XERO LIMITED — Capital/Financing Update 2016

Feb 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(

InformationordocumentsnotavailablenowmustbegiventoASXassoonasavailable.Information anddocumentsgiventoASXbecomeASX’spropertyandmaybemadepublic.

Introduced01/07/96Origin:Appendix5Amended01/07/98,01/09/99,01/07/00,30/09/01,11/03/02,01/01/03,24/10/05,01/08/12, 04/03/13*

Nameofentity*

XeroLimited

ABN*

160661183(ARBN)

We(theentity)giveASXthefollowinginformation.

Part(1(<(All(issues(

Youmustcompletetherelevantsections(attachsheetsifthereisnotenough*space).

1 +Class of+securities issued or tobeissued 2 Numberof+securitiesissuedor to be issued (if known) or maximum number which may beissued	OrdinaryShares
	2,109OrdinaryShares

3 Principal terms of the +securities (e.g. if options, exercise price and expiry dateX if partly paid +securities, the amount outstanding and due dates for paymentX 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 Purposeoftheissue (If issued as consideration for theacquisitionofassets,clearly identifythoseassets)	2,109fullypaidOrdinaryShareswereissuedto LeeHattonatanissuepriceequaltoNZ$16.59, being the 20 day volume weighted average marketpriceofXeroLimited’sOrdinaryShares ontheNZXMainBoardthroughto9February 2016
	Yes
	NZ$16.59perOrdinaryShare,beingthe20day volumeweightedaveragemarketpriceofXero Limited’s Ordinary Shares on the NZX Main Boardthroughto9February2016
	2,109 Ordinary Shares were issued to Lee Hatton,inlieuofcash,asremunerationforher role as a director of Xero Limited for the preceding sixamonth period, to a value of NZ$35,000 (Lee Hatton’s current total annual remunerationforherroleasadirectorofXero LimitedisNZ$70,000)

• See chapter 19 for defined terms.

Appendix 3B Page 2

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 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 nonacash 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	N/A
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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)	10February2016	10February2016	10February2016
	Number	+Class
	136,691,457	Ordinary
	Number	+Class
	769,611RSUs 816,688Options	RSUs (a conditional contractual right to be issued up to 769,611 OrdinaryShares) Unlisted Options (convertible into Ordinary Shares on a 1:1basis)

• 10 Dividendpolicy(inthecaseofa AsforallOrdinaryShares trust, distribution policy) on the increasedcapital(interests)*

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

Part2<Prorataissue
11 Is security holder approval required? 12 Is the issue renounceable or nonarenounceable? 13 Ratioinwhichthe+securitieswill beoffered 14 +Class of +securities to which theofferrelates 15 +Record date to determine entitlements	N/A
	N/A
	N/A
	N/A
	N/A

• See chapter 19 for defined terms.

Appendix 3B Page 4

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 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	N/A
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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)? 33 +Issuedate	N/A
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Part(3(<(Quotation(of(securities(

Youneedonlycompletethissectionifyouareapplyingforquotationofsecurities

• 34 Typeof[+] securities (tickone)

• (a) +SecuritiesdescribedinPart1*

• (b)[Allother][+][securities]

Example:restrictedsecuritiesattheendoftheescrowedperiod,partlypaidsecuritiesthatbecomefullypaid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertiblesecurities*

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

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

Ticktoindicateyouareprovidingtheinformationor* documents

35*

[Ifthe][+][securitiesare][+][equitysecurities,thenamesofthe20largestholdersof] the additional[+] securities, and the number and percentage of additional

• See chapter 19 for defined terms.

Appendix 3B Page 6

+securitiesheldbythoseholders*

• 36 +[Ifthe][+][securitiesare][+][equitysecurities,adistributionscheduleoftheadditional] securitiessettingoutthenumberofholdersinthecategories*

• 1a1,000*

1,001a5,000 5,001a10,000 10,001a100,000 100,001andover

• 37[Acopyofanytrustdeedfortheadditional][+][securities*]

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

38 Number of[+] securities for which +quotationissought 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

• • the extent to which they do notrankequally,otherthanin relation to the next dividend, distribution or interest payment*

• 41 Reasonforrequestforquotation now Example: In the case of restricted securities, endofrestrictionperiod*

(if issued upon conversion of another[+] security,clearlyidentify thatother[+] security)

Number +Class

42 Number and +class of all +securities quoted on ASX (including the +securities in clause38)*

• See chapter 19 for defined terms.

Appendix 3B Page 8

Quotation(agreement(

• 1 +Quotationofouradditional+securitiesisinASX’sabsolutediscretion.ASX mayquotethe[+] securitiesonanyconditionsitdecides.

• 2 WewarrantthefollowingtoASX.*

• Theissueofthe[+] securitiestobequotedcomplieswiththelawandis notforanillegalpurpose.*

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

• Anofferofthe[+] securitiesforsalewithin12monthsaftertheirissue willnotrequiredisclosureundersection707(3)orsection1012C(6) oftheCorporationsAct.*

Note:Anentitymayneedtoobtainappropriatewarrantiesfromsubscribersforthesecuritiesinordertobe abletogivethiswarranty*

• Section724orsection1016EoftheCorporationsActdoesnotapply toanyapplicationsreceivedbyusinrelationtoany[+] securitiestobe quotedandthatnoaonehasanyrighttoreturnany[+] securitiestobe quotedundersections737,738or1016FoftheCorporationsActat thetimethatwerequestthatthe[+] securitiesbequoted.

• Ifweareatrust,wewarrantthatnopersonhastherighttoreturnthe +securitiestobequotedundersection1019BoftheCorporationsAct atthetimethatwerequestthatthe[+] securitiesbequoted.

• 3 WewillindemnifyASXtothefullestextentpermittedbylawinrespectofany claim,actionorexpensearisingfromorconnectedwithanybreachofthe warrantiesinthisagreement.*

• 4 WegiveASXtheinformationanddocumentsrequiredbythisform.Ifany informationordocumentisnotavailablenow,wewillgiveittoASXbefore +quotationofthe+securitiesbegins.WeacknowledgethatASXisrelyingon theinformationanddocuments.Wewarrantthattheyare(willbe)trueand complete.*

==> picture [137 x 48] intentionally omitted <==

Signhere: ............................................................Date:10February2016 ( ~~Director/~~ Companysecretary) Printname: MattVaughan*

• See chapter 19 for defined terms.

Appendix 3B Page 9

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Appendix(3B(–(Annexure(1(

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

Introduced01/08/12Amended04/03/13*

Part(1(

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

• Step(1:(Calculate(“A”,(the(base(figure(from(which(the(placement( capacity(is(calculated( Insert numberoffullypaid[+] ordinary securitiesonissue12monthsbeforethe +issuedateordateofagreementtoissue Add thefollowing: • Numberoffullypaid[+] ordinarysecurities issuedinthat12monthperiodunderan exceptioninrule7.2*

• • Numberoffullypaid[+] ordinarysecurities issuedinthat12monthperiodwith shareholderapproval

• • Numberofpartlypaid[+] ordinary securitiesthatbecamefullypaidinthat 12monthperiod

• Note: • Includeonlyordinarysecuritieshere– otherclassesofequitysecuritiescannot beadded

• • Includehere(ifapplicable)thesecurities thesubjectoftheAppendix3Btowhich thisformisannexed*

• • Itmaybeusefultosetoutissuesof securitiesondifferentdatesasseparate lineitems

• Subtract thenumberoffullypaid[+] ordinary securitiescancelledduringthat12month period “A”(

• See chapter 19 for defined terms.

Appendix 3B Page 10

Step2:Calculate15%of“A”
“B”	0.15 [Note:thisvaluecannotbechanged]
Multiply“A”by0.15
Step3:Calculate“C”,theamountofplacementcapacityunderrule7.1 thathasalreadybeenused
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”]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 11

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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 securitiesondifferentdatesasseparate lineitems
“E”

• See chapter 19 for defined terms.

Appendix 3B Page 12

Step(4:(Subtract(“E”(from([“A”(x(“D”](to(calculate(remaining( placement(capacity(under(rule(7.1A( “A”x0.10 Note:numbermustbesameasshownin Step2 Subtract “E” Note:numbermustbesameasshownin Step3 Total [“A”x0.10]–“E” Note:thisistheremainingplacement capacityunderrule7.1A*

• See chapter 19 for defined terms.

Appendix 3B Page 13

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