XERO LIMITED — Capital/Financing Update 2016

Apr 3, 2016

Rule%2.7,%3.10.3,%3.10.4,%3.10.5

Appendix(3B(

New(issue(announcement,( application(for(quotation(of(additional(securities( and(agreement(

Information%or%documents%not%available%now%must%be%given%to%ASX%as%soon%as%available.%%Information% and%documents%given%to%ASX%become%ASX’s%property%and%may%be%made%public.%

Introduced!01/07/96!!Origin:!Appendix!5!!Amended!01/07/98,!01/09/99,!01/07/00,!30/09/01,!11/03/02,!01/01/03,!24/10/05,!01/08/12,! 04/03/13!

Name!of!entity!

Xero!Limited!

ABN!

160!661!183!(ARBN)!

We!(the!entity)!give!ASX!the!following!information.!

Part(1(<(All(issues(

You%must%complete%the%relevant%sections%(attach%sheets%if%there%is%not%enough%space).

1 +Classof+securitiesissuedorto beissued 2 Numberof+securitiesissuedor to be issued (if known) or maximumnumberwhichmaybe issued 3 Principaltermsofthe+securities (e.g. if options, exercise price and expiry dateV if partly paid +securities, the amount outstanding and due dates for paymentV if +convertible securities, the conversion price anddatesforconversion)	OrdinaryShares
	118,480OrdinaryShares
	118,480 Ordinary Shares were issued upon vesting of 191,805 Restricted Stock Units (Restricted Stock Units or RSUs) granted undertheXeroLimited(USA)EquityIncentive Scheme (US Scheme) as part of the remunerationpackageofUSbasedemployees. TheRSUsvestedsubjecttothetermsoftheUS Scheme,includingthecontinuedemploymentof the relevant employees with the Xero Limited Groupontherelevantvestingdate

4 Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted+securities? If the additional +securities do notrankequally,pleasestate: • thedatefromwhichtheydo • the extent to which they participate for the next dividend, (in the case of a trust,distribution)orinterest payment • the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interestpayment 5 Issuepriceorconsideration 6 Purposeoftheissue (If issued as consideration for theacquisitionofassets,clearly identifythoseassets) 6a Is the entity an +eligible entity thathasobtainedsecurityholder approvalunderrule7.1A? If Yes, complete sections 6b – 6h_inrelationtothe +securities_ thesubjectofthisAppendix3B, andcomplywithsection6i 6b The date the security holder resolution under rule 7.1A was passed 6c Number of +securities issued withoutsecurityholderapproval underrule7.1	Yes
	118,480 Ordinary Shares were issued upon vestingof191,805RSUsgrantedundertheUS Schemeaspartoftheremunerationpackageof US based employees. 73,325 RSUs granted under the US Scheme were cancelled in connectionwithincometaxwithholdingforUS basedemployeesuponvestingofthoseRSUs. Nocashconsiderationwasrequiredtobepaid fortheRSUstovest
	118,480 Ordinary Shares were issued upon vestingof191,805RSUsgrantedundertheUS Schemeaspartoftheremunerationpackageof USbasedemployees
	N/A
	N/A
	N/A

• See chapter 19 for defined terms.

Appendix 3B Page 2

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6d Number of +securities issued with security holder approval underrule7.1A 6e Number of +securities issued with security holder approval under rule 7.3, or another specificsecurityholderapproval (specifydateofmeeting) 6f Number of +securities issued underanexceptioninrule7.2 6g If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Includethe+issuedateandboth values. Include the source of theVWAPcalculation. 6h If+securitieswereissuedunder rule 7.1A for nonccash consideration, state date on whichvaluationofconsideration was released to ASX Market Announcements 6i Calculatetheentity’sremaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure1andreleasetoASX MarketAnnouncements 7 +Issuedates Note: The issue date may be prescribed by ASX(refertothedefinitionofissuedateinrule 19.12).Forexample,theissuedateforapro rata entitlement issue must comply with the applicabletimetableinAppendix7A. Crossreference:item33ofAppendix3B. 8 Number and +class of all +securities quoted on ASX (including the +securities in section2ifapplicable)	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	1April2016
	Number	+Class
	136,932,773	Ordinary
	Number	+Class

9 Number and +class of all +securities not quoted on ASX (including the +securities in section2ifapplicable) 10 Dividendpolicy(inthecaseofa trust, distribution policy) on the increasedcapital(interests)	513,600RSUs	RSUs (a conditional contractual right to be issued up to 513,600 Ordinary Shares) – takingintoaccountthe RSUsthathavevested as set out in this Appendix3B
	820,546Options	Unlisted options (convertible into Ordinary Shares on a 1:1basis)
	AsforallOrdinaryShares

Part(2(<(Pro(rata(issue(

11 Is security holder approval required? 12 Istheissuerenounceableornonc renounceable? 13 Ratioinwhichthe+securitieswill beoffered 14 +Classof+securitiestowhichthe offerrelates 15 +Record date to determine entitlements 16 Will holdings on different registers (or subregisters) be aggregated for calculating entitlements? 17 Policy for deciding entitlements inrelationtofractions 18 Namesofcountriesinwhichthe entity has security holders who will not be sent new offer documents Note:Securityholdersmustbetoldhowtheir entitlementsaretobedealtwith. Crossreference:rule7.7.	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A

• See chapter 19 for defined terms.

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19 Closing date for receipt of acceptancesorrenunciations 20 Namesofanyunderwriters 21 Amount of any underwriting fee orcommission 22 Names of any brokers to the issue 23 Fee or commission payable to thebrokertotheissue 24 Amount of any handling fee payable to brokers who lodge acceptancesorrenunciationson behalfofsecurityholders 25 If the issue is contingent on security holders’ approval, the dateofthemeeting 26 Dateentitlementandacceptance formandofferdocumentswillbe senttopersonsentitled 27 If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders 28 Date rights trading will begin (if applicable) 29 Date rights trading will end (if applicable) 30 Howdosecurityholdersselltheir entitlements in full through a broker? 31 Howdosecurityholderssell_part_ of their entitlements through a broker and accept for the balance?	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A

• 32! How!do!security!holders!dispose! of! their! entitlements! (except! by! sale!through!a!broker)?!

N/A!

• 33! +Issue!date!

N/A!

Part(3(<(Quotation(of(securities(

You%need%only%complete%this%section%if%you%are%applying%for%quotation%of%securities%

• 34! Type!of![+] securities! ( tick%one )!

• (a)! +Securities!described!in!Part!1!

• (b)![All!other!][+][securities!]

Example:!restricted!securities!at!the!end!of!the!escrowed!period,!partly!paid!securities!that!become!fully!paid,! employee!incentive!share!securities!when!restriction!ends,!securities!issued!on!expiry!or!conversion!of!convertible! securities!

Entities(that(have(ticked(box(34(a)(

Additional(securities(forming(a(new(class(of(securities(

Tick%to%indicate%you%are%providing%the%information%or% documents

• 35![If!the!][+][securities!are!][+][equity!securities,!the!names!of!the!20!largest!holders!of!] the! additional![+] securities,! and! the! number! and! percentage! of! additional! +securities!held!by!those!holders!

• 36![If!the!] +securities!setting!out!the!number!of!holders!in!the!categories![+][securities!are!][+][equity!securities,!a!distribution!schedule!of!the!additional!] 1!c!1,000!

• 1,001!c!5,000!

• 5,001!c!10,000!

10,001!c!100,000!

100,001!and!over!

• 37!

• [A!copy!of!any!trust!deed!for!the!additional!][+][securities!]

Entities(that(have(ticked(box(34(b)(

38! Number! of![+] securities! for! which! +quotation!is!sought!

• See chapter 19 for defined terms.

Appendix 3B Page 6

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39 +Class of +securities for which quotationissought 40 Dothe+securitiesrankequallyin allrespectsfromthe +issuedate withanexisting +classofquoted +securities? Iftheadditional+securitiesdonot rankequally,pleasestate: • thedatefromwhichtheydo • the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment • theextenttowhichtheydonot rank equally, other than in relation to the next dividend, distribution or interest payment 41 Reasonforrequestforquotation now Example:Inthecaseofrestrictedsecurities,end ofrestrictionperiod (if issued upon conversion of another +security,clearlyidentify thatother+security) 42 Number and +class of all +securities quoted on ASX (_including_the+securitiesinclause 38)
	Number	+Class

Quotation(agreement(

• 1! +Quotation!of!our!additional!+securities!is!in!ASX’s!absolute!discretion.!!ASX! may!quote!the![+] securities!on!any!conditions!it!decides.!!!

• 2! We!warrant!the!following!to!ASX.!

• The!issue!of!the![+] securities!to!be!quoted!complies!with!the!law!and!is! not!for!an!illegal!purpose.!

• There! is! no! reason! why! those![+] securities! should! not! be! granted! +quotation.!

• An!offer!of!the![+] securities!for!sale!within!12!months!after!their!issue! will!not!require!disclosure!under!section!707(3)!or!section!1012C(6)!of! the!Corporations!Act.!

  • Note:!An!entity!may!need!to!obtain!appropriate!warranties!from!subscribers!for!the!securities!in!order!to!be! able!to!give!this!warranty!

• Section!724!or!section!1016E!of!the!Corporations!Act!does!not!apply! to!any!applications!received!by!us!in!relation!to!any![+] securities!to!be! quoted!and!that!nocone!has!any!right!to!return!any![+] securities!to!be! quoted!under!sections!737,!738!or!1016F!of!the!Corporations!Act!at! the!time!that!we!request!that!the![+] securities!be!quoted.!

• If!we!are!a!trust,!we!warrant!that!no!person!has!the!right!to!return!the! +securities!to!be!quoted!under!section!1019B!of!the!Corporations!Act! at!the!time!that!we!request!that!the![+] securities!be!quoted.!

• 3! We!will!indemnify!ASX!to!the!fullest!extent!permitted!by!law!in!respect!of!any! claim,!action!or!expense!arising!from!or!connected!with!any!breach!of!the! warranties!in!this!agreement.!

• 4! We!give!ASX!the!information!and!documents!required!by!this!form.!!If!any! information!or!document!is!not!available!now,!we!will!give!it!to!ASX!before! +quotation!of!the!+securities!begins.!!We!acknowledge!that!ASX!is!relying!on! the!information!and!documents.!!We!warrant!that!they!are!(will!be)!true!and! complete.!

Sign!here:!! ............................................................!Date:!4!April!2016! ( ~~Director/~~ Company!secretary)! Print!name:!! Matt!Vaughan!

• See chapter 19 for defined terms.

Appendix 3B Page 8

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Appendix(3B(–(Annexure(1(

Calculation(of(placement(capacity(under(rule(7.1(and( rule(7.1A(for(eligible(entities(

Introduced!01/08/12!!Amended!04/03/13!

Part(1(

==> picture [404 x 438] intentionally omitted <==

----- Start of picture text -----

Rule(7.1(–(Issues(exceeding(15%(of(capital(
Step!1:!Calculate!“A”,!the!base!figure!from!which!the!placement!
capacity!is!calculated!
Insert !number!of!fully!paid! [+] ordinary!
securities!on!issue!12!months!before!the!
+issue!date!or!date!of!agreement!to!issue!
Add !the!following:!
•! Number!of!fully!paid! [+] ordinary!
securities!issued!in!that!12!month!
period!under!an!exception!in!rule!7.2!
•! Number!of!fully!paid! [+] ordinary!
securities!issued!in!that!12!month!
period!with!shareholder!approval!
•! Number!of!partly!paid! [+] ordinary!
securities!that!became!fully!paid!in!that!
12!month!period!
Note:%
•% Include%only%ordinary%securities%here%–%
other%classes%of%equity%securities%
cannot%be%added%
•% Include%here%(if%applicable)%the%
securities%the%subject%of%the%Appendix%
3B%to%which%this%form%is%annexed%
•% It%may%be%useful%to%set%out%issues%of%
securities%on%different%dates%as%
separate%line%items
Subtract !the!number!of!fully!paid!
+ordinary!securities!cancelled!during!that!
12!month!period!
“A”(
----- End of picture text -----

• See chapter 19 for defined terms.

Appendix 3B Page 9

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Step!2:!Calculate!15%!of!“A”!

Step2:Calculate15%of“A”	Step2:Calculate15%of“A”
“B”	0.15 [Note:thisvaluecannotbechanged]
Multiply“A”by0.15
Step3:Calculate“C”,theamountofplacementcapacityunderrule 7.1thathasalreadybeenused
Insertnumberof+equitysecuritiesissued oragreedtobeissuedinthat12month period_notcounting_thoseissued: • Underanexceptioninrule7.2 • Underrule7.1A • Withsecurityholderapprovalunder rule7.1orrule7.4 Note: • Thisappliestoequitysecurities,unless specificallyexcluded–notjustordinary securities • Includehere(ifapplicable)the securitiesthesubjectoftheAppendix 3Btowhichthisformisannexed • Itmaybeusefultosetoutissuesof securitiesondifferentdatesas separatelineitems
“C”
Step4:Subtract“C”from[“A”x“B”]tocalculateremaining placementcapacityunderrule7.1
“A”x0.15 Note:numbermustbesameasshownin Step2
Subtract“C” Note:numbermustbesameasshownin Step3
Total[“A”x0.15]–“C”	[Note:thisistheremainingplacement capacityunderrule7.1]

• See chapter 19 for defined terms.

Appendix 3B Page 10

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Part(2(

Part2	Part2
Rule7.1A–Additionalplacementcapacityforeligibleentities
Step1:Calculate“A”,thebasefigurefromwhichtheplacement capacityiscalculated
“A” Note:numbermustbesameasshownin Step1ofPart1
Step2:Calculate10%of“A”
“D”	0.10 Note:thisvaluecannotbechanged
Multiply“A”by0.10
Step3:Calculate“E”,theamountofplacementcapacityunderrule 7.1Athathasalreadybeenused
Insertnumberof+equitysecuritiesissued oragreedtobeissuedinthat12month periodunderrule7.1A Notes: • Thisappliestoequitysecurities–not justordinarysecurities • Includehere–ifapplicable–the securitiesthesubjectoftheAppendix 3Btowhichthisformisannexed • Donotincludeequitysecuritiesissued underrule7.1(theymustbedealtwith inPart1),orforwhichspecificsecurity holderapprovalhasbeenobtained • Itmaybeusefultosetoutissuesof securitiesondifferentdatesas separatelineitems
“E”

• See chapter 19 for defined terms.

Appendix 3B Page 11

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Step!4:!Subtract!“E”!from![“A”!x!“D”]!to!calculate!remaining! placement!capacity!under!rule!7.1A! “A”!x!0.10! Note:%number%must%be%same%as%shown%in% Step%2% Subtract !“E”! Note:%number%must%be%same%as%shown%in% Step%3% Total ![“A”!x!0.10]!–!“E”! Note:%this%is%the%remaining%placement% capacity%under%rule%7.1A%

• See chapter 19 for defined terms.

Appendix 3B Page 12

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