Ann: Xero prices zero coupon US$700m convertible notes, page-2

The purpose and benefit of these transactions for Xero and Xero’s shareholders are as follows:

● Restructures Xero’s existing convertible note liability and accesses new capital of US$700m on highly attractive terms, including a lower cash cost with a zero coupon comparing to existing 2023 notes of 2.375%

● Reduces the level of potential dilution of Xero’s existing shareholders from the 2023 notes and defers potential dilution from the Existing Notes to the new convertible notes’ maturity date of 2025

● Realises the fair value of the existing, in-the-money call spread arrangements entered into in 2018

● Reduces potential dilution of existing Xero shareholders due to the new convertible notes, by raising the effective conversion premium to 75% through entry into new call spread arrangements