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BUSINESS ENVIRONMENT AND OUTLOOK

Macroconomic factors affecting the Company’s financial performance for the 2011 under review include movements in crude oil prices, domestic inflation, and foreign exchange rates, particularly the tenge-US dollar rate.

Business Environment for 2011

The average Brent price in 2011 was US$111.26 per barrel; an increase of US$32.07 per barrel year on year. 

Q4 2011

Q3 2011

Q4 2010

Q4 on Q4 change

 

       2011

   2010

Change

(US$ /bbl)

%

(US$ /bbl)

%

109.36

113.41

86.46

26%

Brent (DTD)

111.26

79.18

41%

Most of the Company’s revenues, financial assets and borrowings are denominated in US dollars, while most of the Company’s operating expenses are denominated in tenge. Company manages currency risk by reducing or increasing the share of financial instruments denominated in US dollars in its portfolio.

Tenge-US dollar exchange rates and domestic inflation, as measured by the consumer price index («CPI») were as follows:

Q4 2011

       Q3 2011

Q4 2010

Q4 on Q4 change

 

       2011

   2010

Change

147.91

146.55

147.49

0%

Average US$ vs KZT

146.62

147.35

0%

1.2%

1.1%

2.6%

-54%

CPI

7.4%

7.8%

-5%

148.40

147.87

147.40

1%

US$ vs KZT

at balance sheet date

148.40

147.40

1%

Source: National Bank of Kazakhstan

The tenge appreciated against the US dollar from average 147.35 KZT/US$ in 2010 to 146.62 KZT/US$ in 2011. The inflation rate in 2011 was 7.4% compared to 7.8% in 2010.