International expansion and capital raising 23 AUGUST 2018 NOT FOR - - PowerPoint PPT Presentation

International expansion and capital raising

23 AUGUST 2018 NOT FOR RELEASE TO U.S. WIRE SERVICES OR DISTRIBUTION IN THE UNITED STATES

• f 90% of the issued share capital of ClearPay Finance

• r warranty, expressed or implied, is made to its fairness,

• r studies conducted by third parties, including industry or

• r any other law (and will not be lodged with the Australian

• f the Corporations Act and will be made available to

• f matters, including legal requirements and the discretion
• f the Company and the Lead Manager. To the maximum

• r distributed in the United States. This Presentation does not

• States. Accordingly, the New Shares may not be ofgered or

• ther applicable state securities laws.

• utside Australia may also be restricted by law and any such

• f this Presentation). By accepting this Presentation you

• bjectives, fjnancial situation or needs of individual investors.

• f, or guidance or outlook on, future earnings or fjnancial

• f subjective judgement and assumptions as to future events

• r performance to difger materially from the forward

• Presentation. Refer to the risks section of this Presentation

• statements. The forward looking statements are based
• n information available to the Company as at the date
• f this Presentation. To the maximum extent permitted by

• r undertaking to release any updates or revisions to

• therwise. Indications of, and guidance or outlook on, future

• treatment. In considering an investment in the Company's

• Placement. The Lead Manager has not authorised, permitted
• r caused the issue or lodgement, submission, dispatch or

• ffjcers, employees and advisers expressly disclaim all liabilities

• r completeness of this Presentation, nor do they make any

EXECUTIVE SUMMARY 4 INTERNATIONAL EXPANSION AND ENTRY INTO THE U.K. 6 CAPITAL RAISING 11 APPENDIX A: ACQUISITION DETAILS 15 APPENDIX B: KEY RISKS 17 APPENDIX C: INTERNATIONAL SELLING RESTRICTIONS 24

AGENDA

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

RETAILER LED INTERNATIONAL EXPANSION AFTERPAY IS BUILDING THE BASE FOR GROWTH

Momentum building in the U.S. – establishing a presence with retail industry leading brands In line with its retailer-led strategy, Afterpay has determined that the U.K. represents the next logical step for international expansion Afterpay will prepare to launch its globally scalable system into the U.K. within the next 6 months and will immediately engage with relevant retailers with a local U.K. presence

Afterpay’s Australian operations are expected to generate material underlying

• perating cash fmow in FY2019

Afterpay’s international growth is expected to require incremental capital Afterpay is undertaking a fully underwritten Institutional Placement (the Placement) to raise at least $108.1m Proceeds will provide scope for near- term, accelerated global expansion and in due course, cornerstone international receivables funding debt facilities

INTERNATIONAL EXPANSION AND ENTRY INTO THE U.K.

As part of the execution plan for the U.S. business, we purposely built infrastructure for global scalability. Technology is based on a single core code base (vs multiple code bases by region) and can be deployed in individual instances by region, tailored to local requirements. The strategic rationale for entering the U.S. in partnership with Matrix was to establish the foundation for a world class team with global responsibility. Key hires made in the U.S. include Sales, Risk, Data & Analytics, Technology and Product personnel with a combined headcount in excess of 30. Each part of the Afterpay business has been assessed individually and also strategically guided to global responsibilities. Afterpay’s existing partnerships with many global retailers provide the framework to leverage and grow internationally.

BUILDING GLOBAL CAPABILITY

Over 800 contracts signed and over 400 merchants live

AS OF MID-AUGUST 2018

Over 150,000 unique customers since launch

Establishing a presence with retail industry leading brands integrated retail merchants underlying merchant sales

28 282 20.4 121 11.7 422

MOMENTUM BUILDING IN THE U.S.

MILLENNIALS don't favour TRADITIONAL RETAIL CREDIT

Current credit options have a low uptake and are underutilised.

ARE USING CURRENT CREDIT OPTIONS6 USE DEBIT CARDS FOR ONLINE PAYMENTS6

third largest e-commerce market in the world

(after china and the U.S.1)

77% 3%

With 66 million people and more than £133b in online retail sales per annum2

OF CONSUMERS SHOP ONLINE3 SIZE OF AUSTRALIA

87

2.6

% x

THE U.K. IS A LARGE ADDRESSABLE MARKET, WITH POSITIVE UNDERLYING DRIVERS

AFTERPAY TO ACQUIRE CLEARPAY STRATEGIC RATIONALE FINANCIAL IMPACT

Afterpay has entered into a Share Purchase Agreement with ThinkSmart to acquire 90%

• f ClearPay Finance Limited (ClearPay), for

1m Afterpay shares, with the acquisition to be completed today Acquiring the ClearPay corporate entity, ClearPay's contracts with relevant service providers and key employees with local knowledge of the U.K. market and regulatory

• landscape. ClearPay’s intellectual property will

not form part of the acquisition ClearPay management have been operating in the payments space in the UK for more than 15

• years. ClearPay understands local regulatory

conditions, which is important in the early stages of a roll-out As one of the world’s largest consumer retail markets, the U.K. ofgers a signifjcant market opportunity Market dynamics are assessed to be favourable, particularly in relation to millennial demographic payment behaviours and preferences Synergy with a number of Afterpay established retailer relationships in Australia, New Zealand and the U.S. that have global operations and a presence in the U.K. ClearPay provides an established operational footprint in the U.K., with local relationships and understanding of local regulatory conditions The acquisition will accelerate the planned launch of the Afterpay global system into the U.K. market and continues Afterpay’s preferred model of partnering with a local market presence to de-risk global expansion (consistent with its N.Z. and U.S. expansion strategies) Afterpay does not expect its U.K.

• perations to materially contribute

to revenue in H1 FY2019 Afterpay will provide more details about its longer-term U.K. market strategy at its H1 FY2019 results presentation

ENTRY INTO THE U.K.

TO ACCELERATE AND DE-RISK ITS PLANNED ENTRY TO THE U.K., AFTERPAY HAS MADE A SMALL ACQUISITION OF A U.K. BASED BUY NOW, PAY LATER BUSINESS

Capital raising

Undertaking a fully underwritten institutional Placement to raise at least $108.1m Afterpay’s Australian operations are expected to generate material underlying operating cash fmow in FY2019 Afterpay’s international growth is expected to require incremental capital to fund:

• Growth of receivables books in the U.S. and U.K. and

ultimately to cornerstone international debt facilities

• Local market investment in terms of team and infrastructure
• Expected operating losses from the U.S. and U.K. businesses in FY2019

Proceeds will provide scope for near-term, accelerated global expansion and in due course, cornerstone international debt facilities Cash on hand as at 30 June 2018, pro forma for the Placement, and available borrowing capacity (prior to establishing international debt facilities) is expected to be suffjcient to fund international expansion costs and facilitate international underlying sales growth well in excess

• f A$1 billion

• 3. EXCLUDES RESTRICTED CASH, EXCLUDES ANY PROCEEDS FROM SPP

SOURCES AND USES SOURCES A$M

Placement 108.1 Total sources 108.1

USES A$M

Capital to be directed to funding Afterpay’s international expansion strategy 104.2 Estimated transaction costs1 3.9 Total uses 108.1

PRO-FORMA CASH BALANCE PRO-FORMA CASH BALANCE A$M

Cash as at 30 June 2018 (audited)2 25.5 Add: Placement proceeds 108.1 Less: Estimated transaction costs1 3.9 Pro-forma cash as at 30 June 20183 129.7

FUNDING INTERNATIONAL EXPANSION

OFFER SIZE ADVISER AND UNDERWRITER OFFER PRICE RANKING SHARE PURCHASE PLAN

Afterpay is undertaking an institutional Placement of new shares in Afterpay (New Shares) to raise at least $108.1m Afterpay is issuing a fjxed c.6.9m New Shares

Highbury Partnership Pty Limited is acting as fjnancial adviser to Afterpay on the acquisition

• f ClearPay and the Placement and SPP

Citigroup Global Markets Australia Pty Limited is acting as sole underwriter and bookrunner to the Placement with Bell Potter and Wilsons acting as co-managers

Pricing will be determined via an institutional bookbuild, with the underwritten fmoor price of $15.75 per New Share representing: New Shares will rank equally with existing

• rdinary shares from

their time of issue

A SPP will be undertaken to allow eligible shareholders in Australia and New Zealand, the opportunity to acquire up to $15,000 of New Shares (subject to scale-back)

• 15.1% discount to closing

price on 22 August 2018 of $18.55; and

• 9.9% discount to 5 day

VWAP to close of trade on 22 August 2018 of $17.49

New Shares under the SPP to be issued at the lower

• f the price paid by investors under the Placement,

and the 5 day VWAP of Afterpay shares up to the SPP closing date Details will be provided to eligible shareholders in due course The SPP aims to raise approximately $20m. Afterpay may decide to scale back applications under the SPP at its absolute discretion. The SPP is not underwritten

CAPITAL RAISING DETAILS

WEDNESDAY, 22 AUGUST TUESDAY, 11 SEPTEMBER - MONDAY, 17 SEPTEMBER (INCLUSIVE)

AUGUST 2018 SEPTEMBER 2018

THURSDAY, 23 AUGUST MONDAY, 17 SEPTEMBER FRIDAY, 24 AUGUST MONDAY, 24 SEPTEMBER THURSDAY, 30 AUGUST TUESDAY, 25 SEPTEMBER FRIDAY, 31 AUGUST WEDNESDAY, 26 SEPTEMBER

Record date for SPP (7:00pm Sydney time) SPP pricing period Trading halt (before market

• pen)

Bookbuild conducted for the Placement SPP closing date Announcement of completion of the Placement (before market open) Trading halt lifted; normal trading resumes Issue of New Shares under the SPP (SPP Shares) Settlement of New Shares under the placement SPP Shares commence trading

• n the ASX

Allotment and normal trading of new securities under the Placement SPP opening date Despatch of SPP Share holding statements

CAPITAL RAISE DETAILS

acquisition details

APPENDIX A

ACQUISITION

Afterpay to acquire 90% of the issued shares in ClearPay, an entity which is 100% owned by ThinkSmart Limited (ThinkSmart)

PURCHASE PRICE AND SHAREHOLDING

Consideration of 1 million Afterpay shares that will be issued in two tranches:

• 750,000 Afterpay shares to be issued to ThinkSmart on completion

(occurs today)

• 250,000 Afterpay shares to be issued to ThinkSmart 6 months after

completion ThinkSmart to retain 10.0% of ClearPay An Employee Share Ownership Plan will be put in place for up to 3.5% of ClearPay for ClearPay stafg (to be sourced from ThinkSmart’s shareholding)

TRANSITIONAL PERIOD

Afterpay will not be acquiring the ClearPay intellectual property or exposed to any economic gains or losses from the ClearPay legacy business, leaving Afterpay to focus on transitioning merchants and the business onto the Afterpay technology platform and branding

INTELLECTUAL PROPERTY

Afterpay will contribute its intellectual property to ClearPay via a non- exclusive licence for the purpose of the roll-out of the business in the U.K.

PATH TO 100% OWNERSHIP

Afterpay will have the option (Option) at any time after 5 years from completion to acquire the remaining shares in ClearPay, with consideration in the form of Afterpay shares or cash (at Afterpay’s election) ThinkSmart will have a one-time put option (Put Option) at 5 years and 6 months from completion The exercise price for the Option and Put Option will be calculated according to agreed valuation principles

BOARD AND MANAGEMENT

A Board of 5 directors to be established for ClearPay, 4 from Afterpay and 1 from ThinkSmart Afterpay will have the right to appoint the ClearPay Chairman and the CEO

TRANSITIONAL SERVICES

The Transitional Services Agreement details the arrangements under which ThinkSmart will provide support to ClearPay for a period of 12 months from completion

DUE DILIGENCE AND COMPLETION

Detailed period of due diligence review with completion occurring concurrently with signing

KEY TERMS OF ACQUISITION

key risks

APPENDIX B:

KEY RISKS

RISK FACTORS

Investors should be aware that there are risks associated with an investment in Afterpay. Some of the principal factors which may, either individually or in combination, afgect the future operating performance of Afterpay are set out below. Some are specifjc to an investment in Afterpay and the New Shares and others are

• f a more general nature.

The summary of risks below is not exhaustive. This Presentation does not take into account the personal circumstances, fjnancial position or investment requirements of any particular person. Additional risks and uncertainties that Afterpay is unaware of, or that it currently considers to be immaterial, may also become important factors that adversely afgect the future performance of Afterpay and the New Shares. The Placement is being made pursuant to provisions of the Corporations Act which allow ofgers to be made without a prospectus. This presentation does not contain all of the information which may be required in order to make an informed decision regarding an application for New Shares ofgered under the

• Placement. As a result, it is important for you to carefully read and understand

the information on Afterpay made publicly available, prior to making an investment decision. In particular, please refer to this Presentation, Afterpay’s full year and annual reports (including Afterpay’s most recent full year FY18 results announcement lodged with the ASX on 23 August 2018 and 4Q18 business update lodged with ASX on 19 July 2018) and other announcements lodged with ASX (including announcements which may be made by Afterpay after publication of this Presentation). You should have regard to your

• wn investment objectives and fjnancial circumstances and should seek

professional guidance from your stockbroker, solicitor, accountant or other professional adviser before deciding whether or not to invest.

• 1. RISKS RELATED TO THE ACQUISITION OF CLEARPAY

Reliance on information provided Afterpay undertook a due diligence process in respect of ClearPay, which relied in part on the review of legal and other information provided by ClearPay. While Afterpay considers the due diligence process undertaken to be appropriate, Afterpay has not been able to verify the accuracy, reliability or completeness of all the information which was provided to it against independent data. If any of the data or information provided to and relied upon by Afterpay in its due diligence process and its preparation of this Presentation proves to be incomplete, incorrect, inaccurate or misleading, there is a risk that the actual fjnancial position and performance of ClearPay may be materially difgerent to the fjnancial position and performance expected by ClearPay and refmected in this Presentation. There is no assurance that the due diligence conducted in respect of ClearPay was conclusive and that all material issues and risks in respect of the Acquisition have been identifjed and avoided or managed appropriately. Any unforeseen issues and risks could adversely afgect the operations, fjnancial performance or position, or prospects of Afterpay. Integration Risk The Acquisition involves the integration of ClearPay which has previously

• perated independently from Afterpay. There is a risk that the integration
• f ClearPay may be more complex than anticipated, encounter unexpected

challenges or issues and take longer than expected, divert management attention or not deliver the expected benefjts and this may afgect Afterpay’s

• perating and fjnancial performance.

Loss of ClearPay personnel While Afterpay is committed to the retention of ClearPay's key stafg, there can be no assurance that there will be no loss of key stafg following the Acquisition. Historical liability If the Acquisition of ClearPay completes, Afterpay may become directly or indirectly liable for any liabilities that ClearPay has incurred in the past as a result of prior acts or omissions, including liabilities which were not identifjed during Afterpay’s due diligence or which are greater than expected, and for which the various forms of protections negotiated by Afterpay in its agreement to acquire ClearPay turn out to be inadequate in the circumstances. Such liability may adversely afgect the fjnancial performance or position of Afterpay post-Acquisition.

• 2. RISKS SPECIFIC TO THE AFTERPAY GROUP

Compliance with laws, regulations and industry standards Afterpay and its subsidiaries (the Group) operates in a range of jurisdictions including Australia, New Zealand, the U.S. and the U.K. (with the ClearPay Acquisition). With the geographic expansion of Afterpay's business, the Group may become subject to additional legal, regulatory, tax, licensing, compliance requirements and industry standards that are constantly changing. There is a risk that any changes in this area may make it uneconomic for the Group to continue to operate in its current markets, or to expand in accordance with its strategy. This may materially and adversely impact the Group’s revenue and profjtability, by preventing the business from reaching suffjcient scale in particular markets. Some of these risks include:

• (Financial product regulation): Regulation may change and the eventual

nature and extent of new laws and regulations are uncertain. Changes in laws, regulations or regulatory policy could adversely afgect one or more of the Group’s businesses and could require substantial compliance costs.

• (Privacy laws): Changes to privacy laws and data protection laws may require

increased compliance costs and systems upgrade costs.

• (Compliance costs): There is a risk of increased compliance costs if the Group

fails to comply with material future changes in laws, regulations and industry standards generally. All of these may have a materially adverse impact on the Group’s revenue and profjtability. Loss of key contracts and relationships Afterpay's business depends on its contracts and relationships with signifjcant merchant clients and end customers. There can be no guarantee that these contracts and relationships will continue or, if they do continue, that they remain

• successful. Afterpay's contracts with retailers can generally be terminated on

short notice, while the Touch business has fjxed end date contracts with its suppliers or merchants, which carries the risk of failing to agree on terms for renewal. Any loss of the Group’s key merchant clients and end customers or a failure to secure new clients or customers on favourable terms, may materially and adversely impact the Group’s revenue and profjtability and also have a negative impact on the Group's reputation.

KEY RISKS

(CONTINUED)

Competitors and new market entrants The Group is a market leader in Australia in providing ‘buy now, pay later’ services, however, a number of competitors currently ofger services similar to this service (for example, zipMoney), and the transaction-processing technology solutions that Touch ofgers. Existing competitors, as well as new competitors entering the industry both in Australia and ofgshore, may engage in aggressive customer acquisition campaigns, develop superior technology ofgerings or consolidate with other entities to deliver enhanced scale benefjts. Such competitive pressures may materially erode the Group’s market share and revenue, or prevent or limit its growth in new markets, and may materially and adversely impact the Group’s revenue and profjtability. Afterpay’s NAB Facility Afterpay has fjnancing arrangements with National Australia Bank (NAB Facility) to support Afterpay’s funding of purchases by end customers. In the unlikely event of repayments not being made or certain terms and conditions not being satisfjed under the NAB Facility, National Australia Bank may terminate its

• bligation. In these circumstances, Afterpay’s capacity to pay merchant clients

in advance of collecting purchase price instalments from end customers may be diminished in the event that other banks are not able to step in and provide fjnancing on equivalent terms. This may have the efgect of slowing down Afterpay’s growth. Failures or disruptions to technology systems and communication networks The Group relies on technology and third-party communication networks to assess customer repayment capabilities. There is a risk that these systems may fail to perform as expected or be adversely impacted by a number of factors outside of the Group's control. This includes damage, equipment faults, power failure, fjre, natural disasters, computer viruses and external malicious interventions such as hacking or denial-of-service attacks. This may cause part

• r all of the Group’s technology system and/or the communication networks to

become unavailable. There is a risk that repeated failures to keep the Group’s technology available may result in a decline in customer and merchant numbers or merchants cancelling their contracts with the Group. This may materially and adversely impact the Group’s fjnancial performance, as well as negatively impacting the Group’s reputation. Banking and payment processing performance The Group replies on online payment gateways, banking and fjnancial and other institutions (such as Medicare and private health insurers in respect of Touch), and point of sale devices for the validation of payment methods (such as bank cards), processing and settlement of payments. Any failures or disruptions to such platforms and technology may impact the fjnancial performance of the Group.

KEY RISKS

(CONTINUED)

Exposure to potential security breaches and data protection issues Through the ordinary course of business, the Group will collect a wide range of confjdential information. Cyber-attacks may compromise or breach technology platforms used by the Group to protect confjdential information. There is a risk that the measures taken by the Group may not be suffjcient to detect or prevent unauthorised access to, or disclosure of, such confjdential information. Any data security breaches or the Group’s failure to protect confjdential information could result in the loss of information integrity, or breaches of the Group’s obligations under applicable laws or agreements, each of which may materially adversely impact the Group’s fjnancial performance and reputation. Activities of fraudulent parties The Group may be exposed to fraud attempts, including risks from the potential collusion between internal and external parties, and end customers attempting to circumvent the Group’s systems (such as Afterpay’s repayment capability assessments). Fraud attempts may potentially result in damage to the Group's reputation and a higher than budgeted cost of fraud to rectify and safeguard business operations, which may materially adversely impact the Group’s revenue and profjtability. Protection and ownership of technology and intellectual property There is a risk that unauthorised use or copying of any of the Group’s software, data, specialised technology or platforms will occur or that the validity,

• wnership or authorised use of intellectual property relevant to the Group’s

business may be successfully challenged by third parties. This could result in signifjcant expense and the inability to use the intellectual property in question, which may materially adversely impact the Group’s fjnancial position and

• performance. Such disputes may also temporarily adversely impact the Group’s

ability to integrate new systems or develop new services which may adversely impact the Group’s revenue and profjtability. There is also a risk that the Group will be unable to register or otherwise protect new intellectual property it develops in the future. The Group’s competitors may then be able to ofger identical or very similar services or services that are otherwise competitive against those provided by the Group, which could adversely afgect the Group’s business. Ability of the Group’s technology to integrate with third party platforms The success of the Group’s services, and the ability to attract additional end customers and merchant clients, will depend on the ability of the Group’s technology and systems to integrate into and operate with various third party systems and platforms, particularly websites, point of sale systems and other merchant systems. In addition, as these systems and platforms are regularly updated, it is possible that when such updates occur it could cause the Group’s services to not operate as effjciently as previously. This will require the Group to change the way some of its systems operates which may take time and expense to remedy.

KEY RISKS

(CONTINUED)

The Group’s technology may be superseded by other technology or changes in business practice The Group’s success will in part depend on its ability to ofger services and systems that remain current with the continuing changes in technology, evolving industry standards and changing consumer preferences. There is a risk that the Group will not be successful in addressing these developments in a timely manner, or that expenses will be greater than expected. In addition, there is a risk that new products or technologies (or alternative systems) developed by third parties will supersede the Group’s technology. This may materially and adversely impact the Group’s revenue and profjtability. Loss of key management personnel The Group’s ability to efgectively execute growth strategies depends on the performance and expertise of its key management personnel. The loss of key management personnel, or any delay in their replacement, may adversely afgect the Group’s future fjnancial performance. Exposure to Afterpay’s end customer bad debts A major part of the Group’s operations and earnings depends on Afterpay’s “buy now, pay later” service provided to end customers and Afterpay’s ability to recoup the purchase value of those products. Afterpay relies on its technology to assess a customer's repayment capability for each transaction. Prolonged miscalculation

• n customers' repayment ability may lead to the business being overly exposed

to bad debts when the end customers fail to meet their repayment obligations to Afterpay, which will adversely impact the Group's profjtability. Capacity constraints Continued increases in transaction volumes may require the Group to expand and adapt its network infrastructure to avoid interruptions to its systems. Any unprecedented transaction volumes may interrupt the Group’s technology, reduce the number of completed transactions, increase expenses, and reduce the level of consumer service, and these factors may potentially adversely impact the Group’s fjnancial performance. Expansions into new ofgshore markets may require additional data centre capacity in those markets due to data security requirements or capacity constraints. Failure to increase transaction volumes, merchant and end customers numbers The revenue and profjtability of the Group relies on increases in transaction volumes and the number of merchant and end customer bases. Failure to increase these metrics may adversely impact the Group’s ability to improve its future revenue and profjtability. Acquisitions Generally The Group's future strategy may involve the acquisition of additional businesses that are aligned with Group's core business. Acquisition transactions involve inherent risks, including:

• accurately assessing the value, strengths, weaknesses, contingent and other

liabilities and potential profjtability of a business;

• integration risks;
• excessive diversion of management attention from the operations of the

existing business;

• potential loss of key personnel and key clients;

KEY RISKS

(CONTINUED)

• unanticipated changes in the industry or general economic conditions that

afgect the assumptions underlying the acquisition; and

• decline in the value of, and unanticipated costs, problems or liabilities

associated with the acquired business. Any of these or similar risks could cause the Group to not realise the benefjts anticipated from any acquisition of a new business and could have a material adverse impact on its fjnancial position.

• 3. GENERAL RISKS

Equity raising underwriting risk Afterpay has entered into an Underwriting Agreement under which the Lead Manager has agreed to fully underwrite the Placement. If certain conditions are not satisfjed or certain events occur under the Underwriting Agreement, the Lead Manager may terminate the Underwriting Agreement. This may have a material impact on the proceeds raised under the Institutional Placement and Afterpay may need to fjnd alternative fjnancing in order to fund its international expansion objectives. Risks relating to share investment There are various risks associated with investing in any form of business and with investing in listed entities generally. The value of the Group's shares depends upon general share market and economic conditions as well as the specifjc performance of the Group. There is no guarantee of profjtability, dividends, return of capital, or the price at which Afterpay Shares will trade

• n the ASX. The past performance of Afterpay Shares is not necessarily an

indication as to future performance as the trading price of shares can go down

• r up in value.

Risks relating to the general economy and capital markets The fjnancial performance of the Group will fmuctuate due to various factors including movements in the Australian and international capital markets, recommendations by brokers and analysts, interest rates, exchange rates, infmation, Australian and international economic conditions, change in government, fjscal, monetary and regulatory policies, prices of commodities, global geo-political events, hostilities and acts of terrorism, investor perceptions and other factors. In the future, these factors may afgect the income and expenses of the Group and may cause the price of Afterpay shares to fmuctuate and trade below current prices. Exposure to adverse macroeconomic conditions The Group's business will depend on end customers transacting with retail merchants, which in turn can be afgected by changes in general economic

• conditions. For example, the retail sector is afgected by such macroeconomic

conditions as unemployment, interest rates, consumer confjdence, economic recessions, downturns or extended periods of uncertainty or volatility, all of which may infmuence customer spending and suppliers' and retailers' focus and investment in outsourcing payment and transaction processing solutions. This may subsequently impact the Group's ability to generate revenue. Legal proceedings and contingent liabilities The Group may be subject to litigation and other claims and disputes in the course of its business, including employment disputes, contractual disputes

• r occupational and personal claims, which could adversely afgect the Group's

business, reputation, operating and fjnancial performance.

KEY RISKS

(CONTINUED)

INTERNATIONAL SELLING RESTRICTIONS

APPENDIX C

INTERNATIONAL SELLING RESTRICTIONS

INTERNATIONAL OFFER RESTRICTIONS

This document does not constitute an ofger of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be ofgered or sold, in any country outside Australia except to the extent permitted below. European Economic Area - Denmark, Germany, Luxembourg, Netherlands and Spain This document has been prepared on the basis that all ofgers of New Shares will be made pursuant to an exemption under the Directive 2003/71/EC ("Prospectus Directive"), as amended and implemented in Member States

• f the European Economic Area (each, a "Relevant Member State"), from the

requirement to publish a prospectus for ofgers of securities. An ofger to the public of New Shares has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in the Relevant Member State:

• to any legal entity that is authorized or regulated to operate in the fjnancial

markets or whose main business is to invest in fjnancial instruments unless such entity has requested to be treated as a non-professional client in accordance with the EU Markets in Financial Instruments Directive (Directive 2014/65/EC, "MiFID II") and the MiFID II Delegated Regulation (EU) 2017/565;

• to any legal entity that satisfjes two of the following three criteria: (i) balance

sheet total of at least €20,000,000; (ii) annual net turnover of at least €40,000,000 and (iii) own funds of at least €2,000,000 (as shown on its last annual unconsolidated or consolidated fjnancial statements) unless such entity has requested to be treated as a non-professional client in accordance with MiFID II and the MiFID II Delegated Regulation (EU) 2017/565;

• to any person or entity who has requested to be treated as a professional client in

accordance with MiFID II; or

• to any person or entity who is recognised as an eligible counterparty in accordance

with Article 30 of the MiFID II unless such entity has requested to be treated as a non- professional client in accordance with the MiFID II Delegated Regulation (EU) 2017/565. Hong Kong WARNING: This document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the "SFO"). No action has been taken in Hong Kong to authorise or register this document or to permit the distribution of this document or any documents issued in connection with it. Accordingly, the New Shares have not been and will not be ofgered or sold in Hong Kong

• ther than to "professional investors" (as defjned in the SFO and any rules made under that
• rdinance).

No advertisement, invitation or document relating to the New Shares has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to New Shares that are or are intended to be disposed of only to persons outside Hong Kong or only to professional

• investors. No person allotted New Shares may sell, or ofger to sell, such securities in

circumstances that amount to an ofger to the public in Hong Kong within six months following the date of issue of such securities. The contents of this document have not been reviewed by any Hong Kong regulatory

• authority. You are advised to exercise caution in relation to the ofger. If you are in doubt

about any contents of this document, you should obtain independent professional advice.

INTERNATIONAL SELLING RESTRICTIONS

(CONTINUED)

New Zealand This document has not been registered, fjled with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 (the "FMC Act"). The New Shares are not being ofgered or sold in New Zealand (or allotted with a view to being ofgered for sale in New Zealand) other than to a person who:

• is an investment business within the meaning of clause 37 of Schedule 1 of

the FMC Act;

• meets the investment activity criteria specifjed in clause 38 of Schedule 1 of

the FMC Act;

• is large within the meaning of clause 39 of Schedule 1 of the FMC Act;
• is a government agency within the meaning of clause 40 of Schedule 1 of the

FMC Act; or

• is an eligible investor within the meaning of clause 41 of Schedule 1 of the

FMC Act. Norway This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007. Accordingly, this document shall not be deemed to constitute an ofger to the public in Norway within the meaning of the Norwegian Securities Trading Act of 2007. The New Shares may not be ofgered or sold, directly or indirectly, in Norway except to "professional clients" (as defjned in Norwegian Securities Regulation

• f 29 June 2007 no. 876 and including non-professional clients having met

the criteria for being deemed to be professional and for which an investment fjrm has waived the protection as non-professional in accordance with the procedures in this regulation). Singapore This document and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any

• ther document or materials in connection with the ofger or sale, or invitation

for subscription or purchase, of New Shares, may not be issued, circulated or distributed, nor may the New Shares be ofgered or sold, or be made the subject

• f an invitation for subscription or purchase, whether directly or indirectly, to

persons in Singapore except pursuant to and in accordance with exemptions in Subdivision (4) Division 1, Part XIII of the Securities and Futures Act, Chapter 289

• f Singapore (the "SFA"), or as otherwise pursuant to, and in accordance with the

conditions of any other applicable provisions of the SFA. This document has been given to you on the basis that you are (i) an existing holder of the Company’s shares, (ii) an "institutional investor" (as defjned in the SFA) or (iii) an "accredited investor" (as defjned in the SFA). In the event that you are not an investor falling within any of the categories set out above, please return this document immediately. You may not forward or circulate this document to any other person in Singapore. Any ofger is not made to you with a view to the New Shares being subsequently

• fgered for sale to any other party. There are on-sale restrictions in Singapore

that may be applicable to investors who acquire New Shares. As such, investors are advised to acquaint themselves with the SFA provisions relating to resale restrictions in Singapore and comply accordingly.

INTERNATIONAL SELLING RESTRICTIONS

(CONTINUED)

Switzerland The New Shares may not be publicly ofgered in Switzerland and will not be listed on the SIX Swiss Exchange or any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other ofgering material relating to the New Shares (i) constitutes a prospectus or a similar notice as such terms are understood under art. 652a, art. 752 or art. 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of

• art. 27 et seqq. of the SIX Listing Rules or (ii) has been or will be fjled with or

approved by any Swiss regulatory authority. In particular, this document will not be fjled with, and the ofger of New Shares will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA). Neither this document nor any other ofgering material relating to the New Shares may be publicly distributed or otherwise made publicly available in Switzerland. The New Shares will only be ofgered to regulated fjnancial intermediaries such as banks, securities dealers, insurance institutions and fund management companies as well as institutional investors with professional treasury operations. This document is personal to the recipient and not for general circulation in Switzerland. United Kingdom Neither this document nor any other document relating to the ofger has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended ("FSMA")) has been published or is intended to be published in respect of the New Shares. This document is issued on a confjdential basis to "qualifjed investors" (within the meaning of section 86(7) of the FSMA) in the United Kingdom, and the New Shares may not be ofgered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) of the FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom. Any invitation or inducement to engage in investment activity (within the meaning

• f section 21 of the FSMA) received in connection with the issue or sale of the New

Shares has only been communicated or caused to be communicated and will

• nly be communicated or caused to be communicated in the United Kingdom in

circumstances in which section 21(1) of the FSMA does not apply to the Company. In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 ("FPO"), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together "relevant persons"). The investments to which this document relates are available only to, and any ofger or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.