XERO LIMITED — Capital/Financing Update 2016

Mar 9, 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%U%All%issues%

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

1% +Class% of% +securities% issued% or% Ordinary%Shares% to%be%issued% 2% Number%of%[+] securities%issued%or% 55,000% to% be% issued% (if% known)% or% maximum% number% which% may% be%issued% 3% Principal% terms% of% the% Ordinary% Shares% issued% upon% exercise% of% +securities% (e.g.% if% options,% vested% options% under% the% Xero% Limited% exercise% price% and% expiry% dateZ% (USA)% Equity% Incentive% SchemeZ% the% if% partly% paid%[+] securities,% the% exercise% price% for% the% exercise% of% the% amount% outstanding% and% due% options%was%NZ$2.75%per%option%% dates% for% paymentZ% if% +convertible% securities,% the% conversion% price% and% dates% for% conversion)%

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 that has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6hinrelationtothe +securities thesubjectofthisAppendix3B, andcomplywithsection6i 6b The date the security holder resolution under rule 7.1A was passed 6c Number of +securities issued withoutsecurityholderapproval underrule7.1 6d Number of +securities issued with security holder approval underrule7.1A	Yes
	Ordinary Shares issued upon exercise of optionsZtheexercisepricefortheexercise oftheoptionswasNZ$2.75peroption
	Issue of Ordinary Shares on exercise of vested options that have been granted under the Xero Limited (USA) Equity Incentive Scheme as part of the remuneration package of a US based employee
	N/A
	N/A
	N/A
	N/A

• See chapter 19 for defined terms.

Appendix 3B Page 2

6e Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 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? Include the +issue date and bothvalues.Includethesource oftheVWAPcalculation. 6h If+securitieswereissuedunder rule 7.1A for nonUcash 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 (refer to the definition of issue date in rule19.12).Forexample,theissuedatefor aprorataentitlementissuemustcomplywith theapplicabletimetableinAppendix7A. Crossreference:item33ofAppendix3B. 8 Number and +class of all +securities quoted on ASX (including the +securities in section2ifapplicable) 9 Number and +class of all +securities not quoted on ASX (including the +securities in section2ifapplicable)	N/A	N/A
	N/A
	N/A
	N/A
	N/A
	10March2016
	Number	+Class
	136,753,577	Ordinary
	Number	+Class
	(a)820,546	Options (convertible intoOrdinaryShares on a 1:1 basis) (taking into account the exercise of 55,000 options as set out in this Appendix3B)

(b)766,954	Conditional contractual right to be issued up to 766,954 Ordinary Shares (taking into account all forfeited RSUstodate)

• 10% Dividend%policy%(in%the%case%of%a% As%for%all%Ordinary%Shares% trust,% distribution% policy)% on% the% increased%capital%(interests)%

Part%2%U%Pro%rata%issue%

Part2UProrataissue
11 Is security holder approval required? 12 Is the issue renounceable or nonUrenounceable? 13 Ratioinwhichthe+securitieswill beoffered 14 +Class of +securities to which theofferrelates 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. 19 Closing date for receipt of acceptancesorrenunciations	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A

• See chapter 19 for defined terms.

Appendix 3B Page 4

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 Date entitlement and acceptance form and offer documents will be sent to personsentitled 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 How do security holders sell their entitlements in full through abroker? 31 Howdosecurityholderssellpart of their entitlements through a broker and accept for the balance? 32 Howdosecurityholdersdispose of their entitlements (except by salethroughabroker)?	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

33% +Issue%date%

N/A%

Part%3%U%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%are%][+][equity%securities,%a%distribution%schedule%of%the%additional%] securities%setting%out%the%number%of%holders%in%the%categories% 1%U%1,000%

1,001%U%5,000% 5,001%U%10,000% 10,001%U%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%

39% +Class% of% +securities% for% which% quotation%is%sought%

• See chapter 19 for defined terms.

Appendix 3B Page 6

• 40% Do%the%[+] securities%rank%equally%in% all%respects%from%the%[+] issue%date% with%an%existing%[+] class%of%quoted% +securities?% If%the%additional%[+] securities%do%not% rank%equally,%please%state:% • the%date%from%which%they%do% • the% extent% to% which% they% participate% for% the% next% dividend,% (in% the% case% of% a% trust,% distribution)% or% interest% payment%

• • the% extent% to% which% they% do% not%rank%equally,%other%than%in% relation% to% the% next% dividend,% distribution% or% interest% payment%

41% Reason%for%request%for%quotation% now%%

Example:% In% the% case% of% restricted% securities,% end%of%restriction%period%

(if% issued% upon% conversion% of% another%[+] security,%clearly%identify% that%other%[+] security)%

Number% +Class 42% Number% and% +class% of% all% +securities% quoted% on% ASX% (including% the% +securities% in% clause%38)%%

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%noUone%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:%10%March%2016% ( ~~Director/~~ Company%secretary)%

Print%name:%% Matt%Vaughan%

• See chapter 19 for defined terms.

Appendix 3B Page 8

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%

Rule%7.1%–%Issues%exceeding%15%%of%capital%

Step%1:%Calculate%“A”,%the%base%figure%from%which%the%placement%capacity%is% calculated%

==> picture [415 x 396] intentionally omitted <==

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

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

Step2:Calculate15%of“A”
“B”	0.15 [Note:thisvaluecannotbechanged]
Multiply“A”by0.15
Step3:Calculate“C”,theamountofplacementcapacityunderrule7.1that hasalreadybeenused
Insertnumberof+equitysecuritiesissued oragreedtobeissuedinthat12month periodnotcountingthoseissued: • Underanexceptioninrule7.2 • Underrule7.1A • Withsecurityholderapprovalunderrule 7.1orrule7.4 Note: • Thisappliestoequitysecurities,unless specificallyexcluded–notjustordinary securities • Includehere(ifapplicable)thesecurities thesubjectoftheAppendix3Btowhich thisformisannexed • Itmaybeusefultosetoutissuesof securitiesondifferentdatesasseparate lineitems
“C”
Step4:Subtract“C”from[“A”x“B”]tocalculateremainingplacement capacityunderrule7.1
“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

Part%2%

Rule%7.1A%–%Additional%placement%capacity%for%eligible%entities% Step%1:%Calculate%“A”,%the%base%figure%from%which%the%placement%capacity%is% calculated%

Part2	Part2
Rule7.1A–Additionalplacementcapacityforeligibleentities
Step1:Calculate“A”,thebasefigurefromwhichtheplacementcapacityis calculated
“A” Note:numbermustbesameasshownin Step1ofPart1
Step2:Calculate10%of“A”
“D”	0.10 Note:thisvaluecannotbechanged
Multiply“A”by0.10
Step3:Calculate“E”,theamountofplacementcapacityunderrule7.1A thathasalreadybeenused
Insertnumberof+equitysecuritiesissued oragreedtobeissuedinthat12month periodunderrule7.1A Notes: • Thisappliestoequitysecurities–not justordinarysecurities • Includehere–ifapplicable–the securitiesthesubjectoftheAppendix 3Btowhichthisformisannexed • Donotincludeequitysecuritiesissued underrule7.1(theymustbedealtwith inPart1),orforwhichspecificsecurity holderapprovalhasbeenobtained • Itmaybeusefultosetoutissuesof securitiesondifferentdatesasseparate lineitems
“E”

• See chapter 19 for defined terms.

Appendix 3B Page 11

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