XERO LIMITED — AGM Information 2016

Jul 19, 2016

XERO LIMITED - ANNUAL MEETING WEDNESDAY 20 JULY 2016

Chairman's Introduction

Welcome

Good morning and welcome to Xero's Annual Meeting for 2016. I'm pleased to be speaking on behalf of the Board, as Chairman, for my third Xero Annual Meeting.

This is a particularly special Annual Meeting as it's the first time we have held the Annual Meeting in Australia, a market that is incredibly important for our long-term growth strategy. It is also the first time our shareholders have been able to attend and participate in the Annual Meeting virtually through an online platform provided by our share registrar.

I'd like to welcome those shareholders who are attending the meeting in person here in Sydney, and also those shareholders joining us online.

To begin, I'll introduce those up on stage.

On my right is Rod Drury, Xero's Chief Executive and Co-founder. Rod will present to us shortly. Next to Rod, are Xero's Chief Financial Officer, Sankar Narayan, Xero's Chief Marketing and Revenue Officer, Andy Lark, and Xero's General Counsel and Company Secretary, Matt Vaughan.

On my left, are non-executive Directors Graham Smith, Bill Veghte, Lee Hatton, Craig Winkler, and Craig Elliott. Unfortunately, Sam Morgan is unable to attend the meeting. Sam sends his apologies.

Before we start with the formal business of the meeting, I have a couple of quick housekeeping points. I'd be grateful if you could please make sure your phone is switched off or on silent. In the event of an emergency, please follow the emergency exit sign and instructions of the venue staff.

We'll begin today with the formal business and resolutions of the meeting, which will be followed by presentations from Rod, Sankar, and Andy.

These presentations will highlight that it has been another strong year for Xero, where we have strengthened our position in Australia, New Zealand and the UK as the preferred provider of small business cloud accounting software and we are continuing to lay the foundations for sustainable growth in the North America. We're proud of this achievement for a company founded just ten years ago and operating in competitive markets.

We also achieved cost efficiencies across Xero, and we are committed to managing the business to cash flow break-even within our current cash balance. As our operating revenues and annualised committed monthly revenues continue to grow, we have diversified our global growth and continue to grow market share of small businesses with a goal of becoming a \$1 billion revenue generating business and exceeding 1 million subscribers. We're in for the long haul. Though we have reached several remarkable milestones to date, in a market of tens of millions of potential customers, we have only just begun.

There will be opportunities for shareholders to ask specific questions as we address each resolution in the formal part of the meeting, and there will be opportunities for shareholders to ask general questions following Rod's presentation. With that said, as Chair of the meeting, I declare Xero's 2016 Annual Meeting formally open.

Sam's Retirement

Before we move to the resolutions to be considered today, I'd like to acknowledge Sam Morgan. Sam will be retiring as a director of Xero Limited by rotation, and will not be standing for re-election.

Sam joined Xero's Board in March 2007, shortly after Xero's incorporation and prior to its listing on the NZX in June 2007. Sam has played a significant role in Xero's global growth over the last 9 or so years, and his contribution to Xero over those years has been immense.

On behalf of the Board, we are extremely grateful for Sam's contribution and wish him all the best in his future endeavours.

Sam has asked me to read out the following statement on his behalf:

"I have had the privilege of being on the Xero board since before we listed in 2007. I'm leaving the board for two reasons: Firstly, I've been there nearly 10 years, which I think is enough time for any Director. Secondly, I feel the company is in an extremely strong position and it is always easier to step down when things are going well.

I leave Xero at a time when it has the best board and management team it has ever had. Our subscription revenues are growing faster than our costs and, as we have already told the market, we are managing the business to cash flow break-even on the money we already have in the bank.

On a personal note, I have known Rod and Sankar for over 10 years. I've greatly enjoyed working with them and with my fellow directors and I continue to work with several of them on other stuff outside of Xero. It has been a great ride and I'd like to thank everyone - especially Rod - for the opportunity to help him build a truly global software business that is making life easier for small business owners around the world every day.

I remain a proud shareholder and wish the company the greatest of continued success."

Thank you Sam.

I will now move to the formal business of the meeting.

[Refer to slides below for the resolutions proposed at the Annual Meeting]

Annual Meeting

20 JULY 2016

Chris Liddell

Chairman's address

Sam Morgan

Director farewell

Resolutions

RESOLUTION 1 Appointment of Auditor

That Ernst & Young be appointed as auditor of Xero Limited and its subsidiaries.

PROXIES

43, 243, 512 (99.639%) FOR

640 (0.001%) AGAINST

156,174 (0.360%) DISCRETIONARY

RESOLUTION 2 Fixing the Remuneration of the Auditor

That the Board is authorised to fix the remuneration of the auditor.

PROXIES

6,670 (0.02%) AGAINST

43,236,335 (99.62%) FOR

156,717 (0.36%) DISCRETIONARY

RESOLUTION 3 Re-election of Chris Liddell as a Director

That Chris Liddell, retiring from office as a Director of Xero Limited by rotation, be re-elected as a Director of Xero Limited.

PROXIES

43,205,032 (99.56%) FOR

34,036 (0.08%) AGAINST

157,124 (0.36%) DISCRETIONARY

RESOLUTION 4 Re-election of Bill Veghte as a Director

That Bill Veghte, retiring from office as a Director of Xero Limited by rotation, be re-elected as a Director of Xero Limited.

PROXIES

43,204,494 (99.56%) FOR

34,406 (0.08%) AGAINST

157,124 (0.36%) DISCRETIONARY

RESOLUTION 5 Approval of Options to be granted to Chris Liddell and Bill Veghte

That the grant of options to subscribe for ordinary shares in Xero Limited to Chris Liddell and Bill Veghte, as remuneration for their roles as Directors of Xero Limited (equating to an annual value of NZ\$220,000 and NZ\$176,000 respectively), in or around February 2017, on the terms set out in the Explanatory Notes to the Notice of Meeting (i.e., on substantively the same terms as the grant of options to Chris and Bill in February 2015, which was approved at Xero's 2014 Annual Meeting, and the grant of options to Chris and Bill in February 2016, which was approved at Xero's 2015 Annual Meeting), be approved, and that the issue of ordinary shares in Xero Limited to Chris and Bill upon any exercise of those options, be approved.

PROXIES

37,581,722 (86.72%) FOR

5,620,964 (12.97%) AGAINST

133,767 (0.31%) DISCRETIONARY

RESOLUTION 6 Approval of the issue of Ordinary Shares to Lee Hatton

That the issue of ordinary shares in Xero Limited to Lee Hatton in lieu of cash, as remuneration for her role as a Director of Xero Limited to a value of NZ\$70,000 per annum on the terms set out in the Explanatory Notes to the Notice of Meeting, be approved.

PROXIES

43,071,376 (99.24%) FOR

167,660 (0.39%) AGAINST

161,261 (0.37%) DISCRETIONARY