Prospectus re Admission to the Official List - Heritage Oil

5 Other finance costsNine-month periods endedYear ended 31 December 30 September2005 2006 2006 2007$ $ $ $(Unaudited)Interest on long-term debt .................. 491,824 532,918 391,392 419,898Interest on convertible bonds ................ — 4,602,740 3,090,411 9,387,986Accretion of convertible debt ................ — 860,895 578,029 2,652,613Accretion of asset retirement obligation ........ — — — 5,376491,824 5,996,553 4,059,832 12,465,873Amount capitalised ....................... — (1,354,427) (793,335) (5,412,970)Finance costs expensed .................... 491,824 4,642,126 3,266,497 7,052,903Finance costs are capitalised in various balance sheet categories.6 Income tax expenseThe Group is subject to income taxes in Canada, Uganda and Russia. All of the Group’s operatingactivities are outside of Canada. In Oman, the effective tax rate is nil as in this jurisdiction the Groupis subject to a production sharing agreement.In Canada, Uganda and Russia, the Group has available tax deductions of $25,418,994(31 December 2006—$14,737,369) and tax losses of $70,286,702 (31 December 2006—$54,750,658), ofwhich $23,452,398 expires from 2008 to 2027, and the remaining $46,834,304 does not have an expiryperiod. No deferred tax assets have been recognised for the benefit of the Canadian tax deductionsand Canadian and Russian tax losses because realisation of the deferred tax assets in the foreseeablefuture is not sufficiently likely.Factors affecting current tax charge for the period:Nine-month periods endedYear ended 31 December30 September2005 2006 2006 2007$ $ $ $(Unaudited)Net loss on ordinary activities before tax . . . (8,262,225) (28,367,755) (12,517,910) (67,482,482)Standard tax rate .................... 37.6% 34.7% 34.7% 32.3%Tax on loss at standard rate ............. (3,108,249) (9,843,611) (4,343,715) (21,796,842)Expenses not deductible for tax purposes . . . 2,878,891 10,247,124 5,218,809 20,156,056Effect of tax losses not recognised ........ 229,358 (403,513) (875,094) 1,640,786Current tax charge ................... — — — —As at 31 DecemberAs at 30 September2005 2006 2006 2007$ $ $ $(Unaudited)The balance comprises temporary differencesattributable to:Available tax losses and deductions ....... 19,107,122 19,744,609 19,273,028 23,639,376Deferred tax asset (unrecognised) .......... 19,107,122 19,744,609 19,273,028 23,639,376195