PHOSLOCK ENVIRONMENTAL TECHNOLOGIES LIMITED — Director's Dealing 2014

2 April, 2014

Stephanie Yong Senior Advisor ASX Compliance Pty Limited 20 Bridge Street NSW 2000

Dear Stephanie,

We respond to your letter dated 31 March, 2014 and questions relating to Phoslock Water Solution's ("PHK") and the Change of Director's Interest Notice (3Y) lodged on 12 February, 2014.

1. Please explain why the Appendix 3Y was lodged late?. The settlement date on the purchase of 38,500 PHK shares for $2,007.50 by Link Traders (Aust) Pty Ltd ("Link"), a company associated with PHK Chairman, Mr Laurence Freedman, was Friday 31 January, 2014.

The 3Y was sent by the accountant for Link to the PWS Company Secretary on the morning of Tuesday 12th February, 2014 – seven business days after the trade. The PHK Company Secretary lodged the 3Y in the afternoon of Tuesday 12th February, 2014.

Link advise that their accountant was on sick leave from late January 2014 until Tuesday 12th February, 2014 hence the delay in providing the 3Y.

2. What arrangements does the Company have in place with its directors to ensure that it is able to meet its disclosure obligations under listing rule 3.19B?

The Company is provided with either a copy of the contract note(s) or completed 3Y as soon as possible after a trade is executed or settled.

Mr Freedman has lodged via PHK, 35 (thirty five) 3Y Notices since he was appointed a Director of PHK on 26 October 2010. All of these were notified to PHK, and then lodged with the ASX within the 5 business day period.

On this occasion, the two business day delay in lodging the 3Y was due to the illness of the Link accountant.

3. If the current arrangements are inadequate or not being enforced, what additional steps does the Company intend to take to ensure compliance with listing rule 3.19B? The Company believes that its arrangements with its directors are satisfactory for notification of Change of Director's Interest Notice (3Y).

Regards,

Robert Schuitema Managing Director & Company Secretary Phoslock Water Solutions Limited

ASX Compliance Pty Limited ABN 26 087 780 489 20 Bridge Street Sydney NSW 2000 PO Box H224 Australia Square NSW 1215

Telephone 61 2 9227 0000 Facsimile 61 2 9241 7620 www.asx.com.au

31 March 2014

Robert Schuitema Company Secretary and Managing Director Phoslock Water Solutions Limited Suite 403, 25 Lime Street Sydney NSW 2000

By email

Dear Robert

Phoslock Water Solutions Limited (the "Company") Appendix 3Y – Change of Director's Interest Notice

We refer to the following:

• 1. The Appendix 3Y lodged by the Company with ASX Limited ("ASX") on 12 February 2014 for Mr Laurence Stephen Freedman (the "Appendix 3Y").
• 1. Listing rule 3.19A which requires an entity to tell ASX the following:
  • 3.19A.1 The notifiable interests of a director of the entity (or in the case of a trust, a director of the responsible entity of the trust) at the following times.
    • On the date that the entity is admitted to the official list.
    • On the date that a director is appointed.

The entity must complete Appendix 3X and give it to ASX no more than 5 business days after the entity's admission or a director's appointment.

• 3.19A.2 A change to a notifiable interest of a director of the entity (or in the case of a trust, a director of the responsible entity of the trust). The entity must complete Appendix 3Y and give it to ASX no more than 5 business days after the change occurs.
• 3.19A.3 The notifiable interests of a director of the entity (or in the case of a trust, a director of the responsible entity of the trust) at the date that the director ceases to be a director. The entity must complete Appendix 3Z and give it to ASX no more than 5 business days after the director ceases to be a director.
• 1. Listing rule 3.19B which states as follows:

An entity must make such arrangements as are necessary with a director of the entity (or in the case of a trust, a director of the responsible entity of the trust) to ensure that the director discloses to the entity all the information required by the entity to give ASX completed Appendices 3X, 3Y and 3Z within the time period allowed by listing rule 3.19.A. The entity must enforce the arrangements with the director.

1. The Companies Update dated 27 June 2008, reminding listed entities of their obligation to notify ASX within 5 business days of the notifiable interests in securities held by each director and outlining the action that ASX would take in relation to breaches of listings rules 3.19A and 3.19B.

The Appendix 3Y indicates that a change in Mr Freedman's notifiable interest occurred on 31 January 2014. It appears that the Appendix 3Y should have been lodged with ASX by 7 February 2014. Consequently, the Company may be in breach of listing rules 3.19A and/or 3.19B.

Please note that ASX is required to record details of breaches of the listing rules by listed companies for its reporting requirements.

ASX reminds the Company of its contract with ASX to comply with the listing rules. In the circumstances ASX considers that it is appropriate that the Company make necessary arrangements to ensure there is not a reoccurrence of a breach of the listing rules.

Having regard to listing rules 3.19A and 3.19B and Guidance Note 22: "Director Disclosure of Interests and Transactions in Securities - Obligations of Listed Entities", we ask that you answer each of the following questions:

• 1. Please explain why the Appendix 3Y was lodged late.
• 1. What arrangements does the Company have in place with its directors to ensure that it is able to meet its disclosure obligations under listing rule 3.19A?
• 3 If the current arrangements are inadequate or not being enforced, what additional steps does the Company intend to take to ensure compliance with listing rule 3.19B?

Your response should be sent to me by a return e-mail or by facsimile on facsimile number (02) 9241 7620. It should not be sent to the Company Announcements Office.

A response is requested as soon as possible and, in any event, no later than close of business (Sydney time) on Thursday, 3 April 2014.

Under listing rule 18.7A, a copy of this query and your response will be released to the market, so your response should be in a form suitable for release and should separately address each of the questions asked. If you have any queries or concerns, please contact me immediately.

Yours sincerely

[Sent electronically without signature]

Stephanie Yong Senior Adviser, Listings Compliance (Sydney)