APPEN LIMITED — Interim / Quarterly Report 2015

Aug 27, 2015

Appen Limited Appendix 4D Half-year report

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1. Company details

Name of entity: Appen Limited ABN: 60 138 878 298 Reporting period: For the half-year ended 30 June 2015 Previous period: For the half-year ended 30 June 2014

2. Results for announcement to the market

2. Results for announcement to the market
			$'000
Revenues from ordinary activities	up	33.0% to	35,838
Profit from ordinary activities after tax attributable to the owners of Appen
Limited	up	28.3% to	2,678
Profit for the half-year attributable to the owners of Appen Limited	up	28.3% to	2,678
Dividends
			Franked
		Amount per	amount per
		security	security
		Cents	Cents
Interim dividend for the year ended 31 December 2015		1.20	1.20

Interim dividend for the year ended 31 December 2015

On 28 August 2015, the Company declared an interim dividend, fully franked. The record date for determining entitlements to the dividend is 4 September 2015.

Comments

The profit for the Group after providing for income tax amounted to $2,678,000 (30 June 2014: $2,088,000).

Refer to the 'Review of Operations' section in the Directors' report attached for further explanation of the results.

3. Net tangible assets

Net tangible assets per ordinary security	Reporting period Cents 12.82	Previous period Cents 9.27

The comparative figure relates to net tangible assets per security as at 31 December 2014.

4. Control gained over entities

Not applicable.

5. Loss of control over entities

Not applicable.

Appen Limited Appendix 4D Half-year report

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6. Dividends

Current period

Current period
					Franked
				Amount per	amount per
				security	security
				Cents	Cents
Interim dividend for the year ended	31	December	2015	1.20	1.20

On 28 August 2015, the Company declared an interim dividend, fully franked. The record date for determining entitlements to the dividend is 4 September 2015.

Previous period

				Franked
			Amount per	amount per
			security	security
			Cents	Cents
Dividends per ordinary and management share, paid on	29	May 2014, 100% franked	8.00	8.00
Dividends per ordinary and management share, paid on	20	June 2014, 100% franked	5.00	5.00

Dividends totalling 13.00 cents per share were paid based on the shares on issue prior to the restructuring of capital.

7. Dividend reinvestment plans

Not applicable.

8. Details of associates and joint venture entities

Not applicable.

9. Foreign entities

Details of origin of accounting standards used in compiling the report:

Not applicable.

10. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The financial statements were subject to a review by the auditors and the review report is attached as part of the Interim Report.

Appen Limited Appendix 4D Half-year report

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11. Attachments

Details of attachments (if any):

The Interim Report of Appen Limited for the half-year ended 30 June 2015 is attached.

12. Signed

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Signed ______

Date: 28 August 2015

Mark Byrne Company Secretary and Chief Financial Officer Sydney

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Appen Limited ABN 60 138 878 298

Interim Report - 30 June 2015

Appen Limited Contents 30 June 2015

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Contents

Contents
Corporate directory	2
Directors' report	3
Auditor's independence declaration	5
Statement of profit or loss and other comprehensive income	6
Statement of financial position	7
Statement of changes in equity	8
Statement of cash flows	9
Notes to the financial statements	10
Directors' declaration	18
Independent auditor's review report to the members of Appen Limited	19

1

Appen Limited Corporate directory 30 June 2015

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Appen Limited Corporate directory 30 June 2015
Directors	Christopher Charles Vonwiller - Chairman
	Mark Brayan - Chief Executive Officer
	William Robert Pulver
	Robin Jane Low
	Jeremy Andrew Samuel
	Stephen Hasker
	Deena Shiff
	Lisa Braden-Harder
Company secretaries	Mark Edmund Payton Byrne
	Leanne Ralph
Registered office	Level 6
	9 Help Street
	Chatswood NSW 2067
	Tel: 02 9468 6300
Principal place of business	Level 6
	9 Help Street
	Chatswood NSW 2067
Share register	Link Market Services Limited
	Level 12
	680 George Street
	Sydney NSW 2000
	Telephone: 1300 554 474
	Facsimile: (02) 9287 0303
Auditor	KPMG
	10 Shelley Street
	Sydney NSW 2000
Solicitors	Norton Rose Fulbright Australia
	Level 18
	Grosvenor Place
	225 George Street
	Sydney NSW 2000
Stock exchange listing	Appen Limited shares are listed on the Australian Securities Exchange (ASX code:
	APX)
Website	www.appen.com

2

Appen Limited Directors' report 30 June 2015

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The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Appen Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the half-year ended 30 June 2015.

Directors

The following persons were directors of Appen Limited during the whole of the financial half-year and up to the date of this report, unless otherwise stated:

Christopher Charles Vonwiller - Chairman Mark Brayan (appointed on 13 July 2015) William Robert Pulver Robin Jane Low Jeremy Andrew Samuel Stephen Hasker (appointed on 7 April 2015) Deena Shiff (appointed on 15 May 2015) Lisa Carol Braden-Harder

Principal activities

During the financial half-year the principal continuing activities of the Group consisted of the provision of data solutions and services for global technology companies and government agencies.

Appen operates through two operating divisions being:

• Content Relevance which provides annotated data used in search technology (embedded in web, e-commerce and social engagement) for improving relevance and accuracy of search results; and

• Speech and Data Collection which provides data used in speech recognisers, machine translation, speech synthesisers and other machine-learning technologies resulting in more engaging and fluent devices including internetconnected devices, in-car automotive systems and speech-enabled consumer electronics.

Supporting both divisions is a global on-demand workforce providing customers with very flexible in-country linguistic and cultural expertise in support of large global initiatives to any of 140 global markets.

Dividends

Dividends paid during the financial half-year were as follows:

Dividends paid for the half-year ended 30 June 2015 of nil cents (2014: 13.0 cents) per ordinary and management share	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 - 1,188

Dividend declared

On 28 August 2015, the Company declared an interim dividend for the year ended 31 December 2015 of 1.20 cents per share, fully franked. The record date for determining entitlements to the dividend is 4 September 2015. The financial effect of these dividends has not been brought to account in the financial statements for the period ended 30 June 2015 and will be recognised in subsequent financial reports.

Review of operations

The profit for the Group after providing for income tax amounted to $2,678,000, an increase of 28% compared to $2,088,000 in the corresponding period in 2014. Earnings before interest, tax, depreciation and amortisation ('EBITDA') increased by 36% from $3,369,000 to $4,843,000. After adding back the listing costs of $214,000 ($150,000 net of tax), the net profit after tax is $2,828,000 and earnings before interest, tax, depreciation and amortisation (‘EBITDA’) is $5,057,000.

Total revenue increased from $26,941,000 to $35,838,000 representing growth of 33%. This was driven by:

• Speech and Data increasing by 10% to $13,064,000 underpinned by ongoing solid demand from its existing customers.

• Content Relevance revenues of $22,740,000, an increase of 52% over the prior period due to existing customer demand and the acquisition of substantial new customers in search, social media and eCommerce. The revenue from new customers greatly reduces the risk of historic customer concentration.

• US-based revenue benefitted from favourable foreign exchange movements.

3

Appen Limited Directors' report 30 June 2015

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Expenses increased by 31% to $31,679,000 from $24,151,000 primarily due to an increase in services purchased to support the additional revenue.

Significant changes in the state of affairs

On 7 January 2015, the Company listed on the Australian Securities Exchange (ASX code: APX).

As set out in the IPO Prospectus, the Company raised $15,000,000 of funds through the issue of 30,000,000 new shares. The proceeds (after costs) from this raising was applied against contingent considerations associated with the previous acquisition (in 2011) of the Butler Hill Group of $2,200,000, the buyback of outstanding options of $5,400,000 and the sell down of shares of $5,100,000.

On 13 July 2015 Mark Brayan was appointed as Chief Executive Officer replacing Lisa Braden-Harder.

There were no other significant changes in the state of affairs of the Group during the financial half-year.

Rounding of amounts

The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.

This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act 2001.

On behalf of the directors

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______ Christopher Vonwiller Director

28 August 2015 Sydney

4

ABCD

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Appen Limited

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 30 June 2015 there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

• (ii) no contraventions of any applicable code of professional conduct in relation to the review

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KPMG

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Tony Nimac Partner

Sydney

28 August 2015

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

5

Appen Limited Statement of profit or loss and other comprehensive income For the half-year ended 30 June 2015

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Note Revenue 4 Other income 5 Expenses Services purchased - data collection Employee benefits expense 6 Depreciation and amortisation expense 6 Impairment of assets 6 Travel expense Professional fees Rental expense Communication expense Change in fair value of contingent consideration Other expenses Finance costs 6 Profit before income tax expense Income tax expense Profit after income tax expense for the half-year attributable to the owners of Appen Limited Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year attributable to the owners of Appen Limited Basic earnings per share 18 Diluted earnings per share 18	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 35,838 26,941 - 62 (18,098) (11,790) (10,069) (9,323) (689) (464) (37) (80) (448) (406) (378) (238) (246) (212) (141) (139) - (445) (1,281) (994) (292) (60)	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 35,838 26,941 - 62 (18,098) (11,790) (10,069) (9,323) (689) (464) (37) (80) (448) (406) (378) (238) (246) (212) (141) (139) - (445) (1,281) (994) (292) (60)
	4,159 (1,481)	2,852 (764)
	2,678 704	2,088 (441)
	704	(441)
	3,382	1,647
	Cents 2.81 2.78	Cents 2.83 2.55

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

6

Appen Limited Statement of financial position As at 30 June 2015

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Note Assets Current assets Cash and cash equivalents Trade and other receivables 7 Prepayments Total current assets Non-current assets Property, plant and equipment Intangibles Other Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 8 Derivative financial instruments 9 Income tax Provisions Revenue received in advance Total current liabilities Non-current liabilities Deferred tax Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital 10 Reserves 11 Retained profits/(accumulated losses) Total equity	Group 30 Jun 2015 31 Dec 2014 $'000 $'000 5,196 8,649 16,226 10,062 335 211	Group 30 Jun 2015 31 Dec 2014 $'000 $'000 5,196 8,649 16,226 10,062 335 211
	21,757	18,922
	353 11,159 8	358 10,859 -
	11,520	11,217
	33,277	30,139
	5,998 559 56 849 571	7,858 640 66 690 41
	8,033	9,295
	1,397 347	913 282
	1,744	1,195
	9,777	10,490
	23,500	19,649
	19,077 4,327 96	18,476 3,755 (2,582)
	23,500	19,649

The above statement of financial position should be read in conjunction with the accompanying notes

7

Appen Limited Statement of changes in equity For the half-year ended 30 June 2015

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Group Balance at 1 January 2014 Profit after income tax expense for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Issue of management shares Share-based payments Dividends paid (note 12) Balance at 30 June 2014 Group Balance at 1 January 2015 Profit after income tax expense for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Transaction costs, net of tax Issue of ordinary shares Share-based payments and transactions Balance at 30 June 2015	Issued capital $'000 8,124 - -	Reserves $'000 3,023 - (441)	Accumulated losses $'000 (3,009) 2,088 -	Total equity $'000 8,138 2,088 (441)
	- 438 - -	(441) - 133 -	2,088 - - (1,188)	1,647 438 133 (1,188)
	8,562	2,715	(2,109)	9,168
	Issued capital $'000 18,476 - -	Reserves $'000 3,755 - 704	Retained profits/ (accumulated losses) $'000 (2,582) 2,678 -	Total equity $'000 19,649 2,678 704
	- - 601 -	704 (233) - 101	2,678 - - -	3,382 (233) 601 101
	19,077	4,327	96	23,500

The above statement of changes in equity should be read in conjunction with the accompanying notes

8

Appen Limited Statement of cash flows For the half-year ended 30 June 2015

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Note Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest and other finance costs paid Income taxes paid Net cash from/(used in) operating activities 17 Cash flows from investing activities Payments for property, plant and equipment Payments for intangibles Payment for contingent consideration Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares 10 Proceeds from borrowings (USD loan) Repayment of borrowings (USD loan) Dividends paid 12 Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the financial half-year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial half-year	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 27,379 28,482 (30,571) (27,706)	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 27,379 28,482 (30,571) (27,706)
	(3,192) 8 (3) (782)	776 7 (60) (595)
	(3,969)	128
	(111) (136) -	(80) - (2,888)
	(247)	(2,968)
	601 - - -	438 2,149 (364) (1,188)
	601	1,035
	(3,615) 8,649 162	(1,805) 5,771 (340)
	5,196	3,626

The above statement of cash flows should be read in conjunction with the accompanying notes

9

Appen Limited Notes to the financial statements 30 June 2015

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Note 1. General information

The financial statements cover Appen Limited as a Group consisting of Appen Limited (the 'Company') and the entities it controlled at the end of, or during, the half-year. The financial statements are presented in Australian dollars, which is Appen Limited's functional and presentation currency.

Appen Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Level 6 9 Help Street Chatswood NSW 2067

A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of the financial statements.

The company was admitted to the Australia Securities Exchange ('ASX') listing on 7 January 2015 under the ASX code 'APX'.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 28 August 2015.

Note 2. Significant accounting policies

These general purpose financial statements for the interim half-year reporting period ended 30 June 2015 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001, as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 31 December 2014 and any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

New, revised or amending Accounting Standards and Interpretations adopted

The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group during the financial half-year ended 30 June 2015 and are not expected to have any significant impact for the full financial year ending 31 December 2015.

Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group.

The following Accounting Standards and Interpretations are most relevant to the Group:

• AASB 2013-9 Amendments to Australian Accounting Standards - Conceptual Framework, Materiality and Financial Instruments (Part C)

• AASB 2014-1 Amendments to Australian Accounting Standards (Part E)

10

Appen Limited Notes to the financial statements 30 June 2015

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Note 3. Operating segments

Identification of reportable operating segments

The Group is organised into two operating segments: Content Relevance and Speech and Data Collection. These operating segments are based on the internal reports that are reviewed and used by the Group's Chief Executive Officer ('CEO'), who is identified as the Chief Operating Decision Maker, in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments.

The CEO reviews management information which covers EBITDA (earnings before interest, tax, depreciation and amortisation), revenue and operating segment reports on a monthly basis. The accounting policies adopted for internal reporting to the CEO are consistent with those adopted in the financial statements.

The CEO does not review segment assets and segment liabilities on a regular basis.

Intersegment transactions

Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.

Major customers

During the year ended 30 June 2015 approximately 79% (30 June 2014: 85%) of the Group's external revenue was derived from sales to 5 major customers.

Operating segment information

Group - 30 Jun 2015 Revenue Services revenue Rent Interest Total revenue Segment result profit Corporate overhead Depreciation and amortisation Interest Profit before income tax expense Income tax expense Profit after income tax expense Group - 30 Jun 2014 Revenue Services revenue Rent Interest Total revenue Segment result profit Corporate overhead Depreciation and amortisation Interest Change in fair value of contingent consideration Profit before income tax expense Income tax expense Profit after income tax expense	Content relevance $'000 22,740 - -	Speech and data collection $'000 13,064 - -	Intersegment eliminations/ unallocated $'000 - 26 8	Total $'000 35,804 26 8
	22,740	13,064	34	35,838
	3,313	4,958	-	8,271 (3,709) (400) (3)
	Content relevance $'000 14,978 - -	Speech and data collection $'000 11,924 - -	Intersegment eliminations/ unallocated $'000 - 32 7
				4,159 (1,481)
				2,678
				Total $'000 26,902 32 7
	14,978	11,924	39	26,941
	1,526	4,293	-	5,819 (2,035) (427) (60) (445)
				2,852 (764)
				2,088

11

Appen Limited Notes to the financial statements 30 June 2015

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Note 4. Revenue

Sales revenue Services revenue Other revenue Interest Rent Revenue Note 5. Other income Net foreign exchange gain Note 6. Expenses Profit before income tax includes the following specific expenses: Depreciation and amortisation Licences Plant and equipment Intangible assets Total depreciation and amortisation Impairment Receivables Finance costs Interest and finance charges paid/payable Net foreign exchange loss Finance costs expensed Employee benefits expense Defined contribution superannuation expense Share-based payments expense Employee benefits expense Total employee benefits expense	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 35,804 26,902 8 7 26 32	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 35,804 26,902 8 7 26 32
	34	39
	35,838	26,941
	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 - 62
	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 30 36 128 89 531 339
	689	464
	37	80
	3 289	60 -
	292	60
	483 101 9,485	441 133 8,749
	10,069	9,323

Note 5. Other income

Note 6. Expenses

12

Appen Limited Notes to the financial statements 30 June 2015

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Note 7. Current assets - trade and other receivables

Note 7. Current assets - trade and other receivables
Trade receivables Less: Provision for impairment of receivables Other receivables Work in progress GST recoverable Other refunds	Group 30 Jun 2015 31 Dec 2014 $'000 $'000 11,003 4,630 (33) (61)
	10,970	4,569
	48 4,896 26 286	623 3,241 129 1,500
	16,226	10,062

Note 8. Current liabilities - trade and other payables

Trade payables VAT payable Other payables and accrued expenses Note 9. Current liabilities - derivative financial instruments Forward foreign exchange contracts Option foreign exchange contracts - Collars	Group 30 Jun 2015 31 Dec 2014 $'000 $'000 2,872 3,801 79 87 3,047 3,970	Group 30 Jun 2015 31 Dec 2014 $'000 $'000 2,872 3,801 79 87 3,047 3,970
	5,998	7,858
	Group 30 Jun 2015 31 Dec 2014 $'000 $'000 421 402 138 238
	559	640

Note 9. Current liabilities - derivative financial instruments

Refer to note 13 for further information on fair value measurement.

13

Appen Limited Notes to the financial statements 30 June 2015

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Note 10. Equity - issued capital

Note 10. Equity - issued capital
30 Jun 2015 Shares Ordinary shares - fully paid 96,280,002 Movements in ordinary share capital Details Date Balance 1 January 2015 Issue of shares 12 February 2015 Issue of shares 8 April 2015 Issue of shares 8 April 2015 Issue of shares 23 June 2015 Issue of shares 23 June 2015 Balance 30 June 2015	30 Jun 2015 Shares 96,280,002		Group 31 Dec 2014 30 Jun 2015 Shares $'000 94,846,002 19,077		31 Dec 2014 $'000 18,476
			Shares 94,846,002 2,500 409,000 613,500 204,500 204,500	Issue price $0.000 $0.367 $0.428 $0.432 $0.489	$'000 18,476 - 150 263 88 100 19,077
			96,280,002

The issue of shares on 12 February 2015 relates to an issue of bonus shares. All other share issues are a result of options being exercised and will be fully disclosed in the 2015 Annual Report.

Note 11. Equity - reserves

Common control reserve Foreign currency translation reserve Share-based payments reserve Other reserves	Group 30 Jun 2015 31 Dec 2014 $'000 $'000 (1,416) (1,416) 2,742 2,038 1,142 1,041 1,859 2,092	Group 30 Jun 2015 31 Dec 2014 $'000 $'000 (1,416) (1,416) 2,742 2,038 1,142 1,041 1,859 2,092
	4,327	3,755

Note 12. Equity - dividends

Dividends paid during the financial half-year were as follows:

Dividends paid for the half-year ended 30 June 2015 of nil cents (2014: 13.0 cents) per ordinary and management share	Group 30 Jun 2015 30 Jun 2014 $'000 $'000 - 1,188

Dividend declared

On 28 August 2015, the Company declared an interim dividend for the year ended 31 December 2015 of 1.20 cents per share, fully franked. The record date for determining entitlements to the dividend is 4 September 2015. The financial effect of these dividends has not been brought to account in the financial statements for the period ended 30 June 2015 and will be recognised in subsequent financial reports.

14

Appen Limited Notes to the financial statements 30 June 2015

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Note 13. Fair value measurement

Fair value hierarchy

The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3: Unobservable inputs for the asset or liability

Group - 30 Jun 2015 Liabilities Forward foreign exchange contracts Option foreign exchange contracts - Collars Total liabilities Group - 31 Dec 2014 Liabilities Forward foreign exchange contracts Option foreign exchange contracts - Collars Total liabilities	Level 1 $'000 - -	Level 2 $'000 421 138	Level 3 $'000 - -	Total $'000 421 138
	-	559	-	559
	Level 1 $'000 - -	Level 2 $'000 402 238	Level 3 $'000 - -	Total $'000 402 238
	-	640	-	640

There were no transfers between levels during the financial half-year.

The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-term nature.

Valuation techniques for fair value measurements categorised within level 2

Derivative financial instruments have been valued using quoted market rates. This valuation technique maximises the use of observable market data where it is available and relies as little as possible on entity specific estimates.

Note 14. Contingent liabilities

The Group has given bank guarantees as at 30 June 2015 of $122,000 (31 December 2014: $122,000) to various landlords.

Note 15. Related party transactions

Transactions with related parties

A database has been provided on commercial terms to a non-for-profit organisation associated with the Chairman. There were no other transactions with related parties during the current financial half-year.

Receivable from and payable to related parties

There were no trade receivables from or trade payables to related parties at the current and previous reporting date.

Loans to/from related parties

There were no loans to or from related parties at the current and previous reporting date.

Note 16. Events after the reporting period

Chief Executive Officer change

On 13 July 2015, Mark Brayan was appointed as Chief Executive Officer replacing Lisa Braden-Harder.

Apart from the dividend declared as disclosed in note 12, no other matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.

15

Appen Limited Notes to the financial statements 30 June 2015

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Note 17. Reconciliation of profit after income tax to net cash from/(used in) operating activities

	Group	Group
	30 Jun 2015	30	Jun 2014
	$'000		$'000
Profit after income tax expense for the half-year	2,678		2,088
Adjustments for:
Depreciation and amortisation	689		464
Share-based payments	-		133
Foreign exchange differences	704		(108)
Change in fair value of contingent consideration	-		445
Impairment loss on receivables	37		80
Change in operating assets and liabilities:
Increase in trade and other receivables	(7,309)		(1,108)
Increase in deferred tax assets	-		(550)
Increase in trade and other payables	(1,238)		(2,045)
Increase in employee benefits and provisions	238		97
Decrease in provision for income tax	(782)		(191)
Increase in deferred tax liabilities	484		854
Decrease in unearned revenue	530		(31)
Net cash from/(used in) operating activities	(3,969)		128
Note 18. Earnings per share

	Group	Group
	30 Jun 2015	30	Jun 2014
	$'000		$'000
Profit after income tax attributable to the owners of Appen Limited	2,678		2,088
	Number	Number
Weighted average number of ordinary shares used in calculating basic earnings per share	95,335,310	73,789,429
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares	841,328		7,991,958
Weighted average number of ordinary shares used in calculating diluted earnings per share	96,176,638	81,781,387
	Cents		Cents
Basic earnings per share	2.81		2.83
Diluted earnings per share	2.78		2.55

The weighted average number of ordinary shares for the half-year ended 30 June 2014 has been restated for the effect of the recapitalisation (8.18 for 1) that occurred between 30 October 2014 and 1 December 2014, in accordance with AASB 133 'Earnings per share'.

Number

Weighted average number of ordinary shares used in calculating basic earnings per share (before restatement) Adjustment required by AASB 133 'Earnings per share' Weighted average number of ordinary shares used in calculating basic earnings per share (after restatement)	7,475,412 66,314,017
	73,789,429

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Appen Limited Notes to the financial statements 30 June 2015

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Note 19. Share-based payments

Long-term incentive plan

The Company has developed a long term incentive plan (“LTIP”) which incorporates performance conditions and will be effective from 1 January 2015. This was confirmed by the board on the 25 February 2015.

The long term incentive plan provides for awards of Performance Rights to senior management, vesting in 1/3 tranches over a three year period, subject to an Earnings per Shares non-market performance condition tested over a one year period. If the EPS target is satisfied the Performance Rights will continue, but will lapse if an employee ceases employment with the Company. Details are outlined in the table below:

The long term incentive plan provides for awards of Performance Rights to senior management, vesting in 1/3 tranches over a three year period, subject to an Earnings per Shares non-market performance condition tested over a one year period. If the EPS target is satisfied the Performance Rights will continue, but will lapse if an employee ceases employment with the Company. Details are outlined in the table below:	ment, vesting in 1/3 tranches dition tested over a one year pse if an employee ceases	ment, vesting in 1/3 tranches dition tested over a one year pse if an employee ceases
Group 30 Jun 2015 30 Jun 2014 Vesting date Number Number 1 March 2016 225,960 - 1 March 2017 225,960 - 1 March 2018 225,960 - Total performance rights 677,880 - Under this calculation method an annual EPS growth target is set at the beginning of each performance period. Earnings per share targets 2015 * 2016 2017 % % % Basic EPS Growth rate 4.3% 10.0% 10.0%	Group 30 Jun 2015 30 Jun 2014 Number Number 225,960 - 225,960 - 225,960 -
	677,880	-

Under this calculation method an annual EPS growth target is set at the beginning of each performance period.

• this is based on the adjusted net profit after tax for 2014.

The Company incurred a charge of $52,476 during this period in relation to this incentive plan.

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Appen Limited Directors' declaration 30 June 2015

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In the directors' opinion:

• the attached financial statements and notes comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2015 and of its performance for the financial half-year ended on that date; and

• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of directors made pursuant to section 303(5)(a) of the Corporations Act 2001.

On behalf of the directors

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______ Christopher Vonwiller Director

28 August 2015 Sydney

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ABCD

Independent auditor’s review report to the members of Appen Limited

Report on the financial report

We have reviewed the accompanying interim financial report of Appen Limited, which comprises the consolidated statement of financial position as at 30 June 2015, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the interim period ended on that date, notes 1 to 19 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company and the entities it controlled at the half-year’s end or from time to time during the interim period.

Directors’ responsibility for the interim financial report

The directors of the company are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the interim financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 30 June 2015 and its performance for the interim period ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As auditor of Appen Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

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Independent auditor’s review report to the members of Appen Limited (continued)

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Appen Limited is not in accordance with the Corporations Act 2001 , including:

(a) giving a true and fair view of the Group’s financial position as at 30 June 2015 and of its performance for the interim period ended on that date; and

(b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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KPMG

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Tony Nimac Partner

Sydney

28 August 2015

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