with    for assessing the effectiveness of the 
                 respect to their  effectiveness  and    Board as a whole, the committees of the 
                 contribution. If  assessments  are    Board, or the contribution of individual 
                 regularly conducted, describe  the    Directors. The Board as a whole bears 
                 process used for the assessments. If    these responsibilities. 
                 assessments are  not regularly    The Board chair meets annually with 
                 conducted, describe how the board    each director individually to discuss 
                 satisfies itself that the board, its    personal contributions and overall Board 
                 committees, and its individual    effectiveness. 
                 directors are performing effectively.     

    43


    Exhibit 99.2

    Form of Proxy


    GOLD RESERVE INC.
     
    PROXY
     
    ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
     
    June 10, 2008
     
    THIS PROXY IS SOLICITED BY THE MANAGEMENT OF GOLD RESERVE INC.
     
    The undersigned shareholder of Gold Reserve Inc. (the “Company”) hereby appoints Rockne J. Timm, Chief Executive 
    Officer of the Company, or failing him, Robert A. McGuinness, Vice President Finance and Chief Financial Officer of the 
    Company, or instead of either of them
    ____________________
    , as proxyholder for the undersigned, with power of
     
    substitution, to attend, act and vote for and on behalf of the undersigned at the Annual and Special Meeting of Shareholders 
    of the Company to be held on June 10, 2008 (the “Meeting”) at 9:30 a.m. (Pacific daylight time) and at any adjournment or 
    postponement thereof, in the same manner, to the same extent and with the same powers as if the undersigned were present at 
    the said Meeting or any adjournment or adjournments thereof and, without limiting the general authorization given, the 
    person above named is specifically directed to vote on behalf of the undersigned in the following manner: 
     
    1)    On the election of directors, for the nominees set forth in the Information Circular of the Company dated April 23, 
        2008:             
     
        VOTE FOR    or    WITHHOLD VOTE 
        (and, if no specification is made, to VOTE FOR);     
     
    2)    On the appointment of PricewaterhouseCoopers LLP as auditors of the Company: 
     
        VOTE FOR    or    WITHHOLD VOTE 
        (and, if no specification is made, to VOTE FOR);     
     
    3)    On the approval of the issuance of 100,000 Class A common shares of the Company for purchase by the KSOP 
        Plan:             
     
        VOTE FOR    or    VOTE AGAINST 
        (and, if no specification is made, to VOTE FOR);     
     
     
    4)    On the approval of the adoption of the Venezuelan Equity Incentive Plan: 
     
        VOTE FOR    or    VOTE AGAINST 
        (and, if no specification is made, to VOTE FOR);     
     
    and conferring discretionary authority to vote on amendments or variations to the matters identified in the Notice of Annual 
    and Special Meeting relating to the Meeting and on all other matters that may properly come before the Meeting or any 
    adjournment thereof in such manner as the person above named may see fit. Management is not aware of any such 
    amendments, variations or other matters to be presented at the Meeting. 
     
        This proxy should be read in conjunction with the accompanying Notice of Meeting and Management Information 
    Circular.                 
     
        The undersigned hereby revokes any instrument of proxy previously given and does hereby further ratify all the said 
    proxy may lawfully do in the premises.         
     
        Please ensure that you date this proxy. If this proxy is not dated in the space below, it shall be deemed to bear the 
    date on which it was mailed by the Company to the shareholder. 
     
     
     
    DATED this           day of          , 2008.         




     
     
    Print Name of Shareholder                           Print Name of Shareholder (if held jointly) 



    Signature of Shareholder                           Signature of Shareholder (if held jointly) 


    Exhibit 99.3

    Annual Report




    TO OUR SHAREHOLDERS AND EMPLOYEES

         2007 was another year of significant achievement for Gold Reserve, as we continued to build the foundation for construction and operation of the Brisas gold and copper project. I am proud to say a number of key milestones have been achieved in the past several months, but we still have several more hurdles to overcome before we attain our goal of producing gold and copper at Brisas, challenges which are typical of a project of this magnitude and location.

      After a great deal of hard work by our employees
    and our advisors, the Permit to Affect Natural
    Resources authorizing us to begin construction at
    Brisas was issued to the Company in 2007 by the
    Venezuelan Ministry of the Environment.

    1

      We will have many more permits to obtain
    leading to production at Brisas and currently we
    are looking to obtain an Initiation Act, or
    administrative authorization to proceed with
    construction from the Venezuelan Ministry of the
    Environment. We have met all conditions precedent
    to proceed and our near-term focus will be to obtain
    this authorization.

    We continued our efforts to develop Brisas,
    updating our NI 43-101 Report, advancing detailed
    engineering, initiating long-lead procurement efforts,
    strengthening working partnerships with local,
    regional and international organizations and
    continuing efforts related to project debt financing.


             The recent NI 43-101 Report indicates that             At the end of the first quarter 2008 we are in 
    Brisas continues to demonstrate low projected    a strong financial condition with a cash position 
    operating costs, robust economics at conservative    of $133 million. We are positioned to complete our 
    metal prices and excellent leverage to rising metal    funding efforts and commence full-scale 
    prices. Further, the magnitude of the capital cost    construction once we receive the Initiation Act. 
    increase contained in the Report was reasonably     
    moderate relative to the mining industry as a whole.             On our Choco 5 property we completed a 
    Considering the project scope changes, the    16-hole exploration drilling program in the last 
    increased capital cost for Brisas was not as dramatic    half of 2007 and 43 kilometers survey lines for 
    as some other projects and in line with    geophysical and geochemical sampling. 
    management’s expectations.    Unfortunately, as a result of high in-country 
        demand for assay services, we are still waiting for 
             We expect the majority of the Brisas detailed    our drill program assay results. 
    engineering to be complete by mid 2008. The initial     
    procurement function is now substantially complete,             We are especially proud of the people who 
    with the placement of orders for long-lead items    have become part of Gold Reserve in Venezuela. 
    such as the gyratory crusher, pebble crushers, semi    In December, our President in Venezuela, Arturo 
    autogenous grinding and ball mills, mill motors,    Rivero himself an employee for over 10 years, 
    and initial construction equipment.    presented 28 people with long service recognition 
        awards, many of which have been with the company 
             In addition, we formed important working    for 15 years. Including these employees who have 
    relationships with Conservation International and    been with us for a long time, we would like to thank 
    more locally with the Venezuelan Fundacion para    all our employees who share in the credit for the 
    el Desarrollo Sostenible- Foundation for Sustainable    success the Company has achieved to date. 
    Development (FDS). We are supporting programs     
    in the Brisas area on malaria prevention and control,             We look forward to 2008 to continue our goal 
    sustainable agriculture for local communities,    of placing Brisas into production. 
    creation of ecotourism opportunities and several     
    other initiatives - while developing a strong working     
    relationship for collaboration well into the future             On Behalf of the Board of Directors of 
    as Brisas matures.    Gold Reserve Inc. 
     
             In 2007 we also completed two concurrent     
    financings totaling $183 million with lead     
    underwriters J. P. Morgan Securities, Inc., RBC     
    Capital Markets and Cormark Securities, Inc.     
    We also continued work on the $425 million             A. Douglas Belanger 
    project debt financing with a consortium of             President 
    banks to complete all the conditions precedent     
    for commitment.     

    2


    FORWARD-LOOKING STATEMENTS    and development of mining properties. This list is not     
        exhaustive of the factors that may affect any of the     
    The information presented or incorporated by    Company’s forward-looking statements. See “Risk factors”     
    reference herein contain both historical information    contained in the Company’s Annual Information Form.     
    and forward-looking statements (including within the         
    meaning of the Securities Act (Ontario), Section 27A             Investors are urged to read our filings with Canadian     
    of the United States Securities Act of 1933, as amended,    and U.S. securities regulatory agencies, which can be     
    and Section 21E of the United States Securities    viewed on-line at www.sedar.com or www.sec.gov.     
    Exchange Act of 1934, as amended). These forward-    Additionally, investors can request a copy of any of     
    looking statements involve risks and uncertainties,    these filings directly from our administrative office.     
    as well as assumptions that, if they never materialize,         
     
    prove incorrect or materialize other than as currently    OVERVIEW     
    contemplated, could cause our results to differ         
    materially from those expressed or implied by such             The following discussion of the Company’s financial     
    forward-looking statements.    position as of December 31, 2007 and results of     
    Numerous factors could cause actual results to    operations for the year ended December 31, 2007 is to     
    differ materially from those in the forward-looking    be read in conjunction with the Company’s audited     
    statements, including without limitation, concentration    consolidated financial statements and related notes.     
    of operations and assets in Venezuela; operational,             We prepare our consolidated financial statements     
    regulatory, political and economic risks associated with    in U.S. Dollars in accordance with accounting principles     
    Venezuelan operations (including changes in previously    generally accepted in Canada. These financial statements     
    established legal regimes, rules or processes); corruption    together with the following management’s discussion     
    and uncertain legal enforcement; requests for improper    and analysis, dated March 28, 2008, are intended to    3 
    payments; civil unrest, military actions and crime; the    provide investors with a reasonable basis for assessing     
    ability to obtain or maintain the necessary permits or    the financial performance of the Company as well as     
    additional funding for the development of Brisas; in the    certain forward-looking statements relating to the     
    event any key findings or assumptions previously    Company’s potential. Additional information on the     
    determined by the Company or the Company’s    Company can be found at www.sedar.com, www.sec.gov     
    consultants in conjunction with the feasibility study    or the Company’s web-site www.goldreserveinc.com.     
    concerning the Brisas Project prepared in 2005 (as         
    updated or modified from time to time) significantly             The Company is engaged in the business of     
    differ or change as a result of actual results in the    exploration and development of mining projects and     
    Company’s expected construction and production at    continues to focus the majority of its management and     
    Brisas (including capital and operating cost estimates);    financial resources on its most significant asset, Brisas,     
    risk that actual mineral reserves may vary considerably    and to a lesser extent the exploration of its Choco 5     
    from estimates presently made; impact of currency, metal    property, both located in Bolivar State, Venezuela.     
    prices and metal production volatility; fluctuations in         
    energy prices; currency controls and exchange rates;             Historically we have financed the Company’s     
    changes in proposed development plans (including    operations through the sale of common stock and other     
    technology used); the Company’s dependence upon the    equity securities. Management expects Brisas, if     
    abilities and continued participation of certain key    constructed, to be similarly financed along with project     
    employees; and risks normally incident to the operation    and corporate debt financing.     


                                       Venezuela has, at times, experienced high levels of             MIBAM approved the Brisas operating plan during 
                             inflation, political and civil unrest, government    2003 which was a prerequisite for submitting the Brisas 
                             involvement in strategic industries and during the last    Environmental and Social Impact Study for the 
                             several years has proposed changes in regulatory regimens.    Exploitation and Processing of Gold and Copper Ore 
                             Despite these matters, we have not curtailed our    (“Estudio de Impacto Ambiental y Sociocultural”) 
                             investment activities in the country. However, as discussed    (ESIA) to MINAMB. MINAMB approved the ESIA in 
                             in greater depth under “Risk Factors” contained elsewhere    early 2007 and in March 2007 issued the Authorization 
                             in our Annual Information Form, our operations and    for the Affectation of Natural Resources for the 
                             investments in Venezuela could be adversely affected by    Construction of Infrastructure and Services Phase of 
                             current and future Venezuelan regulatory changes and/or    the Brisas Project (the “Authorization to Affect”). 
                             domestic and international government policies.     
                 The Authorization to Affect allows us to commence 
        certain infrastructure work, including various 
                             PERMITTING    construction activities at or near the mine site, but does 
        not permit us to construct the mill and exploit the gold 
                                       We are dependent on Venezuelan regulatory    and copper mineralization at Brisas at this time. The 
                             authorities issuing to us various permits and    Authorization to Affect mandates that before 
                             authorizations relating to Brisas that we require prior    commencing significant permitted activities we are 
                             to completing construction of and subsequently operating    required to obtain an “Initiation Act” from MINAMB 
                             Brisas. Consistent with other mining projects of this    which indicates that all conditions precedent to 
                             magnitude and, in addition to permits or authorizations    commencing activities have been met, documents our 
                             that must be received from the Venezuelan Ministry of    understanding of the obligations throughout the term 
                             Environment (“MINAMB”), we require a number of    of the authorization and certifies that the permitted 
    4                                        other permits or authorizations from various local, state    activities can in fact commence. 
                             and federal agencies which will be an ongoing process     
                             during the construction period.             After the Authorization to Affect was issued, 
        MIBAM notified us that certain coordinates, related to 
                                       To our knowledge, all of our properties are in    a small section of a new access road designed to by-pass 
                             compliance with the appropriate regulations and    the community of Las Claritas contained in the 
                             requirements of the mining law and our related contractual    Authorization to Affect, conflicted with several land 
                             obligations. In the third quarter of 2007 we received    parcels recently assigned to small miners by MIBAM. 
                             accreditation letters of technical compliance from    The Company along with SNC-Lavalin re-engineered 
                             MIBAM for all of the properties that comprise Brisas.    the section of the road and submitted new coordinates 
                                       In addition, our social, cultural and environmental    to MIBAM that by-pass the land parcels. MIBAM 
                             programs in the immediate and surrounding areas near    subsequently approved the revised road and the 
                             Brisas are consistent with the government’s social agenda    Company duly notified MINAMB according to the 
                             including the framework of Mission Piar. Mission Piar    procedure set forth in the “Authorization to Affect”. 
                             is one of President Chavez’s social initiatives which             We believe that we have met all conditions precedent 
                             includes the local small miners and encompasses    to commencing the construction of infrastructure and 
                             technical assistance and training to explore and minimize    services phase. Although certain work has been 
                             the miners’ impact on the environment as well as their    completed, the major activities outlined in the 
                             integration into the formal economy. We are committed    Authorization to Affect have been delayed until formal 
                             to the economic and social development of Brisas in a    receipt of the Initiation Act. The timing of the issuance 
                             mutually beneficial manner with the communities located    of the Initiation Act cannot be determined at this time. 
                             near the project, the people in Bolivar State, and the     
                             Bolivarian Republic of Venezuela.     


    UPDATED NI 43-101 REPORT FOR THE BRISAS    requirements estimated at $269 million. Initial capital     
    PROJECT    cost estimates exclude value added taxes of approximately 
        $54 million. Tax exonerations or tax payment holidays     
             Management completed the original Brisas Project    are available for various taxes including value added     
    Feasibility Study in 2005. Since then we have continued    tax and import duty tax on the initial capital costs.     
    to update the inputs and assumptions with the assistance    Management plans to submit the required applications 
    of Pincock, Allen & Holt (“PAH”) and SNC Lavalin,    for all available exonerations and expects to obtain such     
    including the mineral resource and reserve, initial capital    exonerations prior to the construction of the project.     
    cost and operating cost estimates contained therein.    As a result, the cost of such taxes and import duties are     
    Most recently in March 2008, the Company with the    not included in the initial costs of the project. There     
    assistance of Pincock, Allen & Holt (“PAH”) updated    can be no assurances that such exonerations will be     
    and prepared a new Canadian Securities Act (“CSA”)    obtained, the result of which would be to increase initial     
    National Instrument 43-101 report for the Brisas Project,    capital and operating costs.         
    which is summarized below. The Company and SNC-             
    Lavalin, the project’s EPCM contractor, updated the             
    capital costs contained in the NI 43-101 Report.    Initial Capital Cost summary         
     
             The March 2008 NI 43-101 Report utilizes $600    Mine    $ 59.0     
    per ounce gold and $2.25 per pound copper for the    Mill    314.7     
    base-case economic model and at such prices, cash    Infrastructure    67.8     
    operating costs (net of copper byproduct credits) are    Tailings    38.3     
    estimated at $120 per ounce of gold. Total costs including    Owner’s Costs    63.4     
    cash operating costs, exploitation taxes, initial capital    Pre-Stripping    16.7     
    costs (excluding sunk cost), and sustaining capital costs    Indirect Costs (includes EPCM and Camp)    127.6    5 
    are estimated at $268 per ounce of gold.    Contingency    43.8     


         Total Initial Capital    $ 731.3     
             The current operating plan assumes a large open             
    pit mine containing proven and probable reserves of             
    approximately 10.2 million ounces of gold and 1.4 billion    We have placed orders related to initial capital     
    pounds of copper in 483 million tonnes of ore grading    costs totaling approximately $121 million, of which we     
    0.66 grams of gold per tonne and 0.13% copper, at a    have paid approximately $29.1 million (see Contractual     
    revenue cutoff grade of $3.54 per tonne using a gold    Obligations). In addition, we have paid an additional     
    price of $470 per ounce and a copper price of $1.35 per    amount of approximately $25 million for costs which     
    pound. The operating plan anticipates utilizing    are included in the estimate of initial capital costs. The     
    conventional truck and shovel mining methods with    net amount of initial capital costs remaining to be     
    the processing of ore at full production of 75,000 tonnes    committed and paid is approximately $585 million.     
    per day, yielding an average annual production of 457,000             
    ounces of gold and 63 million pounds of copper over    The magnitude of the capital costs increase was     
    an estimated mine life of approximately 18.25 years.    reasonably moderate relative to the mining industry as     
    The strip ratio is estimated at 2.24:1    a whole which continues to experience significant     
        increases in capital and operating costs. Considering the     
             The estimated initial capital cost to construct and    project scope changes, the increased costs for Brisas are     
    place Brisas into production totaling $731 million    not as dramatic as some other projects primarily as a     
    excluding working capital, critical spares and initial fills    result of the fact that detailed engineering is         
    of approximately $53 million and ongoing life-of-mine    approximately 75% complete, the majority of the project’s     


                             infrastructure is in place and Venezuelan energy prices    ENGINEERING AND PROCUREMENT 
                             remain the lowest in the world. In addition, orders for     
                             long-lead items such as the gyratory crusher, pebble             SNC-Lavalin of Toronto and its international 
                             crushers, semi autogenous grinding (SAG) and ball mills,    affiliate are providing the Engineering and Procurement 
                             mill motors, and initial construction equipment have    (EP) and Construction Management (CM) services for 
                             been placed.    Brisas. SNC Lavalin's scope of work under the EP and 
        CM contracts includes providing engineering services 
                                       The primary variances between the current estimate    related to, and management of, the construction of a 
                             of initial capital cost of $731 million compared to the    75,000 metric tonne per day hard rock ore copper 
                             previous estimate of $638 million are as follows:    concentrator and related systems, a tailings dam, the 
        initial pit dewatering wells and support facilities including 
                                       Mill costs increased $73.2 million primarily due to    mobile equipment shop, administration building, 
                             increasing the size of the SAG mills, an increase in steel    communications and IT services, laboratory, 
                             quantity and prices and an escalation in equipment    maintenance facilities, warehouse and employee and 
                             prices. The largest components of the mill cost variances    construction man camp. 
                             were: flotation and grinding increased $49.2 million     
                             which includes $23 million for larger SAG mills (36' to             Pursuant to the EP and CM contracts, SNC Lavalin 
                             38') and an additional $10 million related to SAG mill    is to also provide all services and supplies necessary for 
                             motors. Costs related to cyanide destruction reagent    commissioning and start-up of the project, manage the 
                             facilities and compressed air and water utilities increased    health, safety and environmental plans and assure its 
                             a total of approximately $13 million.    services and those of the trade contractors, comply with 
        commitments contained in the ESIA and local permit 
                                       Mine costs decreased $17.6 million mostly due to    requirements. The cost of SNC Lavalin’s EP and CM 
    6                                        lengthening the pre-production period from 9 months    services is expected to be approximately $60 million over 
                             to 17 months which coincides with the construction    the construction period. 
                             period. This significantly reduces the amount of     
                             equipment required for pre-stripping which was partially             Detailed engineering for Brisas was substantially 
                             offset by escalation in equipment prices. Tailings    advanced during 2007 by SNC Lavalin and was 
                             management facility cost increased $14.5 million mostly    approximately 75% complete at the date of this report. 
                             due to additional earthworks caused by increased hauls    We expect the majority of the detailed engineering to 
                             for suitable construction material and owner’s cost    be complete by mid 2008. Detailed engineering includes 
                             increased $7.8 million primarily due to an increase in    construction drawings, site layout, manpower 
                             site earthworks costs and additional environmental/social    requirements, construction planning, and many other 
                             program costs.    functions required in a project of this magnitude. This 
        is the final step in the engineering process for mine 
                                       EPCM cost increased $18.4 million due to additional    development work and is a major requirement for the 
                             work, management support for extended work period,    construction process. 
                             procurement efforts and increases in currency exchange     
                             rates and contingency costs decreased $15.6 million             In mid 2007, we placed orders for the gyratory 
                             primarily due to placing orders on long lead items,    crusher, two SAG mills, four ball mills, two vertical mills, 
                             advanced-stage project engineering, increased estimation    and the gear drives and motors for the mills. The suppliers 
                             accuracy and receipt of vendor and contractor bids for    are coordinating the fabrication and delivery of these 
                             most project equipment and services.    critical pieces of equipment according to project schedule. 
        We have also begun the process of a phased order for 
        mining and construction equipment from Caterpillar. 


    PROJECT FINANCE    RESULTS OF OPERATIONS     
     
             Significant work has been completed by the    The Company is engaged in the business of     
    Company and its advisors in the evaluation and design    exploration and development of mining projects,     
    of the project financing. The Company engaged    presently focusing our management and financial     
    Corporacion Andina de Fomento (CAF), Export    resources on the Brisas gold and copper project (“Brisas     
    Development Canada (EDC), UniCredit Group (HVB)    Project”), located in Bolivar State, Venezuela. We have     
    and WestLB AG (WestLB) of Germany as Mandated    no commercial production at this time. We have not     
    Lead Arrangers (MLAs) to arrange up to US$425 million    recorded revenue or cash flows from mining operations     
    of project debt for Brisas.    and have experienced losses from operations for each     
        of the last five years, a trend we expect to continue until     
             As part of the evaluation and design of the project    Brisas is fully constructed and put into commercial     
    financing an independent engineering company has    production. The Company’s results of operations are a     
    reviewed our project, provided critical observations,    product of operating expenses, primarily related to the     
    and assisted with our objective of meeting industry best    development of Brisas, net of income on invested cash.     
    practices and the Equator Principles. In certain         
    circumstances compliance with the Equator Principles    The Company has historically re-measured its     
    has increased the operating and capital costs from initial    Bolivar denominated transactions at the official exchange     
    estimates; however, in the long run, Brisas demonstrates    rate of Bs. 2,150/$. In the fourth quarter of 2007, based     
    best practices in all areas of mine development needed    on new guidance from the AICPA’s International     
    to qualify the project for conventional project financing.    Practices Task Force, the Company concluded that the     
        parallel market rate was the most appropriate rate to     
             In 2007 we completed two concurrent financings    use to re-measure Bolivar transactions. Accordingly,     
    providing net proceeds of approximately $173 million.    the Company used the average rate in the parallel    7 
    The lead underwriters were J. P. Morgan Securities, Inc.,    market to re-measure Bolivar transactions during 2007     
    RBC Capital Markets and Cormark Securities, Inc. We    and at December 31, 2007 used the parallel rate to     
    also continue to work on the project debt financing    translate Bolivar denominated monetary items.     
    with MLA’s to complete all the conditions precedent         
    for commitment.    2007 Compared to 2006.     
     
             Any future funding is, among other things,    The consolidated net loss for the year ended     
    contingent on the on-going receipt of permits or    December 31, 2007 was approximately $12,411,000 or     
    authorizations for Brisas, subject to satisfactory due    $0.25 per share, an increase of approximately $5,435,000     
    diligence findings, market conditions, final credit    from the prior year. Other income for 2007 amounted     
    committee approval and other conditions precedent.    to $6,499,000, which is a decrease of approximately     
        $1,753,000 from the previous year. Other income     


                             decreased primarily as a result of a non-recurring gain    2006 Compared to 2005. 
                             on marketable securities during the year ended December     
                             31, 2006, partially offset by higher interest income as a    The consolidated net loss for the year ended 
                             result of increased cash balances.    December 31, 2006 was approximately $6,977,000 or 
        $0.18 per share, a decrease of approximately $2,051,000 
                                Operating expenses for the year amounted to    from the prior year. Other income for 2006 amounted 
                             approximately $18,452,000, which is an increase from    to approximately $8,252,000 which is an increase of 
                             the prior year of approximately $3,745,000. The overall    approximately $6,849,000 from the previous year. Other 
                             increase in operating expenses is primarily attributable    income increased primarily as a result of a non-recurring 
                             to an increase in general and administrative costs of    gain on sales of marketable securities. 
                             approximately $5,500,000, partially offset by a net change     
                             in foreign currency gain of approximately $2,068,000    Operating expenses for the year amounted to 
                             over the prior year.    $14,707,000, which is an increase from the prior year 
        of approximately $4,278,000. The increase in operating 
                                       The increase in general and administrative cost    expenses is attributable to the addition of technical staff, 
                             primarily relates to: approximately $3,300,000 non-cash    engagement of consultants and overall increases in costs 
                             charge related to stock option compensation;    related to corporate management activities, investor 
                             approximately $1,000,000 increase in banking costs    relations and financing efforts associated with the 
                             related to the project debt financing and equipment    development and construction of Brisas as well as foreign 
                             procurement; with the remaining being attributable to    currency loss attributable to the decrease in the value 
                             salary adjustments, addition of technical staff,    of the Canadian dollar compared to the US dollar. The 
                             engagement of consultants and overall increases in costs    non-cash impact of accounting for stock-based 
                             related to corporate management activities associated    compensation also contributed to the increase. 
    8                                       with the development and construction of Brisas.     

    SUMMARY OF QUARTERLY RESULTS

    Quarter ended    12/31/07    9/30/07    6/30/07    3/31/07    12/31/06    9/30/06    6/30/06    3/31/06 









    Other Income    $ (217,816)    $ 4,149,659    $ 1,894,117    $ 673,124    $ 1,417,955    $ 1,119,412    $ 888,611    $ 4,826,080 
    Net (loss) income                                 
    before tax    (8,596,566)    767,375    (1,252,054)    (2,871,675)    (4,873,662)    (2,317,115)    (1,610,458)    2,346,293 
     Per share    (0.16)    0.01    (0.03)    (0.07)    (0.13)    (0.06)    (0.04)    0.07 
     Fully diluted    (0.16)    0.01    (0.03)    (0.07)    (0.13)    (0.06)    (0.04)    0.07 
    Net income (loss)    (8,842,316)    560,392    (1,254,600)    (2,874,969)    (5,057,977)    (2,501,572)    (1,716,975)    2,299,779 
     Per share    (0.16)    0.01    (0.03)    (0.07)    (0.13)    (0.06)    (0.05)    0.06 
     Fully diluted    (0.16)    0.01    (0.03)    (0.07)    (0.13)    (0.06)    (0.05)    0.06 










             Through the third quarter of 2007, the Company    rate to translate Bolivar denominated monetary items 
    re-measured its Bolivar denominated transactions at    which had the effect in the fourth quarter 2007 of 
    the official exchange rate of Bs. 2,150/$. In the fourth    reducing the gain previously reported as Other Income 
    quarter of 2007, based on new guidance from the AICPA’s    on the conversion of dollars to Bolivars. The net loss in 
    International Practices Task Force, the Company    the fourth quarter 2007 is primarily a product of the 
    concluded that the parallel market rate was the most    currency translation noted above as well as a non-cash 
    appropriate rate to use to re-measure Bolivar transactions.    charge related to stock option compensation and salary 
    Accordingly, the Company used the average rate in the    adjustments. Historically, the net losses during the last 
    parallel market to re-measure all 2007 Bolivar    eight quarters are a result of the Company’s efforts to 
    transactions and at December 31, 2007 used the parallel    complete the development of Brisas. 


    LIQUIDITY AND CAPITAL RESOURCES             We have placed orders related to initial capital     
    Investing Activities    costs totaling approximately $121 million, of which we     
        have paid approximately $29.1 million (see Contractual     
             Since acquiring Brisas in 1992, over $290 million    Obligations). In addition, we have paid an additional     
    has been committed for Brisas - approximately $200    amount of approximately $25 million for costs which     
    million has been expended (including capitalized costs    are included in the estimate of initial capital costs. The     
    and costs expensed in the period incurred) and    net amount of initial capital costs remaining to be     
    approximately $90 million has been contractually    committed and paid is approximately $585 million.     
    committed for equipment purchases (see Contractual             As noted elsewhere, we believe that we have met     
    Obligations). The costs expended include: costs of    all conditions precedent to commencing the construction     
    acquiring property and mineral rights, other acquisition    of infrastructure and services phase and are ready to     
    costs, equipment expenditures, litigation settlement costs,    execute our plan to initiate our site works pursuant to     
    general and administrative costs and extensive exploration    the Authorization for the Affectation of Natural     
    costs including geology, geophysics and geochemistry,    Resources for the Construction of Infrastructure and     
    drilling costs for approximately 975 drill holes totaling    Services Phase of Brisas (the “Authorization to Affect”)     
    over 200,000 meters of drilling, independent audits of         
    drilling, sampling, assaying procedures and ore reserves             We expect to proceed with construction activities     
    methodology, environmental baseline work/ socioeconomic    upon issuance of the Initiation Act and adequate funding.     
    studies, hydrology studies, geotechnical studies, mine    These activities are expected to include mobilization of     
    planning, advanced stage grinding and metallurgical test    EPCM contractor, pit and site dewatering, construction     
    work, tailings dam designs, milling process flow sheet    of man-camp and office complex, clearing and     
    designs and a feasibility study, including a number of    earthworks for mill site, tailings management facility,     
    subsequent updates, independent NI 43–101 reports and    dam wall and tailings pipeline corridor, construction of    9 
    an ESIA. Since acquiring the Choco 5 property in 2000,    sedimentation ponds, power-line corridor, conveyor belt     
    the Company has invested approximately $1.4 million    and service road corridor, rock quarry, sanitary fill and     
    on acquisition and exploration costs.    all other related mine site preparation works.     
     
             Based on the recently updated NI 43-101 Report,             The timeline for the activities covered by the     
    overall capital expenditures required to put Brisas into    Authorization to Affect is estimated to be 14-16 months     
    production are estimated to be approximately $731    and we estimate that we will expend approximately     
    million excluding working capital, critical spares and    $100 million over that time period. Overall we anticipate     
    initial fills of approximately $53 million, ongoing life-    a minimum of 36 months to construct Brisas and,     
    of-mine requirements estimated at $269 million and    assuming we receive the required permits and     
        authorizations, we expect commissioning and     
    value added taxes of approximately $54 million. As a    achievement of commercial production shortly thereafter.     
    result of the certain project scope changes, primarily         
    related to increasing the SAG mill diameter from 36'             In the meantime we continue to focus our efforts     
    to 38' and inflationary increases in the cost of various    on obtaining the on-going permits and authorizations     
    mine equipment, milling facility components and raw    related to Brisas, supporting SNC-Lavalin’s efforts to     
    materials, initial capital cost increased approximately    finalize detailed engineering as well as other third party     
    $93 million over the previous estimate of $638 million.    consultants with various technical studies focused on     


        optimizing the design and economics of the project.    and review of a data room to support the due diligence 
        In addition, final details related to port facilities,    process of the banks, and the independent due diligence 
        concentrate sales contracts, electricity and fuel supply    by lenders’ representatives, environmental requirements 
        contracts, land use permits and a number of other    to international standards and the preparation of the 
        agreements related to the construction and operation    International Environmental Impact Statement. 
        of Brisas are proceeding.    Financial models and information memoranda have also 
            been prepared which form the basis of the financial 
        Over 2,000 personnel will be needed for the    assessment of the project. 
        construction of the project and operating employment     
        will peak at over 900 personnel. Value added taxes and             Project financing continues to be a primary focus 
        import duties which could total as much as $54 million    of management. Significant work has been completed 
        are excluded from the initial capital estimates. Tax    by the Company, its advisors and the Mandated Lead 
        exonerations or tax payment holidays are currently    Arrangers in the evaluation and design of the project 
        available for various taxes including value added taxes    financing. Any future funding is, among other things, 
        (“VAT”) and import duty tax on the initial capital costs.    contingent on the on-going receipt of permits or 
        Management is in the process of preparing the    authorizations for Brisas, subject to satisfactory due 
        applications for all available exonerations and expects    diligence findings, market conditions, final credit 
        to obtain available exonerations prior to the construction    committee approval and other conditions precedent. 
        of the project. As a result, the cost of such taxes and    The Company also engaged certain investment banks 
        import duties are not included in the initial costs of the    for the equity portion of the project finance requirements 
        project. However, there can be no assurances that such    and related services which would be contingent upon 
        exonerations will be obtained the result of which would    the project debt being arranged. 
        likely be to increase capital and operating costs.     
    10                 In May 2007 we completed the sale of $103,500,000 
                 Investing activities in 2007 primarily consisted of    aggregate principal amount of 5.50% Senior 
        expenditures related to the continued development of    Subordinated Convertible Notes due 2022 and 
        Brisas, which totaled approximately $45 million and the    13,762,300 Class A common shares at $5.80 per share 
        collateralization of approximately $52 million of cash    (Cdn$6.42 per share) for net proceeds to the Company 
        (restricted cash) related to the purchase of certain long-    of approximately $173,000,000 after deducting 
        lead items for the construction of Brisas. Investing    underwriting fees and offering expenses. 
        activities in 2006 primarily consisted of expenditures     
        related to the continued development of Brisas, which             The notes are unsecured, bear interest at a rate of 
        totaled approximately $15 million and the purchase and    5.5% annually, pay interest semi-annually in arrears and 
        sale of marketable securities, which on a net basis,    are due on June 15, 2022. The notes are convertible into 
        resulted in net sale proceeds of approximately $7 million.    Class A common shares of the Company at the initial 
            conversion rate, subject to adjustment, of 132.626 shares 
        Financing Activities    per $1,000 principal amount (equivalent to a conversion 
            price of $7.54). Upon conversion, the Company will have 
                 Project finance activities have included technical    the option, unless there has occurred and is then 
        and legal due diligence, site visits, and input into areas    continuing an event of default under the Company’s 
        such as the sale, marketing and smelting of the planned    indenture to deliver common shares, cash or a combination 
        gold and gold-copper concentrate, structure of the    of common shares and cash for the notes surrendered. 
        EPCM arrangements with SNC Lavalin, preparation     


             At any time on or after June 16, 2010, and until    company capitalized $4.2 million in interest expense. At     
    June 15, 2012 the Company may redeem the notes, in    December 31, 2007, the fair value of the debt component     
    whole or in part, for cash at a redemption price equal    of the convertible notes was estimated to be $78.7 million     
    to 100% of the principal amount being redeemed plus    based on the net present value of the remaining future     
    accrued and unpaid interest if the closing sale price of    payments of interest and principal, discounted at the     
    the Common Shares is equal to or greater than 150%    prevailing market interest rate.     
    of the conversion price then in effect and the closing         
    price for the Company’s Common Shares has remained             As of March 28, 2008, the Company held     
    above that price for at least twenty (20) trading days in    approximately $133 million in cash and investments.     
    the period of thirty (30) trading days preceding the    Significant additional funding will be required to     
    Company’s notice of redemption. Beginning on June    construct Brisas. In the near-term, management believes     
    16, 2012 the Company may, at its option, redeem all or    that cash and investment balances are sufficient to     
    part of the notes for cash at a redemption price equal    enable the Company to fund its pre-construction     
    to 100% of the principal amount being redeemed plus    activities into 2009 (excluding substantial Brisas Project     
    accrued and unpaid interest.    construction activities).     
     
             The note holders have the option to require the             The timing and extent of additional funding, or     
    Company to repurchase the notes on June 15, 2012 at    project financing, if any, depends on a number of     
    a price equal to 100% of the principal amount of the    important factors, including, but not limited to, the     
    notes plus accrued but unpaid interest. The Company    issuance of the Initiation Act and related authorizations,     
    may elect to satisfy its obligation to pay the repurchase    the actual timetable of our 2008-2009 work plan, our     
    price, in whole or in part, by delivering Common Shares.    assessment of the financial markets, the political and     
        economic conditions in Venezuela, our share price and     
             In the event of a change of control of the Company,    the price of gold and copper.    11 
    the Company will be required to offer to repurchase the         
    notes at a purchase price equal to 100% of the principal             Management provides no assurances that it will be     
    amount of the notes plus accrued but unpaid interest    able to obtain the substantial additional financing that     
    unless there has occurred and is continuing certain events    will be needed to construct Brisas, and the Company     
    of default under the Company’s indenture. The Company    currently has no definitive proposals or firm commitments     
    may elect to satisfy its obligation to repurchase the notes    to proceed with such financing. Failure to raise the     
    in whole or in part by delivering Common Shares.    required funds will mean the Company is unable to     
        construct and operate Brisas, which would have a     
             Accounting standards require the Company to    material adverse effect on the Company.     
    allocate the notes between their equity and debt         
    component parts based on their respective fair values at    Operating Activities     
    the time of issuance. The equity portion of the notes was         
    estimated using the residual value method at             Cash flow used by operating activities for 2007 was     
    approximately $29 million net of issuance costs. The fair    approximately $5.7 million, which was a decrease over     
    value of the debt component is accreted to the face value    2006 of approximately $5.6 million. The decrease in     
    of the notes using the effective interest method over the    cash used by operating activities from 2006 was primarily     
    expected term of the notes, with the resulting charge    due to an increase in interest income as result of increased     
    recorded as interest expense. Interest expense allocable    levels of invested cash and an increase in foreign     
    to the qualifying cost of developing mining properties    currency gain, both of which partially off-set cash     
    and to constructing new facilities is capitalized until assets    expenditures for the period.     
    are ready for their intended use. During 2007, the         


      CONTRACTUAL OBLIGATIONS

         The following table sets forth information on the Company’s material contractual obligation payments for the periods indicated as of December 31, 2007:

                Payments due by Period     



                Less than            More Than 
        Contractual Obligations    Total    1 Year    1-3 Years    4-5 Years    5 Years 






     
        Convertible notes 1    $186,041,250    $ 5,692,500    $11,385,000    $11,385,000    $157,578,750 
        Equipment contracts 2    92,249,714    53,547,646    38,702,068         
        Mandated Lender Group 3    320,000           320,000             
        Operating Lease 4    146,808           125,741    21,067         






     
        Total    $278,757,772    $59,685,887    $50,108,135    $11,385,000    $157,578,750 






     
     
     
        1 In May 2007, the Company issued $103,500,000 aggregate               3 The Company has a services agreement with a group of Mandated 
        principal amount of its 5.50% Senior subordinated convertible notes.               Lenders to provide various banking services related to obtaining 
        The notes pay interest semi-annually and are due on June 15, 2022.               project financing for Brisas. The agreement provides for quarterly 
        Subject to certain conditions, the notes may be converted into Class               payments to each of the four banks in the Mandated Lenders group 
        A common shares of the Company, redeemed or repurchased. The               until the financing is secured. The amount shown above represents 
        amounts shown above include the interest and principal payments               the amount payable under the contract if financing is not secured 
        due unless the notes are converted, redeemed or repurchased prior               during 2008 and the contract is not cancelled by the Company. The 
        to their due date.                   agreement is cancelable at anytime with no further obligation of the 
    12                       Company.             
        2 The Company has placed orders totaling $121 million for the                 
        fabrication of processing equipment, Caterpillar equipment and other               4 The Company leases office space under a non-cancelable operating 
        mining equipment and related engineering. As of December 31, 2007               lease which expires March 1, 2009.     
        the Company has made payments on these contracts of $29.1 million.                 


    MANAGEMENT’S REPORT         
     
     
    To the Shareholders of Gold Reserve Inc.             The Board of Directors fulfills its responsibilities     
        for the consolidated financial statements primarily     
    The accompanying consolidated financial    through the activities of its Audit Committee, which is     
    statements of the Company were prepared by    composed of three directors, none of whom are members     
    management in accordance with accounting principles    of management. This Committee monitors the     
    generally accepted in Canada, consistently applied and    independence and performance of our independent     
    within the framework of the summary of significant    auditors and meets with the auditors to discuss the     
    accounting policies in these consolidated financial    results of their audit and their audit report prior to     
    statements. Management is responsible for all    submitting the consolidated financial statements to the     
    information in the annual report. All financial and    Board of Directors for approval. This Committee reviews     
    operating data in the annual report is consistent, where    and discusses with management the consolidated     
    appropriate, with that contained in the consolidated    financial statements, related accounting principles and     
    financial statements.    practices and (when required of management under     
        securities commissions or the applicable listing standards)     
             Management is responsible for establishing and    management’s assessment of internal control over     
    maintaining an adequate internal control structure and    financial reporting. This Committee also monitors the     
    procedures for financial reporting. Management has    integrity of our financial reporting process and systems     
    established and maintains a system of internal accounting    of internal controls regarding finance, accounting and     
    control designed to provide reasonable assurance that    legal compliance.     
    assets are safeguarded from loss or unauthorized use,         
    financial information is reliable and accurate and             The consolidated financial statements have been    13 
    transactions are properly recorded and executed in    audited on behalf of the shareholders by the Company’s     
    accordance with management’s authorization. This    independent auditors, PricewaterhouseCoopers LLP.     
    system includes established policies and procedures, the    The auditors’ report outlines the scope of their     
    selection and training of qualified personnel and an    examination and their opinion on the consolidated     
    organization providing for appropriate delegation of    financial statements. The auditors have full and free     
    authority and segregation of responsibilities.    access to the Audit Committee.     
     
     
     
     
                 s/ Rockne J. Timm     
                 Chief Executive Officer     
                 March 28, 2008     
     
     
     
                 s/ Robert A. McGuinness     
                 Vice President–Finance and CFO     
                 March 28, 2008     


        INDEPENDENT AUDITORS’ REPORT     
     
     
        To the Shareholders of Gold Reserve Inc.    Internal control over financial reporting 
     
                 We have completed an integrated audit of Gold             We have also audited Gold Reserve Inc.’s internal 
        Reserve Inc.’s 2007 consolidated financial statements    control over financial reporting as at December 31, 
        and of its internal control over financial reporting as at    2007, based on criteria established in Internal Control 
        December 31, 2007 and audits of its 2006 and 2005    - Integrated Framework issued by the Committee of 
        consolidated financial statements. Our opinions, based    Sponsoring Organizations of the Treadway Commission 
        on our audits, are presented below.    (COSO). The Company’s management is responsible 
            for maintaining effective internal control over financial 
        Consolidated financial statements    reporting and for its assessment of the effectiveness of 
            internal control over financial reporting, included in 
                 We have audited the accompanying consolidated    Management’s Annual Report on Internal Control over 
        balance sheets of Gold Reserve Inc as at December 31,    Financial Reporting on page 4 of the Annual Report 
        2007 and December 31, 2006, and the related    on Form 40F. Our responsibility is to express an opinion 
        consolidated statements of operations comprehensive    on the effectiveness of the Company’s internal control 
        loss, changes in shareholders’ equity and cash flows for    over financial reporting based on our audit. 
        each of the years in the three year period ended     
        December 31, 2007. These financial statements are             We conducted our audit of internal control over 
        the responsibility of the Company’s management. Our    financial reporting in accordance with the standards of 
        responsibility is to express an opinion on these financial    the Public Company Accounting Oversight Board (United 
    14    statements based on our audits.    States). Those standards require that we plan and perform 
            the audit to obtain reasonable assurance about whether 
                 We conducted our audit of the Company’s financial    effective internal control over financial reporting was 
        statements as at December 31, 2007 and for the year    maintained in all material respects. An audit of internal 
        then ended in accordance with Canadian generally    control over financial reporting includes obtaining an 
        accepted auditing standards and the standards of the    understanding of internal control over financial reporting, 
        Public Company Accounting Oversight Board (United    assessing the risk that a material weakness exists, testing 
        States). We conducted our audits of the Company’s    and evaluating the design and operating effectiveness of 
        financial statements as at December 31, 2006 and for    internal control based on the assessed risk, and performing 
        each of the years in the two year period then ended in    such other procedures as we consider necessary in the 
        accordance with Canadian generally accepted auditing    circumstances. We believe that our audit provides a 
        standards. Those standards require that we plan and    reasonable basis for our opinion. 
        perform an audit to obtain reasonable assurance about     
        whether the financial statements are free of material             A company’s internal control over financial reporting 
        misstatement. An audit of financial statements includes    is a process designed to provide reasonable assurance 
        examining, on a test basis, evidence supporting the    regarding the reliability of financial reporting and the 
        amounts and disclosures in the financial statements.    preparation of financial statements for external purposes 
        A financial statement audit also includes assessing the    in accordance with generally accepted accounting 
        accounting principles used and significant estimates    principles. A company’s internal control over financial 
        made by management, and evaluating the overall financial    reporting includes those policies and procedures that 
        statement presentation. We believe that our audits    (i) pertain to the maintenance of records that, in 
        provide a reasonable basis for our opinion.    reasonable detail, accurately and fairly reflect the 
            transactions and dispositions of the assets of the company; 
                 In our opinion, the consolidated financial statements    (ii) provide reasonable assurance that transactions are 
        referred to above present fairly, in all material respects,    recorded as necessary to permit preparation of financial 
        the financial position of the Company as at December    statements in accordance with generally accepted 
        31, 2007 and December 31, 2006 and the results of its    accounting principles, and that receipts and expenditures 
        operations and its cash flows for each of the years in the    of the company are being made only in accordance with 
        three year period ended December 31, 2007 in accordance    authorizations of management and directors of the 
        with Canadian generally accepted accounting principles.    company; and (iii) provide reasonable assurance regarding 


    prevention or timely detection of unauthorized acquisition,    Comments by Auditors for U.S. Readers     
    use, or disposition of the company’s assets that could    on Canada-U.S. Reporting Difference     
    have a material effect on the financial statements.             In the United States, reporting standards for     
             Because of its inherent limitations, internal control    auditors require the addition of an explanatory     
    over financial reporting may not prevent or detect    paragraph (following the opinion paragraph) when     
    misstatements. Also, projections of any evaluation of    there are changes in accounting principles that have     
    effectiveness to future periods are subject to the risk    a material effect on the comparability of the Company’s     
    that controls may become inadequate because of changes    financial statements, such as the changes described in     
    in conditions, or that the degree of compliance with    note 2 to the financial statements. Our report to the     
    the policies or procedures may deteriorate.    shareholders dated March 27, 2008 is expressed in     
        accordance with Canadian reporting standards which     
             In our opinion, the Company maintained, in all    do not require a reference to such a change in     
    material respects, effective internal control over financial    accounting principles in the auditors’ report when the     
    reporting as at December 31, 2007 based on criteria    change is properly accounted for and adequately     
    established in Internal Control — Integrated Framework    disclosed in the financial statements.     
    issued by the COSO.         
     
     
     
             s/PricewaterhouseCoopers LLP             s/PricewaterhouseCoopers LLP    15 
             Chartered Accountants             Chartered Accountants     
             Vancouver, British Columbia, Canada             Vancouver, British Columbia, Canada     
             March 27, 2008             March 27, 2008     


        GOLD RESERVE INC.                     
        CONSOLIDATED BALANCE SHEETS                 
        December 31, 2007 and 2006 (Expressed in U.S. Dollars)         
                            2007    2006 







        ASSETS                         
        Cash and cash equivalents (Note 3)            $ 94,680,576    $ 25,374,688 
        Marketable securities (Note 5)                4,987,511    3,309,622 
        Deposits, advances and other                652,572    515,396 






        Total current assets                    100,320,659    29,199,706 
     
        Property, plant and equipment, net (Note 6)            128,624,670    73,643,895 
        Restricted cash (Note 12)                52,080,603     
        Prepaid and other                    872,971    1,772,120 







        Total assets                    $ 281,898,903    $ 104,615,721 







     
        LIABILITIES                         
        Accounts payable and accrued expenses            $ 7,719,316    $ 1,914,633 
        Accrued interest                    237,188     







        Total current liabilities                7,956,504    1,914,633 
     
        Convertible notes (Note 15)                70,306,054     
        Minority interest in consolidated subsidiaries            2,315,536    1,729,076 





        Total liabilities                    $ 80,578,094    $ 3,643,709 







     
    16    Measurement Uncertainty (Note 1)                 
        Commitments (Note 12)                     
     
     
        SHAREHOLDERS’ EQUITY                     
        Serial preferred stock, without par value                 
         Authorized:    Unlimited                 
         Issued:    None                     
        Common shares and Equity Units: (Note 14)            $ 244,295,503    $ 167,463,742 
        Class A common shares, without par value                 
           Authorized:    Unlimited                 
           Issued:    2007… 55,060,934    2006    40,581,192         
           Outstanding:    2007… 54,810,934    2006    40,331,192         
         Equity Units                         
           Issued:    2007…    1,085,099    2006…    1,085,099         
           Outstanding:    2007…    585,824    2006…    585,824         
        Equity component of convertible notes (Note 15)            28,784,710     
        Less, common shares and equity units held by affiliates        (636,267)    (636,267) 
        Stock options                    7,662,237    3,105,169 
        Accumulated deficit                    (81,371,254)    (68,959,761) 
        Accumulated other comprehensive income            2,696,571     
        KSOP debt (Note 7)                    (110,691)    (871) 







        Total shareholders’ equity                201,320,809    100,972,012 






        Total liabilities and shareholders’ equity            $ 281,898,903    $ 104,615,721 





     
        The accompanying notes are an integral part of the consolidated financial statements.         
     
        Approved by the Board of Directors:                 
     
     
     
            s/ Chris D. Mikkelsen            s/ Patrick D. McChesney     


    GOLD RESERVE INC.                         
    CONSOLIDATED STATEMENTS OF OPERATIONS                         
    For the Years Ended December 31, 2007, 2006 and 2005 (Expressed in U.S. Dollars)             
     
            2007        2006    2005     






     
    Other Income:                         
    Interest income    $ 5,164,480    $ 1,088,403    $ 859,945     
    Gain on sale of marketable securities        1,334,604        7,163,655    542,923     






            6,499,084        8,252,058    1,402,868     
    Expenses:                         
    General and administrative        12,143,569        6,646,798    5,054,420     
    Technical services        5,093,963        5,015,222    3,876,928     
    Corporate communications        904,157        699,922    662,350     
    Legal and accounting        774,140        756,752    749,208     
    Foreign currency (gain) loss        (926,299)        1,141,932    78,070     
    Minority interest in net income                         
    of consolidated subsidiaries        462,474        446,374    7,703     






            18,452,004        14,707,000    10,428,679     






     
    Net loss before tax    (11,952,920)        (6,454,942)    (9,025,811)     
    Income tax expense (Note 10)        458,573        521,803    1,471    17 






    Net loss for the year    $ (12,411,493)    $ (6,976,745)    $ (9,027,282)     




     
    Net loss per share–basic and diluted    $ (0.25)    $ (0.18)    $ (0.26)     




     
    Weighted average common shares outstanding        49,703,688        38,123,819    35,048,800     






     
    The accompanying notes are an integral part of the consolidated financial statements.                     
     
     
     
    GOLD RESERVE INC.                         
    CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS                     
    For the Year Ended December 31, 2007 (Expressed in U.S. Dollars)                     





     
     
    Net loss for the year                    $ (12,411,493)     
    Other comprehensive income, net of tax:                         
       Holding gain arising during period                    2,005,468     
       Adjustment for realized gains included in net loss                    (1,334,604)     






     
    Other comprehensive income                    670,864     






     
    Comprehensive loss for the year                    $ (11,740,629)     






     
    The accompanying notes are an integral part of the consolidated financial statements.                     


        GOLD RESERVE INC.                                     
        CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY             
        For the Years Ended December 31, 2007, 2006 and 2005 (Expressed in U.S. Dollars)             
     
     
                                       
                    Common Shares          Accumulated    


    Common Shares and Equity Units Issued 
    Equity Com- ponent of Con-  and Equity Units  Stock  Accumulated  Other Compre- KSOP 
            Common Shares Equity Units    Amount  vertible Notes  Held by Affiliates  Options     Deficit    hensive income    Debt 






     
        Balance, December 31, 2004    33,715,795    1,157,397    $ 136,907,516        $ (674,598) $ 1,004,197    $ (52,955,734)        $ (105,323) 
        Equity units exchanged for                                     
        common shares    47,377    (47,377)                             
        Net loss                            (9,027,282)         
        Stock option compensation                        863,340             
        Common shares issued for:                                     
        Cash    1,106,765        2,612,344                         
        Services    251,350        733,232                         
        KSOP    75,000        258,971                        (258,971) 
        Allocation to KSOP participants                                    280,074 










     
        Balance, December 31, 2005    35,196,287    1,110,020    140,512,063        (674,598)    1,867,537    (61,983,016)        (84,220) 
        Equity units exchanged for                                     
        common shares    24,921    (24,921)                             
        Net loss                            (6,976,745)         
    18    Stock option Compensation                        1,390,776             
        Fair value of options exercised            153,144            (153,144)             
        Common shares issued for:                                     
        Cash    5,096,109        25,702,673                         
        Services    163,875        747,075                         
        KSOP    100,000        189,063                        (189,063) 
        Allocation to KSOP participants                                    272,412 
        Decrease in Shares held                                     
        by affiliates            159,724        38,331                 










     
        Balance, December 31, 2006    40,581,192    1,085,099    167,463,742        (636,267)    3,105,169    (68,959,761)        (871) 
        Opening balance on adoption of                                     
        new accounting standard                                $ 2,025,707     
        Net loss                            (12,411,493)         
        Other comprehensive income                                670,864     
        Stock option Compensation                        4,724,120             
        Equity component of convertible notes                28,784,710                     
        Fair value of options exercised            167,052            (167,052)             
        Common shares issued for:                                     
        Cash    13,985,742        74,349,097                         
        Services    394,000        1,818,012                         
        KSOP    100,000        497,600                        (497,600) 
        Allocation to KSOP participants                                    387,780 










        Balance, December 31, 2007    55,060,934    1,085,099    $ 244,295,503    $ 28,784,710    $ (636,267)    $7,662,237    $ (81,371,254)    $ 2,696,571    $ (110,691) 










     
        The accompanying notes are an integral part of the consolidated financial statements.                 


    GOLD RESERVE INC.                         
    CONSOLIDATED STATEMENTS OF CASH FLOWS                         
    For the Years Ended December 31, 2007, 2006 and 2005 (Expressed in U.S. Dollars)             
     
            2007        2006    2005     






    Cash Flow from Operating Activities:                         
    Net loss for the year    $ (12,411,493)    $ (6,976,745)    $ (9,027,282)     
    Adjustments to reconcile net loss to net                         
        cash used by operating activities:                         
       Stock option compensation        4,724,120        1,390,776    863,340     
       Depreciation        179,111        147,798    93,157     
       Amortization of discount on debt investments                (419)    (2,251)     
       Foreign currency loss        1,131,269            78,070     
       Minority interest in net income of consolidated subsidiaries        462,474        446,374    7,703     
       Net gain on disposition of marketable securities        (1,334,604)        (7,163,655)    (542,923)     
       Shares issued for compensation and KSOP        2,205,792        1,019,487    1,013,306     
    Changes in non-cash working capital:                         
       (Increase) decrease in deposits, advances and accrued interest        (137,176)        (73,266)    (92,558)     
       Increase (decrease) in accounts payable and accrued expenses        (494,798)        29,880    (120,070)     






    Net cash used by operating activities        (5,675,305)    (11,179,770)    (7,729,508)     





     
    Cash Flow from Investing Activities:                        19 
    Purchase of marketable securities        (4,163,941)        (6,539,362)    (3,903,158)     
    Purchase of property, plant and equipment        (44,689,332)    (15,078,403)    (5,574,241)     
    Proceeds from the sale and maturity of marketable securities        6,517,227        13,379,048    6,991,874     
    Increase in restricted cash        (52,080,603)                 
    Capitalized interest paid on convertible notes        (3,273,187)                 
    Other        (108,134)        (279,750)    (205,764)     






    Net cash used by investing activities        (97,797,970)        (8,518,467)    (2,691,289)     






     
    Cash Flow from Financing Activities:                         
    Net proceeds from issuance of convertible notes        98,430,066                 
    Net proceeds from issuance of common shares        74,349,097        25,702,673    2,612,344     






    Net cash provided by financing activities        172,779,163        25,702,673    2,612,344     






     
    Change in Cash and Cash Equivalents:                         
    Net increase (decrease) in cash and cash equivalents        69,305,888        6,004,436    (7,808,453)     
    Cash and cash equivalents - beginning of year        25,374,688        19,370,252    27,178,705     






    Cash and cash equivalents - end of year    $ 94,680,576    $ 25,374,688    $ 19,370,252     




     
    Supplemental Cash Flow Information                         






     
    Non-cash investing and financing activities:                         
    Issuance of common shares as compensation    $ 1,818,012    $ 747,075    $ 733,232     
    Issuance of common shares to KSOP Plan    $ 497,600    $ 189,063    $ 258,971     


     
    The accompanying notes are an integral part of the consolidated financial statements.                     


        1. The Company and Significant Accounting             These consolidated financial statements include 
        Policies:    the accounts of the Company, Gold Reserve Corporation, 
            two domestic subsidiaries, Great Basin Energies, Inc. 
                 The Company. Gold Reserve Inc. (the    (“Great Basin”) and MGC Ventures Inc. (“MGC 
        “Company”) is a mining company incorporated in 1998    Ventures”), four Venezuelan subsidiaries, two Barbadian 
        under the laws of the Yukon Territory, Canada, and is    subsidiaries and five Aruban subsidiaries which were 
        the successor issuer to Gold Reserve Corporation, which    formed to hold the Company’s interest in its foreign 
        was incorporated in 1956. The Company’s primary    subsidiaries or for future transactions. All subsidiaries 
        mineral asset, the Brisas Project, is a gold/copper deposit    are wholly owned with the exception of Great Basin 
        located in the Km 88 mining district of the State of    and MGC Ventures which are 45% and 44% owned, 
        Bolivar in southeastern Venezuela. The Company has    respectively. All intercompany accounts and transactions 
        no revenue producing mining operations at this time.    have been eliminated on consolidation. The Company’s 
        All amounts shown herein are expressed in U.S. Dollars    policy is to consolidate those subsidiaries where control 
        unless otherwise noted.    exists. See Note 9. 
     
                 In February 1999, the shareholders of Gold Reserve    Cash and Cash Equivalents. 
        Corporation approved a plan of reorganization whereby    The Company considers short-term, highly liquid 
        Gold Reserve Corporation became a subsidiary of Gold    investments purchased with an original maturity of three 
        Reserve Inc., the successor issuer (the “Reorganization”).    months or less to be cash equivalents for purposes of 
        Generally, each shareholder of Gold Reserve Corporation    reporting cash equivalents and cash flows. Cash and 
        received one Gold Reserve Inc. Class A common share    cash equivalents are designated as available-for-sale and 
        for each common share owned of Gold Reserve    recorded at fair value. At December 31, 2007 and 2006, 
        Corporation. After the Reorganization, a shareholder of    the Company had approximately $311,000 and $718,000, 
    20    Gold Reserve Inc. continued to own an interest in the    respectively, in Venezuela and banks outside Canada 
        business, through subsidiary companies, that in aggregate    and the United States. 
        was essentially the same as before the Reorganization.     
     
                 Certain U.S. holders of Gold Reserve Corporation             Exploration and Development Costs. 
        elected, for tax reasons, to receive equity units in lieu of    Exploration costs incurred in locating areas of potential 
        Gold Reserve Inc. Class A common shares. An equity    mineralization are expensed as incurred. Exploration 
        unit is comprised of one Gold Reserve Inc. Class B    costs of properties or working interests with specific areas 
        common share and one Gold Reserve Corporation Class    of potential mineralization are capitalized at cost pending 
        B common share. The equity units are substantially    the determination of a property’s economic viability. 
        equivalent to a Class A common share and are    Development costs of proven mining properties not yet 
        immediately convertible into Gold Reserve Inc. Class A    producing are capitalized at cost and classified as 
        common shares upon compliance with certain procedures.    capitalized exploration costs under property, plant and 
        Equity units are not listed for trading on any stock    equipment. The Company capitalizes those costs which 
        exchange, but, subject to compliance with applicable    are directly attributable to the Brisas project including 
        federal, provincial and state securities laws, may be    engineering, procurement and construction management, 
        transferred. Unless otherwise noted, general references    mine planning, environmental impact studies, drilling, 
        to common shares of the Company include Class A    assaying and interest. Costs related to staffing and 
        common shares and Class B common shares as a    maintenance of offices and facilities in Venezuela are 
        combined group.    charged to operations. Property holding costs are charged 
            to operations during the period if no significant 
                 Presentation of Financial Statements    exploration or development activities are being conducted 
        and Consolidation. The consolidated financial    on the related properties. Upon commencement of 
        statements contained herein have been prepared in    production, capitalized exploration and development 
        accordance with accounting principles generally accepted    costs will be amortized based on the estimated proven 
        in Canada, which as described in Note 17, differ in    and probable reserves benefited. Properties determined 
        certain material respects from accounting principles    to be impaired or that are abandoned are written-down 
        generally accepted in the United States of America.    to the estimated fair value. Carrying values do not 
            necessarily reflect present or future values. 


             Property, Plant and Equipment.             Through 2006, the Company re-measured its Bolivar     
    Property, plant and equipment are recorded at the lower    denominated transactions at the official exchange rate     
    of cost less accumulated depreciation. Replacements    of Bs. 2,150/$. In 2007, based on new guidance from     
    and major improvements are capitalized. Maintenance    the AICPA’s International Practices Task Force, the     
    and repairs are charged to expense as incurred. The    Company concluded that parallel market rate was the     
    cost and accumulated depreciation of assets retired or    most appropriate rate to use to re-measure Bolivar     
    sold are removed from the accounts and any resulting    transactions. Accordingly, in 2007 the Company used     
    gain or loss is reflected in operations. Depreciation is    the average rate received in the parallel market of Bs.     
    provided using straight-line and accelerated methods    4,446/$ to re-measure Bolivar transactions and at     
    over the lesser of the useful life or lease term of the    December 31, 2007, used the parallel rate to translate     
    related asset. Interest and financing costs incurred during    Bolivar denominated monetary items.     
    the construction and development of qualifying assets         
    are capitalized.             Stock Based Compensation. The Company     
        uses the fair value method of accounting for stock     
             Impairment Test. The Company reviews long-    options. The fair value is computed using the Black-     
    lived assets for impairment whenever events or changes    Scholes method as described in note 8 and is expensed     
    in circumstances indicate that the carrying amount of    over the vesting period of the option. Consideration     
    the assets may not be recoverable. If the sum of the    paid for shares on exercise of share options, in addition     
    expected future net cash flows to be generated from the    to the fair value attributable to stock options granted,     
    use or disposition of a long-lived asset (undiscounted    is credited to capital stock.     
    and without interest charges) is less than the carrying         
    amount of the asset, an impairment loss is recognized             Income Taxes. The Company uses the liability     
    and the asset is written down to fair value. Fair value is    method of accounting for income taxes. Future tax assets    21 
    generally determined by discounting estimated cash flows.    and liabilities are determined based on the differences     
        between the tax basis of assets and liabilities and those     
             Foreign Currency. The U.S. Dollar is the    amounts reported in the financial statements. The future     
    Company’s functional currency. The Company’s foreign    tax assets or liabilities are calculated using the substantively     
    subsidiaries are integrated foreign operations and    enacted tax rates expected to apply in the periods in     
    accordingly foreign currency amounts are translated    which the differences are expected to be settled. Future     
    into U.S. Dollars using the temporal method. Non-    tax assets are recognized to the extent that they are     
    monetary assets and liabilities are translated at historical    considered more likely than not to be realized.     
    rates, monetary assets and liabilities are translated at         
    current rates and revenue and expense items are             Use of Estimates. The preparation of financial     
    translated at average exchange rates during the reporting    statements in conformity with generally accepted     
    period, except for depreciation which is translated at    accounting principles requires management to make     
    historical rates. Translation gains and losses are included    estimates and assumptions that affect the reported     
    in operating expenses.    amounts of assets and liabilities, disclosure of contingent     
        assets and liabilities at the date of the financial statements     
             In 2003, the Venezuelan government implemented    and the reported amounts of revenues and expenses     
    foreign exchange controls which fixed the rate of    during the reporting period. Actual results could differ     
    exchange between the Venezuelan Bolivar and the US    from those estimates.     
    dollar. Since March of 2005, the rate has been fixed at         
    2,150 Bolivares (Bs.) to US $1.00 ($). In October of             Measurement Uncertainty. At December     
    2005, the government enacted the Criminal Exchange    31, 2007, nearly all of our non-cash assets, including     
    Law which imposes sanctions on the exchange of    our primary mining asset, the Brisas Project, were located     
    Bolivares with foreign currency unless the exchange is    in Venezuela. Our operations in Venezuela are subject     
    made by officially designated methods. The exchange    to the effects of changes in legal, tax and regulatory     
    regulations do not apply to transactions with certain    regimes, national and local political issues, labor and     
    securities denominated in Bolivares which can be    economic developments, unrest, currency and exchange     
    swapped for securities denominated in another currency    controls, import/export restrictions, government     
    effectively resulting in a parallel market for the Bolivar.    bureaucracy, corruption and uncertain legal enforcement.     


        We have not experienced any significant adverse impact    value can be made. The associated asset retirement 
        to date on our operations in Venezuela nor have we    costs are capitalized as part of the carrying amount of 
        curtailed our investment activities in the country.    the long-lived asset and amortized over the same period 
        However, one or more of the issues described herein or    as the underlying asset. 
     
        other factors beyond our control could adversely affect             Convertible Notes. 
        our operations and investment in Venezuela in the future.    Convertible notes are 
            initially recorded at fair value and subsequently measured 
                 Management’s capitalization of exploration and    at amortized cost. They are allocated between their 
        development costs and assumptions regarding the future    equity and debt component parts based on their 
        recoverability of such costs are based on, among other    respective fair values at the time of issuance and recorded 
        things, the Company’s estimate of current mineral    net of transaction costs. The equity portion of the notes 
        reserves and resources which are based on engineering    is estimated using the residual value method. The fair 
        and geological estimates, estimated gold and copper    value of the debt component is accreted to the face 
        prices, estimated plant construction and operating costs    value of the notes using the effective interest rate method 
        and the procurement of all necessary regulatory permits    over the expected life of the notes, with the resulting 
        and approvals. In addition, the Company records    charge recorded as interest expense. Interest expense 
        amounts paid for value-added tax as a non-current asset    allocable to the qualifying cost of developing mining 
        based on the assumption that these amounts will be    properties and to constructing new facilities is capitalized 
        recoverable when the Brisas Project begins production.    until assets are ready for their intended use. 
        These assumptions and estimates could change in the     
     
        future and this could affect the carrying value and the    2. Adoption of New Accounting Policies: 
        ultimate recoverability of the amounts recorded as     
        property and mineral rights, capitalized exploration and             Effective January 1, 2007, the Company adopted 
    22    development costs and other assets. The Company    CICA Section 3855, Financial Instruments – Recognition 
        operates and files tax returns in a number of jurisdictions.    and Measurement. This section establishes standards 
        The preparation of such tax filings requires considerable    for determining when a financial asset, financial liability 
        judgment and the use of assumptions. Accordingly, the    or non-financial derivative is to be recognized on the 
        amounts reported could vary in the future.    balance sheet and whether it will be measured using a 
            cost-based or fair value method. As of January 1, 2007, 
                 Net Loss Per Share. Net loss per share is    our cash and cash equivalents, restricted cash and 
        computed by dividing net loss by the combined weighted    investments in marketable securities have been classified 
        average number of Class A and B common shares    as available-for-sale and are recorded at fair value on 
        outstanding during each year, which has been reduced    the balance sheet. Fair values are determined by 
        by the common shares owned by Great Basin and MGC    reference to published price quotations in active markets 
        Ventures. As of December 31, 2007, 2006 and 2005,    and changes in these fair values are reflected in other 
        there were 3,054,857, 1,369,074, and 2,530,682 shares,    comprehensive income and included in shareholders’ 
        respectively, available for issuance pursuant to the    equity. Our convertible notes are recorded at amortized 
        exercise of previously granted share options. In addition,    cost. Transaction costs incurred to issue the notes are 
        at December 31, 2007, 2006 and 2005 there were nil,    deducted from the underlying balance. Other financial 
        nil, and 2,680,500 shares, respectively, available for    instruments have been designated as loans and 
        issuance upon exercise of common share purchase    receivables or other financial liabilities and are measured 
        warrants. In periods in which a loss is incurred, the effect    at amortized cost. 
        of potential issuances of shares under options, warrants     
        and convertible notes would be anti-dilutive, and    We also adopted CICA section 1530, 
        therefore basic and diluted losses per share are the same.    Comprehensive Income effective January 1, 2007. This 
            section requires the presentation of a statement of 
        Asset Retirement Obligations.    comprehensive income and its components. 
        The Company accounts for asset retirement obligations    Comprehensive income includes net income or loss and 
        based on the guidance in Canadian Institute of    other comprehensive income. Other comprehensive 
        Chartered Accountants standard 3110. The standard    income may include holding gains and losses on 
        requires that the fair value of a liability for an asset    available-for-sale securities, gains and losses on certain 
        retirement obligation be recognized in the period in    derivative instruments and foreign currency gains and 
        which it is incurred if a reasonable estimate of fair    losses from self sustaining foreign operations. 


         As of January 1, 2007, the effect on our balance sheet of adopting these standards is summarized below. As prescribed by these standards, prior periods have not been restated.

                January 1,     
            Adjustment on    2007     
        December 31, 2006    Adoption of    Opening     
    U.S. Dollars    as Reported    New Standards    Balance     




    ASSETS                 
    Current Assets                 
    Cash and cash equivalents    $ 25,374,688        $ 25,374,688     
    Marketable securities    3,309,622    $ 2,334,240 A    5,643,862     
    Deposits, advances and other    515,396        515,396     




    Total current assets    29,199,706    2,334,240    31,533,946     
    Property, plant and equipment, net    73,643,895        73,643,895     
    Other    1,772,120        1,772,120     




    Total assets    $ 104,615,721    $ 2,334,240    $ 106,949,961     




    LIABILITIES                 
    Current Liabilities:                 
    Accounts payable and accrued expenses    $ 1,914,633        $ 1,914,633     
    Future income tax        $ 308,533 B    308,533     




    Total current liabilities    1,914,633    308,533    2,223,166     
    Minority interest in consolidated subsidiaries    1,729,076        1,729,076     




    Total liabilities    3,643,709    308,533    3,952,242     




    SHAREHOLDERS’ EQUITY                23 
    Serial preferred stock, without par value, none issued                 
    Common shares and equity units, without par value    167,463,742        167,463,742     
    Less common shares held by affiliates    (636,267)        (636,267)     
    Stock options    3,105,169        3,105,169     
    Accumulated deficit    (68,959,761)        (68,959,761)     
    Accumulated other comprehensive income        2,025,707 C    2,025,707     
    KSOP debt    (871)        (871)     




    Total shareholders’ equity    100,972,012    2,025,707    102,997,719     




    Total liabilities and shareholders’ equity    $ 104,615,721    $ 2,334,240    $ 106,949,961     





    A      Investments in marketable securities previously accounted for at cost are designated as available-for-sale and carried at fair value.
     
    B      The tax effect of the adjustment to marketable securities is recorded as a future tax liability.
     
    C      The adjustment to marketable securities, net of future tax is recorded as accumulated other comprehensive income.
     

         Our accumulated other comprehensive income consists of unrealized gains on available-for-sale securities, net of tax. Following is a summary of the changes in accumulated other comprehensive income since the adoption of the new accounting standard on January 1, 2007.

    Accumulated Other Comprehensive Income     


    Opening balance on adoption of new accounting standard, January 1, 2007    $ 2,025,707 
     
    Other comprehensive income during the period    670,864 


    Accumulated Other Comprehensive Income at December 31, 2007    $ 2,696,571 




    3. Cash and Cash Equivalents:         
        2007    2006 



    Bank deposits    $ 89,682,777    $ 23,838,243 
    Money market funds    4,997,799    1,536,445 



    Total    $ 94,680,576    $ 25,374,688 




    4. Financial Instruments:

         The carrying amounts for short term deposits, advances, accounts payable and accrued expenses on the balance sheet approximate fair value because of the immediate or short-term maturity of these instruments. Fair value estimates are made at the balance sheet date based on relevant market information but involve uncertainties and therefore cannot be determined with precision. The Company diversifies its cash and investment holdings into Canadian and U.S. treasury and agency obligations, major financial institutions and corporations in order to limit its exposure to risk of principal, liquidity risk and the risk of changes in interest rates. The fair values of investments in marketable securities are determined by reference to published price quotations in an active market and are disclosed in Note 5. The Company is exposed to foreign exchange risk due to its operations in Venezuela and does not ac tively manage this exposure at this time.

    5.    Marketable Securities:         
                Quoted 
            Cost    Market Value 



    24    December 31, 2007         



        Available-for sale securities    $ 2,290,940    $ 4,987,511 



     
        December 31, 2006         



        Equity Securities    $ 3,309,622    $ 5,643,862 




    At December 31, 2006, the Company’s marketable securities consisted of investments in equity securities which were carried at cost. Effective January 1, 2007, with the adoption of the new accounting standard related to financial instruments (see note 2), the company’s marketable securities have been classified as available-for-sale and are recorded at quoted market value with gains and losses recorded within other comprehensive income until realized.


    6. Property, Plant and Equipment:                 
            Accumulated         
        Cost    Depreciation    Net     



    2007                 




    United States                 
    Furniture and office equipment    $ 468,976    $ (318,283)    $ 150,693     
    Leasehold improvements    35,633    (35,633)         




        $ 504,609    $ (353,916)    $ 150,693     




     
    Venezuela                 




    Property and mineral rights    $ 11,252,335        $ 11,252,335     
    Capitalized exploration costs    77,225,929        77,225,929     
    Machinery and equipment deposits    38,853,176        38,853,176     
    Buildings    751,791    $ (321,904)    429,887     
    Furniture and office equipment    592,777    (482,038)    110,739     
    Transportation equipment    688,829    (415,443)    273,386     
    Machinery and equipment    646,724    (318,199)    328,525     




        130,011,561    (1,537,584)    128,473,977     




    Total    $ 130,516,170    $ (1,891,500)    $ 128,624,670     




     
     
    2006                25 




    United States                 
    Furniture and office equipment    $ 417,432    $ (291,095)    $ 126,337     
    Leasehold improvements    35,633    (35,633)         




        $ 453,065    $ (326,728)    $ 126,337     




     
    Venezuela                 




    Property and mineral rights    $ 11,252,335        $ 11,252,335     
    Capitalized exploration costs    61,875,623        61,875,623     
    Buildings    381,599    $ (287,645)    93,954     
    Furniture and office equipment    560,981    (449,466)    111,515     
    Transportation equipment    529,046    (348,897)    180,149     
    Machinery and equipment    318,042    (314,060)    3,982     




        74,917,626    (1,400,068)    73,517,558     




    Total    $ 75,370,691    $ (1,726,796)    $ 73,643,895     





    As of December 31, 2007, Machinery and equipment deposits include amounts paid for infrastructure and milling equipment either in the manufacturing stage or being stored by the manufacturer pending delivery to the project site.


    7. KSOP Plan:

         The KSOP Plan, adopted in 1990 for the benefit of employees, is comprised of two parts, (1) a salary reduction component, or 401(k), and (2) an employee share ownership component, or ESOP. Unallocated shares are recorded as a reduction to shareholders’ equity. Allocation of common shares to participants’ accounts is at the discretion of the Company’s board of directors, subject to certain limitations. The value of the shares allocated is recorded in the statement of operations with a reduction of the KSOP debt account. The Company allocated contributions to eligible participants for the Plan years 2007, 2006 and 2005 of $387,780, $272,412, and $280,074, respectively. As of December 31, 2007, 22,246 common shares remain unallocated to plan participants.

    8. Share Option Plan:

         The Company’s Equity Incentive Plan (the “Plan”) as amended in 2006, allows for the issuance of Class A common share purchase options of up to 10% of the common shares outstanding, in addition to any options issued pursuant to predecessor plans, to officers, directors and key individuals for terms of up to ten years. The vesting period of options ranges from immediately to up to three years. Share option transactions for the last three years are as follows:

                                                       2007    2006    2005 



                Weighted        Weighted         Weighted 
                Average        Average               Average 
                Exercise        Exercise               Exercise 
            Shares    Price    Shares    Price    Shares    Price 







        Options outstanding at                         
    26       beginning of year    2,662,716    $ 3.36    3,148,844    $ 1.36    3,316,374    $ 1.39 
        Options exercised    (228,577)    1.56    (1,823,295)    0.77    (573,030)    1.00 
        Options canceled    (70,000)    2.20    (54,333)    2.72    (115,000)    4.16 
        Options granted    2,081,000    4.79    1,391,500    4.47    520,500    3.21 







        Options outstanding at                         
           end of year    4,445,139    $ 4.14    2,662,716    $ 3.36    3,148,844    $ 1.36 







        Options exercisable                         
        at end of year    3,054,857    $ 3.91    1,369,074    $ 2.52    2,530,682    $ 1.18 







     
                Price        Price        Price 
                Range        Range        Range 







        Exercise price at end of year    $ 0.72 - $ 5.45    $ 0.69 - $ 5.36    $ 0.57 - $ 4.14 
        Exercise price of exercisable options    $ 0.72 - $ 5.45    $ 0.69 - $ 4.65    $ 0.57 - $ 4.14 
     
     
        The following table relates to stock options at December 31, 2007             
                            Weighted Average 
                Weighted    Weighted            Exercise Price 
        Price    Number    Average Remaining    Average         Number    of Exercisable 
        Range    Outstanding    Contractual Life    Exercise Price    Exercisable    Options 






        $0.72 - $1.89    604,139    2.26    $1.70        604,139    $1.70 
        $2.15 - $4.00    509,000    2.41    $3.45        438,500    $3.37 
        $4.02 - $4.19    595,500    3.59    $4.15        441,125    $4.16 
        $4.22 - $4.62    476,500    3.75    $4.46        158,760    $4.57 
        $4.65 - $4.65    25,000    0.68    $4.65        16,500    $4.65 
        $4.83 - $4.83    1,901,000    2.13    $4.83        1,228,333    $4.83 
        $4.89 - $5.24    224,000    3.38    $5.08        117,600    $5.07 
        $5.29 - $5.29    25,000    3.93    $5.29        12,500    $5.29 
        $5.36 - $5.36    65,000    3.93    $5.36        34,900    $5.36 
        $5.45 - $5.45    20,000    4.42    $5.45        2,500    $5.45 







        $0.72 - $5.45    4,445,139    2.65    $4.14        3,054,857    $3.91 









             The Company recorded additional compensation expense of $4,724,120, $1,390,776, and $863,340 for stock     
    options granted during 2007, 2006 and 2005, respectively. The fair value of the options granted was calculated using     
    the Black-Scholes model. In 2007, the model assumed a weighted average risk free interest rate of 3.09%, expected     
    life of 2.29 years, expected volatility of 81% and a dividend yield of $nil. In 2006, the model assumed a weighted average     
    risk free interest rate of 4.63%, expected life of three years, expected volatility of 82% and a dividend yield of $nil. In     
    2005, the model assumed a risk free interest rate of 3.94%, expected life of three years, expected volatility of 65% and     
    a dividend yield of $nil.     
     
    9. Related Party Transactions:     
     
             MGC Ventures. The Chief Executive Officer, President, Vice President-Finance and Vice President-     
    Administration of the Company are also officers and/or directors and shareholders of MGC Ventures. The Company     
    owned 12,062,953 common shares of MGC Ventures at December 31, 2007 and 2006, which represented 44% and     
    46%, respectively of its outstanding shares. The Company believes it has control over MGC Ventures due to the     
    combined shareholdings of the Company and its officers and directors. MGC Ventures owned 258,083 common shares     
    of the Company at December 31, 2007 and 2006. In addition, MGC Ventures owned 280,000 common shares of Great     
    Basin at December 31, 2007 and 2006. During the last three years, the Company sublet a portion of its office space     
    to MGC Ventures for $6,000 per year.     
     
             Great Basin. The Chief Executive Officer, President, Vice President-Finance and Vice President-Administration     
    of the Company are also officers and/or directors and shareholders of Great Basin. The Company owned 15,661,595     
    common shares of Great Basin at December 31, 2007 and 2006, which represented 45% and 46%, respectively of its     
    outstanding shares. The Company believes it has control over Great Basin due to the combined shareholdings of the     
    Company and its officers and directors. Great Basin owned 491,192 common shares of the Company at December 31,    27 
    2007 and 2006. Great Basin also owned 170,800 common shares of MGC Ventures at December 31, 2007 and 2006.     
    During the last three years, the Company sublet a portion of its office space to Great Basin for $6,000 per year.     
     
    10. Income Tax:     
     
             No income tax benefit has been recorded for the three years ended December 31, 2007. The Company’s Venezuelan     
    subsidiaries are not subject to Venezuelan income tax during the development stage and accordingly have not paid or     
    accrued any income tax during the three years ended December 31, 2007. Two of the Company’s U.S. subsidiaries     
    earned net income in 2007, 2006 and 2005 which is included in the Company’s consolidated net loss. Income tax     
    expense recorded by these subsidiaries in 2007, 2006 and 2005 amounted to $458,573, $521,803 and $1,471, respectively.     

         The Company has recorded a valuation allowance to reflect the estimated amount of the future tax assets which may not be realized, principally due to the uncertainty of utilization of net operating losses and other carry forwards prior to expiration. The valuation allowance for future tax assets may be reduced in the near term if the Company’s estimate of future taxable income changes. The components of the Canadian and U.S. future income tax assets and liabilities as of December 31, 2007 and 2006 were as follows:

            Future Tax Asset     



        2007        2006 



    Accounts payable and accrued expenses    $ 229,449        $ 255,731 
    Investment income             
    Property, plant and equipment    8,503,457        8,506,461 




    Total temporary differences    8,732,906        8,762,192 
    Net operating loss carry forward    14,822,963        11,022,034 
    Alternative minimum tax credit    19,871        19,871 




    Total temporary differences, operating losses             
    and tax credit carry forwards    23,575,740        19,804,097 
    Valuation allowance    (23,575,740)        (19,804,097) 




    Net deferred tax asset    $ –        $ – 






      10. Income Tax, continued:

    At December 31, 2007, the Company had the following U.S. and Canadian tax loss carry forwards and tax credits:

            U.S.    Canadian    Expires 



        Regular tax net operating loss:    $ 1,244,312    $ 388,388    2008 
            688,808    511,227    2009 
            341,750    1,149,067    2010 
            645,622        2011 
            1,424,144        2012 
                1,747,595    2014 
                2,178,171    2015 
            1,386,674        2018 
            1,621,230        2019 
            665,664        2020 
            896,833        2021 
            1,435,774        2022 
            1,806,275        2023 
            2,760,522        2024 
    28        3,680,288        2025 
            4,622,825    2,644,804    2026 
            6,033,181    5,723,795    2027 




            $ 29,253,902    $ 14,343,047     




     
        Alternative minimum tax net operating loss:    $ 1,218,023        2008 
            660,271        2009 
            304,472        2010 
            618,845        2011 
            1,399,529        2012 




            $ 4,201,140         




     
     
        Alternative minimum tax credit    $ 19,871         


    11. Segmented Financial Information:

    The Company has one operating segment, which is the exploration and development of mineral properties.

    Segmented financial information by geographic region is as follows:                 

     
    2007    U.S./Canada    Venezuela    Consolidated     




    Other income    $ 6,499,084        $ 6,499,084     
    Depreciation        39,447    $ 139,664    179,111     
    Net loss        7,654,544    4,756,949    12,411,493     





    Identifiable assets                     
    Property, plant and equipment, net    $ 150,693    $ 128,473,977    $ 128,624,670     
    General corporate assets    151,750,970    1,523,263    153,274,233     




    Total identifiable assets    $ 151,901,663    $ 129,997,240    $ 281,898,903     




    2006                     





    Other income    $ 8,252,058        $ 8,252,058     
    Depreciation        31,814    $ 115,984    147,798     
    Net loss        3,110,063    3,866,682    6,976,745     





    Identifiable assets                     
    Property, plant and equipment, net    $ 126,337    $ 73,517,558    $ 73,643,895     
    General corporate assets    28,054,737    2,917,089    30,971,826     




    Total identifiable assets    $ 28,181,074    $ 76,434,647    $ 104,615,721     




    2005                     





    Other income    $ 1,402,868        $ 1,402,868    29 
    Depreciation        23,462    $ 69,695    93,157     
    Net loss        5,802,593    3,224,689    9,027,282     





    Identifiable assets                     
    Property, plant and equipment, net    $ 79,769    $ 57,936,333    $ 58,016,102     
    General corporate assets    22,164,983    1,773,787    23,938,770     




    Total identifiable assets    $ 22,244,752    $ 59,710,120    $ 81,954,872     




    Net loss and identifiable assets of each segment are those that are directly identified with those geographic locations.         

    12. Commitments:

            In June 2007, the Company placed a $64 million order for the fabrication of the Brisas gyratory crusher, pebble crushers, Semi Autogenous Grinding (SAG) and ball mills and other processing equipment from Metso Minerals. As of December 31, 2007, the Company has made payments on this order of $12.0 million. In connection with this order, the Company opened an irrevocable standby letter of credit with a Canadian chartered bank in the amount of $57.7 million, providing security on the performance of obligations. As of December 31, 2007, the Company has restricted cash of $52.1 million as required by this letter of credit.

         The Company has placed additional orders of approximately $57 million for haulage equipment, front end loaders, construction machinery and other mining equipment and related engineering for the construction and operation of Brisas. As of December 31, 2007, the Company has made payments on these orders of $17.1 million and is due to make additional payments totaling $31.1 million during 2008.

         In addition, the Company has a services agreement with a group of Mandated Lenders to provide various banking services related to obtaining project financing for the Brisas Project. The agreement provides for quarterly payments to each of the four banks in the Mandated Lenders group until the financing is secured. The agreement is cancellable at anytime with no further obligation of the Company. The amount payable under the contract in 2008, if financing is not secured during 2008 and the contract is not cancelled by the Company, is $320,000.

         The Company leases office space under a non-cancelable operating lease. In January 2004, the lease was renewed for an additional five years commencing March 1, 2004. Rent expense under the lease during 2007, 2006 and 2005 was $121,928, $118,813 and $115,180, respectively. Future minimum annual rent payable under the lease is $125,741 in 2008 and $21,067 in 2009.


        13. Shareholder Rights Plan:    approval, increased the exercise price of the warrants 
                 The Company instituted a shareholder rights plan    from Canadian $6.50 to Canadian $6.55 and extended 
        (the “Rights Plan”) in 1999. Since the original approval    the expiry date of the warrants to July 31, 2007. None 
        by the Shareholders, the Rights Plan and the Rights    of the warrants were exercised prior to expiration. 
        Plan Agreement have been amended and continued    During 2005, 573,030 shares were issued upon 
        from time to time. In March 2006, the shareholders    exercise of stock options, 533,735 shares were issued 
        approved certain amendments to the Plan including    upon exercise of warrants, 251,350 shares were issued 
        continuing the Shareholder Rights Plan until June 30,    for compensation and 75,000 shares were issued to the 
        2009. The Rights Plan is intended to give adequate time    KSOP plan. 
        for shareholders of the Company to properly assess the     
        merits of a take-over bid without pressure and to allow     
        competing bids to emerge. The Rights Plan is designed    15. Convertible Notes: 
        to give the board of director’s time to consider             In May 2007, the Company issued $103,500,000 
        alternatives to allow shareholders to receive full and    aggregate principal amount of its 5.50% Senior 
        fair value for their common shares. One right is issued    subordinated convertible notes. The notes are unsecured, 
        in respect of each outstanding share. The rights become    bear interest at a rate of 5.50% annually, pay interest 
        exercisable only when a person, including any party    semi-annually in arrears and are due on June 15, 2022. 
        related to it or acting jointly with it, acquires or    The notes are convertible into Class A common shares 
        announces its intention to acquire 20% or more of the    of the Company at the initial conversion rate, subject 
        Company’s outstanding shares without complying with    to adjustment, of 132.626 shares per $1,000 principal 
        the “permitted bid” provisions of the Rights Plan. Each    amount (equivalent to a conversion price of $7.54). 
        right would, on exercise, entitle the holder, other than    Upon conversion, the Company will have the option, 
    30    the acquiring person and related persons, to purchase    unless there has occurred and is then continuing an 
        common shares of the Company at a 50% discount to    event of default under the Company’s indenture, to 
        the market price at the time.    deliver common shares, cash or a combination of 
            common shares and cash for the notes surrendered. 
        14. Common Shares:    Accounting standards require the Company to allocate 
            the notes between their equity and debt component 
                 In May 2007, the Company closed a public offering    parts based on their respective fair values at the time 
        of 13,762,300 Class A common shares of the Company,    of issuance. The liability component was computed by 
        representing aggregate net proceeds to the Company of    discounting the stream of future payments of interest 
        approximately $74 million. In addition to the shares    and principal at the prevailing market rate for a similar 
        issued in the public offering, the Company issued 223,442    liability that does not have an associated equity 
        shares for $333,966 upon exercise of stock options,    component. The equity portion of the notes was 
        100,000 shares valued at $497,600 were issued to the    estimated using the residual value method at 
        KSOP and 394,000 shares valued at $1,818,011 were    approximately $29 million net of issuance costs. The 
        issued as compensation to employees or remuneration    fair value of the debt component is accreted to the face 
        for services from consultants.    value of the notes using the effective interest rate method 
                 In May 2006, the Company closed a public offering    over the expected life of the notes, with the resulting 
        of 3,335,000 Class A common shares of the Company,    charge recorded as interest expense. The expected life 
        representing aggregate net proceeds to the Company of    of the notes is an estimate and is subject to change, if 
        approximately US $24.6 million. In 2006, in addition    warranted by facts and circumstances related to the 
        to the shares issued in the public offering, 1,761,109    potential early redemption of the notes by either the 
        shares were issued upon exercise of stock options,    Company or the holders. Interest and accretion expense 
        100,000 shares were issued to the KSOP and 163,875    allocable to the qualifying cost of developing mining 
        shares were issued as compensation. On November 4,    properties and to constructing new facilities is capitalized 
        2006 the company amended the terms of 2,680,500    until assets are ready for their intended use. During 
        Class A common share purchase warrants which had    2007, the company capitalized $4.2 million in interest 
        been set to expire on November 6, 2006. The    and accretion expense. 
        amendments, which were subject to shareholder     


             At any time on or after June 16, 2010, and until    16. New Accounting Standards:     
    June 15, 2012, the Company may redeem the notes, in    CICA Section 1535. Capital     
    whole or in part, for cash at a redemption price equal    Disclosures. This Section establishes standards     
    to 100% of the principal amount being redeemed plus    for disclosing information about an entity’s capital     
    accrued and unpaid interest if the closing sale price of    and how it is managed. Under this standard the     
    the Common Shares is equal to or greater than 150%    Company will be required to disclose information     
    of the conversion price then in effect and the closing    that enables the users of its financial statements to     
    price for the Company’s Common Shares has remained    evaluate the Company’s objectives, policies and     
    above that price for at least twenty trading days in the    processes for managing capital. The Company will     
    period of thirty trading days preceding the Company’s    adopt this section effective January 1, 2008 and     
    notice of redemption. Beginning on June 16, 2012, the    management is currently assessing the impact on     
    Company may, at its option, redeem all or part of the    the Company’s financial statements.     
    notes for cash at a redemption price equal to 100% of         
    the principal amount being redeemed plus accrued and    CICA Section 3862, Financial     
    unpaid interest.    Instruments – Disclosures.This Section requires     
        entities to provide disclosures in their financial     
             The note holders have the option to require the    statements that enable users to evaluate (a) the     
    Company to repurchase the notes on June 15, 2012, at    significance of financial instruments for the entity’s     
    a price equal to 100% of the principal amount of the    financial position and performance; and (b) the nature     
    notes plus accrued but unpaid interest. The Company    and extent of risks arising from financial instruments     
    may elect to satisfy its obligation to pay the repurchase    to which the entity is exposed during the period and at     
    price, in whole or in part, by delivering Common Shares.    the balance sheet date, and how the entity manages     
    In the event of a change of control of the Company,    those risks. The Company will adopt this section effective    31 
    the Company will be required to offer to repurchase    January 1, 2008 and management is currently assessing     
    the notes at a purchase price equal to 100% of the    the impact on the Company’s financial statements.     
    principal amount of the notes plus accrued but unpaid         
    interest unless there has occurred and is continuing             CICA Section 3064, Goodwill and     
    certain events of default under the Company’s indenture.    Intangible Assets. This Section establishes revised     
    The Company may elect to satisfy its obligation to    standards for recognition, measurement, presentation     
    repurchase the notes in whole or in part by delivering    and disclosure of goodwill and intangible assets.     
    Common Shares.    Concurrent with the introduction of this standard, the     
        CICA withdrew EIC 27, Revenues and Expenses during     
             At December 31, 2007, the fair value of the debt    the pre-operating period. As a result of the withdrawal     
    component of the convertible notes was estimated to    of EIC 27, companies will no longer be able to defer     
    be $78.7 million based on the net present value of the    costs and revenues incurred prior to commercial     
    remaining future payments of interest and principal,    production at new mine operations. The changes are     
    discounted at the prevailing market interest rate.    effective for interim and annual financial statements     
        beginning January 1, 2009. We have not yet determined     
        the impact of the adoption of this change on the     
        disclosure in our financial statements.     


                 FAS 155, Accounting for certain hybrid    for each subsequent reporting period. SFAS No. 159 
        financial instruments. This standard establishes,    also establishes presentation and disclosure requirements 
        among other things, the accounting for certain    designed to facilitate comparisons between entities that 
        derivatives embedded in other financial instruments.    choose different measurement attributes for similar types 
        FAS 155 amends FAS 133 on derivatives and hedging    of assets and liabilities. This standard is effective for 
        and FAS 140 on transfers and servicing of financial    years beginning after November 15, 2007. The Company 
        assets and extinguishments of liabilities. The adoption   

    is currently evaluating the impact of this standard on  

       

    of this standard on January 1, 2007 had no impact on 

      its financial statements.
    the Company’s reported results.   
     
                     FAS 141R, Business Combinations. 
                 Uncertain Tax Positions. In June 2006,    In December 2007, the FASB issued SFAS No. 141 
        FASB issued Accounting for Uncertain Tax Positions    (revised 2007), “Business Combination”. 
        - an Interpretation of FASB Statement No. 109, FIN    SFAS No. 141 (R) establishes principles and 
        48 which prescribes a recognition and measurement    requirements for how an acquirer recognizes and 
        model for uncertain tax positions taken or expected to    measures in its financial statements the identifiable 
        be taken in the Company’s tax returns. FIN 48 provides    assets acquired, the liabilities assumed, and non- 
        guidance on recognition, classification, presentation    controlling interest in the acquiree and the goodwill 
        and disclosure of unrecognized tax benefits. The    acquired. SFAS No. 141(R) also establishes disclosure 
        Company has not recorded any tax amount as a result    requirements to enable the evaluation of the nature 
        of the adoption of this standard.    and financial effects of the business combination. 
            SFAS No. 141(R) is effective for fiscal years 
                 FAS 157, Fair Value Measurements.    beginning after December 15, 2008. The Company 
        In September 2006, FASB issued SFAS 157, Fair Value    is currently evaluating the impact of this standard on 
    32    Measurements, which defines fair value, establishes a    its financial statements. 
        framework for measuring fair value and expands fair     
        value disclosures. The standard does not require any             FAS 160, Non-controlling Interests. 
        new fair value measurements. In December 2007, the    In December 2007, the FASB issued SFAS No. 160, 
        FASB issued SFAS 157-b, which provided for a one-    Non-controlling Interests in Consolidated Financial 
        year deferral of the implementation of SFAS 157 for    Statements—an amendment of Accounting Research 
        non-financial assets and liabilities. However, the    Bulletin No. 51 (“SFAS No. 160”). SFAS No. 160 
        Company is still required to adopt SFAS 157 effective    establishes accounting and reporting standards for 
        January 1, 2008 for financial assets and liabilities that    ownership interests in subsidiaries held by parties other 
        are carried at fair value.    than the parent, the amount of consolidated net income 
            attributable to the parent and to the non-controlling 
                 FAS 159, Fair Value Option. In    interest, changes in a parent’s ownership interest, and 
        February 2007, the FASB issued Statement of Financial    the valuation of retained non-controlling equity 
        Accounting Standard (“SFAS”) No. 159, “The Fair    investments when a subsidiary is deconsolidated. 
        Value Option for Financial Assets and Financial    SFAS No. 160 also establishes disclosure requirements 
        Liabilities—Including an Amendment of FASB    that clearly identify and distinguish between the interests 
        Statement No. 115.” SFAS No. 159 provides companies    of the parent and the interests of the non-controlling 
        with an option to measure, at specified election dates,    owners. SFAS No. 160 is effective for fiscal years 
        financial instruments and certain other items at fair    beginning after December 15, 2008. The Company is 
        value that are not currently measured at fair value. For    currently evaluating the impact of this standard on its 
        those items for which the fair value option is elected,    financial statements. 
        unrealized gains and losses will be recognized in earnings     


    17. Differences Between Canadian and U.S. GAAP:

         The Company prepares its consolidated financial statements in accordance with generally accepted accounting principles (GAAP) in Canada, which differ in certain respects from GAAP in the United States. The effect of the principal measurement differences between U.S. and Canadian GAAP are summarized below.

    Consolidated Summarized Balance Sheets                 
        Canadian GAAP    Change         U.S. GAAP     



    2007                 




    Assets                 
    Current assets A    $ 100,320,659    $                     –    $ 100,320,659     
    Property, plant and equipment, net C,D,E    128,624,670    (42,965,187)    85,659,483     
    Other assets    52,953,574        52,953,574     




        $ 281,898,903    $ (42,965,187)    $ 238,933,716     




     
     
    Liabilities                 
    Convertible notes D    $ 70,306,054    $ 28,270,191    $ 98,576,245     
    Other liabilities A    10,272,040        10,272,040     




        $ 80,578,094    $ 28,270,191    $ 108,848,285     




     
    Shareholders’ equity                 
    Common shares & equity units B    244,295,503    (5,506,126)    238,789,377    33 
    Equity component of convertible notes D    28,784,710    (28,784,710)         
    Less, common shares & equity units                 
    held by affiliates    (636,267)        (636,267)     
    Contributed surplus        5,171,603    5,171,603     
    Stock options B    7,662,237    4,242,848    11,905,085     
    Accumulated deficit B,C,E    (81,371,254)    (46,358,993)    (127,730,247)     
    Accumulated other comprehensive income A    2,696,571        2,696,571     
    KSOP debt    (110,691)        (110,691)     




        201,320,809    (71,235,378)    130,085,431     




        $ 281,898,903    $ (42,965,187)    $ 238,933,716     






            Canadian GAAP    Change           U.S. GAAP 




        2006             




        Assets             
        Current assets A    $ 29,199,706    $ 2,334,240    $ 31,533,946 
        Property, plant and equipment, net C    73,643,895    (41,034,321)    32,609,574 
        Other assets    1,772,120        1,772,120 




            $ 104,615,721    $ (38,700,081)    $ 65,915,640 




     
        Liabilities A    $ 3,643,709    $ 308,533    $ 3,952,242 
     
        Shareholders’ equity             
        Common shares & equity units B    167,463,742    (5,339,074)    162,124,668 
        Less, common shares & equity units             
         held by affiliates    (636,267)        (636,267) 
        Contributed surplus        5,171,603    5,171,603 
        Stock options B    3,105,169    4,075,796    7,180,965 
        Accumulated deficit B,C,    (68,959,761)    (44,942,646)    (113,902,407) 
        Accumulated other comprehensive income A        2,025,707    2,025,707 
        KSOP debt    (871)        (871) 




            100,972,012    (39,008,614)    61,963,398 




            $ 104,615,721    $ (38,700,081)    $ 65,915,640 




     
     
        Consolidated Summarized Statements of Operations             
            2007    2006    2005 
     
    34    Net Loss under Canadian GAAP    $ (12,411,493)    $ (6,976,745)    $ (9,027,282) 
         Stock based compensation B            3,149,038 
         Interest expense E    (1,416,347)         




        Net loss under U.S. GAAP    (13,827,840)    (6,976,745)    (5,878,244) 
     
        Other comprehensive income (loss)             
        Unrealized gain (loss) on available-             
         for-sale securities: A             
             Holding gain (loss) arising during period    2,005,468    3,378,903    1,012,969 
             Reclassification adjustment for (gain)             
        loss included in net loss    (1,334,604)    (5,466,100)    55,957 




             Total comprehensive loss under             
                     U.S. GAAP    $ (13,156,976)    $ (9,063,942)    $ (4,809,318) 




     
             Basic and diluted net loss per share             
                    under U.S. GAAP    $ (0.28)    $ (0.18)    $ (0.17) 




     
     
        Consolidated Summarized Statements of Cash Flows             
            2007    2006    2005 
     
        Cash flow used by operating activities             
         under Canadian GAAP    $ (5,675,305)    $ (11,179,770)    $ (7,729,508) 
        Cash paid for interest E    (1,267,851)         




        Cash flow used by operating activities             
           under U.S. GAAP    $ (6,943,156)    $ (11,179,770)    $ (7,729,508) 




     
     
        Cash flow (used) provided by investing             
         activities under Canadian GAAP    $ (97,797,970)    $ (8,518,467)    $ (2,691,289) 
        Cash paid for interest E    1,267,851         




        Cash flow used by investing             
           activities under U.S. GAAP    $ (96,530,119)    $ (8,518,467)    $ (2,691,289) 






             A In 2007, the Company adopted CICA Section    C Under Canadian GAAP, the Company     
    3855, Financial Instruments – Recognition and    capitalizes mineral property exploration and development     
    Measurement. The effect of the adoption of this standard    costs after proven and probable reserves have been     
    is that the accounting for marketable securities for    established. The Company also capitalizes costs on     
    Canadian GAAP purposes is now substantially consistent    properties where it has found non-reserve material that     
    with US GAAP and accordingly there are no differences    does not meet all the criteria required for classification     
    in marketable securities at December 31, 2007. In 2006,    as proven or probable reserves. Under US GAAP,     
    under U.S. GAAP, marketable securities were classified    exploration and development costs incurred on properties     
    as available-for-sale and were recorded at market value    where mineralization has not been classified as a proven     
    and the unrealized gain or loss, net of tax was recorded    and probable reserve under SEC rules are expensed as     
    as part of comprehensive income. Under Canadian    incurred. Accordingly, certain costs are capitalized for     
    GAAP these securities were carried at the lower of cost    Canadian GAAP purposes but expensed under US GAAP.     
    and quoted market value.         
     
    B For U.S. GAAP purposes, the Company             D In 2007, the company issued $103,500,000     
    adopted SFAS 123R, “Accounting for Stock Based    aggregate principal amount of convertible notes. As     
    Compensation” effective January 1, 2006. SFAS 123R    described in note 15, under Canadian GAAP these notes     
    requires the use of the fair value method of accounting    are allocated between their equity and debt component     
    for stock based compensation. This standard is    parts. The debt component is accreted to the face value     
    substantially consistent with the revised provisions of    of the notes with the resulting interest expense charged     
    CICA 3870, which was adopted by the Company for    to mineral property costs. Under US GAAP, the notes     
    Canadian GAAP effective January 1, 2004. For    are classified as a liability net of issuance costs and     
    U.S. GAAP, the Company applied the modified    accreted to face value over the term on the notes.     
    prospective method of adoption included in SFAS 123R        35 
    which requires that the company expense the fair value    E The Company capitalizes interest on its     
    of all unvested and new grants on a prospective basis    convertible notes on an interest avoidance basis. The     
    beginning January 1, 2006. In 2005, for U.S. GAAP    amount capitalized during an accounting period is     
    purposes, the Company accounted for stock-based    determined by applying an interest rate to the average     
    employee compensation arrangements using the intrinsic    amount of accumulated qualifying assets during the     
    value method prescribed in Accounting Principles Board    period. The Company’s qualifying assets include its costs     
    (APB) Opinion No.25, “Accounting for Stock Issued    of developing mining properties and constructing new     
    to Employees”. Under Opinion No. 25, when the    facilites. The amount capitalized under US GAAP differs     
    exercise price of certain stock options is amended (the    from the amount capitalized under Canadian GAAP     
    “Repricing”), these options are accounted for as variable    due to the difference in the amount of qualifying mineral     
    compensation from the date of the effective Repricing.    property costs which have been accumulated under the     
    Under this method, following the repricing date,    two sets of accounting principles.(See ‘C’ above)     
    compensation expense is recognized when the quoted         
    market value of the Company’s common shares exceeds         
    the amended exercise price. Should the quoted market         
    value subsequently decrease, a recovery of a portion, or         
    all of the previously recognized compensation expense         
    will be recognized.         


    Pro-forma stock based compensation

    For U.S. GAAP purposes, the Company accounted for stock-based employee compensation arrangements using the fair value method in 2007 and 2006 and the intrinsic value method in 2005. Had the fair value method of accounting been used under U.S. GAAP in 2005, the net loss and net loss per share would have been as follows:

            2007    2006    2005 
     
        Net loss under U.S GAAP    $ (13,827,840)    $ (6,976,745)    $ (5,878,244) 
        Variable plan accounting adjustment included in net loss            (2,285,698) 
        Stock based compensation under the fair value method            (863,340) 




        Pro-forma net loss under U.S. GAAP    $ (13,827,840)    $ (6,976,745)    $ (9,027,282) 




     
        Pro-forma basic and diluted net loss             
           per share under U.S. GAAP    $ (0.28)    $ (0.18)    $ (0.26) 




     
     
        Development Stage Enterprise             
     
        In August of 1992, the company acquired the Brisas project. Beginning in 1993 the company decided to focus its efforts 
        on the development of Brisas thereby meeting the definition of a development stage enterprise under Statement of 
        Financial Accounting Standards No. 7 (FAS 7), Accounting and Reporting by Development Stage Enterprises. The 
    36    following additional information is required under FAS 7             

    Consolidated Summarized Statements of Operations - U.S. GAAP

    For the period from January 1, 1993 to December 31, 2007

    Other income    $ (29,686,723) 
    Mineral property exploration and development    39,505,080 
    General & administrative expense    46,136,193 
    Other expense    65,850,869 


    Deficit accumulated during the development stage     
    from January 1, 1993 to December 31, 2007    121,805,419 
     
    Accumulated deficit, December 31, 1992    5,924,828 


    Accumulated deficit, December 31, 2007    $ 127,730,247 



    Consolidated Summarized Statements of Cash Flows - U.S. GAAP

    For the period from January 1, 1993 to December 31, 2007

    Cash used by operating activities    $ (91,196,008) 
    Cash used by investing activities    (117,481,312) 
    Cash provided by financing activities    301,729,044 


     
    Increase in cash and cash equivalents for the period     
     from January 1, 1993 to December 31, 2007    93,051,724 
    Cash and cash equivalents at December 31, 1992    1,628,852 


    Cash and cash equivalents at December 31, 2007    $ 94,680,576 




    Additional Shareholders’ Equity Disclosure - U.S. GAAP                         
    For the period from January 1, 1993 to December 31, 2007                             
     
                        Shares                    Compre-         
            Common Shares and Equity Units Issued    and units    Contrib-    Value    Value    Accum-    hensive         
        Issue    Common    Equity        held by    uted    assigned    assigned    ulated    income    KSOP     
        Price    Shares    Units    Amount    affiliates    surplus    to options    to warrants    Deficit     (loss)    debt     












    Balance, December 31, 1992        8,875,862        $ 8,290,819    $ (70,944)                $ (5,924,828)    $ (50,000)     
    Stock issued for cash                                                 
    Private placement    4.12    2,530,000        10,413,976                                 
    Exercise of options    1.34    300,000        401,000                                 
    Exercise of warrants    3.52    5,037        17,749                                 
    Stock issued for services    3.89    12,552        48,851                                 
    Net loss                                    (5,495,061)             
    Change in KSOP debt                                            5,000     
    Reduction of shareholders’                                                 
    equity due to change in                                                 
    subsidiaries’ minority interest                (25,050)                                 












    Balance, December 31, 1993        11,723,451        19,147,345    (70,944)                (11,419,889)        (45,000)     
    Stock issued for cash                                                 
    Private placement    9.82    2,000,000        19,630,530                                 
    Exercise of options    2.32    295,967        687,494                                 
    Exercise of warrants    6.07    2,134,250        12,962,750                                 
    Stock issued for services    5.50    6,000        33,000                                 
    Stock issued to KSOP    6.19    20,000        123,760                                 
    Stock issued for                                                 
    litigation settlement    6.15    2,750,000        16,912,500                                 
    Value attributed to warrants                                                 
    issued in litigation settlement                800,000                                 
    Net loss                                    (26,297,415)            37 
    Increase in common stock                                                 
    held by affiliates                    (433,332)                             
    Effect of change in accounting                                                 
    For investments                                        108,425         
    Decrease in unrealized gain on                                                 
    available-for-sale securities                                        (29,408)         
    Change in KSOP debt                                            (103,760)     
    Reduction of shareholders’                                                 
    equity due to change in                                                 
    subsidiaries’ minority interest                (843,986)                                 












    Balance, December 31, 1994        18,929,668        69,453,393    (504,276)                (37,717,304)     79,017    (148,760)     
    Stock issued for cash                                                 
    Exercise of options    2.74    167,835        460,162                                 
    Stock issued to KSOP    5.60    50,000        280,195                                 
    Stock issued for minority                                                 
    interest in subsidiaries    7.43    1,329,185        9,882,028                                 
    Net loss                                    (3,847,605)             
    Increase in common stock                                                 
    held by affiliates                    (924,289)                             
    Increase in unrealized gain on                                                 
    available-for-sale securities                                        6,943         
    Change in KSOP debt                                            (187,949)     
    Reduction of shareholders’                                                 
    equity due to change in                                                 
    subsidiaries’ minority interest                (6,924)                                 












    Balance, December 31, 1995        20,476,688        80,068,854 (1,428,565)                (41,564,909)     85,960    (336,709)     
    Stock issued for cash                                                 
    Exercise of options    5.37    497,623        2,673,988                                 
    Exercise of warrants    10.52    1,729,500        18,202,500                                 
    Net loss                                    (7,908,701)             
    Decrease in unrealized gain on                                                 
    available-for-sale securities                                        (83,210)         
    Change in KSOP debt                                            150,001     
    Addition to shareholders’                                                 
    equity due to change in                                                 
    subsidiaries’ minority interest                7,436                                 












    Balance, December 31, 1996        22,703,811        100,952,778 (1,428,565)                (49,473,610)    2,750    (186,708)     


        Additional Shareholders’ Equity Disclosure - U.S. GAAP (continued)                 
        For the period from January 1, 1993 to December 31, 2007                         
     
                            Shares                    Compre-     
                Common Shares and Equity Units Issued     and units    Contrib-    Value    Value    Accum-    hensive     
            Issue    Common    Equity        held by    uted    assigned    assigned    ulated    income    KSOP 
            Price    Shares    Units         Amount       affiliates    surplus    to options    to warrants    Deficit    (loss)    debt 












        Stock issued for cash                                             
        Exercise of options    5.75    124,649        716,716                             
        Stock issued to KSOP    5.02    89,683        450,000                             
        Net loss                                    (10,918,111)         
        Increase in unrealized gain on                                             
        available-for-sale securities                                        8,250     
        Change in KSOP debt                                            (436,152) 












        Balance, December 31, 1997        22,918,143        102,119,494    (1,428,565)                (60,391,721)    11,000    (622,860) 
        Stock issued for cash                                             
        Exercise of options    1.90    223,624        425,883                             
        Stock issued to KSOP    3.00    50,000        150,000                             
        Net loss                                    (5,147,658)         
        Change in shares held                                             
        by affiliates                (1,034,323)    1,025,234                         
        Decrease in unrealized gain (loss)                                         
        on available-for-sale securities                                        (22,625)     
        Change in KSOP debt                                            208,089 












        Balance, December 31, 1998        23,191,767        101,661,054     (403,331)                (65,539,379)    (11,625)    (414,771) 
        Stock issued for cash                                             
        Exercise of options    1.19    12,500        14,899                             
        Stock issued for services    0.84    70,000        58,760                             
    38    Stock issued to KSOP    1.13    300,000        337,500                             
        Stock retired    3.02    (1,629)        (4,915)                             
        Net loss                                    (4,499,321)         
        Net common shares exchanged                                             
        for equity units        (1,584,966)    1,584,966                                 
        Decrease in unrealized loss on                                             
        available-for-sale securities                                        (328,618)     
        Change in KSOP debt                                            230,352 












        Balance, December 31, 1999        21,987,672    1,584,966    102,067,298     (403,331)                (70,038,700)    (340,243)    (184,419) 
        Stock issued for services    0.55    70,000        38,688                             
        Net loss                                    (2,807,648)         
        Equity units exchanged                                             
        for common shares        138,570    (138,570)                                 
        Increase in unrealized gain on                                             
        available-for-sale securities                                        437,875     
        Change in KSOP debt                                            99,310 












        Balance, December 31, 2000        22,196,242    1,446,396    102,105,986     (403,331)                (72,846,348)    97,632    (85,109) 
        Stock issued for cash                                             
        Exercise of options    0.78    5,500        4,285                             
        Stock issued for services    0.75    20,000        15,000                             
        Stock issued to KSOP    0.47    300,000        140,640                             
        Net loss                                    (2,258,191)         
        Change in common stock                                             
        held by affiliates                     (271,267)                         
        Equity units exchanged                                             
        for common shares        133,380    (133,380)                                 
        Increase in unrealized gain on                                             
        available-for-sale securities                                        62,368     
        Change in KSOP debt                                            1,322 












        Balance, December 31, 2001        22,655,122    1,313,016    102,265,911     (674,598)                (75,104,539)    160,000    (83,787) 


    Additional Shareholders’ Equity Disclosure - U.S. GAAP (continued)                     
    For the period from January 1, 1993 to December 31, 2007                             
     
                        Shares                    Compre-         
            Common Shares and Equity Units Issued    and units    Contrib-    Value    Value    Accum-    hensive         
        Issue    Common    Equity        held by    uted    assigned    assigned    ulated    income    KSOP     
        Price    Shares    Units         Amount    affiliates    surplus    to options         to warrants    Deficit    (loss)    debt     











    Stock issued for cash                                                 
    Exercise of options    0.72    18,000        12,960                                 
    Stock issued for services    0.85    100,000        85,200                                 
    Stock issued to KSOP    0.67    200,000        134,000                                 
    Variable plan accounting                                                 
    for options                            1,162,804                     
    Net loss                                    (4,170,926)             
    Equity units exchanged                                                 
    for common shares        23,036    (23,036)                                     
    Decrease in unrealized gain on                                                 
    available-for-sale securities                                        (118,816)         
    Change in KSOP debt                                            19,003     












    Balance, December 31, 2002        22,996,158    1,289,980    102,498,071    (674,598)        1,162,804        (79,275,465)       41,184    (64,784)     
    Stock issued for cash                                                 
    Private placement    1.96    4,042,000        7,888,508                                 
    Exercise of options    0.74    400,000        294,605                                 
    Stock issued for services    5.06    60,000        303,600                                 
    Stock issued to KSOP    1.28    200,000        256,000                                 
    Value assigned to                                                 
    warrants issued                                1,730,641                 
    Variable plan accounting                                                 
    for options                            7,704,726                    39 
    Net loss                                    (11,412,062)             
    Equity units exchanged                                                 
    for common shares        52,100    (52,100)                                     
    Increase in unrealized gain on                                                 
    available-for-sale securities                                        3,072,941         
    Change in KSOP debt                                            (39,568)     












    Balance, December 31, 2003        27,750,258    1,237,880    111,240,784    (674,598)        8,867,530    1,730,641    (90,687,527)    3,114,125    (104,352)     
    Stock issued for cash                                                 
    Private placement    3.61    5,361,000        19,337,034                                 
    Exercise of warrants    4.28    21,100        90,211                                 
    Exercise of options    0.89    373,954        333,310                                 
    Stock issued for services    4.13    54,000        223,012                                 
    Stock issued to KSOP    3.41    75,000        255,750                                 
    Value assigned to                                                 
    warrants issued                                3,682,447                 
    Variable plan accounting                                                 
    for options                            (791,643)                     
    Assigned value of                                                 
    exercised warrants                18,069                (18,069)                 
    Net loss                                    (10,359,891)             
    Equity units exchanged                                                 
    for common shares        80,483    (80,483)                                     
    Decrease in unrealized gain on                                                 
    available-for-sale securities                                         (70,147)         
    Change in KSOP debt                                            (971)     












    Balance, December 31, 2004        33,715,795    1,157,397    131,498,170    (674,598)        8,075,887    5,395,019    (101,047,418)    3,043,978    (105,323)     


        Additional Shareholders’ Equity Disclosure - U.S. GAAP (continued)                 
        For the period from January 1, 1993 to December 31, 2007                         
     
                            Shares                    Compre-     
                Common Shares and Equity Units Issued    and units    Contrib-    Value    Value    Accum-    hensive     
            Issue    Common    Equity        held by    uted    assigned    assigned    ulated    income     KSOP 
            Price    Shares    Units         Amount    affiliates    surplus    to options         to warrants    Deficit    (loss)    debt 











        Stock issued for cash                                             
        Exercise of warrants    4.33    260,900        1,129,905                             
        Exercise of underwriter                                             
         compensation options    3.00    202,100        605,468                             
        Exercise of underwriter                                             
         compensation warrants    4.32    70,735        305,645                             
        Exercise of options    1.00    573,030        571,326                             
        Stock issued for services    2.92    251,350        733,232                             
        Stock issued to KSOP    3.45    75,000        258,971                             
        Net loss                                    (5,878,244)         
        Variable plan accounting                                             
        for options                            (2,285,698)                 
        Assigned value of                                             
        exercised warrants                223,416                (223,416)             
     
        Assigned value of                                             
        expired warrants                        1,489,156        (1,489,156)             
        Equity units exchanged                                             
        for common shares        47,377    (47,377)                                 
        Increase in unrealized gain on                                             
        available-for-sale securities                                        1,068,926     
    40    Change in KSOP debt                                            21,103 












        Balance, December 31, 2005        35,196,287    1,110,020    135,326,133    (674,598)    1,489,156    5,790,189    3,682,447    (106,925,662)    4,112,904    (84,220) 
        Stock issued for cash                                             
        Public offering    7.37    3,335,000        24,574,077                             
        Exercise of options    0.64    1,761,109        1,128,596                             
        Stock issued for services    4.56    163,875        747,075                             
        Stock issued to KSOP    1.89    100,000        189,063                             
        Net loss                                    (6,976,745)         
        Decrease in shares held                                             
        by affiliates                159,724       38,331                         
        Fair value of options                            1,390,776                 
        Assigned value of                                             
        expired warrants                        3,682,447    (3,682,447)             
        Equity units exchanged                                             
        for common shares        24,921    (24,921)                                 
        Decrease in unrealized gain on                                             
        available-for-sale securities                                        (2,087,197)     
        Change in KSOP debt                                            83,349 












        Balance, December 31, 2006        40,581,192    1,085,099    162,124,668    (636,267)    5,171,603    7,180,965        (113,902,407)    2,025,707    (871) 
        Stock issued for cash                                             
        Public offering    5.38    13,762,300        74,015,131                             
        Exercise of options    1.49    223,442        333,966                             
        Stock issued for services    4.61    394,000        1,818,012                             
        Stock issued to KSOP    4.98    100,000        497,600                             
        Net loss                                    (13,827,840)         
        Fair value of options                            4,724,120                 
        Increase in unrealized gain on                                             
        available-for-sale securities                                        670,864     
        Change in KSOP debt                                            (109,820) 












        Balance, December 31, 2007        55,060,934    1,085,099    $238,789,377    $(636,267) $5,171,603 $11,905,085        $(127,730,247)    $2,696,571 $(110,691) 











    CORPORATE INFORMATION         
     
    Officers and Directors    Securities Listings (Symbol GRZ)    Bankers 
     
    Rockne J. Timm        Canada - The Toronto Stock Exchange    Bank of America 
    Chief Executive Officer and Director    United States - American Stock Exchange    Spokane, Washington USA 
     
    A. Douglas Belanger        Transfer Agent    Bank of Montreal 
    President and Director             
            Computershare Trust Company, Inc.    Vancouver, British Columbia Canada 
            Toronto, Ontario Canada     
    James P. Geyer             
    Senior Vice President and Director    Lakewood, Colorado USA    Corp Banca Caracas, Venezuela 
     
    Robert A. McGuinness    Registered Agent     
    Vice President of Finance and CFO    Veale, Kilpatrick, Austring, Fendrick &     
            Fairman    Auditors 
    Mary E. Smith        Whitehorse, Yukon Canada     
    Vice President of Administration and Secretary        PricewaterhouseCoopers LLP 
                Vancouver, B.C. Canada 
    Douglas E. Stewart            Caracas, Venezuela 
    Vice President of Project Development    Offices     
     
    Arturo Rivero        Corporate, USA     
    President, Gold Reserve de Venezuela    926 W. Sprague Avenue, Suite 200    Counsel 
            Spokane,WA 99201     
    James H. Coleman        Ph: (509) 623-1500    Fasken Martineau 
    Non-Executive Chairman and Director    Fx: (509) 623-1634    Toronto, Ontario Canada 
    Jean Charles (JC) Potvin         
    Director        Corporate, Venezuela    Baker & McKenzie 
            Edificio Miranda, Torre A Piso 6, Oficina    Houston, Texas USA 
    Patrick D. McChesney    A-65 Avenida Francisco de Miranda    Caracas,Venezuela 
            Chacao, Caracas, Venezuela     
    Director             
            Ph: 58 212 264 0185     
    Chris D. Mikkelsen        Fx: 58 212 264 1073     
    Director            Annual Meeting 
            Operations, Venezuela     
            Centro Empresarial Catanaima Primer Piso,    The 2008 Annual Meeting will be held at 
            Final Calle Neveri Zona Industrial - Unare    9:30 a.m. on June 10, 2008 
    Share Information    2 Puerto Ordaz, Venezuela    The Spokane Club, 
            Ph: 58 286 951 5124    1002 W. Riverside 
    Number of Shareholders:    Fx: 58 286 951 4635    Spokane, Washington 
    Approximately 11,000             
    Common Shares Issued and Outstanding         
    March 29, 2008             
    Class A common -    55,230,253         
    Equity Units -    1,071,599         
    Common Share Purchase Options         
    4,357,839             
            Additional information regarding the company may be obtained at www.GoldReserveInc.com 



    Gold Reserve Inc.

    926 W. Sprague Ave

    Suite 200

    Spokane, WA 99201

    800.625.9550

    www.goldreserveinc.com