Prospectus re Admission to the Official List - Heritage Oil

16 Trade and other payables31 December 30 September2005 2006 2006 2007$ $ $ $(Unaudited)Trade payables ......................... 1,995,384 9,253,320 6,929,625 10,669,952Other payables and accrued liabilities ........ 2,443,265 3,462,061 2,467,026 5,111,6544,438,649 12,715,381 9,396,651 15,781,606Trade and other payables and accrued liabilities comprise current amounts outstanding for tradepurchases and ongoing costs. The carrying amount of trade and other payables approximates theirfair value.17 Borrowings31 December 30 September2005 2006 2006 2007$ $ $ $(Unaudited)Non-current borrowingsConvertible bonds—unsecured ............ — 54,715,050 54,440,464 136,264,249Non-current portion of long-term debt ...... 7,520,438 8,409,793 8,071,770 8,654,5167,520,438 63,124,843 62,512,234 144,918,765Long-term debt—securedCurrent ............................. 248,045 147,720 140,352 160,224Non-current .......................... 7,520,438 8,409,793 8,071,770 8,654,5167,768,483 8,557,513 8,212,122 8,814,7402006 convertible bondsOn 27 March 2006, the Corporation issued 600 unsecured convertible bonds each with a par value of$100,000 for aggregate proceeds of $60,000,000. Issue costs amounted to $3,000,000 resulting in netproceeds of $57,000,000. The bonds bear a coupon rate of 10% per annum and a term of five yearsand one day. On maturity, any bonds outstanding are redeemed for cash. At the option of the holders,the bonds are convertible, in whole or in part, into Common Shares at a price of U.S.$18.00 per shareat any time during the term of the bonds. The Corporation could redeem, in whole or part, the bondsfor cash at any time on or before 28 March 2007 at 150 per cent. of par value. Pursuant to the bondagreement, the Group is required to maintain an equity to debt, net of cash and cash equivalent, ratioof no less than 0.65:1.00. The proceeds of the bond can be employed for development of the ZapadnoChumpasskoye field in Russia and for general corporate purposes.The bonds included conversion features which in certain circumstances could be settled in cash and sothese features represent a derivative financial instrument which is classified as a liability.The fair value of the liability component of the bonds (net of issue costs) was estimated at$53,862,435. The fair value of the derivative liability representing the bondholders’ conversion feature(note 23) (net of issue costs) was estimated at $3,137,565 on 27 March 2006. The difference betweenthe $60,000,000 principal amount due on maturity and the recorded liability component is accretedand recorded as finance costs using the effective interest method. The derivative financial instrumentis recorded at fair value with resulting gains and losses recorded in finance income and costs.On 17 January 2007, the Corporation gave notice that it had exercised its option to redeem550 outstanding bonds at 150% of par value for total proceeds of $82,500,000 plus accrued interestwhich was paid on 28 March 2007. This resulted in the recognition of a loss of $7,155,622 on theredemption, net of transaction costs, on the recorded liability and derivative liability. Previously, earlyin 2007, 50 bonds, with a total par value of $5,000,000, had been converted into 277,778 CommonShares. As a result of this conversion, a total amount of $7,104,327 was transferred to Share Capitalfrom the convertible bonds and derivative liability of the convertible bonds.203