Summary: Notice to Eligible Shareholders - Rights Issue

5 July 2017

Dear Shareholder

On 3 July 2017, Algae.Tec Limited (Company) announced that the Company would be conducting a pro-rata renounceable rights issue. The rights issue is being made pursuant to a prospectus which was lodged with the Australian Securities and Investments Commission and the ASX on 4 July 2017 (Prospectus). The Prospectus is available on the ASX website (company announcements section, ASX code: AEB) at www.asx.com.au and a copy will be posted to your registered address following the Record Date.

Pursuant to the Prospectus, the issue comprises up to 266,403,087 fully paid ordinary shares in the capital of the Company (Shares) on the basis of three (3) Share for every four (4) Shares held at 5.00pm (WST) on 7 July 2017 (Record Date) at an issue price of $0.03 per New Share (Entitlement), together with one (1) free attaching New Option for each two (2) New Shares subscribed for , each exercisable into one Share at $0.05 on or before 28 July 2020, to raise up to approximately $8.0 million (before issue costs) (Rights Issue).

The Company has applied for quotation of the New Shares and New Options but notes that the quotation of the New Options will be subject to satisfaction of the ASX Listing Rules requirements.

The Rights Issue is open to shareholders who hold Shares as at the Record Date with registered addresses in Australia and New Zealand (Eligible Shareholders). All other shareholders are not eligible to participate in the Rights Issue and will be notified by the company separately.

The Company invites Eligible Shareholders to consider the opportunity to apply for New Shares over and above their Entitlement (Additional New Shares), pursuant to the Prospectus.

Where fractions arise in the calculation of Entitlements, they will be rounded down to the nearest whole number of New Shares and New Options.

The New Shares will rank equally with the existing ordinary Shares from the date of issue.

Following completion of the Rights Issue (assuming that all Eligible Shareholders take up their Entitlements in full and no options are exercised prior to the Record Date), the Company will have issued up to 266,403,087 New Shares and up to 133,201,543 New Options, resulting in total Shares on issue of up to 621,870,782 and total listed options to acquire new Shares on issue of up to 133,201,543.

As an Eligible Shareholder, you may:-

1. Take up all or part of your Entitlement;

2. Take up all of your Entitlement and apply for Additional New Shares;

3. Sell all of your Entitlement;

4. Take up part of your Entitlement and sell the balance of your Entitlement;

5. Allow all or part of your Entitlement to lapse. No shareholder approval for the Rights Issue is required.

The indicative timetable for the Rights Issue (as approved by the ASX) is as follows:

The above timetable is indicative only and subject to change. The Company reserves the right to amend any or all of these events, dates and times subject to the Corporations Act 2001 (Cth), the ASX Listing Rules and other applicable laws. In particular, the Company reserves the right to extend the closing date of the Rights Issue, to accept late applications either generally or in particular cases or to withdraw the Rights Issue without prior notice. The commencement of quotation of New Shares and New Options is subject to approval from ASX.

Before making a decision whether to apply for New Shares or for Additional New Shares, please read the Prospectus carefully in its entirety when you receive it. The Rights Issue is scheduled to close at 5.00pm (WST) on 21 July 2017.

The Directors of the Company recommend that, if you are in doubt as to the value of the Rights Issue or the merits of accepting your Entitlement, you should contact your financial adviser. The Company's latest presentation is also available on its website.

Should you have any queries, please contact the Company Secretary on +61 08 9380 6790.