RD - I would certainly like Xero to pay dividends eventually but we are still in an investment phase. The profile of Xero and the newPacific Fibre cable has attracted significant inward investment making New Zealand a global player in the Internet economy. RD - NZ has been a great first market because we were able to leverage our profile and being listed to create a brand. SI - How is the company performing compared to your projections when you first started and has growth and or profitability stalled over the current economic slowdown and if so have you seen any indication of recovery ? RD - The founders, directors and staff have a big stake in the company as you can see in our annual report. In Xero’s case the non executive directors are shareholder representatives. SI - The sector in which you operate is very competitive and fast developing, why is what you are doing different and if it is will it keep you ahead of the pack? SI - You contribute to a blog on the Xero website and of course your business is web based, what is control cable how important is the internet to the business to spread the Xero brand and business and will you start to use more traditional forms of media and or advertising as you grow?

RD -The challenge with doing our type of business is that we can control costs and product but its very hard in the early days to predict what adoption will be like and therefore what the revenue will be. It is still very early days in the SaaS accounting space. I am concerned about maintaining focus on building the best online accounting system for the SME market. I believe there is a significant opportunity here, but that there is still a lot to do to maintain Xero’s position as a leading SME accounting solution. As I have said Accounting has a broad minimum feature set. If so can you give a time frame when this feature will be implemented? Xero is really easy to use and will save you hours of time each month. RD - Xero is fairly distributed as our sales teams operate out of several areas on many time zones so we build culture online. The approach to market that has worked in NZ we are now rolling out in the UK and Australia and that is looking good but there’s much more to do. In the meantime we are also looking for other SaaS based Stock systems to link Xero to.

RD - Actually the SaaS accounting software isn’t that competitive. RD - It’s very expensive and is a difficult to do significant SaaS busineses out of cashflow. RD - We have trialled a number of sales models in each territory as we worked out the best approach for each market. Again if we were a private company we’d be positioning for a take out. SI - Do you think the Xero stock price accurately reflects the value of the company at present or do you think there is alot of expectation built into the share price? RD - The stock price is not something we think about too much as we are a low liquidity stock. I think people are seeing we are executing well, communicating openly and they are starting to understand the size of the opportunity. They think long term and put in place building blocks that lead to long term value though I think their emerging culture of secrecy and aggrogance is wrong. SI - You are a small company now, how will you keep your strong company culture and customer service when you hopefully get allot bigger? We want to get the UK and Australia countries to a certain point before we open another front.

We’re designing Stock now and hope to get it released this coming year. RD - We are planning to do Stock in the coming year. SI - What are you doing to contain costs considering the current economic environment and the focus by other businesses on this important factor? Say that costs 500k a month. SI - Was the intention of yourself and the Xero board to build the company up as a brand with the express purpose of selling, along the lines of say 42 Below? Be rest assured that we are very focused on small businesses and say no to a lot of things. Overall though we are delighted with where we are at. The large companies we are targeting on on completely different business models. So with Xero the model was 50 people from the start so we could build a global business with a full team. In addition to the funding requirements we also knew that for people to entrust us with their financial data and long term viability we had to have credibility and being listed on the NZX.