Effects Of Foreign Currency Movements

9 Months Ended

Sep. 30, 2012

Effects Of Foreign Currency Movements

17. EFFECTS OF FOREIGN CURRENCY MOVEMENTS

Substantially all of the Company’s operating cash flows and assets are denominated in Polish zloty, Russian ruble and Hungarian forint. This means that the Company is exposed to translation movements both on its balance sheet and statement of operations and comprehensive income. The impact on working capital items is demonstrated on the cash flow statement as the movement in exchange on cash and cash equivalents. The impact on the statement of operations is by the movement of the average exchange rate used to restate the statement of operations from Polish zloty, Russian ruble and Hungarian forint to U.S. dollars. The amounts shown as exchange rate gains or losses on the face of the statements of operations relate only to realized gains or losses on transactions that are not denominated in Polish zloty, Russian ruble or Hungarian forint. Table below presents the exchange rates used for translation of our balance sheet and statement of operations and comprehensive income balances as of and for the three months ended September 30, 2012:

	Balance sheet rate as of September 30, 2012		Balance sheet rate as of December 31, 2011		Average rate for the three  months ended September 30, 2012		Average rate for the three  months ended September 30, 2011
PLN / US$		3.1780		3.4174		3.3107		2.9400
RUR / US$		30.9144		32.2092		31.9874		29.1667
HUF / US$		219.1724		240.6620		226.7603		194.7020

Because the Company’s reporting currency is the U.S. dollar, the translation effects of fluctuations in the exchange rate of our functional currencies have impacted the Company’s financial condition and results of operations and have affected the comparability of our results between financial periods.

The Company has borrowings including its Convertible Notes due 2013 and Senior Secured Notes due 2016 that are denominated in U.S. dollars and euros, which have been lent to its operations where the functional currency is the Polish zloty and Russian ruble. The effect of having debt denominated in currencies other than the Company’s functional currencies is to increase or decrease the value of the Company’s liabilities on that debt in terms of the Company’s functional currencies when those functional currencies depreciate or appreciate in value respectively. As a result of this, the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of the Company’s operations.

Exchange Rate	Value of notional amount		Pre-tax impact of a 1% movement in exchange rate
USD-Polish zloty	$	444 million	$	4.4 million gain/loss
USD-Russian ruble	$	264 million	$	2.6 million gain/loss
EUR-Polish zloty	€	430 million or approximately $557 million	$	5.6 million gain/loss