Foreign exchange gain/loss, net

In 2011, a foreign exchange loss was recognised in the amount of $1 million as compared to a $10 million gain in 2010. In addition, we recognised a foreign exchange loss from exchange rate fluctuations in the amount of $54 million (net of income tax) in 2011 as compared to a $7 million loss (net of income tax) in 2010 in the statement of other comprehensive income. The amount in the statement of comprehensive income represents the effective portion of foreign exchange gains or losses on our hedging instruments. At the date of acquisition of controlling interests in NS Group, Inc. and IPSCO Tubulars, Inc. we hedged our net investment in these operations against foreign currency risk using U.S. dollar denominated borrowings made by Russian entities of TMK. Hedging is used to eliminate the foreign currency exchange rate risk associated with the repayment of these liabilities resulting from changes in the U.S. dollar/Russian rouble spot rates.

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