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9 <strong>Vesuvius</strong> may suffer losses if a counterparty were to fail to perform as contracted or if a material<br />
customer failed to renew a contract on expiry of the contracted term<br />
<strong>Vesuvius</strong> transacts business with and through a number of counterparties, including customers, suppliers<br />
and insurers. The financial failure of one or more of <strong>Vesuvius</strong>’ key customers and suppliers may result in<br />
financial loss, loss of future business and a shortage of raw material supplies. In managing the risks<br />
inherent in its operations, <strong>Vesuvius</strong> transfers risk to insurers where cost effective and, accordingly, the<br />
financial failure of one or more insurers used by <strong>Vesuvius</strong> may result in a financial loss to <strong>Vesuvius</strong>. Any<br />
default by a material customer, supplier or insurer may have a material adverse effect on <strong>Vesuvius</strong>’ future<br />
prospects, results of operations and financial condition. <strong>Vesuvius</strong> enters into contracts of various duration<br />
with its customers. The failure by a material customer to renew a contract on expiry of the contracted term<br />
may have a material adverse effect on <strong>Vesuvius</strong>’ future prospects, results of operations and financial<br />
condition.<br />
10 Future expenditure on compliance with environmental and health and safety laws and regulations may<br />
materially adversely affect <strong>Vesuvius</strong>’ future prospects, financial position and results of operations<br />
<strong>Vesuvius</strong> is subject to applicable laws and regulations in all of the jurisdictions in which it operates,<br />
including those relating to pollution, the protection of the environment, human health and safety, the<br />
manufacture of chemicals, the disposal of hazardous substances and waste materials and remediation of<br />
any land or water contaminated by such substances. Violations of legal or other regulatory requirements<br />
could result in restrictions on operations, the imposition of more stringent permitting conditions, damages,<br />
fines or other sanctions, all of which may have a material adverse effect on <strong>Vesuvius</strong>’ future prospects,<br />
financial position and results of operations. While the <strong>Vesuvius</strong> Board believes that the current and<br />
expected expenditures and risks connected with these and potential future liabilities are unlikely to impair<br />
<strong>Vesuvius</strong>’ financial position materially, there can be no assurance that the costs related to such liabilities<br />
will not exceed current or future financial and insurance provisions which may result in a material adverse<br />
effect on <strong>Vesuvius</strong>’ future prospects, financial position and results of operations.<br />
11 The loss of key personnel or the failure to attract, develop or retain skilled or qualified employees could<br />
negatively impact <strong>Vesuvius</strong>’ business<br />
<strong>Vesuvius</strong> depends on the capabilities and performance of its executive officers and employees. The failure<br />
to attract or retain qualified employees could impact <strong>Vesuvius</strong>’ business and have a material adverse effect<br />
on its financial condition and operating results. Further, the loss of key personnel, particularly where any<br />
such personnel join an existing or newly established competitor of <strong>Vesuvius</strong>, may negatively impact<br />
<strong>Vesuvius</strong>’ business.<br />
12 <strong>Vesuvius</strong> may be adversely affected by changes to tax legislation or its interpretation or increases in<br />
effective tax rates in the jurisdictions in which <strong>Vesuvius</strong> operates<br />
<strong>Vesuvius</strong> operates in multiple jurisdictions and its profits are taxed according to the tax laws of such<br />
jurisdictions. <strong>Vesuvius</strong>’ effective tax rate may be affected by changes in, or interpretations of, tax laws in<br />
any given jurisdiction, including those relating to the utilisation of tax credit carry forwards, changes in<br />
geographical allocation of income and expense, and changes in the Board’s assessment of matters such as<br />
the ability to realise deferred tax assets. <strong>Vesuvius</strong>’ effective income tax rates in a given financial year<br />
reflect a variety of factors that may not be present in the succeeding financial year or years.<br />
13 The funding level of <strong>Vesuvius</strong>’ pension plans may be detrimentally affected by adverse changes in the<br />
actuarial assumptions underlying the plan liabilities and/or a decline in the market value of plan<br />
investments<br />
<strong>Vesuvius</strong> operates defined benefit pension plans worldwide, but principally in the UK and the US, the total<br />
worldwide valuation of which resulted in a net deficit, calculated on an IAS 19 basis, of £54.7 million as at<br />
30 June 2012. <strong>Vesuvius</strong> also operates defined contribution pension schemes for its current and former UK,<br />
US and overseas employees. The funding position of the defined benefit pension plans will fluctuate<br />
depending on market conditions, investment performance, changes to actuarial funding assumptions,<br />
changes in the rate of inflation and interest rates and <strong>Vesuvius</strong>’ financial position.<br />
<strong>Vesuvius</strong>’ largest defined benefit pension plans are in the UK and the US, each of which is closed to new<br />
members and closed to further benefit accrual for existing members. <strong>Vesuvius</strong>’ most significant UK<br />
pension plan is the Cookson Group Pension Plan (the “UK Plan”). Following the Demerger, the UK Plan<br />
16