KMG-Bernuth, Inc., a subsidiary of KMG Chemicals, Inc. (NYSE:KMG), is disappointed that the Persistent Organic Pollutants Review Committee of the Stockholm Convention at its Ninth Meeting in Rome last week recommended that pentachlorophenol (penta) move to the next stage of the Persistent Organic Pollutant (POP) listing process. POPs are products that are persistent, bio-accumulative and toxic, and that have the potential to transport to remote regions such as the Arctic. In deciding to continue the POPs listing process for penta, the committee acknowledged that penta itself does not meet all of the POP screening criteria, yet the committee pursued the listing process anyway based on pentachloroanisole (PCA), a transformation product of penta and other chemicals. KMG believes this was an error in judgment, because the available scientific data is insufficient to conclude that PCA meets the listing requirements, and because penta is only a limited source for PCA. In this next stage of the POPs listing process, the committee must conduct a risk management evaluation that considers possible control measures for penta in light of factors such as the limited nature of the current uses, alternative products and processes, and impacts from any national and regional control actions already taken. In 2008, the United States and Canada undertook a similar risk management evaluation for penta, and each country concluded that, with enhanced control measures applicable to the product, penta’s long-established use in pressure treating utility poles and cross-arms could continue. As the POPs listing process continues over the next year or more, KMG believes the POPs Review Committee will realize ultimately that the current uses and regulatory practices in place in the United States and Canada are sufficiently protective to allow the continued use of penta in these countries. KMG will remain actively engaged in the POPs listing process. There is every reason to believe that the existing use of penta on utility poles and cross-arms will be allowed to continue as Canada, a Party to the Stockholm Convention, has recently favorably reevaluated the use of penta on poles and cross arms. Because the United States has not ratified the Stockholm Convention, these developments have no direct, immediate regulatory impact on KMG.