XERO LIMITED — Management Reports 2014

Dec 22, 2014

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23
December
2014

Dear

shareholder

2014
has
been
our
biggest
year
yet,
and
we
are
delighted
to
have
grown
the
business
to
over
$US100m
Annualised
Committed
Monthly Revenue
while
growing
at
over
80%.
The
real
story
of
this
year
has
been
the
onboarding
of
world-­‐class
capability.
We’ve
now
grown
the team
to
over
1,000,
who
are
coming
on
stream
to
accelerate
innovation
in
2015.
Onboarding
so
many
staff
has
been
an
incredibly
time consuming
activity
but
it
positions
us
very
strongly
for
the
coming
years.

You
may
have
read
that
we
just
recently
passed
400,000
paying
customers,
a
major
milestone
as
we
head
into
key
selling
seasons
in
the UK,
New
Zealand
and
the
US.
In
2014
we
processed
NZ$250
billion
of
transactions
and
95
million
invoices,
connecting
millions
of businesses,
advisors,
suppliers
and
customers
worldwide.

The
support
from
our
customers
and
partners
is
both
humbling
and
exciting.
Together
we’ve
established
Xero
as
one
of
the
leading platforms
on
which
they
connect,
collaborate
and
conduct
their
business.
Through
a
constant
innovation
cycle,
we
are
fulfilling
our potential
as
a
small
business
growth
engine,
bringing
together
crucial
capabilities
in
accounting,
payroll
and
payments
with
insights
and the
business
specific
applications
small
businesses
need
from
our
hundreds
of
partners
worldwide.

We’re
now
utilising
large
volumes
of
data
to
report
business
performance
at
scale
and
deliver
insights
to
help
improve
the
growth
of small
businesses,
providing
a
real
time
data
set
to
discover
the
real
power
of
the
small
business
economy
and
trends
such
as
growing self
and
part-­‐time
employment.

We’re
thrilled
to
be
playing
a
role
in
igniting
the
small
business
economy.
Our
customers
are
adding
employees
and
growing
revenue and
margins
by
having
clear
visibility
of
their
numbers
and
easy
access
to
advisors.
At
the
same
time,
the
vibrant
ecosystem
around Xero,
including
the
growing
advisor
channel,
is
creating
jobs
worldwide.

We’re
continuously
improving
the
platform
with
over
400
releases
to
benefit
users
deployed
during
2014.
Most
of
these
releases
were silent,
unnoticed
by
customers,
but
span
small
business
tasks
ranging
from
payroll
through
to
beautiful
business
reporting.
We
just unveiled
a
new
business
dashboard
to
help
small
businesses
have
better
visibility
of
their
cash
flow
as
Xero
begins
its
delivery
of
‘Big Data
for
Small
Business’
in
early
2015.

Our
momentum
is
not
only
a
clear
vote
for
platforms
born
and
bred
in
the
cloud,
but
also
for
those
optimised
for
mobile
devices.
In
the past
12
months,
over
145,000
small
businesses
have
downloaded
Xero
Touch
enabling
them
to
pay,
invoice,
and
manage
cash
flow
any place,
any
time.

Today,
we
are
New
Zealand’s
and
Australia’s
most
loved
accounting
platform
and
we
are
achieving
a
similar
position
in
the
UK.
As
we said
at
our
Annual
Meeting
in
July
this
year,
our
focus
until
now
has
been
to
establish
Australia
and
the
United
Kingdom
as
our
next growth
engines.
Having
delivered
that,
our
focus
is
now
on
the
US.
We
are
making
good
progress
in
getting
our
operating
team
in
place. The
small
business
cloud
market
is
still
in
its
infancy:
of
the
addressable
market
of
hundreds
of
millions
of
small
businesses,
only
a
small percentage
currently
use
cloud
financial
software.

Throughout
2014
we’ve
invested
significantly
in
our
platform,
which
is
becoming
critical
infrastructure
in
our
core
markets.
We
now manage
500
servers
across
multiple
data
centres
while
maintaining
best-­‐in-­‐class
uptime
of
99.99
percent.
We
have
our
sights
set
on
not just
leading
in
building
our
cloud
infrastructure,
but
also
putting
the
innovations
and
investments
from
the
global
cloud
providers
like Microsoft,
Google
and
Amazon
to
work
for
small
businesses.

On
the
reverse
of
this
letter
is
a
disclosure
notice
informing
shareholders
that
we
have
extended
the
repayment
dates
(from
December 2014
to
July
2015)
for
two
executive
loans
that
were
granted
in
December
2011
to
Ross
Jenkins,
our
CFO,
and
Chris
Ridd,
our
Australian MD.
These
loans
were
used
by
Ross
and
Chris
to
purchase
shares
in
Xero.
Ross
and
Chris
remain
valuable
members
of
our
leadership team,
and
the
Board
has
extended
the
repayment
date
of
these
loans
to
help
ensure
that
Ross
and
Chris,
along
with
the
remainder
of the
leadership
team,
remain
highly
incentivised
to
continue
to
work
hard
for
you
to
drive
long-­‐term
growth.

Thank
you
all
for
your
support
in
2014.
Our
team
are
fired
up
and
excited
about
what’s
to
come.
2015
is
going
to
rock.

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Rod
Drury,
CEO

Xero
Limited

NZ
Company
Number
1830488;
ARBN
160
661
183 3
Market
Lane Wellington,
New
Zealand

==> picture [153 x 72] intentionally omitted <==

This
document
is
for
information
only.
It
does
not
require
any
action
from
you.

**Xero

Limited**

(the
Company)

Disclosure
Document
Relating
to
the
Provision
of
Financial
Assistance
Not
Exceeding 5%
of
Shareholders’
Funds
(Section
80(1)(b) Companies
Act
1993)

To:
All
shareholders
of
the
Company

Introduction

This
document
is
provided
to
all
shareholders
in
accordance
with
the
requirements
set
out
in
section
80
of
the Companies
Act
1993.
It sets
out
the
details
on
which
the
financial
assistance
provided
to
selected
employees
by
the Company
in
December
2011,
in
connection with
the
purchase
of
shares
in
the
Company,
is
amended.

**Details

of
Financial
Assistance**

On
10
December
2011,
the
Company
provided
financial
assistance
by
way
of
loans
from
the
Company
to
Ross
Jenkins,
Chief Financial Officer
of
the
Company,
and
Chris
Ridd,
Managing
Director
of
Xero
Australia
Pty
Limited,
to
enable each
of
them
to
purchase
shares
in
the Company
on
identical
terms
as
described
below:

• a) Shares: 196,364
  ordinary
  shares
  in
  the
  Company.

• b) Consideration
  paid
  or
  payable
  for
  the
  shares: NZ$540,000
  (based
  on
  the
  volume
  weighted
  average price
  of
  Xero’s
  shares quoted
  on
  the
  NZSX
  for
  the
  20
  days
  prior
  to
  10
  December
  2011
  of
  NZ$2.75
  per share).

• c) Nature
  and
  amount
  of
  the
  financial
  assistance: A
  loan
  of
  NZ$540,000
  for
  up
  to
  three
  years
  at
  4%
  interest per
  annum.

The
Board
of
the
Company
resolved
to
extend
the
repayment
date
of
the
above
loans
to
9
July
2015.
All
other
terms
of
these
loans remain
the
same.

Dated:
23
December
2014

Signed

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==> picture [109 x 45] intentionally omitted <==

Chris
Liddell Chairman
of
the
Board
of
Xero
Limited

Rod
Drury Director
of
Xero
Limited

Xero
Limited NZ
Company
Number
1830488;
ARBN
160
661
183 3
Market
Lane Wellington,
New
Zealand