Antaria : Chairman's Address to Shareholders

Name

Tuesday 7 June 2016

Chairman's Address to Shareholders

1. Alusion

2. As you know the Board has been in discussions with MERCK KGaA regarding the dramatic decline in MERCK orders over the past 12 to 18 months. The Board has sought to clarify potential order intake going forward to determine the financial viability of the Alusion facility, particularly given the lease for the premises which houses the Alusion facility expires in December 2016.

3. To that end, the Board has been in dialogue with MERCK with a view to reaching agreement for the continued manufacture of Alusion at volumes which allow the Alusion facility to become financially viable.

4. The Board is evaluating all alternatives in conjunction with MERCK and will update shareholders further as matters develop.

5. ZinClear

6. The European Union formally approved zinc oxide as an active ingredient for use as a UV filter in January 2016. This means zinc oxide, which previously had no "official" recognition, is a natural alternative to synthetic or chemical filters for suncare and cosmetic applications. Given Europe is the global cosmetics "capital", this development is of significant importance to our growth prospects in the European market.

7. In order to leverage the opportunities and address potential challenges presented by this regulatory change, we have:

8. Introduced a range of "all natural" white label suncare formulations which were showcased at In Cosmetics Paris 2016, the premier global cosmetics event. These formulations offer brand owners a "shelf ready" solution for brand owners wishing to offer their customers non-chemical UV filter suncare products. The response so far to the "white label" range has been quite encouraging.

9. Negotiated with our key distribution partners in Europe and the USA minimum purchase commitments for the period to December 2017.

10. Negotiated non-exclusive distributorships in regions where it is more attractive for us to have multiple distribution partners servicing the region.

    Antaria Limited ABN 54 079 845 855 Postal Address: PO Box 725, Welshpool, Western Australia 6986

    Production Facility: 112 Radium St, Welshpool, Western Australia 6106 tel [phone] fax [phone] www.antaria.com

11. Explored appointing external formulators in the various regions in which we market ZINCLEAR in order to better service and support our distribution partners and brand owners.

12. Given the expected growth in volumes resulting from the regulatory changes in Europe and in order to leverage the economies of scale presently enjoyed by our larger competitors, we are pressing ahead with the outsourcing of the manufacture of IM and XP powders and dispersions, in addition to our range of white label formulations. Discussions with potential outsourcing partners are currently in progress and the goal is to have outsourcing arrangements in place by December 2016. This timing coincides with the expiry of the lease of the ZINCLEAR manufacturing facilities in Welshpool.

13. As a consequence of the outsourcing program, we have been slowly reducing staff numbers at our Welshpool facilities. Once ZINCLEAR outsourcing is completed and, subject to the outcome of the MERCK negotiations, we expect ongoing staffing levels to be minimal as we refocus away from manufacturing towards IP development and commercialisation and the management of the distribution, marketing and sale of our range of UV filter powders and dispersions.

14. New Product Initiatives

15. The Board intends to continue to leverage the portfolio of patents which are owned by the company.

16. To that end, we are presently working with a number of Universities on the commercialisation of products which exploit our nano-technology capabilities.

17. These technologies involve applications which range from 3D printing to mitigating emissions from coal fired power stations.

18. ENDS

    Rade Dudurovic Chairman