Dialog Semiconductor Annual Report 2018

FY2018 Annual Report · Dialog Semiconductor

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Dialog Semiconductor Plc
Annual report and accounts 2018

Powering
the smart
connected
future

Powe ring

The world is being re-shaped by
the convergence of social, mobile,
cloud and big data. The combination
of these technologies unlocks an
incredible opportunity to connect
everything together in a new way
which is dramatically transforming
the way we live and work.

Marc Benioff

the smartPowe ring

the smartconn ected

conn ected

Millennials, and the generations that follow,
are shaping technology. This generation has
grown up with computing in the palm of their
hands. They are more socially and globally
connected through mobile internet devices
than any prior generation. And they don’t
question; they just learn.

Brad D. Smith

fut ure

Some people call this artificial intelligence,
but the reality is this technology will enhance
us. So instead of artificial intelligence, I think
we’ll augment our intelligence.

Ginni Rometty

fut ure

Who we are

Powering the smart
connected future

We are a fabless semiconductor company
primarily focused on the development
of highly-integrated and power-efficient
mixed-signal ICs for consumer electronics
and other high-growth markets.

Our passion for innovation and
entrepreneurial spirit ensures we remain
at the core of the Internet of Things (“IoT”)
and mobile computing.

Introduction

Who we are

2018 Financial highlights

Industry drivers

Industry dynamics

Investment case

Our technologies

Our framework and values

Chairman’s statement

Q&A with our CEO, Dr Jalal Bagherli

What we do

At a glance

Our business model

Managing our resources and relationships:
U Engaging with our colleagues
U The strength of our customer relations
U Managing our production partners

and suppliers

U Through our business activity we create

value for society

U We operate and promote environmentally

responsible practices

Our markets and strategy

Governance

IFC

Our markets and strategy

Our strategy

Our strategic priorities:
U Extending our product portfolio
U Achieving a broader and deeper

customer base

U Delivering continuous innovation
U Focusing on strategic initiatives and M&A

Our performance

Key performance indicators “KPIs”

Segmental review:
U Mobile Systems
U Advanced Mixed Signal
U Connectivity
U Automotive & Industrial
Financial review

Sustainability and risk

Managing risk and uncertainty

Introduction to governance

Leadership – Board of Directors

Leadership – Management team

Directors’ report

Corporate governance statement

Directors’ remuneration report

Remuneration at a glance

Directors’ remuneration policy

Annual report on remuneration

Statement of Directors’ responsibilities

Responsibility statement

Financial statements

Independent auditor’s report

Consolidated financial statements

Notes to the consolidated financial statements

Company financial statements

Notes to the Company financial statements

Financial performance measures

Other information

Glossary of Terms – Technical

Glossary of Terms – Financial

Advisers and corporate information

Group directory

Related undertakings

Branches and representative offices

149

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162

164

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166

167

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2018 Financial highlights

Gross margin (%)

47.9%

2018

2017

2016

Diluted EPS (US$)

US$1.80

2018

2017

2016

1.80

2.21

Year-on-year revenue growth (US$m)

+7%

2018

2017

2016

Operating margin (%)

13.8%

2018

2017

2016

13.8

1,442

1,353

1,198

25.9

Cash ﬂow from operating activities (US$m)

US$288.6m

2018

2017

2016

288.6

284.7

248.8

Underlying year-on-year revenue growth (US$m)

Underlying gross margin (%)

+7%

2018

2017

2016

1,442

1,353

1,198

48.3%

2018

2017

2016

Underlying operating margin (%)

19.5%

2018

2017

2016

Underlying diluted EPS (US$)

US$2.90

19.5

19.2

18.5

2018

2017

2016

2.09

47.9

47.7

47.3

3.25

48.3

47.9

47.4

2.90

2.92

Underlying measures of performance are non-IFRS measures because they exclude amounts that
are included in, or include amounts that are excluded from, the most directly comparable measure
calculated and presented in accordance with IFRS or are calculated using financial measures that
are not calculated in accordance with IFRS. We do not regard non-IFRS measures as a substitute
for, or superior to, the equivalent IFRS measures. Non-IFRS measures presented by Dialog may not
be directly comparable with similarly-titled measures used by other companies.

An explanation of the adjustments made to the equivalent IFRS measures in calculating the non-
IFRS measures and reconciliations of the non-IFRS measures to the equivalent IFRS measures for
each of the periods presented are set out in the section entitled “Financial performance measures”
on pages 156 to 161.

Dialog Semiconductor PlcAnnual report and accounts 2018

Industry drivers
A number of external factors are creating new opportunities
for the industry and driving growth

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driving

The semiconductor industry is enabling a smart
connected future where consumers benefit from
an array of new technologies. Our challenge
is to deliver innovation and make it happen.

Technological advancements and industry
dynamics are creating new investment
opportunities and growth.

IOT: SMART CONNECTED
FUTURE

Semiconductors serve as the foundation
for enabling a connected world. There will
be a major focus on smaller chips that
consume less power and provide better
support for wireless connectivity.

Consumers are more connected than
ever, owning an average of four IoT
devices that communicate with the cloud.
Globally, an estimated 127 new devices
connect to the Internet every second.1

The IoT is also benefiting from
infrastructure improvements that have
enhanced connectivity. Similarly,
technological advances are reducing
power requirements, decreasing costs,
and promoting the development of more
integrated IoT solutions.

1 McKinsey & Company, “What’s new with

the Internet of Things”, May 2017.

Dialog Semiconductor PlcAnnual report and accounts 2018

5G AND AR/VR TECHNOLOGIES

SECURITY

Major telecommunications companies, together
with mobile phone device manufacturers, are
preparing to release 5G capabilities. The US
started the 5G roll-out in H2 2018 while Japan and
Korea are expected to start in 2019. 5G will enable
an increasing number and range of machines to
transmit and receive data. Bandwidth-intensive
applications, such as high-resolution video
streaming and AR/VR, now accounts for 70%
of broadband data usage; and that is expected
to rise rapidly.

Security concerns around connected devices
pose a major threat to semiconductor companies.
These include home automation systems, wearable
devices, and industrial automation products.
Semiconductor products, especially those used
in areas such as connected health and industrial
automation, will therefore, need to place more focus
on developing secure chips.

growth

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RISE OF ARTIFICIAL
INTELLIGENCE

AI is viewed as a source of
differentiation from their competition
by businesses. The next generation
of AI is set to be combined
with self-driving cars, surgical
robots, autonomous drones, and
smartphones. Semiconductor chips
consume a huge amount of power
to do such AI intensive tasks.

LONGER BATTERY LIFE

Semiconductors are used
extensively in electronic devices,
such as smartphones, wearables,
flat-screen monitors and LED TVs.
The industry is set to grow as needs
such as long battery life continue to
be driven by the increasing power
consumption brought by data
processing and AI capabilities.

CONSOLIDATION
THROUGH M&A

As semiconductor industry
growth slows in certain segments,
companies are increasingly turning
towards M&A to sustain profitability,
seek new sources of revenue, and
reduce revenue volatility through
a diversified portfolio of products.

Dialog Semiconductor PlcAnnual report and accounts 2018

Industry dynamics

Our position is shaped by

industry
dynamics…

TOP INDUSTRY DYNAMICS
IN THE NEXT THREE YEARS

IMPLICATIONS
FOR DIALOG

DIVERSE CUSTOMER DEMANDS
U Most OEMs offer a wide range of electronic
applications to consumers, in some cases
requiring a complete system approach to solve
all semiconductor requirements.

To meet this challenge, Dialog continues to broaden
its product portfolio through a combination of organic
development and M&A. Companies are seizing
the opportunities to serve new sectors, applications
and geographies.

Read more about our customers
on Page 20

INCREASING COMPETITION FOR TALENT
U Electronic engineers are in high demand and

companies outside of the semiconductor industry
are now establishing internal teams to take care
of some of their semiconductor requirements.

For a number of years, Dialog has established policies,
processes and a number of programmes to recruit,
develop and retain talent globally.

Read more about our people
on Pages 18-19

CROSS-BORDER REGULATIONS
U The global nature of the supply chain and the
increasingly complex geopolitical environment
are becoming a concern for our industry.

ASP EROSION
U The semiconductor industry is highly competitive,

and the price of ICs erodes every year.

Our fabless operating model provides our business
with the ability to adapt to different trading scenarios
whenever they may arise.

Read more about our risks
on Pages 52-56

Dialog’s continuous innovation results in differentiated
and innovative products which create value for our
customers. This helps to offset the price erosion which is
intrinsic to our industry. Additionally, with higher volumes,
we can extract lower prices from our fabrication partners.

Read more about our segmental review
on Pages 36-42

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Dialog Semiconductor PlcAnnual report and accounts 2018

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Investment case

SUPPORT ORGANIC AND
INORGANIC EXPANSION
U We reinvest our cash in organic and
inorganic initiatives which aim to
enhance our competitive advantage,
expand our technology portfolio and
our customer base.

Number of Sales Opportunities
with a value higher than US$250k

KPI

1,011

Read more on our KPIs
on Pages 34-35

KPI

Technological innovation and agility

A close R&D collaboration with our
customers enhances our innovation
capacity and creates strong and long
lasting customer relations. Our customers
want our focused innovation, technical
expertise, high integration and fast product
development and support. Given the speed
of technological change in our markets,
our focus is to develop and retain long-term
relationships with all our major customers,
adopting a true partnership approach.

Customers with a significant contribution
to revenue include Apple, Xiaomi, Huawei,
Samsung and Panasonic.

These top five customers represented
83% of Dialog revenue in 2018 (2017 82%;
2016: 92%). We recognise there is a risk
associated with this level of customer
concentration and the revenue derived from
our largest customer (Apple Inc.) is shown
on page 144, note 33c.

See details of customer concentration
in the Risk section on Page 53

During 2018 we reached a landmark
agreement with Apple Inc., a testimony of
the quality and strength of our mixed-signal
technology. Dialog will continue on its
path to create a more diversified business,
welcoming new customers across multiple
business segments.

Customer and industry
standards

As a supplier of semiconductors to
manufacturers of sophisticated electronic
goods we are subject to a significant body
of technical, legal, social responsibility, and
quality control requirements defined by
our customers.

For more information see our
2018 Sustainability Report

Our target end-markets

IoT

MOBILE

AUTOMOTIVE

COMPUTING & STORAGE

A landmark agreement with Apple Inc.

On 11 October 2018, Dialog announced
an agreement with Apple Inc. to license
certain of its power management
technologies, transfer certain of its
assets and over 300 employees to
support chip research and development.
The employees who will be transferred
when the deal closes have worked closely
with Apple for many years, and this
transition will foster deeper collaboration
between the two companies.

This agreement was the result of a long-
standing and close R&D collaboration
which resulted in the creation of unique
power management technology for
mobile applications.

Apple will remain an important customer
and innovation partner to Dialog and we
expect to continue to collaborate with
them to develop innovative technologies
for many years to come.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Managing our production partners and suppliers

Our people
Our people
and culture
and culture

Customer
Customer
relations
relations

IP and
IP and
products
products

Robust and responsible
supply chain

Strong balance
Strong balance
sheet
sheet

Building our competitive advantage

100%

On Time Delivery performance (%)

2018

2017

2016

100

About our Supplier Code of Conduct

We expect all of our major suppliers to
comply with our Supplier Code of Conduct.

For more information see our
2018 Sustainability Report

We operate a high-touch fabless business
model and we have developed strong and
responsible relationships with our foundry,
test and packaging partners. Over time, our
engagement has evolved into a close R&D
and supply chain collaboration.

Dialog employees are based in many of the
premises of our partners. We undertake
annual audits of our existing fabrication
partners covering operational and
sustainability aspects.

We outsource our wafer production to leading
foundries like TSMC and Global Foundries,
mostly in Taiwan and China. They provide
high-quality products and have the ability
to meet both our stringent qualification
requirements and tight deadlines.

Over the years we have worked closely
with TSMC to introduce new manufacturing
technologies for our highly-integrated
power management ICs, such as 130
nanometre BCD.

The final assembly of our chips is
outsourced to a number of qualified
subcontractors in Asia.

Our test programmes, based on our own
and individual customers’ specifications are
developed by our test engineers in parallel
with the design process.

Leveraging the outsourcing model to its
fullest for volume manufacturing, we still
retain in-house a prototype test facility,
including physical analysis capabilities.
This facilitates fast ramping to volume
manufacturing at the foundry and at
packaging and test sub-contractors,
achieving best-in-class industry yields and
extremely high quality and reliable products.
Equally important, it allows us to minimise
the scope of tests required and the device
test time, helping to reduce unit costs.

A resilient supply chain

How we manage our value chain

Materiality*

Given the nature of our business model
and our commercial relationships, value
chain management is a particularly
important issue for Dialog. This not only
includes operational aspects (including the
avoidance and mitigation of supply chain
disruption and supply constraints), but also
sustainability aspects such as:
U The impact of our business partners on

human rights and labour rights.

U Health and safety performance amongst

our suppliers.

U The environmental impacts of both
our suppliers and the contents of
our products.

This reflects:
U Evolving stakeholder expectations,
which place ever-growing emphasis
on the need for companies to identify,
and use their legitimate influence to
proactively manage, their indirect
sustainability impacts.

U Dialog’s duty to help protect its own

customers from reputational, contractual
or commercial harm.

We manage our value chain through:
U A policy of only dealing with fabrication
partners who are accredited to or
are compliant with the ISO14001
(environment) and ISO9001 (quality)
management standards.

U Screening of all new fabrication partners
against our Self-Audit Checklist (which
covers labour and human rights, health
and safety, the environment and business
ethics), as well as pre-qualification audits
prior to the integration of new fabrication
partners into our supply chain.
U Annual auditing (by joint Dialog and

third-party auditing teams) of all existing
fabrication partners against our Supplier
Audit Checklist and Corporate Social
Responsibility Checklist. In addition
to requirements relating to ISO14001,
OHSAS18001 and ISO9001, auditing
covers a range of broader corporate social
responsibility issues, including those drawn
from the SA8000 social accountability
standard. In 2018, we carried out 22
supplier audits on this basis (2017: 18).

Responsibility in this respect sits
with the Senior Vice President Global
Manufacturing Operations. He is
supported in this role on a day-to-day
basis by the Environmental Manager.

Proportion of major fabrication partners screened/
audited for sustainability performance by issue
type (new fabrication partners screened1/
existing fabrication partners audited2)
Health and safety (%)
Environment (%)
Labour rights (incl. human rights) (%)
Society (%)

2016
100/100
100/100
100/100
100/100

2017
100/100
100/100
100/100
100/100

2018
100/100
100/100
100/100
100/100

Type and number of “major” negative audit findings3
Health and safety
Environment
Labour practices (incl. human rights)
Society

2016
0
1
0
0

2017
6
2
3
0

20185
7
54
206
0

1 Screening activity is aimed at improving the performance of our fabrication partners where necessary,

rather than their exclusion from our supply chain.
Includes both documentary auditing and on-site auditing. All our fabrication partners were subjected to
auditing in 2018.
i.e. audit findings of sufficient seriousness that Dialog requires immediate correction on the part of
the supplier.

4 Such as, boundary noise management, waste management and indoor air quality management.
5

In 2018, we continued to strengthen our audit processes and expanded the scope of our audits to include
Silego Technology Inc., acquired in November 2017.

6 Such as working hours management above and beyond local law and foreign contract worker protection.

* As indicated on page 16, material sustainability issues.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Managing our resources and relationships continued

Through our business activity we create value for society

Our people
and culture

Customer
Customer
relations
relations

IP and
products

Robust and responsible
Robust and responsible
supply chain
supply chain

Strong balance
Strong balance
sheet
sheet

Building our competitive advantage

Our most important societal impact is the
generation of economic value, much of
which is distributed amongst investors,
employees, suppliers, host governments
and other beneficiaries. The nature of
products means we play an important role
in helping millions of end-users access
affordable and life-enhancing technology.
Furthermore, our position at the forefront
of semiconductor R&D means we are
constantly contributing towards the
advancement of scientific knowledge
in this area, laying the ground for future
technological innovation, whether by
ourselves or others. Our products are
based around a range of power-efficient
IC solutions, and we aim to have a positive
impact on the wider environment through
the development and marketing of energy-
saving technology.

Societal benefits

Economic impact

In pursuit of the generation of profit we
also generate broader economic value,
much of which is distributed to a wider set
of stakeholders.

For more information see our
2018 Sustainability Report

Our products

Materiality*

Our products are based around a range
of power-efficient IC solutions, and we
aim to have a positive impact on the wider
environment through the development and
marketing of energy-saving technology.

Positive product impacts

The technology that we design, develop and
market supports the wider provision (by our
business partners) of advanced, affordable
technology to consumers in a range of
global mass-markets, including:
U Personal, portable computing devices.
U IoT applications.
U LED solid state lighting and

LED backlighting.

Total value generation and distribution by type
(US$ millions)
Economic value generated
Economic value distributed
Operating costs1
Employee wages and benefits2
Payments to providers of capital
Payments to government
Community investments
Economic value retained

1 Excluding employee wages and benefits and property tax.
2

Including share-based payments.

2016
1,197.6
1,076.2
794.9
230.3
3.4
47.4
0.2
121.4

2017
1,352.8
1,183.1
881.3
274.5
1.3
25.8
0.2
169.7

2018
1,442.1
1,304.2
933.7
311.2
3.1
56.0
0.2
137.9

Minimisation of negative
product impacts

The nature of our integrated circuits means
that their actual and potential negative
impacts are relatively limited. Nonetheless,
we design our products in a way that is
intended to minimise any negative impacts
they might have over their lifecycle.
This includes efforts to reduce the size of
our integrated circuits (thus reducing the
amount of input materials required, as
well as the amount of packaging used to
protect and ship them). In addition, and
as described above, we aim to make our
integrated circuits as energy-efficient as
possible – while also enhancing the energy
efficiency of the larger products in to which
they are incorporated.

Given the important role our integrated
circuits play in managing the power supply
of more than a billion consumer end-
products, we place significant emphasis on
ensuring they do not pose any health and
safety risks to end-users.

In this context, our products offer a range of
advantages to end-users (and, by extension,
our customers who are selling to them).

These include:
U Mobile power management: Greater
power efficiency, resulting in longer
battery life and increased mobility.
For example, typical usage tests
suggest our Power Management
Integrated Circuits decrease the power
consumption of smartphones, tablets
and Ultrabooks™ by up to 30%**.
U Power conversion: Our high efficiency
AC/DC power converters and LED
drivers help maximise power conversion
efficiency using digital technology
and fewer components. This includes
converters that use little or no power
while on standby – a particularly
important aspect when you consider that
standby demand consumes more than
100 billion kilowatt-hours of electricity
annually in the United States alone
(enough to power more than nine million
American households). Furthermore, our
solid state lighting (“SSL”) LED drivers
support very high efficiency, long-lifespan
SSL bulbs.

U Connectivity: Our Bluetooth® low
energy, SmartBond™ System-On-
Chip helps increase the battery life
of relevant wireless products by up
to 100%*** – reducing overall power
usage and enhancing the mobility of
connected products.

* As indicated on page 16, material sustainability issues.
** Compared to discrete solutions.
*** Compared to similar products available in the market.

Dialog Semiconductor PlcAnnual report and accounts 2018

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We operate and promote environmentally
responsible practices

Our people
and culture

Customer
Customer
relations
relations

IP and
IP and
products
products

Robust and responsible
Robust and responsible
supply chain
supply chain

Strong balance
Strong balance
sheet
sheet

Building our competitive advantage

Environmental responsibility

Energy and carbon emissions

We are working across our offices to
significantly reduce CO2 emissions and
minimise the carbon footprint of our
business. This year, we have offset 100%
of emissions from all air travel and the use

of rental cars from our two main design
centres – Nabern and Swindon. We work
with Climate Care to offset CO2 emissions
through various renewable energy projects
in Turkey, China and Taiwan.

Scope 1
Scope 2
Scope 3

2017
Total
92.5
1,651.5
5,210.2

2017 per
employee
0.05
0.86
2.71

2018
Total
81.2
1,170.3
4,203.6

2018 per
employee
0.04
0.56
1.99

Scope 1: Direct emissions from self-generation.

Scope 2: Indirect emissions from the consumption of purchased electricity, heat or steam.

Scope 1 and 2 emissions from our two largest design centres – Nabern and Swindon.

Scope 3: Other indirect emissions including those related to transport. Includes all air travel
and car hire.

Materiality*

We operate responsible practices within our
own business and promote them across
our supply chain.

Our products themselves are based around
a range of energy-efficient IC solutions, and
we aim to have a positive impact on the
wider environment through the development
and marketing of energy-saving technology.
We make an ongoing effort to minimise our:
U Energy consumption and

carbon emissions.
U Pollution and waste.
U Use of natural resources.

Management approach

Responsibility for environmental
performance sits with our Senior Vice
President Global Manufacturing Operations.
We further govern our environmental
responsibility through the application of the
Dialog Code of Conduct, which addresses
our emissions to air and water, resource
use, management of hazardous substances
and waste management. Furthermore, we
are certified to the ISO14001 environmental
management standard, and our Company
Quality and Management Manual
support our efforts to achieve continuous
improvement. In 2016, we implemented
a new energy management system in
Germany, achieving ISO50001 certification.

* As indicated on page 16, material sustainability issues.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Our markets and strategy

The opportunities in our markets

The major markets in which we operate are below (market size in US$)
PMICs, Charger ICs and Haptics

Key Drivers

2017-2021 CAGR
Source: Gartner 2018, Dialog internal.

Audio Codec

2021

2017

2021

2017

2017-2021 CAGR
Source: Gartner 2017, IDC 2016, Dialog internal.

Bluetooth® low energy

23%

2021

2017

$334m

2017-2021 CAGR
Source: IHS Technology Q1 2018 Report, Dialog internal.

Wireless, USB audio

10%

2021

2017

$505m

2017-2021 CAGR
Source: Future source (October 2018) and Dialog internal.

$6.2bn

$5.5bn

U Increasing daily use of mobile devices.
U Larger batteries and battery charge time reduction.
U Larger, higher resolution screens, higher rate of data
transmission and multi-core application processors.

U Industry increase in “always-on” applications.
U Acceleration of mobile technology into the

Automotive space.

$542m

$523m

U More power-efficient audio solutions which help

to extend battery life.

U High-quality audio technology capturing speech

and audio.

U Industry increase in “always-on” applications.

$762m

U Increase in the number of smart connected devices.
U Very low power data transmission from peripherals

to smartphones and tablets.

U Solutions enabling customers a fast go-to-market.

$735m

U Increase in power-efficient, feature-rich wireless

audio applications.

U Fast growing USB type-C Hi-res audio headsets for

the mobile market.

U Fast growing semi-professional Unified Communication

headsets with low-latency microphone features.

Configurable Mixed-signal ICs

2021

2017

$1,683m

$1,436m

2017-2021 CAGR
Source: Gartner 2018, Dialog internal estimates.

Power Conversion

43%

2021

2018

$197m

2018-2021 CAGR
Source: Statista (2018), WitsView (Dec 2015), Gartner (2018), Dialog internal estimates.

U Initially focused on consumer markets requiring reliable

and cost sensitive products, as well as fast time-to-market.

U CMICs replace incumbent discrete components so its
growth potential is higher than the end-market growth.
U Addressing the opportunity in consumer, mobile, IoT,

automotive, communications and computing end-markets.

$579m

U Larger smartphone/mobile device batteries and higher

power adapters needed to charge them.

U Consumer demand for faster mobile device charging

and smaller travel adapters/power supplies requires very
efficient, higher power density AC/DC IC solutions.
U An expanding array of new rapid charging protocols,

including the new USB Power Delivery 3.0 (USB-PD 3.0),
Qualcomm® Quick Charge™ 4+ and other new proprietary
OEM protocols.

U Market shift from edge-lit design to multi-segment and
direct backlighting to enable higher resolution and high
dynamic range (“HDR”) displays.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Our strategy

A path for future revenuegrowth

Our ambition is to power the smart connected
future, enhancing the usability, effectiveness and
sustainability of consumer electronic products.

Read about Managing risk and uncertainty
on Page 52

We made good progress in 2018, moving forward with initiatives
in each of our strategic priorities. Our goal is to generate
sustainable long-term value for our customers, our shareholders,
our employees and other stakeholders.

The strategic framework aims to give a comprehensive view of
our business and the links between our strategy, risks and the
progress made during the year.

STRATEGIC PRIORITY

WHY IT IS IMPORTANT

EXTEND OUR
PRODUCT
PORTFOLIO

We aim to continuously extend our
product portfolio of highly-integrated
mixed-signal, lower power products.
This helps us to diversify, open up
new addressable markets and stay
ahead of the competition.

HOW WE MEASURE
OUR PROGRESS

New products introduced and
sold in 2018 with revenues greater
than US$200,000.

ACHIEVE A BROADER
AND DEEPER
CUSTOMER BASE

The quality of our products has
attracted the leading brands in each of
our markets. We want to maintain and
grow those strong relationships while
further diversifying our customer base
by launching new products and opening
up new addressable markets.

New customers welcomed to Dialog
with revenues greater than US$200,000.
Additionally, we deepened our existing
customer base with new ASIC and
ASSP products.

DELIVER
CONTINUOUS
INNOVATION

STRATEGIC
INITIATIVES
AND M&A

Innovation is at the core of our business.
Our top talent and technology, paired
with an innovative product development
philosophy and sustained R&D
investment, enables Dialog to deliver
high value to our customers.

US$326m

Expensed in R&D programmes
during 2018, an increase of 8%
compared with 2017.

We support the expansion of our
business through a combination of
organic initiatives, such as investments
in new technologies and establishing
regional partnerships, and M&A.

In Q4 2018 we entered the Indian
smartphone market with the first
PMIC volume production for the latest
Micromax smartphone.

Our ongoing collaborations with
Renesas and Xilinx will strengthen our
presence in the automotive segment.

Dialog Semiconductor PlcAnnual report and accounts 2018

Our strategic priorities

Extending our
product portfolio

Applying our mixed-signal expertise into
the development of new products

HOW WE MEASURE
OUR PROGRESS

Dialog entered the growing haptics market with
ultra-low power and compact Haptic IC.

The DA7280 offers a unique and highly responsive
haptic experience to the next generation of
smartphones, gaming and automotive UI systems.
This product offers lower power consumption and
approximately 50% reduction in cost (Bill of Materials)
compared to existing solutions on the market.

As haptic drivers spend the majority of their time in
standby/idle mode, the DA7280 was designed to utilise
very low idle current consumption (360nA) to maximise
battery life.

New products introduced and sold in 2018
with revenue greater than US$200,000

2018

2017

2016

Touchscreens are becoming a necessity, both in
the consumer and increasingly in the automotive
market, and this new IC will help provide a superior
user experience.

extend

KEY RISKS
U Human Capital.
U Information technology

and security.

U Dependency on mobile and

consumer electronics.
U Supply chain interruption.
U Quality assurance.
U Return on research and
development investment.

PROGRESS IN 2018
U New 15 Degrees-of-Freedom

(“DOF”) SmartBond™ Multi-Sensor
Kit to support sensor connectivity
in the Internet of Things (“IoT”).
Built on Dialog’s DA14585
SmartBond™ System-on-Chip
(“SoC”), the kit allows engineers
to easily connect sensors to the
cloud at the lowest power and
smallest footprint.

U Added Bluetooth® Mesh support
to SmartBond™ product family.
Enhanced by the Bluetooth® mesh
standard, SmartBond™ SoCs
will now enable extended-range
applications within the home and
industrial environments.

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Dialog Semiconductor PlcAnnual report and accounts 2018

Our strategic priorities

Achieving a broader and
deeper customer base

Four billion Configurable Mixed-signal
ICs shipped to date

This is a significant milestone for our Configurable
Mixed-signal ICs (“CMICs”) technology, with over
four billion CMICs having been shipped to date.
The milestone validates Dialog’s configurable technology,
including the highly successful GreenPAK™ product
family, as the leading choice for the market.

As market demand for CMIC technology intensifies,
Dialog has added to its suite of development tools to
further accelerate customer product designs across
IoT and mobile end-markets.

PROGRESS IN 2018
U Jabra introduces the first product
on the market featuring Dialog’s
DA14495 hi-fi audio SoC, delivering
superior connectivity and industry-
leading performance, even in busy
work environments.

U Dialog Semiconductor USB PD chipset
was adopted by Hosiden for its latest
smartphone adapters. Hosiden selected
Dialog to reduce BOM and minimise
adapter size for one of Japan’s leading
mobile TELCO providers.

KEY RISKS
U Dependency on key customers.
U Dependency on mobile and

consumer electronics.

HOW WE MEASURE
OUR PROGRESS

New customers welcomed to Dialog
in 2018 with revenue greater than
US$200,000. Additionally, we deepened
our existing customer base with new
ASIC and ASSP products.

2018

2017

2016

broaden

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Dialog Semiconductor PlcAnnual report and accounts 2018

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Connectedhealth

A chip a day keeps
the doctor away

The number of patients being treated for chronic diseases
reached almost two billion* in 2017. In that context, connected
health represents a new growth area for our business.

Dialog is working with some of the leading pharma
companies in the development of new Bluetooth® low energy
ICs targeting disposable medical products. Our technology
is enabling new ways to meet market needs in areas such
as glucose monitoring and prescription drugs timestamping
and dosage.

Applications such as glucose monitors, injectors, inhalers,
blood pressure meter, and thermometers will be optimised
and get connected using our Bluetooth® low energy and
Configurable Mixed-signal ICs.

* Source: Statista and 2017 Dialog internal.

Dialog Semiconductor PlcAnnual report and accounts 2018

health

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Dialog Semiconductor PlcAnnual report and accounts 2018

Our strategic priorities

Delivering continuous innovation

Dialog Semiconductor First to Demonstrate
Stereo HiFi Quality Audio Over Bluetooth® low energy

The technology, which enables True Wireless Stereo
audio streaming over Bluetooth® low energy, was
showcased in a proof of concept implementation to
Bluetooth® SIG Associate members at Bluetooth®
World 2018 in Santa Clara, California.

This allows developers to overcome challenges
of battery life and synchronisation for True
Wireless Stereo systems.

innovation

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PROGRESS IN 2018
U Nanopower PMIC press release.
U Introduced the first Configurable
Mixed-signal ICs with In-System-
Programming, adding significant value
in a wide range of battery powered
applications and extending the range
of addressable applications.

KEY RISKS
U Dependency on mobile and

consumer electronics.

U IP protection.
U IP infringement.

HOW WE MEASURE
OUR PROGRESS

US$326m

Expensed in R&D programmes during 2018,
an increase of 8% compared to 2017.

2018

2017

2016

76%

Engineering talent ratio
(2017: 75%; 2016: 75%)

326m

303m

261m

KPI

860

Inventions for which we are pursuing
or have already obtained patent
protection (2017 approximately 800;
2016: approximately 700)

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Dialog Semiconductor PlcAnnual report and accounts 2018

Our strategic priorities

Focusing on strategic initiatives and M&A...

Entering the Indian smartphone
market with our partner UNISOC

In 2018 we partnered with UNISOC,
formerly Spreadtrum Communications,
to develop the SC2703, an optimised
high-performance Power Management
Integrated Circuit (“PMIC”) that is powering
the latest addition to the new Micromax
Canvas LTE smartphone series.

The smartphone market in India has
taken off in recent years, largely due to
the entrance of mobile network operator
Reliance Jio and has driven tremendous
adoption of 4G-enabled devices.
Micromax, one of the leading handset
players in India, began rolling out its
Canvas series of smartphones with 4G
capabilities for first time smartphone users,
and the Canvas series quickly became the
highest selling phone series in the under
Rs 5,000 budget (approximately US$70)
segment in India after its launch.

Our collaboration with an innovator
like UNISOC unlocks new possibilities
for our business.

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focus

PROGRESS IN 2018
U Powered the latest addition to the new
Micromax Canvas LTE smartphone
series through our collaboration
with UNISOC.

U Energous Corporation Announces New
DA2223 Receiver IC Designed for Small
Electronic Devices. The Smallest IC in the
Energous portfolio increases the available
market for wireless charging by providing
Energous WattUp® to smaller form
factors devices.

KEY RISKS
U Human capital.
U Dependency on key customers.
U Dependency on mobile and

consumer electronics.

HOW WE MEASURE
OUR PROGRESS

During 2018 we continued developing
our partnerships with UNISOC and
Energous Inc. Our ongoing collaborations
with Renesas and Xilinx will strengthen
our presence in the automotive segment.

Dialog Semiconductor PlcAnnual report and accounts 2018

Evolve and develop

The gaming experience continues to evolve
and the development of richer virtual reality
experiences is taking the gaming industry
into an exciting new phase.

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Dialog’s technology supports a richer
gaming experience, enabling efficient
power management of the main console
and controllers, low power connectivity
(Bluetooth® low energy) for AR/VR controllers,
a sharper and stronger haptic experience
at ultra-low power, and high-performance
audio with our audio ICs.

game on

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By using special input/output devices
(joysticks, data gloves or other devices),
users can receive feedback from
computer applications in the form of felt
sensations in the hand or other parts of
the body. In combination with a visual
display, haptics technology can be used
to train people for tasks requiring hand-
eye coordination, such as surgery and
space ship manoeuvres. It can also be
used for games in which you feel as well
as see your interactions with images.
For example, you might play tennis with
another computer user somewhere else
in the world. Both of you can see the
moving ball and, using the haptic device,
position and swing your tennis racket and
feel the impact of the ball.

Dialog Semiconductor PlcAnnual report and accounts 2018

game on

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Dialog Semiconductor PlcAnnual report and accounts 2018

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Key performance indicators “KPIs”

Our KPIs

We are a business built on innovation
and deep mixed-signal semiconductor
expertise, and our four strategic
objectives support the ambition to
power the smart connected future.
Through our KPIs we monitor our pool

of talent, vital to fostering innovation.
Alongside, we remain focused on
delivering a more diversified, cash-
generative growth which will, in turn,
support the expansion of our business.

Our key performance indicators seek
to ensure performance is aligned to
strategy and stakeholders’ interests.
Additionally, the Company works with a
wide range of metrics covering different
aspects of our business activities.

Performance indicators

Definition and relevance

2018 performance

Employee turnover
2018

10.7%

2018

2017

2016

10.7%

10.3%

7.9%

Engineering talent ratio
2018

76%

2018

2017

2016

76%

75%

Number of sales opportunities
2018

1,011

2018

2017

2016

1,011

1,038

823

Customer concentration
2018

75%

2018

2017

2016

75%

77%

74%

Free cash flow
2018

US$230m

2018

2017

2016

US$230m

US$205m

US$195m

Number of leavers in the last 12 months
divided by the average headcount during
that period expressed as a percentage.
Monitoring our ability to recruit and
retain experienced engineering and
commercial professionals is vital given
the strong competition for skills in
the sector, ageing population, and
our business growth ambitions.

In 2018, employee turnover was broadly
stable at 10.7%. Our ability to recruit
and retain engineering professionals
remained high. In 2018 the total number
of employees remained broadly in line
with 2017. Dialog has a performance
management system to ensure we
reward our best employees through
appropriate mechanisms.

Proportion of employees in engineering
functions as a percentage of the total
employee base. Monitoring the size
of our engineering pool and our ability
to generate innovation.

In 2018, the engineering talent ratio was 76%,
slightly above 2017.

Number of sales opportunities recorded
in the pipeline in a given year, with a value
higher than US$250k excluding cancelled,
rejected, lost, and opportunities which
reached their end of life.

In 2018, the number of sales opportunities
with a value higher than US$250k was
broadly in line with 2017. However, the
number of opportunities with a value
lower than US$250k almost doubled.
This is a reflection of the increasing number
of revenue opportunities in our various
business segments.

Proportion of Group revenue from the
single largest customer. Monitoring the
risk associated with reliance on a single
source of income.

In 2018, customer concentration was
slightly below the previous year at 75%,
two percentage points lower than in 2017.
Revenue growth in 2018, excluding our
largest customer, was 16%.

Free cash flow is a non-IFRS measure that
represents cash flow from operating activities,
less capital expenditure. It provides a
measure of the cash available for expansion,
to make strategic investments in, or acquire,
other businesses, to repay borrowings and
to fund distributions to shareholders.

Free cash flow in 2018 was 12% above 2017.
This was the result of the higher profitability
in 2018 alongside the Company’s ability to
convert profit into cash, partially offset by
higher tax payments. In 2018, we saw a net
outflow from income taxes of US$41.1 million
(2017: inflow US$8.3 million).

Dialog Semiconductor PlcAnnual report and accounts 2018

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Performance indicators

Definition and relevance

2018 performance

Revenue growth
IFRS 2018

Underlying 2018

+7%

2018

-12%
-12%

+7%

+7%
+7%

2018
2018

2017
2017

2016
2016

+13%
+13%

Gross margin
IFRS 2018

47.9%

Underlying 2018

48.3%

2018
2018

2017
2017

2016
2016

47.9%
48.3%

47.7%
47.9%

47.3%
47.4%

Actual and prior year’s full-year revenue
measured in our reporting currency, US
dollars. Monitoring this revenue trend
provides a measure of business growth.

Actual and prior year’s gross margin.
Gross margin is gross profit expressed
as a percentage of revenue and shows the
value of the Group’s products. Monitoring
this trend provides a measure of our ability
to obtain profit margin from our products
and manage our manufacturing costs over
a period of time.

Revenue in 2018 was 7% above 2017.
Excluding the contribution from the
acquisition of Silego Technology Inc.,
revenue in 2018 was broadly in line with
2017. The main contributors to the revenue
performance in 2018 were the acquisition
of Silego Technology, the solid performance
of our connectivity technologies, in
particular SmartBond™, our Bluetooth®
low energy products, and the increased
adoption of rapid charge technologies.
Excluding revenue from Silego Technology,
revenue in 2018 was in line with 2017.

Gross margin in 2018 (both IFRS and
underlying) was slightly above 2017.
This increase was mainly the result
of lower manufacturing costs.

Operating expenses as a percentage of revenue
IFRS 2018

Underlying 2018

34.3%

28.9%

2018
2018

2017
2017

2016
2016

34.3%

33.1%

28.9%

28.8%

32.9%

29.0%

Operating margin
IFRS 2018

Underlying 2018

13.8%

19.5%

2018
2018

2017
2017

2016
2016

13.8%

19.5%

19.2%

18.5%

25.9%

Diluted EPS (US$)
IFRS 2018

Underlying 2018

1.80

2.90

2018
2018

2017
2017

2016
2016

1.80%

2.90%

2.92

3.25

2.21

2.09

Actual and prior year’s operating expenses
(“OpEx”) expressed as a percentage of
revenue. OpEx % provides a measure of our
effort in innovation and the efficiency of our
operating structure over a period of time and
it reflects the need for current returns as well
as an investment in future revenue growth.
OpEx % and underlying OpEx % provide a
useful reflection of the focus and efficiency
of our operating structure. OpEx includes
Selling & Marketing expenses, General &
Administrative expenses and Research
& Development expenses.

OpEx % in 2018 was 120bps above 2017
mainly due to the acquisition of Silego.
On an underlying basis, OPEX % was
10bps above 2017. Underlying R&D % was
at the same level as 2017, a reflection of
our commitment to innovation. SG&A %
was 10bps above 2017. We made further
investment in our sales network but G&A
functions did not increase significantly.
It is important to note that our R&D effort
is not directly linked to the revenue of the
same period. It represents an investment
in future revenue streams.

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Actual and prior year’s operating margin.
Monitoring this trend provides a measure
of our ability to increase the profitability
of our operating activity over a period of
time. Underlying operating margin provides
a useful link to our ability to generate cash
as we are a low capital intensity business.

Operating margin in 2018 was in line with
2017 which includes the acquisitions
of Silego Technology Inc. and the ams
AG LED backlighting business in 2017.
On an underlying basis, operating margin
was 30bps above 2017. This increase is
mostly the result of the improvement in
underlying gross margin.

Actual and prior year’s diluted EPS.
Monitoring this trend provides a useful
measure of our ability to generate
earnings and the inherent value of our
business for our shareholders over
a period of time. Underlying diluted
EPS provides a useful reflection
of the inherent value of the business.

Diluted EPS was 19% below 2017 to US$1.80
in line with the movement in net income
which is mostly due to the recognition of
a fair value loss of US$10.9 million on the
warrants we hold over shares of Energous.
2016 diluted EPS included the impact from
the Atmel termination fee. Underlying diluted
EPS was 1% below 2017, due to a US$1.0
million currency translation loss. In 2017 we
recognised a currency translation gain of
US$1.7 million.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Segmental review

Mobile Systems

Leveraging our mixed-signal expertise
to create the next wave of innovation
Energy efficiency is a key feature of our power management, charging and
audio ICs. We have been at the centre of the mobile computing revolution
since its early days and we are investing to leverage our expertise into new
segments. Dialog is well positioned to create the next wave of innovation
in smart power management, charging and haptics.

“As consumer demands continue
to push design boundaries,
Dialog’s expertise and IP
contribute to solving the complex
challenge of extending battery
life while adding new features,
all in a small form factor.”

Udo Kratz
Senior Vice President and General Manager,
Mobile Systems Business Group

KEY FACTS

US$1,030m

Revenue (US$m)

US$248.8m

Underlying operating profit

Underlying operating profit reconciliation
on Pages 45-46

Highlights
U Reached an agreement with Apple
Inc. to license certain of our PMIC
technologies, and transfer certain assets
and over 300 employees.

U Introduced the first fully-integrated
nanopower PMIC for low power
IoT applications.

U Entered the growing Indian smartphone

market with first PMIC volume production
for the latest Micromax smartphone.
U Entered the haptics market with an ultra-
low power and compact Haptic IC.
U Leveraged our power management

technology into new markets
such as gaming, solid state drives
and automotive.

Our markets
U System power and battery management
ICs for large-screen smartphones and
tablets (5”–11” category).

U High-efficiency battery chargers for

smartphones and tablets.

U Audio CODECs for mobile computing

and accessories.

U High-voltage power management for
Chromebooks™, Ultrabooks™, and
convertible tablets.

U Automotive-grade PMICs for in-vehicle
infotainment, electronic instrument
cluster, telematic systems and driver-
assisted displays.

U Low-power and highly-integrated power
management for connected consumer
applications including smart wearables,
home and building automation, and
connected medical devices.

Our products

Dialog replaces discrete power
management components with highly-
integrated, single-chip solutions that reduce
energy usage, provide design simplicity at
a lower cost and improve the overall power
density of mobile products.

Our PMICs are highly configurable.
This allows them to be factory-tailored to
meet the exact voltage and current needs
of every component on a circuit board.

This flexibility is attractive to both platform
vendors and customers. Platform vendors
can validate one PMIC and use it in multiple
platform variants, and end-customers
who wish to differentiate from other
platform customers can modify some
peripheral functions.

Our leadership position in PMICs allows us
to quickly address developing market trends
and we continue to see significant focus on
battery charging.

72%

of total Group
revenue in 2018

Dialog Semiconductor PlcAnnual report and accounts 2018

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A fully-integrated nanopower PMIC to power connected devices

Today’s “always-on” IoT devices such as fitness trackers, smartwatches and smart
home products are expected to spend less time tethered to a charger, but expanding
feature sets present new challenges to battery life. With board area already at a premium
for engineers, new power management solutions are favoured over increasing battery
capacity. Dialog’s first fully-integrated nanopower PMICs build on our expertise in power
management and IoT connectivity to provide engineers with a compact, powerful
solution that solves these challenges while reducing overall form factor of the system.

Key drivers
U Battery charge time reduction.
U Increasing efficiency requirements to
address tightening thermal budgets.

U Industry increase in “always-on”

applications requiring ultra-low power
solutions to extend battery life.
U Broader adoption and reliance upon
platform reference designs for lower
customer development cost and faster
time-to-market.

U Expansion of high-performance

processors into Automotive infotainment
systems driving adoption of integrated
power solutions.

U Utilising haptics technology to further

differentiate consumer devices.

The increasing electrification of the
automobile is driving additional business
potential for Dialog power management
solutions. High resolution screens within the
cabin for advanced infotainment systems
and clusters, combined with always on
driver assistance features require high-
performance processing solutions. Dialog’s
experience in power management of
multi-core processors and our AECQ100
Automotive qualified products have us
perfectly positioned to respond to our
customers’ needs.

Always-on sensing combined with
increased context awareness in a wide
range of smart devices has the effect of
exponentially increasing the number of use
cases that customers wish to support.

Strategies to manage leakage and
quiescent current are now evolving in
parallel with new topologies to deliver higher
power density to support the next level of
“full power” benchmark performance.

Accommodating such diverse requirements
while maintaining battery life is one reason
why customers continue to turn to Dialog
to support their next power challenge.
With such powerful market dynamics at
play in high-volume segments, the stage
is set for the next wave of innovation in
smart power management – Dialog is well
positioned to deliver.

2018 progress
U Since 11 October 2018 we have worked
towards the closing of the licensing
agreement with Apple Inc. which is
expected during H1 2019.

U Successful mass production release
of industry-leading Nanopower PMIC
products for connected consumer
applications: DA9230 & DA9231.

U Launched first fully integrated nanopower

PMIC including system power and
battery management, DA9070
and DA9073.

U Entered the growing Indian

smartphone market with the first
PMIC volume production for latest
Micromax smartphone.

U Entered into new markets with production
of custom application specific (“ASICs”)
PMICs for the gaming and DSLR
camera markets.

U Continued leadership of audio codec

product for a leading computing platform.

U Expanded our automotive PMICs

solutions for Renesas R-Car H3, M3 and
V3M computing platforms.

U Launched industry’s lowest power high

definition haptics driver, DA7280.

Forward focus areas for 2019

Extend product portfolio

U Extend our Automotive PMIC portfolio.
U Expanding our engagement in gaming and Solid State Drives PMIC design.

Deliver continuous innovation

U Accelerate System-on-Chip partner collaboration.
U Leverage Dialog internal synergies to provide signal chain solutions to our customers.

Strategic initiatives and M&A

U Deepen our collaboration with strategic partners.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Segmental review continued

Advanced Mixed Signal

Configurable and programmable ICs enable
our customers a fast time-to-market
Configurable Mixed-signal ICs pioneer a new category of ICs which enable
our customers to customise and integrate multiple analog, logic and discrete
functions into a single chip. This can be prototyped in hours, accelerating
time-to-market and reducing board space.

PrimAccurate™ digital control technology is at the heart of our AC/DC
converters, backlight driver ICs and solid state lighting LED driver ICs.
It enables energy-efficient products and helps our customers meet ever
increasing government standards and energy regulations.

“In 2018, we maintained
our commanding share in
the rapid charge market
and grew our backlighting
business over 3X.”

Davin Lee
Senior Vice President and General Manager of
Advanced Mixed Signal

Highlights
U Launched the first in-system

programmable CMIC.

U We sustained our strong position in the
fast charging smartphone/tablet market
with approximately 60% market share.
U We began shipping USB PD 3.0 solutions

in volume to customers.

U We introduced a unique silicon-optimised
state machine solution that simplifies
induction heat cooker power supply
controller design.

U We grew our backlighting revenue by
more than 3X, through both organic
growth and the acquisition of ams AG
LED backlighting business.

Our markets
U Configurable Mixed-signal ICs for IoT,
mobile computing and automotive.

U AC/DC controller solutions for

smartphones, tablets, appliances,
industrial products – digital intelligence
and state machine solutions for high
power density rapid charge and
non-rapid charge applications, and
power supplies.

U LED drivers for display backlighting in TV,

automotive and LED displays.
U LED drivers for solid state lighting
in residential and commercial
lighting applications.

16%

of total Group
revenue in 2018

KEY FACTS

US$230m

Revenue (US$m)

US$30.5m

Underlying operating profit

Underlying operating profit reconciliation
on Pages 45-46

Our products

Configurable Mixed-signal IC

A new product category, integrating analog
mixed-signal functionality on an easily
configurable software platform. CMICs use
non-volatile memory to configure multiple
analog, digital, and power functions
allowing customers to easily replace
standard analog, logic and discrete board
components. The CMIC enables a fast
go-to-market, reduces board space and
costs. There are over 30 different products
already available, addressing a wide range
of consumer IoT and mobile applications.
Its configurability allows our customers to
adapt through the design cycle, differentiate,
and achieve a lower power consumption
than using discrete components.

AC/DC Power Conversion and Control

As large screens and powerful applications
continue to drive portable device purchasing
decisions, consumers now also make their
choices based on fast charging capability.
In fact, rapid charging continues to be the
fastest growing segment in the highest
volume market – smartphones, and Dialog
remains the number one player with
approximately 60% market share.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Dialog’s AC/DC travel adapter IC solutions
support virtually all fast charge protocols,
including the newest USB Power Delivery
3.0 specification with programmable power
supply (PPS); Qualcomm® Quick Charge™
4+; Samsung Adaptive Fast Charging
(“AFC”); Huawei SuperCharge™ technology
and Fast Charger Protocol (“FCP”) as well
as other proprietary OEM protocols.

In 2018, we introduced our new state
machine-based USB Power Delivery
(“USB PD”) 3.0 RapidCharge interface
IC that uses far fewer components,
simplifies design and lowers the BOM
cost versus conventional microcontroller-
based approaches.

Our AC/DC high power density
RapidCharge chipsets and AC/DC
converter ICs deliver efficiency as high
as 90% and support output power up to
45W, using fewer and smaller components.
In 2018 we developed a new high power
density topology that reduces heat
dissipation and enables low system cost,
resulting in an easy-to-use, ultra-high power
density travel adapter solution.

We expanded our SAM in 2018 with two
new AC/DC solutions that lower BOM
costs and improve performance for the
appliances and small electrics markets.
We introduced a unique silicon-optimised
state machine solution for induction heat
cookers and an AC/DC converter for small
electric appliances, such as toasters and
coffee makers.

LED Backlight Drivers

When it comes to buying a new display,
consumers consistently cite best
picture quality as their number one
buying consideration.

That’s why manufacturers are transitioning
LED displays from edge-lit to multi-segment
(zone) direct backlighting technology: to
enable the vibrant visual experience of
4K, 8K and high dynamic range (“HDR”)
TVs, with MiniLED backlight displays
emerging now and MicroLED capability
on the horizon.

Direct backlighting requires LED drivers
that can drive many LED zones and
plays to Dialog’s core BroadLED™ IP.
This technology lowers the bill of materials
(“BOM”) cost, improves picture quality
and reduces power dissipation for better
thermal performance, higher reliability and
longer lifetime.

LED Solid State Lighting (“SSL”)

With its energy savings, improved
performance and lower costs, solid
state lighting (“SSL”) has become the
preferred technology for new residential
and commercial installations.

Dialog addresses the SSL market with
a broad range of high performance, low
BOM cost LED driver ICs. We support both
dimmable and non-dimmable solutions, with
ongoing investment in both commercial and
residential SSL applications.

2018 progress
U Over four billion CMICs shipped

since launch.

U Introduced the first in-system

programmable CMIC.

U Maintained our dominant position in the

mobile device rapid charging market with
approximately 60% market share.
U Delivered solutions in volume for
virtually all fast charge protocols,
including USB PD 3.0.

U Shipped LED backlight driver ICs
in volume for virtually all leading
TV manufacturers.

Key drivers
U Consumer applications have very short
design cycles and demand low-power,
low-cost small form factor ICs.

U Consumer demand for faster mobile
device charging and smaller travel
adapters requiring very efficient, higher
power density solutions.

U Stringent government regulations

continue to raise the bar for efficiency and
standby power in electronic products.

Forward focus areas for 2019

Extend product portfolio

The first Configurable
Mixed-signal IC with
in-system programming

The introduction of in-system
programming streamlines the
development process as it allows
the installation of an un-programmed
CMIC (GreenPAK) on the printed
circuit board, simplifying modifications
late in the design cycle, in-field or in
the production line. These features
and the ultra-low power consumption
will add significant value in a
wide range of battery powered
applications and extend the range
of addressable applications.

U Increase the value of our configurable platform incorporating additional analog and power

management IP.

U Continue to deliver next-generation RapidCharge™ adapter solutions, including USB PD
high power density solutions, to meet emerging fast charging standards and sustain our
leadership position.

U Extend our leadership in LED backlighting, delivering products for next-generation MiniLED

and MicroLED displays.

U Expand our SSL LED driver solutions for commercial and professional LED lighting.

Achieve a broader and deeper customer base

U Increase cross-selling of CMICs across our customer base, particularly in Asia.
U Extend our RapidCharge™ AC/DC USB PD power supply solutions to a broader

customer base.

U Leverage our AC/DC converter IP and ASSP technologies to address the appliances and

small electrics markets.

U Extend our core BroadLED™ technology for performance innovations in the computing,

automotive and TV LED backlighting markets.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Segmental review continued

Connectivity

Everything is connected
As the Internet of Things continues to develop and evolve, more
and more applications are getting connected. Our low power
connectivity technologies and audio ICs help our customers
to succeed in these highly-competitive markets.

“In 2018 shipments
of SmartBond™ SoCs
sailed past the 200
million units mark.”

Sean McGrath
Senior Vice President and General Manager,
Connectivity, Automotive & Industrial
Business Group

Highlights
U Delivered strong revenue growth in

Bluetooth®* low energy.

U Completed the upgrade of our

SmartBond™ product portfolio to
support Bluetooth® 5.0.

U Launched our Bluetooth® Mesh software

development kit (SDK).

10%

of total Group
revenue in 2018

Our markets
U Single chip transceivers for DECT-

based cordless telephones, wireless
microphones, headsets and
gaming consoles.

U SmartBond™ single chip wireless
ICs, certified to the Bluetooth® low
energy standard, for enabling IoT node
connectivity to the cloud.

U SmartBeat™ provides a platform for
robust, low-power wireless audio
over USB, DECT, and as a Bluetooth
co-processor. This platform offers
a highly-integrated solution for high
quality and fixed low-latency wireless
audio applications supporting sample
frequencies up to 192kHz.

* The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc.

and any use of such marks by Dialog Semiconductor B.V. is under licence. Other trademarks and
trade names are those of their respective owners.

KEY FACTS

US$149m

Revenue (US$m)

US$17.0m

Underlying operating profit

Underlying operating profit reconciliation
on Pages 45-46

Our products

Bluetooth® low energy is the gateway to
personal connectivity and easy access
to the cloud.

Dialog’s SmartBond™ family is the simplest
route to delivering power-friendly and flexible
Bluetooth® low energy connected products
to the market. SmartBond™ DA14585 is
still the market-leading low power, high
integration Bluetooth® low energy SoC,
covering a broad range of applications.

In 2018, we introduced the DA14682 and
DA14683, two new devices that bring
support for the Bluetooth® 5.0 standard
to our high-end product line. These new
products offer customers the ability to take
advantage of the standard’s features while
enjoying the benefits of the integration on
a complete power management unit and
charger for rechargeable applications.
Alongside this, the new products bring an
increased level of security ensuring end-to-
end encryption of the application’s data.

This is all backed up by our powerful
SmartSnippets™ software tooling and
extensive applications support, making
it easy for designers to get the most out
of their system. Our innovation roadmap
ensures designers will have the Bluetooth
solutions they need, when they need them.

Dialog Semiconductor PlcAnnual report and accounts 2018

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The newly introduced SmartBond™
DA14585 IoT SDK makes prototyping
and developing sensor node-to-cloud
application easy. The kit includes 15
degrees-of-freedom (“DoF”) covering
motion sensing, temperature, pressure,
humidity, air quality, light and sound
sensing. Couple to an intuitive smartphone
application and several cloud connectivity
options, the kit is an ideal solution for
customers to accelerate their development
and time-to-market.

SmartBond™ has a strong base for
further growth, building on a solid partner
ecosystem, an increasing portfolio of
reference designs, and a growing online
engineering community.

SmartBeat™ products support the trend
to replace the analog 3.5mm audio jack
headset connection with digital alternatives.
The SmartBeat™ chip-set, DA14195
audio processor and DA7217 ultra-low
power codec, is aimed at Bluetooth® and
USB type-C™ digital audio connections
with smartphones.

In 2018, Dialog launched the DA14495
single chip, which integrates the fastest
1.9GHz DECT radio in industry. This new
product aims at the professional headset
and pro-audio segment, benefiting from
the interference free radio technology and
the advanced audio processing.

2018 progress:
U Strong revenue growth in Bluetooth®

low energy.

U Completed the upgrade of our Bluetooth®

low energy products to support
Bluetooth 5.0.

U Strengthened market position in the
wearable segment with key design
wins at multiple customers.

U Launched our Bluetooth® mesh SDK
in support of the newly introduced
Bluetooth® mesh standard.

U Launched the DA14495 SmartBeat™

Audio IC platform for 1.9GHz
professional headphones.

Key drivers
U Rapid market expansion of Bluetooth®
low energy fuelled by the connectivity
needs of the Internet of Things.

U New market trend for digital headsets
for smartphone aftermarket using the
Bluetooth® 1.9GHz DECT and USB
type-C™ audio interface.

U Focusing on the fast-growing Unified
Communication products segment
with 1.9GHz DECT audio and USB-
audio headsets.

U Maturity of DECT handset market.

Sailing past the 200 million
units of SmartBond™

In 2018, shipments of SmartBond™,
our Bluetooth® low energy product
sailed past the 200 million units.

Wearable devices, Human Interface
devices, Smart Home applications,
proximity tags and portable medical
devices are some of the applications
driving the growth in the market.
The introduction of the Bluetooth® mesh
standard, which enables many-to-many
communication in a mesh network
topology will enable new applications
in the Smart Building, Smart Home
and Industrial space to take advantage
of this standardised protocol and fuel
further growth of the standard in the
medium term.

Forward focus areas for 2019

Achieve a broader and deeper customer base

U Continue to invest in the Bluetooth® low energy (“BLE”) platform and increase

market footprint.

U Leverage distribution and Sales representative network to expand our BLE customer base.

Deliver continuous innovation

U BLE focus on wearables, smart home and connected health.
U Expand our low latency wireless audio towards microphones and headset brands.
U Expand our audio expertise for voice user interfaces and audio enhancements

in consumer headsets.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Automotive & Industrial

Capitalising on our experience and mixed-
signal expertise, Dialog continues to support its
loyal customers in the mid-to high-end European
automotive segment and the industrial lighting
segment through customer-specific parts.

“Our custom motor control
ICs capitalise on our power
management and mixed-
signal expertise.”

Sean McGrath
Senior Vice President and General Manager,
Connectivity, Automotive & Industrial
Business Group

KEY FACTS

US$33m

Revenue (US$m)

US$11.7m

Underlying operating profit

Underlying operating profit reconciliation
on Pages 45-46

Our heritage in mixed-signal
expertise

Over the years, we have built a
wealth of mixed-signal expertise.
We deploy this know-how to support
our customers, to remain competitive,
and to play in this market through
specific customer programmes.

Highlights
U Continued to support our customers to

Our markets
U Custom motor control ICs for

remain competitive.

windscreen wipers.

U We played in this market with customer-

specific programmes.

of total Group
revenue in 2018

U Electronic ballasts for fluorescent or
high-intensity industrial lighting and
energy-efficient controllers for LED
lighting solutions.

2018 progress
U Successful development of new LED

lighting solutions.

Key drivers
U Increasing market for reverse wipers and

LED lighting solutions.

Our products

Dialog supplies motor control ICs to leading
automotive suppliers, who in turn deliver
Dialog-based windscreen wiper motor
products addressing mid to high-end
European and Japanese cars.

These devices capitalise on Dialog’s
expertise and knowledge of technologies
ranging from power management systems
and mixed-signal design, to high-voltage
circuits and embedded microprocessors on
a single integrated circuit in an automotive-
qualified CMOS process, including
flash memory.

For the industrial market, Dialog develops
innovative control ASICs for conventional
light sources, such as fluorescent, and for
other industrial applications. Our future
development focus is on energy-efficient
controllers for LED lighting solutions.
These devices seek to deliver optimal
control and regulation of light sources,
while maximising their service life.
Through intelligent control, using advanced
digital signal processing, these devices help
to minimise energy consumption.

Forward focus areas for 2019

Achieve a broader and deeper customer base

U Support our customers to remain competitive.
U Follow this market with appropriate investments.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Financial review

Our disciplined approach to capital allocation
aims to create shareholder value

Our people
Our people
and culture
and culture

Customer
Customer
relations
relations

IP and
IP and
products
products

Robust and responsible
Robust and responsible
supply chain
supply chain

Strong balance
sheet

Building our competitive advantage

In 2018, we delivered another year of revenue growth, increased underlying
operating margin and free cash flow, while investing over US$325 million
in the development of new products. We successfully integrated Silego and
launched a new share buyback tranche for up to €150 million.

“Our highly cash generative
business gives us the
financial flexibility to support
the next phase of growth.”

Wissam Jabre
Chief Financial Officer, Senior Vice
President Finance

Year ended 31 December
US$ millions unless stated otherwise
Revenue2
Gross profit3
Gross margin %2, 3
R&D % of revenue3
SG&A % of revenue
EBITDA1
EBITDA margin %1
Operating profit
Operating margin %2
Profit before tax
Net income
Basic EPS (US$)
Diluted EPS (US$)2
Cash flow from operating activities
Free cash flow1, 2

IFRS basis

Underlying basis1

2018

Change

Change
2017
2017
2018
+7%
+7% 1,442.1 1,352.8
1,442.1 1,352.8
+7%
648.4
+7%
644.9
696.0
691.1
48.3% 47.9% +40bps
47.9% 47.7% +20bps
22.6% 22.4% +20bps
0bps
20.4% 20.4%
8.5% 8.4% +10bps
11.7% 10.7% +100bps
n/a
+8%
315.8
339.6
23.5% 23.3% +20bps
n/a
+7%
+9%
259.5
281.6
19.5% 19.2% +30bps
0bps
+9%
266.6
+1%
289.7
-1%
228.0
-17%
225.4
-1%
3.08
-19%
3.05
-1%
2.92
-19%
2.90
n/a
n/a
+1%
n/a
+12%
205.3
n/a
229.9

n/a
n/a
n/a
n/a
187.0
199.7
13.8% 13.8%
194.8
196.2
169.4
139.8
2.34
1.89
2.21
1.80
284.7
288.6
n/a
n/a

Non-IFRS measures (see explanations and reconciliations to the nearest equivalent IFRS measures
in the section entitled “Financial performance measures” on pages 156 to 161).

2 Key performance indicators.
3

Certain product development costs have been reclassified from cost of sales to research and
development expenses (see note 1 to the consolidated financial statements).

Basis of preparation

Accounting policies

The consolidated financial statements of
Dialog Semiconductor Plc (“the Company”)
and its subsidiaries (together, “Dialog”
or “the Group”) for the year ended
31 December 2018 are set out on
pages 94 to 98.

The consolidated financial statements
have been prepared in accordance with
International Financial Reporting Standards
(“IFRS”) as adopted for use in the European
Union and those parts of the Companies
Act 2006 that are applicable to companies
reporting under IFRS. The consolidated
financial statements also comply with IFRS
as issued by the International Accounting
Standards Board.

The Group’s significant accounting policies
are unchanged compared with the year
ended 31 December 2017, except for
the adoption of IFRS 15 Revenue from
Contracts with Customers and IFRS 9
Financial Instruments with effect from
1 January 2018.

Recent accounting pronouncements that
have not yet been adopted by the Group
are outlined in note 1 to the consolidated
financial statements.

Revenue recognition

IFRS 15 Revenue from Contracts with
Customers provides a single, principles-
based five step model to be applied to all
contracts with customers.

Adoption of IFRS 15 had no impact on
the recognition and measurement of
the majority of the Group’s revenue.
Under our previous revenue recognition
policy, however, revenue on certain sales
to distributors and the related cost of sales
were not recognised until the onward sale
of the products by the distributors to the
end customers. Under IFRS 15, we are
required to recognise revenue on all sales
to distributors when the products are
physically transferred to the distributors,
net of allowances for estimated rebates
and returns.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Financial review continued

We applied IFRS 15 using the modified
retrospective approach, whereby prior
periods were not restated and we
recognised a credit of US$1.5 million to the
opening balance of retained earnings as at
1 January 2018 representing the cumulative
effect of the adoption of IFRS 15.

Revenue recognised in 2018 was
US$10.1 million higher than it would
have been under our previous
revenue recognition policy, of which
US$9.4 million was recognised in our
Advanced Mixed Signal operating segment
and US$0.7 million in Connectivity.

Further details are set out in note 35 to
the consolidated financial statements.

Financial Instruments

IFRS 9 Financial Instruments introduced
a new model for classification and
measurement of financial assets and
financial liabilities, a single, forward-
looking “expected loss” model for
measuring impairment of financial assets
(including trade receivables) and a new
approach to hedge accounting that
is more closely aligned with an entity’s
risk management activities.

Adoption of IFRS 9 had no immediate
impact on the Group’s results or
financial position.

Further details are set out in note 35 to the
consolidated financial statements.

Reclassification of certain product
development costs

With effect from 1 January 2018, we changed
the income statement classification of
the amortisation of capitalised product
development costs, the amortisation of
acquired technology-based intangible
assets and royalties payable for the use
of intellectual property in our product
development activities. Previously, we
included these costs within cost of sales.
We now include them within research
and development expenses.

We made this change in order that our
results are more comparable with our
industry peers.

As shown in note 1 to the consolidated
financial statements, comparative
information has been re-presented on a
consistent basis with the effect that cost of
sales was US$24.2 million lower and R&D
expenses were US$24.2 million higher in
2017 than previously reported.

Critical accounting judgements
and estimates

Details of the critical accounting judgements
made in preparing the consolidated
financial statements and key sources of
estimation uncertainty that may affect the
carrying amount of the Group’s assets
and liabilities within the next financial year
are set out in note 2 to the consolidated
financial statements.

Non-IFRS measures

We assess the performance of the
Group’s businesses using a number of
measures. Certain of them are non-IFRS
measures because they exclude amounts
that are included in, or include amounts
that are excluded from, the most directly
comparable measure calculated and
presented in accordance with IFRS, or are
calculated using financial measures that
are not calculated in accordance with IFRS.
All underlying measures of profitability and
free cash flow are non-IFRS measures.

An explanation of the adjustments made
to the equivalent IFRS measures in
calculating the non-IFRS measures and
reconciliations of the non-IFRS measures
to the equivalent IFRS measures for the
periods presented are set out in the section
entitled “Financial performance measures”
on pages 156 to 161.

We report non-IFRS measures because
they provide useful additional information
about the financial performance of the
Group’s businesses. We do not regard
these non-IFRS measures as a substitute
for, or superior to, the equivalent IFRS
measures. Non-IFRS measures used by
Dialog may not be directly comparable
with similarly-titled measures used by
other companies.

Agreements entered
into with Apple

On 11 October 2018, we announced that
we have entered into an agreement with
Apple Inc. (“Apple”) to license our power
management technologies and to transfer
to Apple certain assets and over 300
employees from our design centres in the
UK, Germany and Italy.

Apple will pay US$300 million for the
licence and asset transfers. The transaction
is expected to complete in the first half
of 2019, subject to applicable regulatory
approvals and other customary closing
conditions. We have accordingly classified
the assets to be transferred to Apple and
certain directly associated liabilities as held
for sale.

Our revenue for 2018 was unaffected by
this agreement and we will continue to
supply Apple with PMICs for their current
generation of products. Revenue associated
with those products, which totalled
approximately US$870 million in 2018,
will begin to decline in the second half of
2019 and phase out by 2022. We expect
to continue to provide PMICs to other
customers across the globe.

When we announced this agreement
with Apple, we also announced that we
have been awarded a broad range of new
contracts from Apple for the development
and supply of power management, audio
sub-system, charging and other mixed-
signal integrated circuits.

Revenue from the new contracts is
expected to commence in 2019 and
accelerate in 2020 and 2021.

On completion of the licence and asset
transfer agreement, Apple will make a
prepayment of US$300 million that is
expected to be recouped against the sale of
our products over the following three years.

During 2018, we incurred transaction
costs of US$7.8 million in relation to the
agreements with Apple (within general and
administrative expenses).

Recent acquisitions

Silego Technology Inc.

We completed the acquisition of
Silego Technology Inc. (“Silego”)
on 1 November 2017.

Silego is included in our Advanced
Mixed Signal operating segment.
Silego contributed US$104.2 million to the
Group’s revenue in 2018 compared with
US$11.4 million in 2017. When compared
on a full-year basis, Silego’s revenue in 2018
was 24% higher than in 2017.

We incurred integration costs of
US$2.8 million in relation to Silego during
2018, taking the total integration costs
incurred to US$5.0 million.

Contingent consideration of up to
US$30.4 million was payable for the
acquisition of Silego dependent on Silego’s
revenue in 2017 and 2018. Based on
Silego’s revenue in 2017, the first instalment
of US$10.0 million was paid in full and a
further US$17.9 million was payable based
on Silego’s revenue for 2018.

During 2018, we recognised a credit of
US$0.9 million arising from the finalisation
of the contingent consideration and a credit
of US$0.2 million due to the forfeiture by
former employees of deferred consideration
payable for Silego.

Dialog Semiconductor PlcAnnual report and accounts 2018

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LED backlight business

We acquired ams AG’s LED backlight
technology and product portfolio
on 15 November 2017.

We have included the business in
our Advanced Mixed Signal operating
segment where it contributed
US$11.3 million to revenue in 2018
compared with US$0.8 million in 2017.

Dyna Image Corporation

Deconsolidation and subsequent
accounting under the equity method

We hold a 48.5% shareholding in Dyna
Image Corporation (“Dyna Image”).

Dyna Image was accounted for as a
subsidiary until it was deconsolidated at
the end of 2017. Details are set out in note 4
to the consolidated financial statements.

With effect from 1 January 2018, we
have accounted for Dyna Image as an
associate using the equity method with
an initial carrying amount of US$1.1 million.
During 2018, Dyna Image continued to
make losses. We recognised our share of
those losses in the consolidated income
statement until the carrying amount of our
investment was reduced to nil during the
fourth quarter of 2018.

Under the equity method, the Group’s
revenue no longer includes any contribution
from Dyna Image. During 2017, the Group’s
revenue included Dyna Image’s revenue of
US$5.5 million.

Agreement to dispose of our
shareholding in Dyna Image

Following the termination of negotiations
with a potential investor in December 2017,
it had been the intention of the shareholders
in Dyna Image to gradually wind down the
company in a way that would safeguard
the interests of its creditors. During early
2018, however, the shareholders were
approached by a potential acquirer of
the business.

On 7 December 2018, each of the
shareholders in Dyna Image entered into
an agreement to dispose of their respective
interests in a transaction that is expected to
complete in the first half of 2019, subject to
applicable regulatory approvals.

We expect to receive consideration
of between US$2.4 million and
US$5.0 million in exchange for
our shareholding in Dyna Image.

Synaptics Incorporated

During 2018, we held discussions with
regard to the potential acquisition of
Synaptics Incorporated. On 31 July 2018,
we announced that these discussions
had been terminated. We incurred related
costs of US$3.6 million (within general
and administrative expenses).

Results of operations

Analysis by operating segment

Mobile Systems segment revenue was
US$1,029.6 million in 2018 compared with
US$1,042.9 million in 2017, a decrease
of 1%. Revenue declined principally due
to the effect in the fourth quarter of 2018
of our reduced share of volume for the
main PMIC on Apple’s 2018 smartphone
platform, though this was partially offset
by higher demand for our custom PMICs
on other platforms.

Mobile Systems’ operating profit was
$248.5 million in 2018 compared with
$271.7 million in 2017. Operating profit
benefited from favourable product mix
but this was outweighed by the effect of
the lower sales volume and higher R&D
expenses. Operating margin declined
to 24.1% (2017: 26.1%).

Mobile Systems’ underlying operating
profit was US$248.8 million in 2018
compared with US$271.8 million in 2017.
Underlying operating margin was also
lower at 24.2% (2017: 26.1%).

Mobile Systems’ underlying operating
profit excludes payroll taxes arising
on share-based compensation of
US$0.3 million (2017: US$0.1 million).

Connectivity segment revenue was
US$148.8 million in 2018 compared with
US$136.4 million in 2017, an increase of
9%. Connectivity’s revenue increased
principally due to strong growth in demand
for Bluetooth® low energy products and
our new range of audio ICs.

Connectivity’s operating profit was higher
at US$16.9 million in 2018 compared with
US$14.3 million in 2017, with the effect of the
higher sales volume and improved product
margins being only partially offset by higher
R&D expenses. Operating margin improved
to 11.4% (2017: 10.5%).

Connectivity’s underlying operating profit
was broadly the same as its reported
operating profit in both 2018 and 2017.

Automotive & Industrial segment revenue
was US$32.7 million in 2018 compared
with US$33.0 million in 2017, a decrease
of 1%. Revenue declined over the year as
a whole principally due to lower demand
for automotive products in the fourth
quarter of 2018.

Automotive & Industrial’s operating profit
was US$11.7 million in 2018 compared with
US$12.5 million in 2017, a decrease of 7%.
Operating profit was lower principally due
to higher R&D expenses. Operating margin
declined to 35.8% (2017: 38.1%).

Automotive & Industrial’s underlying
operating profit was broadly the same
as its reported operating profit in both
2018 and 2017.

Advanced Mixed Signal segment revenue
was US$229.8 million in 2018 compared
with US$132.7 million in 2017, an increase
of 73%. When adjusted to reflect the
contribution of Silego for comparable
periods and for the effect of IFRS 15,
Advanced Mixed Signal’s revenue in 2018
was broadly unchanged compared with
2017. Growth in sales of Rapid ChargeTM
smartphone power adaptors was offset
by lower sales of residential solid state
lighting driver ICs.

Advanced Mixed Signal made an operating
profit of US$1.8 million in 2018 compared
with an operating loss of US$15.1 million in
2017, the improvement being principally due
to the contribution of Silego for the full year
in 2018. Operating margin was 0.8% in 2018
compared with (11.4)% in 2017.

Advanced Mixed Signal’s underlying
operating profit was US$30.5 million in
2018 compared with US$5.9 million in 2017.
Underlying operating margin was 13.3%
in 2018 compared with 4.5% in 2017.

Results by operating segment

Year ended 31 December
US$ millions
Mobile Systems
Connectivity
Automotive & Industrial
Advanced Mixed Signal
Total segments
Corporate activities
Total Group

Revenue

Operating profit/(loss)

2018
1,029.6
148.8
32.7
229.8
1,440.9
1.2
1,442.1

2017
1,042.9
136.4
33.0
132.7
1,345.0
7.8
1,352.8

Change
-1%
+9%
-1%
+73%
+7%
-84%
+7%

2018
248.5
16.9
11.7
1.8
278.9
(79.2)
199.7

2017
271.7
14.3
12.5
(15.1)
283.4
(96.4)
187.0

Dialog Semiconductor PlcAnnual report and accounts 2018

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Financial review continued

Advanced Mixed Signal’s underlying
operating result excludes the increase
in cost of sales of US$3.1 million
(2017: US$2.3 million) arising from
consumption of the fair value uplift on
acquired inventory, amortisation of
US$22.6 million (2017: US$15.3 million) on
the fair value uplift of acquired intangible
assets, integration costs of US$1.4 million
(2017: US$2.0 million) and deferred
consideration payable for Silego treated as
compensation expense of US$1.5 million
(2017: US$1.4 million).

Corporate activities principally comprise
the costs of operating central corporate
functions, the Group’s share-based
compensation expense and certain
other unallocated costs.

Corporate activities also comprise various
development stage businesses and,
until its deconsolidation at the end of 2017,
included the results of Dyna Image.

Corporate activities showed an operating
loss of US$79.2 million in 2018 compared
with an operating loss of US$96.4 million
in 2017.

Corporate’s underlying operating loss
was US$26.4 million in 2018 compared
with US$45.2 million in 2017, with the
improvement being principally due to
lower R&D expenses in development
stage businesses.

Corporate’s underlying operating result
excludes the Group’s share-based
compensation expense of US$41.2 million
(2017: US$35.4 million), transaction costs
of US$11.3 million (2017: US$4.5 million),
integration costs of US$1.4 million
(2017: US$0.3 million), credits totalling
US$1.1 million in relation to the
remeasurement and forfeiture of contingent
and deferred consideration payable
for Silego, and, in 2017, amortisation of
US$1.1 million on the fair value uplift of
acquired intangible assets and losses
totalling US$9.9 million on the impairment
of assets held by Dyna Image and its
subsequent deconsolidation.

Analysis of the Group’s results

Revenue was US$1,442.1 million in 2018
compared with US$1,352.8 million in 2017,
an increase of 7%. When adjusted to reflect
the contribution of Silego for comparable
periods and for the effect of IFRS 15,
revenue in 2018 was broadly unchanged
compared with 2017. Revenue growth in
Connectivity was offset by the net reduction
in demand for our custom PMICs in Mobile
Systems in the fourth quarter of 2018.

Dialog’s revenue, particularly in its Mobile
Systems segment, is dependent on the life
cycle of its customers’ products and the
seasonal nature of the spending pattern
in the consumer markets in which they
operate. As a result, Dialog’s business may
fluctuate seasonally with lower revenue
in the first half of the year, since many of
its larger consumer-focused customers
tend to have stronger sales later in the
year as they prepare for the major holiday
selling seasons.

Cost of sales was US$751.1 million in 2018
compared with US$708.0 million in 2017,
an increase of 6% that was principally due
to the acquisition of Silego.

Gross profit was US$691.1 million in 2018
compared with US$644.9 million in 2017,
an increase of 7%.

Gross margin was 20 basis points higher at
47.9% in 2018 compared with 47.7% in 2017.
Gross margin improved largely due to a
favourable change in product unit costs.

Underlying gross profit was
US$696.0 million in 2018 compared with
US$648.4 million in 2017, an increase of
7%. Underlying gross margin was 40 basis
points higher at 48.3% in 2018 compared
with 47.9% in 2017.

Underlying gross profit excludes share-
based compensation expenses and
related payroll taxes of US$1.8 million
(2017: US$1.2 million) and consumption of
the fair value uplift on acquired inventory
of US$3.1 million (2017: US$2.3 million).

Selling and marketing expenses were
US$83.9 million in 2018 compared with
US$70.4 million in 2017. We maintained
tight control of selling and marketing costs
but they increased due to the acquisition
of Silego.

Underlying selling and marketing expenses
increased to US$65.0 million in 2018
compared with US$56.6 million in 2017, and
were higher as a percentage of the Group’s
revenue at 4.5% in 2018 compared with
4.2% in 2017.

Underlying selling and marketing expenses
exclude share-based compensation
expenses and related payroll taxes totalling
US$4.4 million (2017: US$4.1 million),
amortisation of US$14.0 million (2017:
US$8.9 million) on the fair value uplift
of acquired intangible assets, deferred
consideration payable for Silego treated as
compensation expense of US$0.5 million
(2017: US$0.4 million) and, in 2017,
integration costs of US$0.4 million.

General and administrative expenses
were US$84.3 million in 2018 compared
with US$74.9 million in 2017, with the
increase being largely due to the acquisition
of Silego and corporate transaction costs.

Underlying general and administrative
expenses increased slightly to
US$57.4 million in 2018 compared with
US$56.9 million in 2017, but were lower
as a percentage of the Group’s revenue at
4.0% in 2018 compared with 4.2% in 2017.

Underlying general and administrative
expenses exclude share-based
compensation and related payroll
taxes totalling US$12.8 million (2017:
US$12.2 million), transaction costs of
US$11.3 million (2017: US$4.5 million),
deferred consideration payable for Silego
treated as compensation expense of
US$0.5 million (2017: US$0.5 million),
integration costs of US$2.5 million
(2017: US$0.7 million) and, in 2018, a
credit of US$0.2 million on the forfeiture of
deferred consideration payable for Silego.

R&D expenses were US$326.3 million
in 2018 compared with US$303.0 million
in 2017, an increase of 8%.

R&D costs totalled US$356.3 million in
2018 (2017: US$331.2 million), of which
US$24.8 million (2017: US$21.0 million)
were capitalised, and we recognised R&D
expenditure credits of US$5.2 million
(2017: US$7.2 million).

Dialog has an extensive R&D engineering
team focused on mixed-signal
semiconductor power saving technologies.
Dialog believes that its R&D activities are
critical to support its strategy of growth
and product diversification.

Underlying R&D expenses were
US$294.2 million in 2018 compared with
US$275.8 million in 2017, an increase
of 7%. When adjusted to reflect the
contribution of Silego on a like-for-like
basis, underlying R&D expenses were
broadly unchanged in 2018 compared
with 2017, because higher spending in
Mobile Systems was largely offset by lower
spending in development stage businesses.
Underlying R&D expenses represented
20.4% of the Group’s revenue in 2018,
broadly unchanged compared with 2017.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Underlying R&D expenses exclude share-
based compensation expenses and related
payroll taxes totalling US$22.7 million
(2017: US$18.0 million), amortisation of
US$8.6 million (2017: US$7.5 million) on
the fair value uplift of acquired technology,
integration costs of US$0.2 million
(2017: US$1.2 million) and deferred
consideration payable for Silego treated as
compensation expense of US$0.6 million
(2017: US$0.5 million).

Other operating income was
US$3.2 million in 2018 compared with an
expense of US$9.6 million in 2017.

In 2018, we recognised income from R&D
contracts of US$2.3 million and a credit of
US$0.9 million arising from the finalisation
of the contingent consideration payable
for Silego.

In 2017, we recognised income from R&D
contracts of US$0.3 million and losses
totalling US$9.9 million on the impairment
of assets held by Dyna Image and its
subsequent deconsolidation.

Operating profit was US$199.7 million in
2018 compared with $187.0 million in 2017.

Underlying operating profit was
US$281.6 million in 2018 compared with
US$259.5 million in 2017, an increase
of 9%. Underlying operating profit improved
because the effect of higher overall
sales volumes outweighed the increase
in underlying sales and marketing and
R&D expenses.

Underlying operating margin was 30 basis
points higher at 19.5% in 2018 compared
with 19.2% in 2017.

Interest income was US$9.9 million in
2018 compared with US$6.0 million in 2017,
with the increase reflecting higher US dollar
interest rates.

Interest expense increased to
US$3.1 million in 2018 compared with
US$1.3 million in 2017, principally due to
the additional interest expense recognised
on the contingent consideration payable
for Silego.

Other finance expense was
US$10.3 million in 2018 compared with
income of US$3.1 million in 2017.

Other finance income/(expense) comprises
foreign currency translation gains and losses
that arise on monetary assets and liabilities
that are denominated in currencies other
than the functional currencies of the entities
by which they are held and fair value gains
and losses recognised in relation to certain
of our strategic investments.

We recognised a net currency translation
loss of US$1.0 million in 2018 compared
with a net gain of US$1.7 million in 2017.

During 2018, we recognised a fair
value loss of US$10.9 million
(2017: gain of US$0.9 million) on the
warrants that we hold over shares in
Energous and amortisation of the gain
on initial recognition of the second
tranche of warrants amounting to
US$1.6 million (2017: US$0.8 million).

During 2017, we recognised losses
totalling US$0.3 million on other
strategic investments.

Share of loss of associate was
US$1.1 million (2017: US$nil) in relation
to Dyna Image.

Income tax

Our approach to tax is to support our
business strategy and the creation of
long-term value for our shareholders
by conducting the Group’s affairs in a
tax efficient manner whilst remaining in
compliance with applicable laws and
regulations. Our “Approach to Tax” can be
found at www.dialog-semiconductor.com.

Income tax expense was US$55.3 million
(2017: US$25.4 million) on profit before tax
of US$196.2 million (2017: US$194.8 million),
an effective tax rate for the year of 28.2%
(2017: 13.0%).

Our effective tax rate is sensitive to the
geographic mix of the Group’s profits,
reflecting a combination of different tax
rates in different countries, changes in
tax legislation and tax rates, the impact of
acquisitions, disposals and restructuring
and to currency exchange rate movements,
which give rise to tax effects where an
entity’s functional currency differs from the
currency in which it is required to calculate
and pay income taxes.

A large proportion of Dialog’s R&D
activities are undertaken in the UK and
the Netherlands and we are therefore able
to benefit from the UK and Netherlands
tax regimes that provide incentives
for innovation.

Our income tax expense for 2018 includes
a charge of US$2.8 million (2017: credit of
US$1.5 million) resulting from the finalisation
of prior year tax items with tax authorities.

Our income tax expense for 2017
reflected a non-cash deferred tax credit of
US$6.7 million resulting from US tax reform.
We excluded this non-recurring credit in
determining our underlying income tax
expense for 2017.

Our underlying income tax expense was
US$63.2 million (2017: US$38.6 million)
on underlying profit before tax of
US$289.7 million (2017: US$266.6 million).
Our underlying effective tax rate for 2018
was therefore 21.8%, which compares
with 14.5% for 2017.

Excluding the charge of US$2.8 million
in respect of the agreement of prior year
items (2017: credit of US$1.5 million),
our underlying effective tax rate for 2018
was 20.8%, which compares with 15.0%
for 2017.

Our underlying effective tax rate for 2017
was unusually low, principally because
of the tax effects of unpredictable, and
significant in the year, currency exchange
rate movements.

Net income was US$139.8 million in
2018 compared with US$169.4 million in
2017. Net income in 2017 reflected a loss
of US$4.5 million that was attributable
to the non-controlling interest in Dyna
Image. Underlying net income was
US$225.4 million in 2018 compared with
US$228.0 million in 2017, a decrease of 1%.

Basic earnings per share were
US$1.89 (2017: US$2.34) based on the
weighted average of 74.0 million shares
(2017: 74.5 million shares) that were in issue
during the year excluding 2.4 million shares
(2017: 2.1 million shares) held by employee
benefit trusts and, in 2017, the weighted
average of 1.4 million of our own shares
that were held in treasury. Underlying basic
earnings per share were US$3.05
(2017: US$3.08).

Diluted earnings per share were US$1.80
(2017: US$2.21). Diluted earnings per share
additionally reflect the weighted average
of 3.7 million (2017: 4.1 million) dilutive
employee share options. Underlying diluted
earnings per share were US$2.90
(2017: US$2.92).

Dialog Semiconductor PlcAnnual report and accounts 2018

Financial review continued

Cash flows

Summary cash flow statement

Cash flow from operating activities
was US$288.7 million in 2018 compared
with US$284.7 million in 2017, reflecting
higher cash generated from operations that
was partially offset by the timing of income
tax cash flows.

Cash generated from operations
before changes in working capital was
US$322.3 million in 2018 compared
with US$301.5 million in 2017.

Excluding the effect of acquisitions,
net working capital increased by
US$1.0 million compared with an
increase of US$30.9 million in 2017.

Demand for our products is typically
higher in the fourth quarter of the year
and lower in the first and second quarters.
Inventory levels therefore usually decline
between the end of the third quarter and
the end of the year. We anticipated higher
than usual sales of new customer products
in the first quarter of 2018 and therefore had
unusually high levels of inventory at the end
of 2017. Inventory levels were therefore lower
at the end of 2018 compared with the end
of 2017, releasing cash of US$13.6 million.
At the end of 2018, inventories represented
61 days’ cost of sales in the preceding
quarter (end of 2017: 60 days’ cost of sales).

Trade and other receivables were
higher at the end of 2018 compared
with the end of 2017, absorbing cash
of US$36.3 million. At the end of 2018,
trade and other receivables represented
24 days’ sales in the preceding quarter
(end of 2017: 15 days’ sales) and
reflected our reduced use of receivables
financing facilities.

Trade and other payables were higher at
the end of 2018 compared with the end
of 2017 releasing cash of US$16.0 million,
principally due to lower materials purchases
in the fourth quarter of 2018 compared with
2017. At the end of 2018, trade and other
payables represented 50 days’ cost of sales
in the preceding quarter (2017: 51 days’
cost of sales).

Movements on other working capital
items had the effect of releasing cash
of US$6.0 million during 2018.

Interest paid was US$0.5 million in 2018
compared with US$0.4 million in 2017.

Year ended 31 December

US$ millions
Cash generated from operations
Interest received, net
Income taxes (paid)/received
Cash flow from operating activities
Purchase of property, plant and equipment
Purchase of intangible assets
Capitalised development expenditure
Capital element of finance lease payments
Free cash flow
Payment of contingent consideration
Purchase of businesses, net
Purchase of other investments, net
Purchase of own shares into treasury
Purchase of Dialog shares by EBTs, net
Other cash flows, net
Net cash inflow/(outflow) during the period
Currency translation differences
Increase/(decrease) in cash and cash equivalents

2018
321.6
8.2
(41.1)
288.7
(26.1)
(6.2)
(24.8)
(1.7)
229.9
(9.4)
(3.5)
–
–
(18.2)
0.1
198.9
(0.3)
198.6

2017
270.6
5.8
8.3
284.7
(47.9)
(6.2)
(21.0)
(4.3)
205.3
–
(267.9)
(13.7)
(125.0)
(17.1)
0.4
(218.0)
0.2
(217.8)

Interest received was US$8.7 million in 2018
compared with US$6.2 million in 2017.

During 2018, we made net income tax
payments of US$41.1 million compared
with net receipts of US$8.3 million in 2017.
Income tax cash flows comprise payments
on account in respect of current year
taxable profits and adjusting payments
or receipts in respect of earlier years.
During 2017, we received repayments of
income taxes overpaid in respect of earlier
years totalling US$38.1 million.

Capital expenditure totalled
US$58.8 million in 2018 compared with
US$79.4 million in 2017, with the reduction
principally reflecting the unusually high
expenditure on testing equipment
during 2017.

Free cash flow was US$229.9 million in
2018 compared with US$205.3 million
in 2017. Our robust free cash flow
provides a basis for financing strategic
investments and for making distributions
to shareholders.

Cash outflow in relation to acquired
businesses was US$12.9 million in 2018
compared with US$267.9 million in 2017.

During 2018, we made a number of
payments in relation to the purchase
of Silego. We paid a purchase price
adjustment of US$0.7 million following
agreement with the vendors of Silego’s
cash, debt and working capital levels on
completion. We also paid US$9.4 million
in relation to the first tranche of the
contingent consideration payable for
Silego and US$2.8 million in settlement
of deferred consideration.

During 2017, there was a net cash outflow
of US$258.4 million on completion of
the purchase of Silego and we paid
US$9.5 million in cash for ams’s LED
backlight business.

Cash outflow on other investments
was US$nil in 2018 compared with
US$13.7 million in 2017.

During 2017, we paid US$15.0 million on
subscription for shares in Energous and
received US$1.3 million on the sale of our
shareholding in Arctic Sand.

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Dialog Semiconductor PlcAnnual report and accounts 2018

Net cash outflow on share purchases
was US$18.2 million in 2018 compared
with US$142.1 million in 2017.

Employee benefit trusts purchased
the Company’s ordinary shares in the
market at a cost of US$21.8 million
(2017: US$24.3 million) and
received proceeds of US$3.6 million
(2017: US$7.2 million) on the exercise
of share options.

During 2017, we made settlements in
relation to the Company’s share buyback
programme totalling US$125.0 million
including transaction costs.

Liquidity and capital resources

Financial risk management

Dialog is exposed to financial risks
including counterparty credit risk, liquidity
risk and market risks, which include
foreign exchange risk and interest rate
risk. Disclosures about these risks and
the ways in which we manage them are
presented in note 32 to the consolidated
financial statements.

Dialog has a centralised treasury function
that is responsible for ensuring that
adequate funding is available to meet the
Group’s requirements as they arise and for
maintaining an efficient capital structure,
together with managing the Group’s
counterparty credit risk, foreign currency
and interest rate exposures. All treasury
operations are conducted in accordance
with strict policies and guidelines that are
approved by the Board.

We use currency derivatives to manage
currency risks and we hold certain
equity options and warrants for strategic
reasons. We do not hold derivative financial
instruments for speculative purposes.

Cash and cash equivalents

Cash is managed in line with Treasury
policy to ensure there is no significant
concentration of credit risk in any one
financial institution.

Credit risk is measured using counterparty
credit ratings. As a minimum, a counterparty
must have a long-term public rating of
at least ‘single A’.

Counterparty limits are based on a
rating matrix and closely monitored.
Credit risk is further limited by investing
only in liquid instruments.

At the end of 2018, cash and cash
equivalents included US$96.1 million
(end of 2017: US$145.1 million) in relation
to receivables sold under these facilities.

Currency hedging activities

Dialog uses forward currency contracts and
currency swaps to manage the Group’s
exposure to currency risk on highly probable
forecast cash flows denominated in foreign
currencies; principally employment costs,
rents and other contractual payments.
We also use derivatives to hedge the
currency translation exposure on the
Euro-denominated liabilities that arise
in relation to successive tranches of the
Company’s share buyback programme.

Derivative financial instruments are
measured at fair value that is determined
based on market forward exchange rates at
the balance sheet date. At the end of 2018,
currency derivatives held by the Group were
represented by a liability of US$6.2 million
(end of 2017: asset of US$6.6 million).

All currency derivatives held to hedge
forecast cash flows were designated
as hedging instruments in cash flow
hedge relationships. During 2018,
a loss of US$10.1 million (2017: gain of
US$16.4 million) was recognised in other
comprehensive income representing
the change during the year in the fair
value of derivatives in effective hedging
relationships and a cumulative fair value
gain of US$2.3 million (2017: gain of
US$0.4 million) was transferred from
equity to profit or loss on the occurrence
of the hedged cash flows.

After taking into account hedging, we
recognised a net currency translation
loss of US$0.9 million (2017: net loss of
US$0.2 million) in profit or loss in relation
to liabilities to purchase shares under the
Company’s share buyback programme.

At the end of 2018, cash and cash
equivalents amounted to US$677.8 million
(end of 2017: US$479.3 million), which
principally comprised investments in money
market funds and bank deposits with
a maturity of three months or less.

Revolving credit facility

In July 2017, the Company and certain of its
subsidiaries, as guarantors, entered into a
US$150 million three-year revolving credit
facility provided by four financial institutions.
The facility is committed and available for
general corporate purposes. In June 2018,
we exercised our option to extend the
maturity date by a year but reduced the
amount of the facility to US$112.5 million
from July 2020 until it matures in July 2021.
On the second anniversary of the facility,
we have the option to extend the maturity
date by a further year subject to the consent
of the lenders. We also have the option
to increase the amount of the facility by
US$75 million subject to certain conditions.

The credit agreement contains various
provisions, covenants and representations
that are customary for such a facility.

We have not yet made any drawings under
the facility.

We consider that the revolving credit
facility and our significant cash balances
are sufficient to satisfy the Group’s
working capital requirements in the
near-to medium-term.

Receivables financing facilities

We utilise non-recourse receivables
financing facilities provided by two
financial institutions in an aggregate
amount of US$240 million. In March
2018, we extended the principal facility of
US$220 million for a period of 18 months
and it now matures on 31 October 2019.

Gross receivables sold under the facilities
decreased by US$57.8 million to stand
at US$113.5 million at the end of 2018
compared with US$171.3 million at the
end of 2017.

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Dialog Semiconductor PlcAnnual report and accounts 2018

Financial review continued

Balance sheet

Summary balance sheet

As at 31 December
US$ millions
Assets
Cash and cash equivalents
Other current assets
Total current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities and equity
Current liabilities
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Total equity
Total liabilities and equity

2018

2017

677.8
296.2
974.0
439.5
217.4
66.4
6.0
13.8
743.1
1,717.1

393.9
8.0
12.7
414.6
1,302.5
1,717.1

479.3
281.2
760.5
439.5
235.6
83.9
7.5
49.8
816.3
1,576.8

199.7
4.0
30.7
234.4
1,342.4
1,576.8

Share buyback programme

We initiated our share buyback programme
in May 2016. By the end of 2017, we had
purchased a total of 4,483,816 shares at
a cost of €168.7 million (US$184.7 million).
Details of the share purchases made during
2016 and 2017 are set out in note 26 to the
consolidated financial statements.

At the Company’s 2018 AGM, the Directors
were granted a new authority to purchase
up to 7,638,214 of the Company’s ordinary
shares. Such authority shall (unless
previously renewed, varied or revoked)
expire on the day before the next AGM
of the Company or on 30 June 2019,
whichever is the earlier.

Purchases made under the share buyback
programme are off-market and are effected
by way of contingent forward purchase
contracts entered into with brokers.
Barclays, Goldman Sachs, HSBC or Merrill
Lynch may be appointed as brokers for
purchases under the 2018 AGM authority.

On 6 November 2018, the Company
announced details of the first tranche of
the share buyback programme pursuant
to the 2018 AGM authority, under which
it committed to purchase shares with
a minimum cost of €100.0 million and
a maximum cost of €150.0 million.

We have not yet been required by the
appointed broker to make any intermediate
settlements in relation to this tranche, under
which the broker may continue to purchase
shares until 21 May 2019.

We do not expect to announce another
tranche of share purchases under the 2018
AGM authority but we will seek renewal
of the share buyback authority at the
Company’s 2019 AGM. We will consider
initiating further tranches of share purchases
in the context of our regular assessment
of the Group’s future growth opportunities
and its strategic objectives.

Capital management

The Group’s capital is represented by
its total equity.

We seek to maintain a capital structure
that supports the ongoing activities of
our business and its strategic objectives
in order to deliver long-term returns to
shareholders. We allocate capital to support
organic and inorganic growth, investing to
support research and development and
our product pipeline.

We will fund our growth strategy using a mix
of equity and debt after giving consideration
to prevailing market conditions.

Goodwill

At the end of 2018 and 2017, the carrying
amount of goodwill was US$439.5 million.

Goodwill impairment tests carried out
during 2018 showed that the recoverable
amount of each operating segment to which
goodwill is allocated was comfortably in
excess of its carrying amount and therefore
no impairment was recognised.

Other intangible assets

At the end of 2018, the carrying
amount of other intangible assets
was US$217.4 million (end of 2017:
US$235.6 million). During 2018, additions
amounted to US$31.2 million, comprising
capitalised product development costs of
US$24.8 million and purchased software,
licences and patents totalling US$6.4 million.
During 2018, the amortisation expense was
US$49.1 million (2017: US$42.0 million).

Property, plant and equipment

Since Dialog operates a fabless business
model, it does not have any manufacturing
facilities but it does occupy R&D facilities
and administrative offices. At the end of
2018, Dialog operated in 29 locations
worldwide covering a total of 57,800 square
metres. Dialog’s facilities are all held under
operating leases. Management believes
that Dialog’s facilities are adequate for its
current requirements.

Property, plant and equipment principally
comprises test equipment, office equipment
and leasehold improvements. At the end of
2018, the carrying amount of property, plant
and equipment was US$66.4 million (end
of 2017: US$83.9 million). Additions during
the year amounted to US$26.1 million.
During 2018, the depreciation expense was
US$31.5 million (2017: US$30.8 million).

Other non-current assets

Other non-current assets decreased
by US$37.5 million to US$19.8 million
(end of 2017: US$57.3 million), primarily
due to the recognition of losses totalling
US$34.6 million on the remeasurement
of our investments in Energous shares
and warrants.

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Dialog Semiconductor PlcAnnual report and accounts 2018

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Current assets

Going concern

Uncertain tax positions

IFRIC 23 Uncertainty over Income Tax
Treatments clarifies the application of the
recognition and measurement requirements
of IAS 12 Income Taxes where there is
uncertainty over income tax treatments.

We already account for income taxes
on a basis consistent with IFRIC 23 and
therefore do not expect it to affect the
Group’s results or financial position.

Consequences of Brexit

Considerable uncertainty exists as to
the timing of the UK’s exit from the EU,
scheduled to take place on 29 March 2019,
the terms of any withdrawal agreement
between the UK and the EU and the effect
of Brexit on the UK’s future relationships
with the EU, other multilateral organisations
and individual countries outside the EU.

We continue to believe that Brexit will not
have a significant impact on Dialog in the
short term because only a small amount
of our revenue is derived from customers
in the UK. However, since approximately
two-thirds of our workforce is based in the
EU and our teams are typically comprised
of several nationalities, we will monitor
very closely any proposed changes to the
current regulations in respect of the rights
of EU and other nationals to work in the UK,
and vice versa.

The longer-term effects of Brexit on
our operating environment are difficult
to predict and subject to wider global
macroeconomic trends and events,
but may impact ourselves, our customers
and other counterparties.

While the withdrawal negotiations are
ongoing and during any subsequent
transition period, we will operate on a
business as usual basis within applicable
regulations and our continuing focus will
be on growing our business.

Wissam Jabre
Chief Financial Officer,
Senior Vice President Finance

Current assets totalled US$974.0 million
at the end of 2018 compared with
US$760.5 million at the end of 2017,
an increase of US$213.5 million.

Cash and cash equivalents increased
by US$198.5 million to US$677.8 million.
Other current assets increased by
US$15.0 million to US$296.2 million,
principally reflecting an increase of
US$36.3 million in trade and other
receivables that was partially offset
by a decrease of US$19.2 million
in inventories.

Current liabilities

Current liabilities totalled US$393.9 million
at the end of 2018 compared with
US$199.7 million at the end of 2017.
Excluding the share buyback obligation of
US$171.8 million that was recognised at the
end of 2018, current liabilities increased by
US$22.0 million to US$221.7 million at the
end of 2018, principally reflecting an increase
of US$14.9 million in trade and other
payables and the reclassification as current
of the liability for the remaining contingent
consideration payable for Silego.

Income tax assets and liabilities

At the end of 2018, the Group had net
current tax payables of US$6.0 million (end
of 2017: net payables of US$0.6 million).

At the end of 2018, the Group had net
deferred tax liabilities of US$2.0 million
(end of 2017: net assets of US$3.5 million),
comprising deferred tax assets of
US$6.0 million (end of 2017: US$7.5 million)
and deferred tax liabilities of US$8.0 million
(end of 2017: US$4.0 million).

Other non-current liabilities

Other non-current liabilities decreased by
US$18.0 million to US$12.7 million (end of
2017: US$30.7 million), principally due to
the reclassification as current of the liability
for the remaining contingent consideration
payable for Silego.

Total equity

Total equity was US$1,302.5 million at the
end of 2018 (end of 2017: US$1,342.4 million).
At the end of 2018, Dialog shares held
by employee benefit trusts amounted to
US$22.5 million (end of 2017: US$0.9 million).

For the reasons set out on page 62,
the Directors continue to adopt the going
concern basis in preparing the Group’s
and the Company’s financial statements.
We outline on pages 52 to 56 the principal
risks and uncertainties that the Directors
believe could adversely affect the Group’s
results, cash flows and financial position.

Accounting standards to
be adopted in 2019

Leases

IFRS 16 Leases provides a single lessee
accounting model, requiring lessees to
recognise a right-of-use asset and a lease
liability for all leases, except those with
a short lease term and/or involving an
underlying asset of low value. In summary,
for lessees, the distinction between an
operating lease and a finance lease will
disappear and most operating leases will be
accounted for similarly to the way in which
finance leases were accounted for under
the predecessor accounting standard,
IAS 17 Leases.

Further details on the accounting for leases
under IFRS 16 are set out in note 1 to the
consolidated financial statements.

We will adopt IFRS 16 using a modified
retrospective approach whereby prior
periods will not be restated but we will
recognise cumulative effect adjustments
to the opening consolidated balance sheet
on the transition date, 1 January 2019.
We estimate that we will recognise lease
liabilities totalling US$67.6 million on
adoption of IFRS 16 and corresponding
right-of-use assets totalling US$66.4 million
(after deducting existing net accrued lease
rentals of US$1.2 million).

Going forward, we expect that IFRS 16 will
be beneficial to operating profit to the extent
that depreciation of the right-of-use assets
will be lower than the rental expense that
would have been recognised under IAS 17.
We expect, however, that operating profit
will be only slightly higher in 2019 than it
would have been under IAS 17. After taking
into account the interest expense on the
lease liabilities, we expect that net income
will be slightly lower in 2019 than it would
have been under IAS 17.

As we progress through 2019, we will show
in the notes to our consolidated financial
statements the effect of adopting IFRS 16
on our quarterly and year to date results.

We can confirm that the calculation of the
financial covenants associated with our
revolving credit facility will be unaffected
by the adoption of IFRS 16.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Managing risk and uncertainty

This section sets out a description of the principal risks and uncertainties that
could adversely impact the Company’s financial situation or reputation and
therefore its ability to execute its strategic objectives.

THE BOARD AND
AUDIT COMMITTEE

The Board is responsible for approving
the Company’s strategic aims and
objectives and for determining the
nature and extent of the risks it is willing
to take in achieving those objectives.
The Board seeks to maintain sound risk
management and internal control systems.
It delegates responsibility for monitoring
the effectiveness of these to the Audit
Committee, which meets a minimum
of four times per year. At least annually,
the Audit Committee will review the
effectiveness of the Group’s risk and
control processes.

OPERATIONAL
MANAGEMENT

The Management Team is responsible
for managing risk within the business on
a day-to-day basis. They set objectives,
determine strategy to achieve those
objectives and put in place processes
to manage the attendant risks.
The management team provides input
to the Corporate Risk Register which is
then reviewed by the Risk Management
Office (“RMO”) and the Audit Committee.

Our risk
management
framework

THE RISK
MANAGEMENT OFFICE

The RMO meets quarterly. It is chaired
by the Chief Financial Officer and is
composed of the heads of the Legal and
Risk Management functions, plus senior
representation from across the business.
The role of the RMO is to improve the
identification and quantification of risks,
to assign responsibility for risk mitigation
and to monitor the progress being
made in those activities. The RMO has
accountability for reporting key risks and
their status to the Management Team
and the Audit Committee.

INTERNAL AUDIT

Internal Audit’s role is to provide
independent assurance to the Audit
Committee and the Management Team
on the effectiveness of risk management
and control. To ensure Internal Audit’s
independence from line management,
the Director of Internal Audit is accountable
to the Audit Committee. The Internal Audit
activities are governed by an Internal Audit
plan, which is developed with reference to,
amongst other things, the corporate risk
register and the plan is approved by the
Audit Committee. Based upon its activity,
Internal Audit is responsible for reporting
significant risk exposures and identified
control issues to the Audit Committee
and to Senior Management.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Our principal risks

The Company is affected by a number of risk factors, some of which, including macroeconomic
and industry-specific cyclical risks, are outside Dialog’s control. The Company recognises four
categories of risks: strategic, operational, financial, and legal and compliance.

RISK TREND KEY

Risk
increasing

Risk
stable

Risk
decreasing

Strategic risks

Dialog management is focused on executing its strategic objectives in order to mitigate its dependencies on key markets and customers.
As part of our 2018 review, a political conditions risk has been added to our strategic risks.

DEPENDENCY ON MOBILE AND CONSUMER ELECTRONICS

Mitigating actions

Dialog’s product portfolio is heavily focused upon the mobile and
consumer electronics market. Dialog’s revenue is heavily reliant
upon the commercial success of its customers’ end products,
principally in the high-end mobile phone market. If the market
for these products flattens or declines, Dialog’s revenue and
profitability will be impacted. Furthermore, the consumer
electronics market is characterised by short product cycles
and rapid innovation which provide opportunities for customers
to change suppliers for subsequent product generations based
on competitive factors such as price, quality, technology or
specific product specifications.

We engage with our customers to understand their requirements and
tailor the products we design to their specifications. Dialog expensed
US$326 million in R&D in 2018 to anticipate and respond to new
product developments and market trends. The Company rapidly
implements new designs to meet customer needs and to keep
abreast of technological trends.

Examples include Configurable Mixed-signal ICs with in-system
programming, low power haptic ICs and nanopower PMICs for
low power IoT applications.

Dialog also looks for technology and product acquisitions where
appropriate. Examples include the acquisitions of Silego, Inc.
with its Configurable Mixed-signal Integrated Circuit technology
and product portfolio, as well as the portfolio of LED backlighting
products and technology acquired from ams AG in 2017.

DEPENDENCY ON KEY CUSTOMERS

Mitigating actions

Dialog relies on a relatively small number of customers, within
the mobile and consumer electronics market, for a substantial
proportion of its revenue. The loss of our largest customer,
Apple Inc. or of specific products sold to Apple, would have
a material effect on revenue and profitability. Dialog’s 2018
revenue derived from Apple Inc. was US$1,082 million.
We recognise that Apple has the resources and capability to
internally design PMICs and we expect this capability to be
enhanced through the transaction between Dialog and Apple
announced in October 2018, when completed.

Dialog seeks to diversify its product offerings within its key
accounts and to expand its relationships with more top tier
global electronics companies.

As a result of the announced transaction with Apple, Dialog
expects to reduce its dependency on Apple over a three to five
year term and diversify its future Apple revenue across a range
of power management, audio subsystem, charging and other
mixed-signal products.

Dialog also monitors and reviews acquisition opportunities
to further diversify its product offering and customer base.

RETURN ON RESEARCH AND DEVELOPMENT INVESTMENT

Mitigating actions

Dialog’s investments in research and development of products,
technology and methodologies may not result in successful
products or anticipated levels of revenue or profitability.

Dialog engages with key customers and market leaders to
anticipate future product and technology requirements.

Dialog’s ongoing product and technology development
processes incorporate detailed business justifications and
review of business cases.

Dialog seeks to manage its technology and product research
and development efficiently and effectively through rigorous
project management and engineering controls.

Dialog Semiconductor PlcAnnual report and accounts 2018

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Managing risk and uncertainty continued

Strategic risks continued

HUMAN CAPITAL

Mitigating actions

In order to successfully execute its current and future business
commitments, Dialog needs to continue to build its organisational
capability in two key areas: continuous innovation in product
development, manufacturing and packaging technologies; and
leadership skills in an expanding and complex global operation.

We continue to monitor the progress of Brexit discussions and
any impact these may have on our ability to attract and retain
key employees from the EU into the UK.

Dialog seeks to create a positive working environment that results
in low levels of staff turnover. Over the years, it has developed an
effective recruitment process to attract and retain high-calibre staff,
while succession planning for senior management positions facilitates
continuity of leadership. Dialog has dedicated human resource
professionals working closely with the business to drive further
development of its personnel and benchmark its employment terms
to match industry top performers.

Dialog has a decentralised approach to research & development
with teams around the world. In a highly competitive talent market
we believe this flexible approach is advantageous, allowing us to
recruit talent where it resides and as a defence mechanism to stop
large scale “poaching” by competitors.

Emerging talent programmes continued successfully in 2018, with
new graduates and interns entering the business – the majority within
engineering functions.

GEOPOLITICAL EVENTS

Mitigating actions

The increasing use of tariffs and trade barriers between the US and
China could adversely impact end-user demand, with a consequent
impact on demand for Dialog’s products.

Uncertainty around Brexit and the UK’s withdrawal from the EU
may adversely affect economic conditions in the UK, the EU
and elsewhere. We continue to believe that Brexit will not have
a significant impact on Dialog in the short term because only a
small amount of our revenue is derived from customers in the UK.
However, approximately two-thirds of our workforce is based in the
EU and our teams are typically comprised of several nationalities.
We have not yet experienced any material negative impact from
Brexit, but we cannot predict its future implications.

Tensions exist between Ukraine and Russia which, if escalated
further, could potentially affect Dialog’s continuing operations
in Western Ukraine.

Operational risks

Although currently unaffected, Dialog continues to monitor the situation
closely. Supply Chain options are constantly under review to ensure
the most efficient arrangements are in place. The US represents
a significant part of Dialog’s customer’s end-user global market,
but the rest of the world should be unaffected by any additional US
tariffs on Chinese goods.

Dialog will continue to monitor very closely any proposed changes
to the current regulations in respect of the rights of EU and other
nationals to work in the UK, and vice versa.

Dialog will continue to monitor events in Ukraine. Our IT infrastructure
ensures that projects could continue at multiple locations should
operations in Ukraine become too difficult to maintain.

Dialog recognises that time-to-market for high volume supply of complex ICs is a critical factor for the success of its customers.
Therefore, the effectiveness and efficiency of Dialog’s internal operations and management of its supplier relationships are significant
factors contributing to its short-term and long-term performance. We run programmes to drive continuous improvement through all
facets of the value chain from design to order fulfilment.

SUPPLY CHAIN INTERRUPTION

Mitigating actions

Dialog runs a “high-touch” fabless business model and outsources
the capital intensive production of silicon wafers, packaging
and testing of integrated circuits to leading third-party suppliers,
mainly in Asia. The manufacturing of products runs over multiple
stages with multiple suppliers. The failure of any of these third-
party vendors to deliver products or otherwise perform as required
could damage relationships with our customers, decreasing our
revenue and limiting our growth. Supplier delivery performance
can be adversely affected by multiple issues. For example,
if increased demand for these suppliers’ products exceeds
their production capacity.

Dialog has forged close partnerships with its suppliers, which help
capacity planning and management. Dialog’s suppliers are mainly
highly respected large-scale operations. Dialog strives to source
its high volume components via a dual sourcing strategy where
appropriate. Dialog works with a range of foundries and back-end
vendors, mainly in Taiwan, China and Singapore, to mitigate the risk
of supply chain disruption and constraints. The geographical spread
of Dialog’s suppliers also helps with disaster recovery planning.

Dialog achieved a total company “On Time Delivery” performance
of 100% in 2018, which measures performance against delivery
dates confirmed by Dialog at date of order acceptance.

Dialog continues to carry out supplier audits which cover
a wide range of topics including compliance and product
quality (ISO 9000 and ISO 14000) reviews.

Dialog conducts regular business reviews with its suppliers
to manage supplier performance and future capabilities.

Dialog Semiconductor PlcAnnual report and accounts 2018

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INFORMATION TECHNOLOGY AND SECURITY

Mitigating actions

Dialog is heavily dependent upon the quality, resilience and
security of its information systems, which support the engineering,
manufacturing and enterprise aspects of the business.

Dialog is continuously strengthening its internal monitoring and
controls; applying best practice to ensure a robust and secure
IT environment.

Risks relating to cyber security continue to grow, with consequent
risks to assets, intellectual property and the data of the Company,
its customers and its employees.

Dialog’s IT systems are managed on a global basis to ensure
a unified approach, with IT operations being distributed between
Europe, Asia and the USA.

Engineering tools are being consolidated into regional data centres
connected by an upgraded network to allow increased agility,
reliability and scale.

Joint roadmaps have been developed with the business to align and
prioritise IT investment with evolving business needs and to maintain
compliance and controls.

IT policies and procedures have been reviewed and updated to
reflect the changing regulatory environment, including data privacy
regulations in various countries.

QUALITY ASSURANCE

Mitigating actions

Given the timetables for some key product introductions,
Dialog must ensure tight control over the new product introduction
process and in particular quality assurance in high-volume
product ramps.

Dialog needs to avoid releasing faulty products which may
cause delays in the assembly line of its customers and defects
in their products.

Dialog operates a “high-touch” fabless model, with engineers
working closely together with our foundry partners to optimise
the manufacturing process.

Dialog emphasises quality assurance through product validation
prior to mass production, in-line controls and monitoring of yields
with real-time information feeds from manufacturing facilities.

Dialog works with key suppliers to achieve industry-leading yields
based upon typical defect density limitation. To support this,
Dialog has engineers located at key supplier sites.

Yield performance on key products is monitored during regular
internal operational reviews.

Financial risks

Given the Company’s sector and business model, Dialog tends to be cash generative, operating across the globe. This exposes the
Company to several financial risks including fluctuations in interest and foreign exchange rates and credit risk relating to counterparties
the Company transacts with. It also needs to ensure access to liquidity at all times to meet its financial obligations and investment in future
growth. Through proactive stewardship and financial discipline we seek to mitigate the impact of these risks on the financial performance
of the Company.

FOREIGN CURRENCY

Mitigating actions

The majority of Dialog’s revenue and expenses are denominated
in US dollars. Some exposure exists to non-USD denominated
operating expenditure, primarily Euro and Pound sterling, meaning
exchange rate volatility could have an adverse impact on our
financial results.

Discrete currency exposures are managed on a case by case basis.
Transactional currency exposures are managed using forward
currency contracts, hedging no further than 12 months out on
a layered approach. These are designated as cash flow hedges
and at the year-end approximately US$136 million equivalent
were outstanding.

During the year, share buyback liabilities were hedged using forward
currency contracts, forming an economic hedge but not designated
for hedge accounting purposes. Please refer to notes 26 and 32
to the consolidated financial statements.

COUNTERPARTY RISK

Mitigating actions

Dialog is exposed to the potential default of banks, suppliers and
customers. If their credit worthiness were to change, this could
have an adverse effect on Dialog’s business and financial condition.

The Company uses non-recourse receivables financing to help
manage credit risk of selected customers. When executing financial
transactions, Dialog deals with reputable financial institutions in
accordance with Board approved policy.

Financial stability is a key selection criteria for all suppliers.
Annual performance reviews are carried out for key suppliers
by Dialog’s Manufacturing Review Board.*

* The Manufacturing Review Board is an internal management committee responsible for supplier lifecycle management, supplier performance,

onboarding and phasing out of suppliers as required, according to Dialog’s manufacturing strategy.

Dialog Semiconductor PlcAnnual report and accounts 2018

Managing risk and uncertainty continued

Financial risks continued

FUNDING AND LIQUIDITY

Mitigating actions

The risk of being unable to continue to meet the financial
obligations/requirements of our operations and provide
resources for future growth.

The business has no debt and is cash generative. As such, the
Company finances its operations from surplus cash, only raising
debt when necessary. The policy is to maintain a sufficient level of
liquidity appropriate to meet short-term liabilities and longer-term
strategy. Cash flow from operating activities in 2018 was US$289
million. In addition the Company has a US$150 million revolving credit
facility which remains undrawn. See note 8b.

Legal and compliance risks

As Dialog has an increasingly global presence, it continues to update and enhance its policies, processes and procedures to comply
with international and local requirements. Dialog recognises the importance of behaving as a good corporate citizen across the globe.
In addition, the Company seeks to utilise the legal protection offered across the globe to protect our assets, including specifically our
intellectual property rights.

COMPLIANCE WITH LAWS AND REGULATIONS

Mitigating actions

Dialog is subject to national and regional laws and regulations
in such diverse areas as product safety, product claims, patents,
copyright, trademarks, competition, employee health and safety,
the environment, corporate governance, share listing and related
disclosure, employment and taxes. Failure to comply with laws
and regulations could expose Dialog to civil and/or criminal
actions leading to damages, fines and criminal sanctions against
us and/or our employees with possible consequences for our
financial results and corporate reputation. Changes to laws and
regulations could have a material impact on our cost of doing
business. Tax, in particular, is a complex area where laws and
their interpretation are changing regularly, leading to the risk
of unexpected tax exposures.

Dialog monitors laws and legal and regulatory changes across the
countries in which it operates and continues to update its policies,
processes and compliance programmes.

We audit our key suppliers to ensure their compliance with industry
standards and legal requirements.

We also continue to strengthen our system of internal controls,
procedures and resources which reinforce compliance with various
legal regimes.

IP PROTECTION

Mitigating actions

As a highly innovative company Dialog has IP that is attractive to
others. Dialog must ensure that this IP is sufficiently protected both
legally (via patents) and physically (via security and IT processes).
We seek to protect our current business and our IP from being
copied or used by others through appropriate use of patents,
copyrights and trademarks on a global basis.

Dialog has in excess of 850 patent families and continues an active
patent registration programme overseen by its Patent Committee.

Dialog has continued to make investments to improve the tools used
to protect its IP. Engineering projects are segregated and access
controlled via a tracked approval process.

IP INFRINGEMENT

Mitigating actions

The semiconductor industry is characterised by frequent litigation
regarding intellectual property rights. We may be subject to claims
by third parties who allege that our products infringe their patents
or other intellectual property rights. Such claims against us or our
customers could adversely affect our business and require us to
pay royalties/damages or expend significant resources to modify
or redesign our products.

Dialog invests significantly in original research and development
to address product requirements with innovative solutions.
Furthermore, we have invested in a robust patent protection
programme to deter frivolous infringement claims by competitors.

Dialog also seeks indemnification for intellectual property infringement
by its suppliers.

Strategic report approved on 6 March 2019

Dr Jalal Bagherli
Chief Executive Officer

Wissam Jabre
Chief Financial Officer, Senior Vice President Finance

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Dialog Semiconductor PlcAnnual report and accounts 2018

Introduction to governance

Dear shareholder,

I am pleased to present our 2018
corporate governance report.
As Dialog is incorporated in
the UK and listed in Frankfurt,
we are not required to follow,
and report against, the UK
Corporate Governance Code.
In line with our commitment
to maintaining high standards
of corporate governance
and oversight, the Board
has decided to follow the UK
Code to the extent it considers
it beneficial to the good
governance of the Company.

2018 developments

The Board is cognisant of the recent
revisions to the UK Code. Following the
publication of the latest iteration of the Code
in July 2018, the Board was apprised of the
key alterations to its framework. The Code
became effective on 1 January 2019 and
the Board will, where appropriate, act to
reflect the revised UK Code in Dialog’s
approach to corporate governance.
Details of those steps will be provided to
shareholders in our 2019 Annual Report.
Certain of the key changes in the Code
have been made in areas where we have
made significant progress in recent years,
including in embedding our culture and
strengthening engagement with our key
stakeholders. New regulations also came
into effect for UK companies, relating to the
CEO to employee pay ratio and extension
of reporting around s.172 of the Companies
Act. Reporting in line with those regulations
will be included in the 2019 Annual report.

Additionally, we published our Gender Pay
Gap report and our approach to tax.

Culture and stakeholders

Dialog is a business built upon the values
enshrined in “The Spirit of Dialog”, the
cornerstone of our corporate values.
As detailed in the Chairman’s statement,
the Board and senior management team
continued to work closely with our internal
and external stakeholders to promote our
culture and values. We believe this is an
important factor in protecting and delivering
sustainable long-term value for shareholders.

Succession planning

Succession planning is an important
element of good governance, ensuring that
we are fully prepared for planned or sudden
departures from key positions throughout

the year. The Nomination Committee has
reviewed the succession plans for the
Board, the Management Team and other
key roles within the organisation. This review
also provided visibility of Dialog’s talent
pipeline to ensure we are maximising the
potential of our people.

Board refreshment

Aidan Hughes, who has been a key member
of the Board since 2004, will step down
at the 2019 AGM. As part of our ongoing
programme of Board and Committee
refreshment, the Board is looking to appoint
a new independent non-executive Director
who will be, in addition, appointed to the
Audit Committee to ensure that Committee’s
composition remains aligned with best
practice corporate governance.

Our Board continues to include an
appropriate balance of longer serving and
more recently appointed Directors, with
diverse backgrounds and experience.
This serves to bring fresh thinking to the
Board yet preserves the knowledge,
experience and understanding of the
evolution of the Dialog business within the
Board as a whole, all of which provides the
platform for fruitful discussion at Board level.

The Board has continued to focus on
providing effective leadership and oversight
of the Group as it seeks to create value for
our shareholders.

In 2017, we conducted an externally
facilitated Board evaluation. Its findings
were presented to the Board in February
2018. Later in 2018, we conducted an
internal evaluation. The Directors engaged
extensively with both the internal and
external evaluations and found them
to be helpful processes in promoting
effectiveness at Board level. The outcome
of both reviews were positive and confirmed
that the Board and its Committees operate
to a high standard.

Senior Independent Director
(“SID”)

Having carefully considered the role and
responsibilities of a Senior Independent
Director, and the fact that Rich Beyer is a
Chairman who was wholly independent on
appointment in 2013, the Board does not
believe there is a necessity to appoint a SID
at this time. Rich is available to shareholders
as are all of the Directors, particularly the
Chairs of each of the Board Committees.
Furthermore, any concerns regarding the
performance of the Chairman may be
addressed to and will be managed by the
Chair of the Nomination Committee. As such,
the Board believes that its composition
continues to ensure a proper division
between management and non-executive
oversight; nonetheless, we will review the
potential for a new SID on an ongoing basis.

Non-executive Director positions

We have not set hard guidelines at Dialog
but recognise the importance of ensuring
Directors have sufficient time to discharge
their obligations to Dialog and believe
each of the Directors has demonstrated
exceptional commitment to their roles for
the past fiscal year, as exemplified by their
meeting attendance on page 66.

Remuneration

The Directors’ remuneration report,
together with an introductory letter from
our Remuneration Committee Chairman,
Mike Cannon, is set out on page 70.
As set out in the letter and report, we
are proposing some changes to the
remuneration policy at the 2019 AGM.

Understanding our stakeholders

As set out in the Chairman’s statement,
the Board continues to take account of
the impact of its decisions on all of our
stakeholders. We have also begun to assess
the methods in which we ensure meaningful
engagement can take place between the
Board and the workforce. This engagement,
amongst other things, will allow Directors
to gauge how the Group’s new strategic
initiatives are embedding within the
organisation. The alignment of our strategy,
corporate culture and corporate governance
framework provides us with the foundation to
ably meet any challenges that the business
faces, and position us for long-term growth.

In 2017, the European Union Directive on
disclosure of non-financial and diversity
information (the “Non-Financial Reporting
Directive”) came into effect. Since 2015,
the Company has adopted the Global
Reporting Initiative (GRI) framework for the
purpose of identifying and reporting on our
material sustainability topics. In 2018, we
transitioned to the GRI Standards, against
which our 2018 Sustainability Report
makes a ‘GRI-referenced’ claim. In our
annual sustainability report, we provide
disclosure on the impacts of our activities;
our interaction with stakeholders; and,
in respect of environmental, employee,
social, human and labour rights, anti-
corruption and anti-bribery matters.

Finally, as we have outlined before, as a
Board, we recognise the importance of
constructive dialogue between the Board
and Dialog’s investors, and we remain
open to all feedback from shareholders.
In addition to ongoing meetings and
consultation conducted throughout the year,
all Directors are available at the Company’s
AGM and we encourage you to take
advantage of this opportunity should you
wish to meet with and engage in discussion
with any member of your Board.

Nick Jeffery
Chairman, Nomination Committee

Dialog Semiconductor PlcAnnual report and accounts 2018Leadership – Board of Directors

The Board of Dialog currently comprises eight Directors. This includes one Executive Director,
and seven independent non-executive Directors (including the Chairman).

2. Dr Jalal Bagherli
Executive Director
(Chief Executive Officer)
Joined: September 2005

Jalal was previously Vice President
and General Manager of the Mobile
Multimedia business unit for Broadcom
Corporation. Prior to that Jalal was the
CEO of Alphamosaic, a venture-funded
silicon start-up company in Cambridge
focusing on video processing chips for
mobile applications. He has extensive
experience in the semiconductor industry
through his previous professional and
executive positions at Sony Semiconductor
and Texas Instruments, managing
semiconductor product businesses and
working with customers in Asia, Europe
and North America. Jalal has a BSc (Hons)
in Electronics Engineering from Essex
University, and holds a PhD in Electronics
from Kent University, UK.

External Appointments: Jalal has
been a non-executive Director of Lime
Microsystems Ltd since 2005 and was the
Chairman of the Global Semiconductor
Association Europe from 2011 to 2013.

Board Experience:

1. Rich Beyer
Chairman
Joined: February 2013

Appointed Chairman in July 2013. Rich has
a long-standing career in the technology
sector. He was the Chairman and CEO of
Freescale Semiconductor from 2008 to
2012. Prior to this, he held positions as CEO
and Director of Intersil Corporation, Elantec
Semiconductor and FVC.com. He has also
held senior leadership positions at VLSI
Technology and National Semiconductor
Corporation. In 2012, he was Chairman of
the Semiconductor Industry Association
Board of Directors and served for three
years as a member of the US Department
of Commerce’s Manufacturing Council.
He currently serves on the Board of Micron
Technology Inc. and previously served on
the Boards of Analog Devices, Microsemi
Corporation (now Microchip Technology),
Credence Systems Corporation (now
LTX-Credence), XCeive Corporation and
Signet Solar. Rich served three years as an
officer in the United States Marine Corps.
He earned Bachelor’s and Master’s degrees
in Russian from Georgetown University,
and an MBA in marketing and international
business from Columbia University
Graduate School of Business.

External Appointments: Rich
currently serves on the Board of Micron
Technology Inc.

Board Experience:

The Board of Dialog currently
comprises eight Directors. This includes
one Executive Director, and seven
independent non-executive Directors
(including the Chairman).

The Board of Directors comprises a mix
of the necessary skills, knowledge and
experience required to provide leadership,
control and oversight of the management
of the Company and to contribute to the
development and implementation of the
Company’s strategy.

In particular, the Board combines a group
of Directors with diverse backgrounds
within the technology sector, in both public
and private companies, which combine to
provide the expertise to drive the continuing
development of Dialog, advance the
Company’s commercial objectives and
strategy, thus putting the Company in a
strong position to maximise shareholder
value. The Board also combines a number
of longer serving Directors with more
recently appointed Directors. This serves
to bring fresh thinking to the Board yet
preserves the knowledge, experience and
understanding of the evolution of the Dialog
business within the Board as a whole.

Director biographies are set out above
and on page 59 and further details on the
composition of the Board, and the Board’s
Committees, are detailed on pages 64
and 65.

Committee membership
A – Audit Committee
N – Nomination Committee
R – Remuneration Committee

Board experience
– Technology
– Telecommunications
– Finance
– Governance

Dialog Semiconductor PlcAnnual report and accounts 2018

3. Alan Campbell
Independent non-executive Director
Joined: April 2015

5. Mary Chan
Independent non-executive Director
Joined: December 2016

7. Nick Jeffery
Independent non-executive Director
Joined: July 2016

Mary’s career has spanned executive
leadership roles at some of the world’s most
successful international firms, including
AT&T, Alcatel Lucent, Dell Inc. and General
Motors Corporation (“GM”). At Dell, between
2009 and 2012, Ms Chan led the company’s
Enterprise Mobility Solutions and Services
business in the USA. Prior to this, at Alcatel-
Lucent, Ms Chan served as Executive Vice
President of the company’s US 4G LTE
Wireless Networks business. Most recently
at GM, Ms Chan served between 2012
and 2015 as President, Global Connected
Consumers & OnStar Service USA.
She holds both Bachelor and Master of
Science degrees in Electrical Engineering
from Columbia University.

Nick has a career of over 20 years
in the telecommunications industry.
He has held a position on the Vodafone
Executive Committee since 2013 and
from 1 September 2016 became CEO of
Vodafone UK Limited. He has undertaken
numerous roles within Vodafone including
CEO of the Group’s acquired Cable and
Wireless Worldwide operations from 2012
to 2013, and CEO of Vodafone Group
Enterprise from 2013 to 2016. Having begun
his career at Cable & Wireless plc (Mercury
Communications) in 1991, he then founded
and led Microfone Limited in 2001, whilst
serving as Head of Worldwide Sales and
Europe Managing Director at Ciena Inc.
from 2002 until 2004.

External Appointments: Ms Chan is a
managing partner at VectoIQ, LLC., and
currently serves as an Independent Director
on the Boards of Magna International,
Microelectronics Technology Inc, SBA
Communications Corporation and
WiTricity Corporation.

Committee Membership: Nomination,
Remuneration

Board Experience:

6. Aidan Hughes
Independent non-executive Director
Joined: October 2004

Aidan is a Fellow of the Institute of Chartered
Accountants in England and Wales and
qualified as a chartered accountant with
PriceWaterhouse in the 1980s. He has held
senior finance roles at Lex Service Plc and
Carlton Communications Plc. He was a
FTSE 100 finance Director, having held that
position at the Sage Group Plc from 1993
to 2000. From December 2001 to August
2004 he was a Director of Communisis Plc.

External Appointments: Aidan is a
non-executive Director and Chair of Audit
Committee for Ceres Power Holdings
PLC. He is also an investor and adviser
to a number of international private
technology companies.

Committee Membership: Audit
Board Experience:

External Appointments: CEO,
Vodafone UK.

Committee Membership: Nomination
(Chair), Remuneration

Board Experience:

8. Eamonn O’Hare
Independent non-executive Director
Joined: March 2014

Eamonn has spent over two decades as
CFO of some of the world’s fastest-growing
consumer and technology businesses.
From 2009 to 2013, he was CFO and main
board member of Virgin Media Inc. and led
its successful sale to Liberty Global Inc.
in 2013. From 2005 to 2009, he served as
CFO of the UK operations at Tesco plc.
Before joining Tesco, he was CFO and
Board Director at Energis Communications
and led the successful turnaround of
this high profile UK telecoms company.
Prior to this Eamonn spent ten years at
PepsiCo Inc. in a series of senior executive
roles in Europe, Asia and the Middle East.
Eamonn spent the early part of his career
in the aerospace industry with companies
that included Rolls-Royce PLC and BAE
Systems PLC.

External Appointments: Eamonn
is the Chairman and CEO of Zegona
Communications Plc, and a Director
of Tele2 AB.

Committee Membership: Audit
Board Experience:

Alan brings over 30 years of relevant
business and financial expertise to
Dialog Semiconductor, having extensive
experience as a Chief Financial Officer in
the semiconductor industry. He began
his career in 1979 with Motorola and has
spent over 12 years in Europe and 20 years
in the USA. In 2004, he guided Freescale
through its separation from Motorola and
successfully executed an initial public
offering (“IPO”) that listed the company on
the New York Stock Exchange (“NYSE”).
In 2006, he was instrumental in the
execution of a Leverage Buy-Out (“LBO”)
in one of the largest technology financial
transactions at that time. In 2011, he
successfully led the company back to the
public market to be listed on the NYSE.

External Appointments: Alan is currently
Chairman of ON Semiconductor.

Committee Membership: Audit (Chair)
Board Experience:

4. Mike Cannon
Independent non-executive Director
Joined: February 2013

Mike’s career in the high-tech industry
spans 30 years. He was President, Global
Operations of Dell from February 2007
until his retirement in 2009. Prior to joining
Dell, Mike was the CEO of Solectron
Corporation, an electronic manufacturing
services company, which he joined as
CEO in 2003. From 1996 until 2003, Mike
was CEO of Maxtor Corporation, a disk
drive and storage systems company,
and successfully led the NASDAQ IPO of
Maxtor in 1998. Mike previously held senior
management positions at IBM and Control
Data Corporation. Mike studied Mechanical
Engineering at Michigan State University
and completed the Advanced Management
Program at Harvard Business School.

External Appointments: Mike currently
serves on the boards of Seagate
Technology as the Lead Independent
Director and chairman of the Nominating
and Governance committee and also
serves on the Compensation committee,
and on the Lam Research Corporation
board on the Audit committee and the
Nominating and Corporate Governance
committee. Mike was previously on the
board of directors of the US – China
Business Council.

Committee Membership: Remuneration
(Chair), Nomination

Board Experience:

Dialog Semiconductor PlcAnnual report and accounts 2018

Leadership – Management team

4. Mohamed Djadoudi
Senior Vice President, Global
Manufacturing Operations & Quality
Mohamed joined Dialog in March 2007
and is responsible for product engineering,
test and assembly development, data
automation, software support, offshore
manufacturing operations and quality.
Mohamed has more than 25 years’
experience in the field of semiconductor
manufacturing operations, starting initially
with IBM in France and the US. He was
previously Senior Vice President and Chief
Technology Officer of the Unisem group,
an assembly and test subcontractor based
in Malaysia and China. He also held the
position of Vice President of Test Operations
at ASAT (Atlantis Technology), based in
Hong Kong, before becoming one of the
original members of the management buy-
out team of ASAT UK, where he served as
the Technical Director. Mohamed holds an
Electronic and Electrotechnic degree from
the Paris University of Technology.

Tenure with Dialog: 11 years

1. Dr Jalal Bagherli
Chief Executive Officer
Jalal joined Dialog as CEO and an
Executive Board Director in September
2005. He was previously Vice President &
General Manager of the Mobile Multimedia
business unit for Broadcom Corporation.
Prior to that Jalal was the CEO of
Alphamosaic, a venture-funded silicon
start-up company in Cambridge focusing
on video processing chips for mobile
applications. He has extensive experience
in the semiconductor industry, through
his previous professional and executive
positions at Sony Semiconductor and Texas
Instruments, managing semiconductor
product businesses and working with
customers in the Asia, Europe and North
America. Jalal is a non-executive Director
of Lime Microsystems Ltd since 2005 and
was the Chairman of Global Semiconductor
Association Europe from 2011 to 2013.
He has a BSc (Hons) in Electronics
Engineering from Essex University, and
holds a PhD in Electronics from Kent
University, UK.

Tenure with Dialog: 13 years

2. Vivek Bhan
Senior Vice President, Engineering
Vivek joined Dialog in November 2013 and is
responsible for the overall engineering and
technology direction, including design and
product development across the various
business groups within Dialog. He brings a
wealth of engineering leadership experience
in the semiconductor industry including
technology and products for advanced
cellular systems, connectivity and medical
applications within RF, mixed-signal and
SOC space. He has held senior positions
at Freescale, Fujitsu Semiconductor and
Motorola. Vivek holds a MS in Electrical
Engineering and MBA from Arizona
State University.

Tenure with Dialog: Five years

3. Christophe Chene
Senior Vice President, Asia
Christophe joined Dialog in November 2011
as Vice President, Asia and is based in
Taiwan. He has over 20 years of experience
in the semiconductor industry, focusing
on building international businesses with a
strong Asian footprint. Previously he served
as Senior Vice President and General
Manager of the TV Business Unit as well as
Senior Vice President of worldwide sales
for Trident Microsystems. Prior to that,
Christophe served in various international
executive and managerial positions at
Texas Instruments, Sharp and Xilinx.
Christophe holds an Electronics Engineering
degree from INSA, Toulouse.

Tenure with Dialog: Seven years

Dialog Semiconductor PlcAnnual report and accounts 201861

8. Sean McGrath
Senior Vice President and General
Manager, Connectivity, Automotive
& Industrial Business Group
Sean joined Dialog in November 2012.
Sean has more than 15 years’ experience in
RF semiconductor businesses, introducing
innovative business models and leading
organisations to rapid growth. Prior to
Dialog, he was General Manager of the
Smart Home & Energy group at NXP and
General Manager of the RF Power and
Base Stations business at NXP/Philips
Semiconductors. He previously held senior
roles at Philips Semiconductors and Mikron
Austria GmbH, focusing on the RFID
and connectivity markets. Sean holds an
honours degree in Geophysics and Geology
from Harvard University and an MBA with
distinction from INSEAD.

Tenure with Dialog: Six years

9. Julie Pope
Senior Vice President, Human Resources
An experienced international HR executive,
Julie began her career as a consultant at
The Wyatt Company progressing to KPMG
before joining IBM in 1998. With IBM,
Julie spent time in New York and Paris.
Julie joined American Express in New
York in 2003 in International Benefits and
moved to VP Global Mobility and HR
Business Partner, Global Business Travel.
She relocated to Sydney in 2011 as the
VP HR Australia and New Zealand and
then moved to the UK as VP HR Business
Partner EMEA. During her career, Julie has
gained extensive international experience
in reward and benefits, global mobility,
change management, talent planning,
mergers and acquisition and global talent
acquisition. Julie holds a Bachelor’s degree
in Mathematics and Psychology from Lamar
University in Beaumont, Texas and is an
Associate of the Society of Actuaries.

Tenure with Dialog: One year

5. Wissam Jabre
Chief Financial Officer, Senior Vice
President, Finance
Wissam joined Dialog in 2016 after serving
as Corporate Vice President of Finance
at Advanced Micro Devices (AMD) since
2014. Between 2003 and 2014, he held
various executive positions at Freescale
Semiconductor, including Vice President
and Chief Procurement Officer, Vice
President Global Pricing, Chief Financial
Officer of the Networking & Multimedia
Solutions Group. Wissam began his career
at Schlumberger, gaining international
experience in the Middle East, Europe
and North America, before joining
Motorola. He holds a Bachelor of Electrical
Engineering degree from the American
University of Beirut and an MBA from
Columbia Business School, New York.
Wissam is a CFA® charterholder.

Tenure with Dialog: Two years

6. Udo Kratz
Senior Vice President and
General Manager, Mobile Systems
Business Group
Udo joined Dialog in May 2006. He has over
20 years’ experience in the semiconductor
industry, gained in general management,
senior marketing and engineering at Robert
Bosch GmbH, Sony Semiconductor and
Infineon Technologies. Udo holds an
Electronic Engineering degree from the
University for Applied Sciences, Mannheim.

Tenure with Dialog: 12 years

7. Davin Lee
Senior Vice President and General
Manager, Advanced Mixed Signal
Business Group
Davin joined Dialog in July 2014. He was
previously CEO of Scintera Networks.
Prior to that, Davin was the Vice-President
and General Manager of the Consumer
Business Unit at Intersil Corporation.
Prior to that, Davin was Vice-President
of Marketing at Xicor. He previously held
senior positions within Altera and National
Semiconductor. Davin holds a BSEE from
The University of Texas at Austin and an
MBA from Kellogg School of Management
at Northwestern University.

Tenure with Dialog: Five years

10. Tom Sandoval
Senior Vice President, Worldwide Sales
Tom joined Dialog in September 2015
and is responsible for the worldwide sales
organisation. He has over 25 years of
experience in the semiconductor industry
and has held executive management
positions in sales, marketing and
engineering. Prior to joining Dialog, Tom
served as Vice President of Sales for the
Americas at Xilinx. He previously served as
CEO of Calypto Design Systems. Tom holds
a BS degree in Electrical Engineering from
the University of Southern California.

Tenure with Dialog: Three years

11. Colin Sturt
Senior Vice President, General Counsel
Colin Sturt joined Dialog Semiconductor
in October 2015 as Senior Vice President,
General Counsel. Prior to joining Dialog,
Colin held the position of Vice President
of Corporate Development, General
Counsel and Corporate Secretary at
Micrel, Incorporated. He was previously
a corporate attorney with Davis Polk &
Wardwell LLP. Earlier in his career, Colin
served in manufacturing management and
operational and organisational improvement
roles with National Semiconductor
Corporation. He holds a Law degree from
the Columbia University Law School and
a Bachelor’s and two Master’s degrees
from Brigham Young University.

Tenure with Dialog: Three years

12. Mark Tyndall
Senior Vice President, Corporate
Development & Strategy and General
Manager, Emerging Products
Business Group
Mark joined Dialog Semiconductor in
September 2008. Prior to this, Mark was
Vice President of Business Development
and Corporate Relations at MIPS
Technologies. From 1999 to 2006, he held
the position of Vice President of Business
Development at Infineon and has also
served as a board director of a number
of start-up companies, several of which
were successfully acquired. Earlier in his
career, Mark held management positions
in marketing at Fujitsu Microelectronics
and in design at Philips Semiconductors.

Tenure with Dialog: Ten years

Role Tenure with
Chief Executive Officer
Senior Vice President, Engineering

Name
Dr Jalal Bagherli
Vivek Bhan
Christophe Chene Senior Vice President, Asia
Mohamed Djadoudi Senior Vice President, Global Manufacturing Operations & Quality
Wissam Jabre
Udo Kratz
Davin Lee
Sean McGrath
Julie Pope
Tom Sandoval
Colin Sturt
Mark Tyndall

Tenure with Dialog (years)
13
5
7
11
2
Chief Financial Officer, Senior Vice President, Finance
12
Senior Vice President and General Manager, Mobile Systems Business Group
5
Senior Vice President and General Manager, Advanced Mixed Signal Business Group
6
Senior Vice President and General Manager, Connectivity, Automotive & Industrial Business Group
1
Senior Vice President, Human Resources
3
Senior Vice President, Worldwide Sales
Senior Vice President, General Counsel
3
Senior Vice President, Corporate Development & Strategy and General Manager Emerging Products Business Group 10

Dialog Semiconductor PlcAnnual report and accounts 201862

Directors’ report

The Directors of Dialog
Semiconductor Plc (‘‘Dialog’’
or the “Company’’) present
their Annual report and audited
financial statements for the year
ended 31 December 2018.
These accounts have been
prepared under IFRS and are
available on the Company’s
website: www.dialog-
semiconductor.com

Principal activities and
review of the business

Dialog Semiconductor develops and
distributes highly-integrated, mixed-signal
ICs, optimised for personal portable,
Configurable Mixed-signal IC, low energy
short-range wireless, LED solid state lighting
and automotive applications. The Company
provides customers with world-class
innovation combined with flexible and
dynamic support.

The Company is listed on the Frankfurt (FWB:
DLG) Stock Exchange (Regulated Market,
Prime Standard, ISIN GB0059822006) and
is a member of the German TecDax index.
The Company is registered in the UK and the
registered number is 03505161. A full list of
Company subsidiaries outside of the UK is
detailed in Dialog’s related undertakings set
out on page 167.

Further information on the principal
activities of the business and the factors
affecting future developments are
detailed in the Group’s Strategic report.
Information on treasury policies and
objectives is included in note 32 to the
consolidated financial statements.

Future developments

The Company’s stated objective is to
power the smart connected future by
becoming the leading global supplier of
highly-integrated, power management,
AC/DC, solid state lighting and low energy
short-range wireless connectivity. The key
aspects of the Group’s strategy are set out
in the Strategic report on page 25.

Research and development R&D

The Company believes that its future
competitive position will depend on its ability
to respond to the rapidly changing needs of
its customers by developing new designs
in a timely and cost-effective manner.
To this end, the Company’s management
is committed to investing in R&D of new
products and customising existing products.

To date, R&D projects have been in
response to key customers’ requests
to assist in the development of new
custom ASICs, and for the development

of application-specific standard products
(“ASSPs”). The Company does not expect
any material change to this approach in
the foreseeable future.

Greenhouse gases

Corporate responsibility and a commitment
to sustainable business practices are
important to Dialog’s business model
and a component of Dialog’s strategy
to deliver long-term profitable growth.
Our commitment to environmentally oriented,
sustainable business practices is evidenced
in our commitment to continually reduce CO2
emissions and minimise the carbon footprint
of our business. Further details on the
Company’s commitment to sustainable and
environmentally friendly business practices
are set out on pages 21 to 23.

Going concern

The Directors have formed a judgement
at the time of approving the financial
statements that there is a reasonable
expectation that the Company has adequate
resources to continue for the foreseeable
future. The Company held US$678 million
of cash and cash equivalents at the end
of 2018 (2017: US$479 million) and has a
US$150 million Revolving Credit Facility,
with an initial three-year period to July 2020,
which was undrawn at 31 December 2018.
The Company expects to continue to deliver
revenue and profit growth in the period
ahead. For these reasons, the Directors
have adopted the going concern basis in
preparing the financial statements.

Dividends and share
repurchases

The Company has historically been
committed to reinvesting all profits into
laying the framework for future growth.
Accordingly, since its initial public offering
in 1999, Dialog has not paid any cash
dividend. Directors do not recommend the
payment of a dividend for 2018 (2017: nil).
At the 2019 Annual General Meeting, in line
with the shareholder approvals obtained
in 2017 and 2018, the Board will be asking
shareholders for an authority to continue
the share buyback programme.

The first tranche of the share buyback
programme corresponding to the 2018
Buyback Programme was announced
by the Company on 6 November 2018,
for up to €150 million and a maximum
maturity date of 21 May 2019. It should
be emphasised that, even if shareholder
authority to continue the share buyback
programme is granted, no decision has
yet been made to implement such a
programme and implementation will only
occur if the Board considers this in the
best interests of the Company depending
on the prevailing circumstances.

Purchase of own shares by
Employee Benefit Trust

The Company operates an Employee Benefit
Trust, which purchases and sells shares in
the Company for the benefit of employees
under the Company’s share option scheme,
Long-Term Incentive Plan, Executive
Incentive Plan and Employee Share Plan.
Since the Company has de facto control of
the assets and liabilities of the Trust, they are
included in the Company and Group balance
sheets. At 31 December 2018, the Trust
held 2,607,259 shares, which represented
3.4% of the total called-up share capital,
at a nominal value of £260,726.

Share capital

The Company’s issued share capital
comprised a single class of shares referred
to as ordinary shares.

Details of the share capital are set
out in note 25 to the consolidated
financial statements.

Substantial shareholdings

Details of substantial shareholdings are
on page 67.

Directors

The Directors, together with their biographies,
are listed on pages 58 and 59.

Powers of Directors

The Directors are authorised to issue the
nominal amount of securities representing
the aggregate of approximately one third of
the issued share capital of the Company;
of that one third they can issue an amount
equal to 5% of the issued share capital on
a non-pre-emptive basis generally and a
further 5% on a non-pre-emptive basis in
certain limited circumstances related to the
financing of a transaction. The Directors
have additional power to issue up to a
further third of the issued share capital of
the Company, provided it is only applied
on the basis of a rights issue.

Directors’ remuneration
and interests

Directors’ remuneration and interests are
detailed in the Annual report on remuneration
on pages 79 to 85 of this report. No Director
had a material interest during the year
ended 31 December 2018 in any contract of
significance with any Group company.

The agreement between the Company and its
Directors for compensation for loss of office
is given in the Director’s remuneration policy
report on pages 73 to 78 of this report.

Directors’ third-party
indemnity provisions

The Company has granted an indemnity to
its Directors against proceedings brought
against them by third parties, by reason of

Dialog Semiconductor PlcAnnual report and accounts 201863

their being Directors of the Company, to
the extent permitted by the Companies Act
2006. Such indemnity remains in force as at
the date of approving the Directors’ report.

Election and re-election
of Directors

In accordance with the Company’s Articles
of Association, one third of the Directors
have to stand for re-election at the Annual
General Meeting. Any Director who has
been on the Board for more than nine years
is subject to annual re-election. The next
Annual General Meeting will be held on
2 May 2019 at 9am at Tower Bridge House,
St Katharine’s Way, London, E1W 1AA.

Corporate governance

The Company’s Corporate governance
statement is set out on pages 64 to
69 of this report. While the UK Code
does not apply to Dialog, in line with our
commitment to maintaining high standards
of corporate governance and oversight,
the Board will follow the UK Code to the
extent it considers it beneficial to the good
governance of the Company.

Principal risks and uncertainties

The Company is exposed to a number of
risks and uncertainties that could affect
the performance of the Company and its
prospects. The Board of Directors and the
Audit Committee are responsible for the
Company’s process of internal control and risk
management and for reviewing its continuing
effectiveness. The Board ensures, to the
extent possible, that the system of internal
procedures and controls is appropriate to the
nature and scale of the Company’s activities
and that appropriate processes and controls
are in place to effectively manage and mitigate
strategic, operational, financial and other risks
facing the Company. A list of the principal
risks and their management is set out on
pages 52 to 56.

Financial instruments

The Group’s financial risk management and
policies, and exposure to risks, are set out
on pages 55 to 56 of this report and on note
32 to the consolidated financial statements.

Employee policies

It is our policy to support our people
through training, career development and
opportunities for promotion. We operate
an open management approach and
consult with our staff on matters that are
of concern to them. We share information
with employees on the performance of
the Company which, together with profit-
related bonuses and stock option awards,
encourage staff involvement.

Diversity and equal opportunity

In 2018, Dialog operated from 29 locations in
16 countries with a highly diverse workforce,
incorporating employees from 69 nationalities.

Dialog takes equality and equal opportunity
for all employees very seriously. We believe
diversity among our employee base is an
important attribute to a well-functioning
business. Diversity spans a range of factors
including diversity in terms of geographic
origin, background, gender, race, faith,
education, experience, viewpoint, interests,
technical, and interpersonal skills. We also
ensure that we offer equal opportunities in all
aspects of employment and advancement
regardless of age, disability, gender, marital
status, nationality, race, religious or political
beliefs or sexual orientation.

Where existing employees become disabled,
it is the Group’s policy to provide continuing
employment wherever practicable in the
same or alternative position and to provide
appropriate training to achieve this aim.

Gender diversity is of particular importance.
Women comprise 17.6% of the overall
workforce and further details are set
out on pages 18 and 19 of this report.
Although this is in line with the industry
average, the Company is supporting various
initiatives in the areas of STEM education to
encourage more women to pursue careers
in engineering and electronic engineering.

Disabled persons

Our policy provides for disabled persons,
whether registered or not, to be considered
for employment, training and career
development in accordance with their
aptitudes and abilities. We offer equal
opportunities in all aspects of employment
and advancement regardless of any disability.

Statement on disclosure of
information to auditors

The Directors who were members of the
Board at the time of approving the Directors’
report are listed on pages 58 and 59 of this
report. Each of the Directors affirms that:
U So far as they are aware, there is no

relevant audit information of which the
Company’s auditors are unaware; and
U They have taken all the steps that they
ought to have taken as a Director in
order to make themselves aware of any
relevant audit information and to establish
that the Company’s auditors are aware
of that information.

This confirmation is given and should be
interpreted in accordance with the provisions
of s418 of the Companies Act 2006.

Capital structure

As at 31 December 2018, the Company’s
issued share capital comprised a single
class of shares referred to as ordinary
shares. Details of the share capital, and

changes in share capital, can be found
in note 25 to the consolidated financial
statements. On a show of hands at a general
meeting of the Company every holder of
shares present in person and entitled to
vote shall have one vote, and on a poll every
member present in person or by proxy and
entitled to vote shall have one vote for every
ordinary share held.

The notice of the general meeting specifies
deadlines for exercising voting rights either
by proxy notice or by presence in person
or by proxy in relation to resolutions to be
passed at a general meeting. All proxy votes
are counted and the numbers for, against
or withheld in relation to each resolution are
announced at the AGM and published on
the Company’s website after the meeting.
There are no securities carrying special
rights, nor are there any restrictions on voting
rights attached to the ordinary shares.

There are no restrictions on the transfer of
shares in the Company other than:
U Certain restrictions may from time to

time be imposed by laws and regulations
(for example, insider trading laws); and

U Directors and senior management of
the Company are not allowed to trade
in shares or exercise options in certain
close periods (such close periods
normally start two weeks before the
end of each financial quarter and
end 48 hours after the release of the
financial results).

The Company is not aware of any
agreements between shareholders that
may result in restrictions on the transfer
of securities and for voting rights.

Dialog has an Employee Benefit Trust
which holds Dialog shares for the benefit
of employees, including for the purpose of
satisfying awards made under the various
employee and executive share plans.
The trustee may vote the shares as it sees
fit, and if there is an offer for the shares the
trustee is not obliged to accept or reject
the offer but will have regard to the interests
of the employees and may otherwise take
action with respect to the offer it thinks fair.

The Company’s Articles of Association may
only be amended by a special resolution at
a general meeting of shareholders.

Annual General Meeting

The notice convening the Annual General
Meeting will be published separately
and posted on the Company’s website.
The meeting will be held at Tower Bridge
House, St Katharine’s Way, London, E1W
1AA on 2 May 2019 at 9 a.m.

By order of the Board

Dr Jalal Bagherli
Director
6 March 2019

Dialog Semiconductor PlcAnnual report and accounts 201864

Corporate governance statement

Chairman

Mr Rich Beyer is Chairman of the Board.
Rich was appointed to the Board in
February 2013 and as Chairman in
July 2013. Upon appointment, he
was determined by the Board to be
independent. The Chairman is responsible
for the effective working of the Board and
oversight of management while the CEO,
together with the executive management
team, is responsible for the day-to-day
running of the Company. The functions
of Chairman and CEO are not combined
and the responsibilities of both roles are
clearly divided.

The Chairman, CEO and the Company
Secretary work together in planning a
forward programme of Board meetings
and meeting agendas. As part of this
process the Chairman ensures that the
Board is supplied, in a timely manner,
with information in a form and of a quality
to enable it to discharge its duties.
The Chairman encourages openness,
debate and challenge at Board meetings.
The Chairman holds a number of other
directorships and the Board considers that
these do not interfere with the discharge of
his duties to the Company. The Chairman is
available to meet shareholders on request.

Board composition

The Board currently comprises eight
Directors who are listed below.

The Board of Directors comprises a mix
of the necessary skills, knowledge and
experience required to provide leadership,
control and oversight of the management of
Dialog and to contribute to the development
and implementation of the Company’s
strategy. In particular, the Board combines a
group of Directors with diverse backgrounds
within the technology sector, in both public
and private companies, which combine
to provide the Board with a rich resource
and expertise to drive the continuing
development of Dialog and advance
the Company’s commercial objectives.
The Board also combines a number of
longer serving Directors with Directors
who have joined the Board more recently.
This combination provides the Board with
a fresh perspective while ensuring there is
continuity and experience from Directors
who have served during a period of rapid
growth and development for the business.
In addition, the geographic background
of the Board is diverse and includes
Directors who have international work
experience. Director biographies are set
out on pages 58 and 59.

Director
Rich Beyer
Dr Jalal Bagherli
Alan Campbell
Mike Cannon
Mary Chan
Aidan Hughes
Nick Jeffery
Eamonn O’Hare

Status
Current
Current
Current
Current
Current
Current
Current
Current

Independent/non-independent
Independent (Chairman)
Non-independent (Executive)
Independent
Independent
Independent
Independent
Independent
Independent

Tenure (years)
5
13
3
5
2
14
2
4

Concurrent
tenure* (years)
5
N/A
3
5
2
13
2
4

* Note: Concurrent tenure means tenure on the Board concurrently with the Company’s CEO. Aidan Hughes

will step down from the Board immediately prior to the 2019 AGM.

The Board of Dialog
Semiconductor is committed
to maintaining high corporate
governance standards to protect
the interests of all stakeholders.

While the UK Code does not apply to
Dialog, the Company has always had regard
for UK corporate governance best practice.
In line with our commitment to maintaining
high standards of corporate governance
and oversight, the Board will follow the UK
Code to the extent it considers it beneficial
to the good governance of the Company.

Board of Directors –
role and responsibilities

The Board has overall responsibility for the
leadership, control and oversight of the
Company. The day-to-day responsibility
for the management of the Company
has been delegated by the Board to the
Chief Executive Officer (“CEO”), who
is accountable to the Board. The CEO
executes this authority through an executive
management team outlined on pages 60
and 61 of this report. In addition, a number
of responsibilities of the Board are delegated
to sub-committees of the Board; details of
which are set out below.

Matters reserved for the Board

While the Board has delegated day-to-day
responsibility for the management of the
Company to the CEO, certain matters are
formally reserved for the Board. The Board
has overall responsibility for: Company
objectives, strategy, annual budgets,
risk management, acquisitions or major
capital projects, remuneration policy, and
Corporate Governance. It defines the roles
and responsibilities of the Chairman, CEO,
other Directors and the Board Committees.
In addition, the Board approves the
quarterly financial statements and reviews
the Company’s systems of internal control.
It approves all resolutions and related
documentation put before shareholders
at general meetings.

Dialog Semiconductor PlcAnnual report and accounts 201865

Board refreshment and renewal

The Board is committed to a policy of
ongoing Board refreshment and renewal.
The Nomination Committee continually
reviews the composition and diversity,
including gender diversity, of the Board
and the skills and experience of each
of the Directors. The relevant skills and
experience of each Director are set out
under individual biographies, which are
detailed on pages 58 and 59.

Subject to approval at the Annual General
Meeting by shareholders, Directors are
appointed for a term of three years.
Any Director who has been on the Board for
more than nine years is subject to annual re-
election. The standard terms of the letter of
appointment of non-executive Directors are
available, on request, at the Annual General
Meeting of shareholders. Directors seeking
re-election are subject to a performance
appraisal, which is overseen by the
Nomination Committee. In accordance
with its Articles of Association a third of
Directors stand for re-election at each
Annual General Meeting.

Board size

At the end of 2018, the Board comprised
eight Directors. A maximum of ten Directors
is allowable under Dialog’s Articles of
Association. The eight members of the
Dialog Board include one Executive
Director and seven independent, non-
executive Directors (including the Chairman).
The Nomination Committee has reviewed
the size and performance of the Board
during the year. The Committee considered
that the Board functions effectively;
comprises the skills, knowledge and
experience required by Dialog; is not
so large as to be unwieldy; and meets
corporate governance best practice
guidelines on independence.

Board independence

Corporate governance best practice states
that at least half the Board, excluding the
Chairman, should comprise non-executive
Directors determined by the Board to
be independent.

The Board has determined that Alan
Campbell, Mike Cannon, Mary Chan, Aidan
Hughes, Eamonn O’Hare, and Nick Jeffery
are independent. The Chairman, Rich Beyer,
was independent on his appointment to
the Board. The Company’s Chief Executive
Officer, Dr Jalal Bagherli, is the only
Executive Director on the Board.

Excluding the Chairman, the Board currently
comprises six independent non-executive
Directors and one Executive Director and
is, therefore, compliant with the principle
that at least half the Board, excluding the
Chairman, should comprise Directors
determined by the Board to be independent.

These terms of reference are available on
the Company’s website. The Chairman
of each Committee attends the Annual
General Meeting and is available to answer
shareholder questions. The reports of each
of the Board Committees are set out on
pages 67 and 69.

As part of our ongoing programme of
Board refreshment and renewal, Mr Hughes
will not be standing for re-election at the
2019 AGM.

At the time of the appointment of Alan
Campbell, the Board considered the
prior working relationship between
Rich Beyer and Mr Campbell who both
served at Freescale. Rich Beyer joined
Freescale in March 2008 and held the
position of Chairman and CEO through to
June 2012. During this period, Alan held
the position of Chief Financial Officer of
Freescale reporting to Rich. The Board
noted the three-year cooling off period
between this prior working relationship and
Alan’s appointment to the Dialog Board.
Having carefully considered all the factors,
the Board concluded that Alan Campbell
is wholly independent.

Senior Independent Director

Having carefully considered the position and
role of the SID, and the fact that Rich Beyer
is a Chairman who was wholly independent
on appointment, the Board does not believe
there is a necessity to appoint a SID at this
time. Comparable to the role of a SID at
other companies, Rich Beyer is available to
shareholders who have concerns for which
contact through the normal channel of CEO
has failed to resolve or is inappropriate.
Furthermore, any concerns regarding the
performance of the Chairman may be
addressed to and will be managed by the
Chair of the Nomination Committee.

Board Committees

The Board has established a number of
Committees to assist in the execution of its
responsibilities. During 2018, these were:
Audit Committee, Nomination Committee
and Remuneration Committee. Ad hoc
committees are formed from time to time to
deal with specific matters.

The composition of the Board Committees,
as at 6 March 2019, is set out below.
Attendance at meetings held in 2018 is set
out in the table on page 66.

Each of the permanent Board Committees
has terms of reference under which
authority is delegated to them by the Board.

Committee members
Audit Committee
Alan Campbell (Chair)
Aidan Hughes
Eamonn O’Hare
100% independent (3 of 3)

Nomination Committee
Nick Jeffery (Chair)
Mike Cannon
Mary Chan
100% independent (3 of 3)

Remuneration Committee
Mike Cannon (Chair)
Nick Jeffery
Mary Chan
100% independent (3 of 3)

* Chris Burke served on the Nomination and

Remuneration Committees until stepping down
from the Board immediately prior to the May
2018 AGM.

Alan Campbell, Chairman of the Audit
Committee, Nick Jeffery, Chairman of the
Nomination Committee and Mike Cannon,
Chairman of the Remuneration Committee,
are also available to shareholders should
they have specific concerns or issues
relevant to their respective committees.

Company Secretary

All Directors have access to the advice and
services of the Company Secretary, who
is responsible to the Board for ensuring
that Board procedures are complied with.
The Company Secretary seeks to ensure
that the Board members receive appropriate
induction and ongoing training and
development to enable them to discharge
their duties. The Company Secretary is also
responsible for advising the Board on all
Corporate Governance matters.

The appointment and removal of the
Company Secretary is a matter for
the Board.

Tim Anderson of Reynolds Porter
Chamberlain LLP is the Company Secretary
and has served in this role for over 18 years.

Dialog Semiconductor PlcAnnual report and accounts 2018Corporate governance statement continued

Board
5

2018 Board and Committee attendance
Audit
Director
4
Number of meetings in 2018
Meetings attended
Richard Beyer
Dr Jalal Bagherli
Chris Burke*
Alan Campbell
Michael Cannon
Mary Chan
Aidan Hughes
Nick Jeffery
Eamonn O’Hare

5
5
1
5
5
5
5
5
5

Remuneration Nomination
4

4
4

* Chris Burke stepped down immediately before the May 2018 AGM.

Director training
and development

The Board is committed to a programme
of periodic training and development of its
Directors. As part of this process, at least
one Board meeting is held at the location of
one of the Company’s international offices
each year. During 2018, a Board meeting
was held in California. As part of the Board
meeting in California the Board received
a presentation from local management.
In addition, at the October 2018 Board
meeting FTI delivered a training session on
the new UK Corporate Governance Code.

Performance evaluation

The Board recognises the importance of
continuing evaluation of the performance of
the Board and its Committees and a review
of the operation and performance of the
Board and its Committees is undertaken
annually. Such a review is normally
conducted internally. However, in line with
best practice, every three years there is an
externally facilitated review.

In 2017, consistent with this best practice,
the Board engaged an independent
third party to conduct an evaluation.
The evaluation in 2017 was conducted by
Equity Communications Ltd, a company
which has no other connection with Dialog.

The findings of the evaluation were
presented to the Board in February 2018.
The Board will consider a further third-party
Board evaluation process in 2020.

In 2018, an internally conducted review
was undertaken the results of which were
presented to the Board in February 2019.

Board meetings

The Board holds at least four Board
meetings each year. The Board may meet
more frequently as required. In addition,
there are ad hoc Board calls through the
year and when necessary. The number of
meetings of Board sub-committees each
year varies by Committee. There were five
Board meetings in 2018. The attendance
at Board and Committee meetings by the
Directors who held office in 2018 is set out
above. The Board places considerable
importance on attendance at both
scheduled Board and Committee meetings.
During the year, no Director attended less
than 75% of scheduled Board or Board
Committee meetings to which they were
entitled to attend. At scheduled Board
meetings, the Board also meets without
the Executive Director present.

In addition, the non-executive Directors
meet annually to review the performance
of the Chairman. This process, which
commenced in 2015, is an annual process
and occurred in February 2018.

The 2019 review will be held during the
course of the calendar year.

Director induction and
continuing development

Following appointment to the Board, new
Directors are provided with induction
materials and are briefed on the Company,
its structure, strategy, technologies,
operations, corporate governance practice,
and their duties and responsibilities
as a Director.

Briefings for all non-executive Directors
are held with the executive management
at Board meetings. Throughout the year,
Directors are also provided with detailed
briefing materials on the performance
of the Company and market analysis on
the performance of, and prospects for,
the business.

External non-executive
directorships

The Board believes that a broadening of
the skills, knowledge and experience of
non-executive Directors is of benefit to the
Company. As such, the Company welcomes
the participation of the non-executives on
the Boards of other companies. To avoid
potential conflicts of interest, non-executive
Directors inform the Chairman of the
Nomination Committee before taking up any
external appointments. Details of the non-
executive positions of each Director are set
out under individual biographies, which are
detailed on pages 58 and 59.

The Board has not established a hard
guideline on the number of other executive
or non-executive positions that a Director
should hold but recognises the guidelines
set out by a number of proxy advisers and
other influential governance bodies.

Directors’ fees

The annual fee for non-executive Directors
in 2018 was £145,000. The annual fee for
the Chairman was £200,000. The Chair
of the Audit Committee, the Nomination
Committee and the Remuneration
Committee received an additional fee of
£16,000, £5,000 and £12,000 respectively
for their role on that Committee.

The other Committee members receive
an additional fee for serving on those
Committees as set out on page 84.
Details of the activities of these Committees
during 2018 are set out on pages 67 to 69.

Directors’ fees were paid in cash and
shares. Non-executive Directors are not
eligible to participate in the Company’s
bonus or share award schemes.

None of the remuneration of the non-
executive Directors is performance related.
Non-executive Directors’ fees are not
pensionable and non-executive Directors
are not eligible to join any Company
pension plans. Non-executive Directors
are reimbursed for their reasonable travel
and accommodation expenses incurred in
connection with attending meetings of the
Board or related committees.

The compensation of the Executive Director
comprises a base salary and variable
components. Variable compensation
includes an annual bonus linked to, and
dependent on, certain business targets as
well as long-term incentives. The executive
Director’s remuneration is inclusive of any
Director’s fee. Further details are set out in
the Directors’ remuneration report which
begins on page 70.

Dialog Semiconductor PlcAnnual report and accounts 201867

Internal control and
risk management

In accordance with the EU Transparency
Directive (DTR 7.2.5), the Board of Directors
(following review and recommendation by
the Audit Committee) acknowledge that
they are responsible for the Company’s
process of internal control and risk
management. Such processes are designed
to manage rather than eliminate the risk of
failure and can only provide reasonable and
not absolute assurance against material
misstatement or loss.

The Board ensures, to the extent possible,
that the system of internal procedures and
controls is appropriate to the nature and
scale of the Company’s activities and that
appropriate processes and controls are in
place to effectively manage and mitigate
strategic, operational, financial and other
risks facing the Company.

A detailed list of risks and their management
is set out on pages 52 to 56.

The Company has an ongoing process of
identifying, evaluating and managing risk.
The process was in place during 2018 and
up to the date of the approval of the 2018
Annual report and financial statements.
The Board and Audit Committee can
confirm that necessary actions are being
undertaken to remedy any perceived failings
or weakness identified from these ongoing
process reviews.

Audit Committee

The Board of Directors has established
an Audit Committee and has delegated
authority to the Committee to consider
and report to the Board on the Company’s
financial reporting, internal control and risk
management procedures, and the work of
the internal and external auditors.

During 2018, the Audit Committee
comprised only independent non-executive
Directors. Members at the end of 2018 were
Alan Campbell (Chairman), Aidan Hughes
and Eamonn O’Hare.

Share ownership and dealing

Significant shareholders

The provisions of the UK Disclosure Rules
and Transparency Rules (“DTR”) require
that any person or fund acquiring a direct or
indirect interest of 3% or more of a class of
shares issued by the Company – with voting
rights at the Company’s general meeting
– must inform the Company of its interest
within two working days. If the 3% interest
is exceeded, the shareholder must inform
the Company of any increase or decrease
of one percentage point in its interest.

In accordance with DTR 5.1.5 with respect
to voting rights attached to shares held by
investment managers (on behalf of clients),
by scheme operators and ICVCs, the
first threshold for disclosure is set at 5%,
with the next level set at 10% and every
percentage above 10%.

Once Dialog is notified, the Company
must then notify BaFin and the Frankfurt
Stock Exchange.

Dialog’s shares are listed with Clearstream
Germany as legal owner. As far as the
Company is aware, based on TR-1
notifications received, those holding
a significant beneficial interest (i.e.
greater than 3%) in the Company as
of 31 December 2018 were:

9.01% – Tsinghua University
3.004% – Norges Bank

The free-float includes the following shares
held on behalf of discretionary clients as per
the share register on 31 December 2018:

SIX SIS AG
Citigroup Global Markets
The Bank of New York Mellon
Union Investment
Privatfonds GmbH
BNP Paribas Securities Services
State Street Bank & Trust Corp.

9,216,342
7,690,087
6,902,382

3,186,760
2,779,146
2,752,917

As of 20 February 2019, the Company was
aware of the following holdings:

9,052,122
Citigroup Global Markets
8,795,240
The Bank of New York Mellon
8,783,934
SIX SIS AG
3,137,664
State Street Bank & Trust Corp.
BNP Paribas Securities Services 2,683,913
2,380,689
Citigroup Global Markets*

* Reflecting a different shareholder ID.

Dialog’s free-float is 73,774,880 or 96.6%
of the outstanding shares. The free-float
is calculated by excluding the 2,607,259
shares held in the Dialog Semiconductor Plc
Employee Benefit Trust.

Details of Directors’ shareholdings are set
out on pages 81 and 82. The Company has
a policy on dealing in shares that applies
to all Directors and senior management.
Under this policy, Directors are required to
obtain clearance from the Chief Executive
Officer (or in the case of the Chief Executive
Officer himself, from the Chairman)
before dealing.

Directors and senior management are
prohibited from dealing in the Company’s
shares during designated close periods and
at any other time when the individual is in
possession of Inside Information as defined
by Article 7 of Regulation (EU) No. 596/2014
of the European Parliament and the Council
of 16 April 2014 (“MAR”). Transactions in
securities of the Company’s own shares
carried out by members of the Board of
Directors and of their family members will
be reported within three business days and
published without delay, if the total value of
such transactions in any one year exceeds
€5,000, pursuant to and in accordance with
Article 19 of MAR.

Loans to Directors or
senior executives

The Company will not provide or guarantee
any loans to Directors or senior executives.

Relations with shareholders

The Company is committed to ongoing and
active communication with its shareholders.
Dialog has a Head of Investor Relations
who manages communication between the
Company, its shareholders and the broader
financial community. The Company also
retains independent advisers in the UK and
Germany to help manage communication
with both English and German speaking
shareholders. Dialog prepares annual and
quarterly consolidated financial statements
in accordance with IFRS as adopted by the
EU, and IFRS issued by the IASB.

The Company maintains an investor
relations section on its website: dialog-
semiconductor.com/investor-relations.
This contains copies of investor
presentations and annual reports as well
as providing other financial statements
and corporate press releases.

There is regular discussion between
Company management and analysts,
brokers and institutional shareholders,
ensuring that the market is appropriately
informed on business activities.

Dialog promptly discloses price-
sensitive information to all market
participants. Notifications are first
sent to the Frankfurt Stock Exchange
and the Federal Financial Supervisory
Authority in Germany (Bundesanstalt für
Finanzdienstleistungsaufsicht – BaFin)
and then published via an electronic
information system.

Dialog Semiconductor PlcAnnual report and accounts 201868

Corporate governance statement continued

Dialog’s Audit Committee has recent and
relevant financial experience. In line with
best practice, the Board has affirmed
that members of the Audit Committee
also have significant expertise in Dialog’s
business sector. Alan Campbell, Chairman
of the Audit Committee, has long-standing
experience as a CFO in the semiconductor
industry. Eamonn O’Hare also has two
decades’ experience as CFO at some of
the world’s fastest-growing consumer and
technology businesses. Aidan Hughes has
experience as a senior accountant and
Finance Director at a number of public and
private companies, many of which are in the
technology sector. Biographies are set out
on pages 58 and 59.

The Audit Committee meets a minimum of
four times a year. In 2018, the Committee
met four times. Attendance at meetings
held is set out in the table on page 66.
The Committee also meets privately with the
internal and external auditors and separately
with the executive management.

The internal audit function is appropriately
resourced with the required skills and
experience, and is supported by specialist
resources where required. The Director of
Internal Audit is accountable to the Audit
Committee and meets independently with
the Committee Chairman regularly during
the year. The Committee approves the
internal audit plan and receives a report
on internal audit activity at each meeting,
and monitors the status of findings or
improvement actions.

The Audit Committee’s main responsibilities
include to:
U Review and advise the Board on the

integrity of the financial statements of the
Company, including the Annual report,
quarterly financial statements and other
formal announcements relating to the
Company’s financial performance;

U Review and advise the Board on

the effectiveness of the Company’s
internal controls;

U Make recommendations on the

appointment and remuneration of
external auditors and to monitor their
performance and independence; and
U Approve and monitor the policy for non-
audit services provided by the external
auditors to ensure that the independence
and objectivity of the auditors is
not compromised.

In order to fulfil its duties, the Committee
receives sufficient, reliable and
timely information from the Dialog
management team.

The full terms of reference of the Committee
are available on our website under the
Corporate Governance section of the
Investor Relations section.

Activity in 2018

During the period since the last Annual
report to the date of this report, the Audit
Committee has:
U Reviewed the Annual report and

accounts – including the report of the
external auditor – for the year ended
31 December 2018;

U Reviewed the interim reports issued in

May, August and October 2018;
U Reviewed and approved the external
auditor’s audit plan for 2018, including
the auditor’s proposed fee and statement
of independence;

U Reviewed non-audit fees paid to the
external auditor in the year, which
totalled US$150,000 and related solely
to the review of the Group’s quarterly
financial statements;

U Received and discussed with the external
auditor reports setting out the auditor’s
findings from each quarterly review and
the full year audit;

U Considered the appropriateness and
disclosure of accounting policies, key
judgements and estimates with a focus
on the key audit matters: the carrying
amount of goodwill, and the capitalisation
of development costs;

U Monitored the progress of management’s

implementation project for IFRS
16 Leases;

U Reviewed the impact of adopting IFRS 15
Revenue from Contracts with Customers
and IFRS 9 Financial Instruments on the
Group’s results and financial position,
the expected impact of IFRS 16 and the
related disclosures made in the Group’s
quarterly and annual financial statements;
U Reviewed the risk register for updates to

key risks and status;

U Approved the annual internal audit plan,
received and reviewed internal audit
reports, including a report on the audit
of changes made to the internal controls
over revenue recognition in response to
IFRS 15 and the annual assessment and
review of internal controls, and monitored
the effective and timely remediation of
any control weaknesses; and

U Reviewed and updated the Committee’s

terms of reference.

The Company believes that an effective
and robust system of internal control is
essential to achieving reliable business
performance. The system of internal control
is supported by a strong commitment by
the management team, ongoing monitoring
by the Audit Committee and a dedicated
internal control function. There continues
to be ongoing focus on the internal
control over financial reporting using the
COSO framework to design relevant and
sustainable internal controls and test the
operating effectiveness of internal controls.

The Committee is pleased with the progress
achieved in 2018 and will continue to
monitor the ongoing work in these areas
in 2019.

Role of the External Auditor

The external auditor audits the Group’s
consolidated financial statements.
Prior to the Audit Committee proposing
the appointment or reappointment of the
external auditor, the proposed auditor
provides details of any professional, financial
and other relationship which may exist
between the auditor and the Company that
could call its independence into question.
This includes the extent to which other
(non-audit) services were performed for
the Company in the past year or which
are contracted for the following year.

The external auditor has committed
to informing the Chairman of the
Audit Committee of any grounds for
disqualification or impartiality of the
auditor occurring during the audit,
unless such grounds are eliminated.

The external auditor has committed to
report to the Audit Committee, without
delay, on all facts and events of importance
that should be brought to the attention
of the Board of Directors, which come
to light during the performance of the
audit, including the Company’s financial
performance. The external auditor takes
part in Audit Committee meetings on the
annual consolidated financial statements
and reports on the essential results of
its audit.

Deloitte were appointed auditors in 2015
and their appointment was subsequently
confirmed at the 2016 Annual General
Meeting. The Company, through the Audit
Committee, has a policy of annual review
of the external auditors. In compliance with
European Union audit legislation, the audit
engagement partner is rotated every five
years and the audit is put out to tender at
least every ten years.

Dialog Semiconductor PlcAnnual report and accounts 201869

During the year, the Committee sought
and received general advice relating to
remuneration from independent adviser Aon
Plc. Aon is a signatory to the Remuneration
Consultants Group Code of Conduct and
any advice was provided in accordance with
this code. Aon provided no other services
to Dialog during 2018 and has no other
connection with the Company other than as
adviser on issues relating to remuneration.

In 2018, the Committee met formally on
four occasions. Attendance at scheduled
meetings is set out on page 66.

The full terms of reference of the Committee
are available on our website under the
Corporate governance section of the
Investor Relations section.

A detailed report on the work of the
Remuneration Committee during 2018,
is set out on page 85.

Tim Anderson
Company Secretary

External auditor and
non-audit work

The Company has a policy in place
governing the conduct of non-audit work
by the external auditor. Under this policy
the auditor is prohibited from performing
services where the auditor:
U May be required to audit his/her

own work;

U Would participate in activities that would
normally be undertaken by management;

U Is remunerated through a “success fee”

structure; and

U Acts in an advocacy role for

the Company.

Other than the above, the Company does
not impose an automatic ban on the
external auditor undertaking non-audit work.
The external auditor is permitted to provide
non-audit services that are not, or are not
perceived to be, in conflict with auditor
independence, provided it has the skill,
competence and integrity to carry out the
work and that such work does not conflict
with EU regulations.

Details of the amounts paid to the
external auditor during the year for audit
and other services are set out in note 7
to the consolidated financial statements.
In line with EU regulations, the Audit
Committee will ensure that, for the year
ended 31 December 2020, non-audit
fees paid to the Company’s auditor will
be capped at a maximum of 70% of the
average audit fees paid in the last three
consecutive financial years.

Nomination Committee

The Board of Directors has established a
Nomination Committee to review Board
structure, size and composition and make
recommendations to the Board, and to
identify and nominate Board candidates
for approval by the Board. The Committee
is responsible for succession planning for
Directors and ensuring there are appropriate
succession plans in place for all key
executive positions within the Company
to minimise “key-man” risk.

The full terms of reference of the Committee
are available on our website under the
Corporate Governance section of the
Investor Relations section.

At the end of 2018, the Nomination
Committee comprised Nick Jeffery
(Chair), Mary Chan and Mike Cannon.
The Committee comprises only
independent non-executive Directors.
By invitation, other members of the Board
may attend the Committee’s meetings.
The Committee is free to seek its own
advice free from management as it
deems appropriate.

During the year, the Committee used
the services of an external search and
recruitment agency to assist with the
non-executive recruitment. The firm, Egon
Zehnder, is an independent third party and
has no other connection with Dialog.

During the year, the Committee met formally
on four occasions. Attendance at scheduled
meetings is set out on page 66.

Activity in 2018

The key activities of the Nomination
Committee during the year were to:
U Review the composition of the Board
to ensure the Directors have the skills
and expertise to effectively oversee the
implementation of the Group’s stated
strategy; and

U Review succession arrangements for

all key executive positions.

Remuneration Committee

The Board of Directors has established
a Remuneration Committee to review
and make recommendations to the Board
in respect of the salaries and incentive
compensation of the officers of the
Company and its subsidiaries, and provide
recommendations to the management
team for other employees and consultants
as appropriate.

At the end of 2018, the Remuneration
Committee comprised Mike Cannon
(Chair), Nick Jeffery and Mary Chan.
The Committee comprised only
independent non-executive Directors.
By invitation, other members of the Board
may attend the Committee’s meetings.
The CEO and the Senior Vice President,
Human Resources, may also attend by
invitation but take no part in discussions or
decisions on matters relating to their own
remuneration. The Committee is free to
seek its own advice free from management
as it deems appropriate.

Dialog Semiconductor PlcAnnual report and accounts 201870

Directors’ remuneration report

Annual statement from Mike
Cannon, Chairman of the
Remuneration Committee

Dear shareholder,

I am pleased to present the Directors’
remuneration report for 2018, which has
been prepared by the Remuneration
Committee and approved by the Board.

Our last substantive review of executive
remuneration policy was in 2014, and a
new policy resulting from that review was
approved by shareholders at the 2015
AGM. In 2016, shareholders approved
some minor changes to our policy on
Directors’ contracts, but the main features
of the overall policy remained unchanged.
This policy will expire at the 2019 AGM.
As a result, a full review of the policy was
undertaken in 2018, and a new policy has
been designed as set out on pages 73
to 78 and will be presented to shareholders
at the 2019 AGM.

The report is in two parts: the Annual
Report on remuneration which sets out the
details of and basis for remuneration during
2018, and the Directors’ remuneration
policy, which describes the policy for
the remuneration of Executive and non-
executive Directors.

Context of the
Committee’s decisions

Dialog is building on its leadership
position in power-efficient mixed-
signal ICs to capitalise on new growth
opportunities. Our custom, configurable and
programmable design expertise, coupled
with our ability to quickly and reliably ramp
to high-volume production, enables us
to serve an increasingly broad customer
base. Our deep expertise and track record
provide us with a strong foundation to drive
the next phase of growth and create value
for Dialog shareholders.

The vast majority of Dialog’s peers, with
which the Company competes both for
business and for talent, continue to be
US-listed companies operating a US-style
executive compensation model. As a
result, remuneration in Dialog’s sector is
heavily influenced by US practice, and this
is reflected in some aspects of Dialog’s
remuneration policy. Dialog’s remuneration
policy has been designed so that the
majority of remuneration is delivered through
performance-based, long-term variable
remuneration with significant emphasis on
equity. Variable remuneration is delivered
through an annual bonus and long-term
incentive, and performance measures
are chosen to incentivise and reward the
successful achievement of our strategic
objectives in alignment with the interests
of our shareholders.

Performance and
remuneration for 2018

Dialog has delivered robust performance
over 2018. Revenue has grown by over
6% to an all time high, and both operating
margin and gross margin have improved
over 2017 levels. In addition, we have
struck a landmark agreement with Apple
Inc. which clarified our long-term business
relationship and monetised our unique IP.
This strong operational performance has
been reflected in both the annual bonus
for 2018. Further detail on the annual
bonus outcomes and targets is provided
on pages 79 and 80.

Base salary

The Committee reviewed the CEO’s base
salary in the first half of 2018. Normally the
review would reference his performance
alongside the salary increase range for other
employees of the Company, as well as the
positioning of his package compared to
Dialog’s peer group. However, due to the
challenging economic climate and need for
cost-cutting in 2018, the Committee agreed
that the CEO would not receive an increase
this year. His base salary therefore remains
at £485,886 (US$620,379) which is below
the market median for Dialog’s peer group,
based on the Company’s size at the time of
the July 2018 review.

Annual Bonus

As a result of the strong performance in
2018, an annual bonus award of 115.3%
of target has been achieved by the
CEO, compared with 128.9% for 2017
and 69.24% for 2016.

Bonus performance outcomes are detailed
in the Annual Report on Remuneration on
pages 79 and 80.

Long-term incentive

The 2016 award made under the Long-Term
Incentive Plan (“LTIP”) will vest in the first
quarter of 2019. The LTIP is subject to a
performance test over the period 2016-18
and 47.08% of the target number of shares
are expected to vest (23.54% of the max
number of shares).

Introduction of new
Remuneration Policy
at 2019 AGM

Following the announcement of our
landmark agreement with Apple, at our
Capital Markets Day on 1 November,
Dialog’s management set out a strategic
transformation plan to protect and create
shareholder value over the long term.
As Dialog enters an important period of
strategic and transformational change, it
is critical that remuneration incentivises
and retains our senior executives as they
lead, manage and oversee the successful
implementation of our strategy. In this
context, the current remuneration policy
is not sustainable because:
U CEO remuneration is not only below
market median (and has been for a
number of years), but significantly below
market lower quartile;

U A remuneration package positioned
significantly below market lower
quartile is extremely unlikely to
incentivise and retain the CEO to lead
the current executive team through
this important period of strategic and
transformational change;

U In addition, when taking account

of remuneration levels in our sector,
the current policy is unlikely to be fit
for purpose if the requirement to recruit
a new CEO arises during the life of the
policy; and

U The current policy was approved in 2014
prior to significant growth in the business
– in terms of revenue, employee numbers
and extent of operations.

As a result, the Committee believes that
the remuneration policy must be amended
so that remuneration for our CEO can
be brought to appropriate competitive
levels. While the Committee notes that
remuneration levels will continue to be
considerably below the median of our
peers, it has determined to take a prudent
approach to any increases in order to
balance the risks to the business and
the expectations of our shareholders.
We recognise concerns of shareholders and
proxy advisers that “chasing the median”
through benchmarking has had the impact
of increasing remuneration levels, which led
the Committee to consider alignment with
the lower quartile as being an appropriate
and balanced approach. This would help
“lock-in” the current CEO and provide
increased flexibility in the case of any
future recruitment.

Dialog Semiconductor PlcAnnual report and accounts 201871

It is also important to note that, despite this
proposed increase in target LTIP award
levels, the Remuneration Committee is
maintaining features of UK and European
remuneration rather than following more
generous US practices. 100% of the Dialog
CEO’s LTIP award will be in performance
shares, and the portion of his annual bonus
above 100% of base salary will be deferred
into shares rather than the US norm of
paying bonuses entirely in cash. In addition,
the increase in share ownership guidelines
is significantly above the median level at the
FTSE 250 (200% of base salary) and even
the FTSE 100 (300% of base salary).

Shareholder consultation

As part of the comprehensive review of
our remuneration policy, the Committee
wrote to major shareholders representing
approximately 50% of our issued share
capital, as well as proxy advisers.
The Committee is extremely grateful for
the feedback provided by shareholders as
part of engagement, and is pleased that
overall, shareholders were supportive of the
proposals. The feedback had an impact
on our final proposals; specifically, the
Committee decided to introduce a 2-year
post-vesting holding period to LTIP awards
granted under the new remuneration
policy and to improve the level of detail of
the disclosure of targets under the bonus
scheme and our Long-Term Incentive Plan.

If you have any feedback on our
remuneration arrangements, please pass
those comments for my attention to our
Company Secretary, Tim Anderson at
RPC, Tower Bridge House, St Katharine’s
Way, London, E1W 1AA. We have been
pleased at previous AGMs to receive a
positive response from shareholders to
our remuneration approach. We hope you
find the contents of this report informative.
The Committee would welcome your
support at our AGM on 2 May 2019 for our
advisory shareholder vote on the Annual
report on remuneration and binding vote
on the Directors’ remuneration policy.

Finally, I would like to thank my fellow
Committee members as well as the internal
and external teams who supported us with
their contributions over the past year.

Mike Cannon
Chairman, Remuneration Committee
6 March 2019

Dialog Semiconductor Plc

Changes proposed for 2019

Central to the review of the remuneration
policy is the Committee’s desire to ensure
that our remuneration arrangements
remain competitive against our most
direct semiconductor peers over the next
three-year period. Competition for talent
in our industry is intense and, given the
importance of the upcoming period of
strategic change, such a large discrepancy
between the remuneration at Dialog and
those of our peers presents a risk to the
Company and our shareholders, and could
impact Dialog’s ability to recruit and retain
external executive talent in the future.

In order to create a sustainable
remuneration policy over the next three-
year period, the following changes to the
Directors’ remuneration policy for the CEO
are proposed:

1. Increase in target bonus from 100% of
base salary to 125% of base salary;

2. Increase in target LTIP award from

£2 million to £3 million;

3. Increase in the share ownership guideline

from 3x to 4x base salary; and

4. Introduce a 2-year post-vesting holding
period to LTIP awards in recognition
of feedback received during our
consultation on the proposed changes.

Holding periods are an unusual feature
of long-term incentive plans at our
competitors. However, the Committee
decided to introduce this feature after
listening to the feedback received from
shareholders and proxy agencies, and
in order to take account of best practice
at UK companies. No other material
changes are proposed for Executive
Directors, the Chairman or non-executive
Directors. The approach to the selection of
performance metrics and the measurement
of performance will also remain unchanged
for the annual bonus and LTIP. In light of
the transformational level of change in the
business and strategy, the Committee is
satisfied that the ability of Executives to
achieve maximum pay-outs under the
revised policy will be challenging. It should
be noted that the Committee has a clear
track record of setting targets that require
truly exceptional performance for high pay-
outs to be made, evidence of which can be
seen in the levels of vesting under the LTIP
over the period since the introduction of our
first binding remuneration policy.

The proposals set out above would bring
the CEO’s target bonus, target LTIP award
level, and target total remuneration to
around the lower quartile of our peer group.
Base salary will be subject to the normal
annual review process.

Dialog Semiconductor PlcAnnual report and accounts 2018Remuneration at a glance

Summary of our current remuneration policy and structure for Financial Year 2018
Component
Base Salary

Features
U Salary and benefits to facilitate recruitment

and retention

U Fixed pay is restrained to emphasise

performance-based remuneration and further
align the interests of the CEO and shareholders

U Target potential 100% of base salary
U Key financial, commercial and

organisational goals

U The portion of any award above 100% of salary

is deferred into shares for three years

How we implemented
U 0% increase
U Chief Executive Officer: £485,886
U 15% pension allowance

U 115.3% of target bonus paid
U CEO: £560,227

U Target award is capped at £2 million
U 2x multiplier for excellent performance
U Goals focused on KPIs and long-term

shareholder returns

U CEO 300% of salary

U Awards granted to the CEO in 2018 had

a target value of £2 million at grant

U CEO exceeds requirement

Annual Bonus – weightings:

15% Revenue

15% Underlying gross margin

15% EBIT

25% Diversification

30% Commercial goals

LTIP – weightings:

33.3% Revenue

33.3% Underlying operating margin

33.3% Relative Total Shareholder Return

Shareholding Requirements

How we measure performance and link to strategy

The table below links Dialog’s current performance measures to our strategy. The bonus metrics are reviewed annually and set appropriately
for the strategy for the year.

Measure
Revenue

Underlying operating margin

Underlying gross margin

Relative Total Shareholder Return (“TSR”)

Commercial & organisational goals

2018
Annual Bonus

LTIP

Rationale and link to strategy
Measures top-line business growth

Measures profitability of our operating activity

Provides a measure of ability to obtain profit margin from our
products and manage our manufacturing costs
Measures the delivery of long-term sustainable value growth
for shareholders
Focuses executives on the delivery of our strategic goals

How we performed
Revenue (US$m)

1,442

2018

2017

Operating margin, underlying (%)

Gross margin, underlying (%)

19.5%

1,442

1,353

2018

2017

48.3%

19.5

19.2

2018

2017

48.3

47.9*

* 2017 Gross margin is presented on a consistent basis. Further information is presented on page 99, note 1.

2018 Remuneration

The chart below shows the 2018 potential opportunity and actual achievement compared to 2017 actual achievement.

2018 potential

2018 actual

2017 actual

1,000

2,000

3,000
£’000

4,000

5,000

6,000

Minimum

Target

Maximum

Base salary

Beneﬁts

Pension

Annual Bonus

LTIP

Effect of share price movement on LTIP

Maximum = Fixed pay, maximum annual bonus (200% of salary) and maximum value of the LTIP vesting.
Target = Fixed pay and on-target award for Annual Bonus (100% of salary) and 1x target value of the LTIP vesting.
Minimum = Fixed pay (base salary, benefits and pension).

The split of the LTIP bar shows the value lost or gained due to the effect of the share price. The arrow on the “2017 actual” and “2018 actual” LTIP outcome shows the
value loss of the vested shares due to the decrease in share price since grant.

Dialog Semiconductor PlcAnnual report and accounts 201873

Directors’ remuneration policy

Our policy on remuneration

Dialog’s remuneration policy for Executive Directors is set by the Remuneration Committee. The Committee’s primary objective is to ensure
that remuneration is structured so as to attract and retain Executive Directors of a high calibre, with the skills and experience necessary to
develop and grow the Company successfully. Executives should be rewarded in a way that aligns with shareholder interests and promotes
the creation of sustained value for the Company’s shareholders.

The Committee believes that a simple approach is most effective. Dialog’s elements of executive remuneration are fixed pay (base salary,
benefits and pensions), annual bonus and a long-term incentive. A significant portion of remuneration is linked to, and paid in, Company
shares, which enables alignment with shareholder interests and reinforces our pay-for-performance philosophy. The Committee believes
that executives should hold a meaningful number of shares personally. The individual remuneration elements operated for executives are
described in more detail in the policy table below. Since there is currently only one Executive Director – the CEO – we refer to remuneration
for the Executive Director, Executive Directors and the CEO interchangeably throughout this report.

The Committee reviews the CEO’s remuneration package annually both in the context of Company performance and against a range of peer
companies. In reviewing the CEO’s pay arrangements the Committee takes into account:
U The history and growth profile of the Company;
U The Company’s UK incorporation and associated corporate governance expectations;
U The Company’s international focus, operations and talent market;
U The general external environment and the market context for executive pay;
U The competitive international market for senior executives in the semiconductor industry; and
U The pay and employment practices of Dialog employees generally.

Directors’ remuneration policy table

The table below summarises Dialog’s remuneration policy for Executive Directors and, where indicated, for non-executive Directors.
The policy will take formal effect when approved at the 2019 AGM.

Base salary
Purpose and link to strategy

Maximum opportunity

Operation

Performance framework
Changes in policy

Retirement benefits
Purpose and link to strategy
Maximum opportunity
Operation

Performance framework
Changes in policy

Executive Directors
Facilitate recruitment and retention of the best executive talent globally – executives with the experience
and expertise to deliver our strategic objectives at an appropriate level of cost.
Base salary increases will not ordinarily exceed the percentage increases awarded for other UK-based
Dialog employees with comparable levels of individual performance and potential.
In cases where an Executive Director’s base salary lies materially below the appropriate market
competitive level and where such positioning is not sustainable in the view of the Remuneration
Committee, annual increases may exceed those for other employees described above. The rationale for
any such increase will be described in the Annual report on remuneration for the relevant year.
Salary is reviewed annually, with any increases normally taking effect in July. A number of factors
are considered including, but not limited to, market pay levels among international industry peers of
comparable size, and base salary increases for other Dialog employees.
n/a
No change

Executive Directors
Provide market competitive retirement benefits which help foster loyalty and retention.
Employer contribution of 15% of base salary.
Executive Directors are provided with a defined contribution to pension or equivalent cash allowance
arrangement.
n/a
No change

Dialog Semiconductor PlcAnnual report and accounts 201874

Directors’ remuneration policy continued

Other benefits
Purpose and link to strategy

Executive Directors
Provide market competitive benefits at an appropriate cost which help foster loyalty and retention.

Maximum opportunity

Operation

Performance framework
Changes in policy

Relocation benefits may also be provided based on business need, individual circumstances and location
of employment.
There is no maximum for benefits, but they represent a small percentage of remuneration.

In the case of relocation, additional benefits may be provided including, but not limited to, the cost of
relocation expenses, real estate fees, tax equalisation to home country and tax return filing assistance,
temporary housing and schooling. The Remuneration Committee has discretion to determine the value
of such benefits and details of any such benefits provided will be disclosed in the Annual report on
remuneration covering the year in which they were provided.
Executive Directors are eligible to receive benefits including, but not limited to, a cash allowance in lieu
of a company car, medical insurance for the Executive Director and his/her immediate family members,
life and disability insurance, holiday (25–30 days a year, based on length of service) and pay in lieu thereof
where applicable, and services to assist with preparation of a tax return or returns where necessary due
to the international nature of work completed.

Any reasonable business-related expenses (including tax thereon) can be reimbursed if determined to be
a taxable benefit. Executive Directors are eligible for other benefits and all-employee share plans which
are introduced for the wider workforce on broadly similar terms.
n/a
No change

Annual bonus plan
Purpose and link to strategy

Executive Directors
Motivate Executive Directors to achieve stretching financial and commercial objectives consistent with
and supportive of Dialog’s growth plans.

Maximum opportunity

Operation

Performance framework

Create a tangible link between annual performance and individual pay opportunity.
Target award of 125% of base salary. Award value can range between 0 and 2x target award level based
on the performance condition.

The Committee retains discretion to adjust the overall bonus outcome to take account of performance
outside the normal bounds. This discretion cannot be used to raise the bonus outcome above 2x
target bonus.
The portion of any award up to 100% of base salary is paid in cash, and the portion of any award above
100% of base salary is awarded in deferred shares.

Deferred shares normally vest after three years, and are subject to the plan rules in the event of
termination or change in control. Dividend equivalents may be paid on any shares which vest.

The Committee may vary the performance measures and mix used to adapt to changing Company
circumstances. Financial measures will be a significant portion of the total scorecard.
Performance metrics include:
U Financial goals (which determine a significant portion of bonus every year);
U Commercial goals; and
U Organisational and employee-related goals.

Changes in policy

For financial metrics, performance is set in line with the stretch annual budget.
Increase in target bonus from 100% to 125% of salary.

Dialog Semiconductor PlcAnnual report and accounts 201875

Long-Term Incentive Plan (“LTIP”)
Purpose and link to strategy

Maximum opportunity

Operation

Performance framework

Changes in policy

Executive Directors
Motivate Executive Directors to deliver sustainable long-term shareholder value through long-term
profitability and share price growth.
Target award of £3 million. Maximum award at date of grant is 2x target award level based on the
performance condition.
Annual award of performance shares (which may also be in the form of nominal/nil-cost options).
Performance is measured over three years, based on performance metrics selected by the
Remuneration Committee to support the Company’s business strategy.

Vesting is dependent on continued employment with the Company at the time of vesting.
Dividend equivalents may be paid on any shares which vest. Certain “leaver” provisions apply
and are described in the section headed “Termination arrangements” below.

A holding period of two years will normally apply to any vesting awards.

The Committee has the discretion in certain circumstances to settle an award in cash. In practice
this will only be used either to cover the settlement of tax on vesting or in exceptional circumstances
for Executive Directors.
Performance metrics include suitable Company financial performance metrics and at least one third
on a relative TSR condition measured versus a comparator group. The Committee reviews and selects
appropriate measures and their weightings in advance of each award.

0.5x the target award vests for threshold performance, 1x the target award vests for target performance
and 2x the target award vests for maximum performance as defined by the Remuneration Committee
under the plan.

For the relative TSR condition, Dialog Semiconductor TSR is measured over the three-year performance
period and compared to the companies in the comparator group. If Dialog TSR is at the median of
the comparator group then 0.5x the target award vests. If Dialog TSR is at the 60th percentile of the
comparator group then 1x the target award will vest. If Dialog TSR is at or above the 75th percentile
of the comparator group then 2x the target award will vest. For performance in between these levels,
vesting is determined on a straight-line basis.

If Dialog TSR is negative over the three-year performance period, then the maximum number of shares
which can vest subject to the relative TSR condition will be capped at 1x the target award, even if relative
TSR is above 60th percentile.

For the Company financial performance component, targets are normally set annually over the three-year
performance period.
Increase in target award from £2 million to £3 million.

Termination arrangements
Purpose and link to strategy

Maximum opportunity

Executive Directors
To limit the Company’s liability for payments in cases of termination, and to provide a fair and equitable
settlement in line with market practice where appropriate.
Notice periods from the Company do not exceed 12 months.

Termination not in connection with a change in control

In the case of the current CEO, the notice period is 12 months.

The maximum termination payment due in the case of termination of employment by the Company
without “cause” or termination by the Executive for a pre-defined good reason (see definition below) is:
U 1x base salary;
U 12 months’ continuation of pension and fringe benefits; and
U Annual bonus pro-rated for the period worked only and subject to the normal performance test

at year end.

Termination in connection with a change in control

In the case of the current CEO, the notice period from the employee or the Company is 12 months.

The maximum payment due in the case of termination of employment by the Company without “cause”
or termination by the Executive for a pre-defined good reason in connection with a change in control
event is:
U 1x base salary;
U 12 months’ continuation of pension and fringe benefits; and
U Annual bonus time pro-rated for the period worked, and subject to performance.

Dialog Semiconductor PlcAnnual report and accounts 2018Directors’ remuneration policy continued

Additional points:
The above termination payments (both in connection with and not in connection with a change in control)
would be reduced by the amount of any other contractual payments made to the Executive. Such
payments could include a payment in lieu of notice, garden leave payment, and/or a payment in lieu of
holiday accrual. Any payment in lieu of notice will be limited to the pro-rata value of base salary and the
other benefits described under the retirement benefits and other benefits sections above. An Executive
can also be placed on garden leave.

A pre-defined “good reason” includes: material salary reduction (other than across-the-board reductions
of up to 10%) or any reduction on change of control; company required relocation by 30 miles; or material
diminution in duties, responsibilities or authority (but a change in reporting line alone does not constitute
a good reason).

In addition to the above termination payments, the Committee may pay reasonable outplacement
and legal fees where considered appropriate and may pay any statutory entitlements or settle any
compromise claims in connection with a termination of employment, where considered in the best
interests of the Company.

Termination provisions for LTIP are as follows:

Termination not in connection with a change in control

If an Executive Director is not employed by the Company at the time of vesting, the award will lapse,
except in certain circumstances as determined by the Board including death, disability, retirement
and any other circumstance as decided by the Board. The portion of any award which vests will
be determined by the Board based on a number of factors including performance against targets.
Alternatively, the Board may decide that outstanding awards will vest in accordance with the normal
vesting schedule. Unless the Board decides otherwise, in all cases the vesting level will be reduced in
accordance with time proration. In the case that employment is terminated by the Company without
cause or termination by the executive for a pre-defined good reason detailed above, then the outstanding
awards will vest subject to time proration and performance against targets.

Termination in connection with a change in control

In the event of a change in control of the Company, any award will be rolled over into an award in the new
entity but with the Company having discretion for time pro-rated vesting, subject to performance, with the
balance rolled over. Performance-based awards, after application of any performance test, will roll over
into time-based awards. Any awards rolled over will ordinarily vest at the nominal vesting date. However,
in the case that employment is terminated by the Company without cause, or termination by the executive
for a pre-defined good reason detailed above in connection with a change in control, then outstanding
awards will vest immediately without time proration.
No change

Non-executive Directors
Supports recruitment and retention of a non-executive Director with the experience and skills that will
make a major contribution to the Dialog Board.
Aggregate fees are subject to the limit set out in the Articles of Association or any such higher amount
as determined by ordinary resolution.
Fees are normally reviewed annually. Fees may be paid in a combination of cash and shares subject to
any requirements of the Articles of Association of the Company or shareholder resolution. Non-executive
Directors’ fees are not eligible for any incentive awards or share options.

The Chairman’s fee and other non-executive Director fees are determined by the Board following a review
and recommendation by the Remuneration Committee.

Non-executive Directors may also receive tax advice.

In addition to the fees referred to above, non-executive Directors are also reimbursed for the costs of
travel relating to the performance of their duties, and these costs may be grossed-up if treated as a
taxable benefit in the applicable jurisdiction.
Fee reviews take account of individual performance and contribution, company size, growth and
complexity, level of experience and market profile and time committed.
No change

Changes in policy

Fees
Purpose and link to strategy

Maximum opportunity

Operation

Performance framework

Changes in policy

Dialog Semiconductor PlcAnnual report and accounts 201877

Remuneration of Directors on recruitment and appointment

Dialog is an international company and competes for executive talent on a global basis. In order to recruit and retain Directors of the calibre
needed to execute the Company’s growth objectives it may be necessary to provide remuneration and benefits taking account of practice
among other global semiconductor companies.

The following principles apply in the case of the external recruitment of Directors and the appointment of internal candidates who may be
promoted to the Board:
U As far as possible, the remuneration of new Directors will be set in accordance with the existing Directors’ remuneration policy described

in this report;

U The Remuneration Committee will seek to pay no more than is necessary while ensuring that it can attract the best candidates on a

global basis;

U The remuneration package provided will take account of a range of factors, including but not limited to, the calibre of a candidate, the level

of existing remuneration, the jurisdiction the candidate is recruited from, and the individual’s skills and experience;
U The remuneration package will take account of internal relativities and appropriate international market comparisons;
U The Remuneration Committee has the discretion to determine the fixed elements of a remuneration package (comprising base salary,
retirement and other benefits) as it deems necessary and in shareholders’ interests. Exercise of such discretion may be necessary, for
example in the event of a new appointment to the Board following an acquisition or where commitments have been made as part of a
transaction; and

U The Remuneration Committee will in all cases be guided by reasonable market practice and will take appropriate advice where necessary.

The table below outlines policy in respect of recruitment where it differs from that outlined above. Policy in respect of other components of pay
is unchanged in recruitment situations from that outlined above. Note that only the references to fees apply to non-executive Directors.

Pay component
Annual base salary or fee

Other benefits

Long-term incentive

Compensation for forfeited
remuneration

Service contracts

Changes in policy

Approach in application to recruitment situations
The following factors will be taken into account when determining appropriate base salary/fee:
U The candidate’s existing salary/fee, location of employment, skills and experience and expected

contribution to the new role;

U The previous incumbent’s salary/fee for the same role;
U The current salaries/fees of other Dialog Directors;
U Current relevant market pay data for the role; and
U The value of other elements of remuneration to be provided and the combined value

of the total package.

The Company recruits executives on a global basis and recruitment is a case in which the Remuneration
Committee may choose to exercise the discretion described in the policy table above to provide
relocation benefits. In cases where the Committee believes that the Company and its shareholders’
interests will be served best by provision of relocation benefits, the Committee will seek to limit these
benefits both in terms of their value and the period over which they are provided. Benefits provided may
include relocation allowances and global mobility benefits such as housing or schooling as described
in the policy table, which may be provided on consideration of family size and business need.
The Committee has discretion to provide awards under the LTIP which exceed the maximum outlined
in the policy table above in cases where it considers it necessary in order to facilitate recruitment of
high-calibre executives. Such awards may be provided as compensation for remuneration foregone at
a previous employer as described in the row below. The Committee also has discretion to provide such
awards in other circumstances where it considers them necessary to secure an executive’s appointment.
In cases other than compensation for or “buy-out” of previous awards, LTIP target awards in addition to
normal policy levels will be limited to 100% of a target executive’s Dialog salary.
The Committee may choose to compensate for forfeited remuneration when recruiting an external
candidate by providing replacement awards.

Where a replacement award is deemed to be necessary, the structure and level will be carefully designed
in accordance with the recruitment principles above. Such awards would be designed to take account
of the vesting period and where applicable, the performance conditions of the awards they replace.
They may include “clawback” provisions. An explanation of the basis of any “buy-out” will be provided
as soon as practicably possible after appointment.
Notice periods offered to new Executive Directors will not normally exceed 12 months. However, if it is
necessary to offer an Executive Director a longer notice period at recruitment, then the length of the
notice period will reduce on a rolling basis until it is no greater than 12 months.
No change

Dialog Semiconductor PlcAnnual report and accounts 201878

Directors’ remuneration policy continued

Clawback and malus policy

Under the rules of the deferred bonus plan, the LTIP and the previous EIP, the Remuneration Committee is entitled to cancel or claw back
some or all of a participant’s awards in the event that the Audit Committee of the Company determines that the financial accounts of the
Company were misstated to a material extent (such determination must be made within two years of the award date or six years if in relation
to fraud or reckless behaviour by an executive). Such clawback may be applied through direct repayment or a reduction in unvested awards
or future grants, or a reduction in such other payments as might otherwise be due from the Company to the individual.

Shareholding requirement

The Committee will set a shareholding requirement for Executive Directors. The requirement for the current CEO will be increased from
300% to 400% of base salary with effect from 2019. The Committee reviews the level of shareholding requirement from time to time and
has authority to amend it as necessary.

Share options for non-executive Directors

Until 2012, non-executive Directors received part of their fees in the form of options over Dialog shares. This practice was felt to align their
interests with those of shareholders. Use of options was stopped ahead of the 2013 financial year and the last awards made (in 2012) vested
in 2015. No further options have been awarded since 2012 and none will be awarded in future years. Provision of share options is not included
in the policy table above as options are not part of the Company’s forward-looking remuneration policy. According to UK regulations however,
reference to options must be made in the policy section of the Directors’ remuneration report, in order to permit payments under outstanding
awards, hence the inclusion of this section here.

Remuneration policy for Executive Directors compared to that for other employees

The Company’s remuneration policy for Executive Directors is similar to that for all other Dialog employees. Differences in policy are
outlined below:
U Annual bonus – All Dialog employees participate in annual bonus plans. The nature of those plans varies somewhat by location and

employee category. Most employees participate in a profit-sharing plan; a smaller group participates in a plan based on performance
against individual objectives;

U LTIP – Participation in the LTIP is limited to employees in senior roles and executives, which currently comprise around 50 Dialog
employees. This number may increase over time as the business grows. Different conditions to those attaching to awards made
to Executive Directors may apply; and

U Notice periods – Other UK employees’ contracts of employment include three-month notice periods.

Remuneration scenarios for the CEO

The charts below illustrate for the 2019 year the pay mix between the different elements of remuneration for the CEO, assuming threshold,
target and maximum performance. Amounts are shown in GBP (000s).

Minimum

Threshold

Target

Maximum

575
100%

575
24%

304
13%

607
15%

575
13%

575
7%

1,215
16%

1,500
63%

3,000
72%

6,000
77%

1,000

2,000

3,000

4,000
5,000
Remuneration (£000s)

6,000

7,000

8,000

9,000

Fixed Pay

Annual Bonus

LTIP

The scenarios shown above are based on the following assumptions:
U Minimum performance: fixed pay only (base salary, benefits and pension);
U Threshold performance: fixed pay, annual bonus (62.5% of salary) and 0.5x target value of the LTIP award vesting;
U Target performance: fixed pay, annual bonus (125% of salary) and 1x target value of the LTIP award vesting; and
U Maximum performance: fixed pay, maximum annual bonus of 250% of salary and 2x target value of the LTIP award vesting.

We have assumed a target LTIP grant of £3 million, which is the proposed limit for the policy for 2019.

Dialog Semiconductor PlcAnnual report and accounts 2018Annual report on remuneration for the year
ended 31 December 2018

1. Executive Director remuneration: Single Figure Table (audited)

The table below sets out the single figure for the CEO:

Incumbent
Dr Jalal Bagherli
Dr Jalal Bagherli

Total
salary
US$2
620,379
640,770

Year
20181
20171

Benefits
US$
20,464
15,923

Pension
US$
93,057
96,115

Total fixed
pay
US$3
733,900
752,809

Total
variable
pay
US$6

Total
excluding
LTI
US$7

Annual
bonus
US$4

Long-term
Incentive
US$5

Total
US$8
715,298 1,068,025 1,783,323 1,449,198 2,517,223
846,098 1,399,163 2,245,261 1,598,907 2,998,070

Notes:
1 Exchange rates used are: 2017: GBP 1 = USD 1.35093 ; EUR 1 = USD 1.19875; 2018: GBP 1 = USD 1.2768; EUR 1 = USD 1.1451.
2 Base salary earned during the financial year. The base salary is shown in USD in this table, but set and paid in GBP. The CEO’s 2018 GBP base salary increase was 0%.
3 The sum of basic salary, benefits and pension.
4 Annual bonus cash element and deferred share element awarded in relation to the financial year ended 31 December.
5 For the 2017 performance year, 13,427 EIP options and 33,526 LTIP awards vested. Value is based on a price of €25.00 (the share price on the vesting date).

For the 2018 performance year, 43,001 LTIP awards will vest. Value is based on a price of €21.84 (average share price over last three months in 2018).

6 The sum of annual bonus (cash and deferred share element) and long-term incentives.
7 The sum of basic salary, benefits, pension and annual bonus (cash and deferred share element).
8 The sum of basic salary, benefits, pension, annual bonus (cash and deferred share element) and long-term incentives which vested for performance to the end

of the year.

2. Commentary on the Executive Director Single Figure Table

2.1 Base salary

The Remuneration Committee reviewed the CEO’s base salary in July 2018 with reference to his performance, the scale of the Group, and the
positioning of his package compared to Dialog’s peer group. Given the challenging economic climate and need for cost-cutting in 2018, the
CEO was awarded a 0% increase in annual base salary with effect from 1 July 2018 which resulted in his base salary remaining at £485,886
(US$620,379).

2.2 Other benefits and Pension

The CEO received a cash allowance in lieu of a company car (US$13,023), medical insurance for himself and his spouse and Group life and
income protection insurance. The total value of taxable benefits provided was US$20,464 equivalent to 3.30% of his current salary.

The CEO receives a pension allowance of 15% of base salary which is in line with policy. In 2018, the Company made pension allowance
payments of £72,883 (US$93,057) to the CEO.

2.3 Annual bonus disclosure

For 2018, the CEO was eligible for a target annual bonus of 100% of base salary, which could range up to 200% of base salary for maximum
performance. The portion of any bonus awarded above target is deferred into shares which vest after three years.

Performance measures used were:
U Financial goals (70%) comprising revenue (15%), underlying gross margin (15%), EBIT (15%), diversified revenue (25%); and
U Commercial & organisational goals (30%).

The 2018 bonus was determined at 115.3% of target, reflecting performance as set out in the table below. Performance targets under these
measures are considered by the Board to be commercially sensitive and will, where possible, be disclosed in a future Annual report when
they are considered no longer to be commercially sensitive.

Measure
Financial

Diversification

Commercial goals

Revenue

Underlying gross margin

EBIT
Diversified Revenue

Below
Threshold

Between
Threshold
and Target

On Target

Above Target

Outcome

$1,442m

48.3%

19.5%

The outcomes of the goals in this category were between threshold
and target overall. Exact figures are not shown as they are deemed
commercially sensitive.

See below

The overall outcome for the commercial goals was above target. This reflects performance as set out in the table below:

Performance Measure
Carve-out/M&A

Outcome
Above-target performance on this measure in recognition of the landmark
agreement with Apple Inc. which clarified our long-term business
relationship and monetised our unique IP.

Dialog Semiconductor PlcAnnual report and accounts 2018
Annual report on remuneration for the year
ended 31 December 2018 continued

2. Commentary on the Executive Director Single Figure Table continued

2.3 Annual bonus disclosure continued

Accordingly, the Committee determined that a bonus equivalent to 115.3% of base salary should be paid for the performance in the 2018 financial
year. Of this, 15.3% (£74,341) will be deferred into shares for three years. The Committee also considered the disclosure of the performance
targets relating to the 2018 annual bonus. Having reviewed the targets, the Committee decided that the targets continued to be commercially
sensitive if disclosed at the same time as the bonus is paid. The targets for the 2017 annual bonus have been set out below:

Performance Measure
Financial

Revenue

Underlying gross margin
EBIT

Diversification
Commercial goals

Total

2.4 LTIP disclosure

Weighting Threshold

20% $1,209m $1,343m $1,478m $1,353m

Target Maximum Outcome Threshold
10%

Target Maximum
40%

20%

Bonus payable (% of salary)

Bonus
payable
21.5%

45.5%
17.8%

44.0%
16.9%

47.0%
20%
19.6%
20%
20% The outcome of $321m was in between threshold and target.
Successful completion and integration of Silego acquisition.
Executed successfully on milestones for long-term partnerships.

46.7%
19.2%

20%
20%

10%
10%

20%

40% 36.0%
40% 35.6%
10.8%

25.0%
128.9%

Awards granted under the 2016 Long-Term Incentive Plan (“LTIP”) are capable of vesting in 2019 subject to the achievement of revenue,
underlying operating margin and relative Total Shareholder Return (“TSR”) performance targets. Following the completion of the final performance
period in 2018, the Committee has assessed performance against the performance targets set over the performance period and has determined
that 47.08% of the target number of share options awarded will vest to participants. In light of shareholder feedback obtained during our
consultation with shareholders, we have enhanced disclosure of performance outcomes under the LTIP.

Measure
Revenue
EBIT (underlying operating
margin)
Relative TSR vs. peer group

Target award level
(% of target award)
33.3%
33.3%

Performance Needed
for Maximum Vesting
$4.89bn
21.7%

Outcome
$3.99bn
19.1%

Actual vesting outcome
(% of target award)
17.65%
29.43%

33.3% Dialog TSR over the 3-year performance period was below

0.00%

the median of the peer group, i.e. the constituents of the
S&P Select Semiconductor Index. For maximum payout,
upper quartile performance would have been needed.

Total

100.0%

47.08%

The Chief Executive was awarded a target number of 91,324 LTIP share options in 2016 (which is equivalent to a maximum number of
182,648 share options if all the maximum performance targets are met). As a result of the actual vesting outcome, 43,001 of the target number
of LTIP share options awarded to the Chief Executive in 2016 (i.e. 47.08% of target) will vest in 2019. As the share price at the date of vesting for
the 43,001 share options was not known at the date of publication, they have been valued for the purpose of the single figure using Dialog’s
average share price over October, November and December 2018 of Euro 21.84. This results in a value of US$1,068,025. This figure will be
updated next year when the actual share price at the date of vesting is known.

2.5 Share awards made during the year

In 2018 the CEO was granted an LTIP award with a target value of £2 million in line with the policy in force. As noted in the policy section,
shares awarded are structured as nominal priced options, hence the reference to options throughout.

Granted number

Awarded during the year
LTIP – performance shares

Date of award
05/03/2018

Target
92,775

Max
185,550

Value of award

30-day
average share
price at date
of grant in £
Max
£21.5575 £1,999,997 £3,999,994

Target

% of max
award that
will vest at
threshold

Performance period
25% 01/01/2018–31/12/2020

Note: The value is calculated as the number of shares, multiplied by the average closing Dialog Semiconductor share price over the 30 business days up to and including
5 March 2018 (€24.36). The sterling equivalent share price was £21.5575, resulting in a maximum LTIP award value of £3,999,994 which equates to a target LTIP award
of £1,999,997.

The LTIP performance shares set out in the table above will vest subject to performance against three performance metrics:
U Dialog TSR performance over the three-year performance period relative to the constituents of the S&P 1500 Select Semiconductor index

(one third);

U Dialog revenue in each year of the three-year performance period (one third); and
U Dialog underlying operating margin in each year of the three-year performance period (one third).

Revenue and underlying operating margin targets are set annually over the three-year performance period of the award. For each annual
period a third of this part of the award is assessed on actual Dialog performance against targets set at the beginning of each year. Relative Total
Shareholder Return is measured at the third anniversary date of the award over the three-year performance period. Shares accrued during the
performance period are released to Executive Directors as soon as practicable after the third anniversary of the award.

2.6 Dilution

As disclosed in the 2012 Annual report, share dilution as a result of equity-based incentive awards to all Dialog employees is managed to an
average 1% flow rate in order to ensure that it moves over time towards a rolling 10% in ten years.

Dialog Semiconductor PlcAnnual report and accounts 201881

3. Non-executive Directors’ remuneration: Single Figure Table (audited)

Incumbent
Chris Burke2
Chris Burke2
Aidan Hughes
Aidan Hughes
Russ Shaw
Russ Shaw
Richard Beyer
Richard Beyer
Mike Cannon
Mike Cannon
Eamonn O’Hare
Eamonn O’Hare
Alan Campbell
Alan Campbell
Nick Jeffery
Nick Jeffery
Mary Chan
Mary Chan

Year
20181
20171
20181
20171
20181
20171
20181
20171
20181
20171
20181
20171
20181
20171
20181
20171
20181
20171

Fees
US$3
67,460
196,942
195,350
206,693
–
59,993
255,360
270,186
203,650
215,473
195,350
201,268
205,565
217,500
199,181
210,918
195,989
207,954

Taxable
Benefits
US$
2,171
2,048
11,092
5,976
–
1,067
10,528
4,653
5,831
1,494
2,404
1,698
10,095
4,424
2,866
4,324
8,187
3,870

Incentives
(Annual)
US$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

Incentives
(Long-term)
US$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

Other
remuneration
US$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

Shares
Vested
US$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

Total
US$
69,631
198,990
206,442
212,669
–
61,060
265,888
274,839
209,481
216,967
197,754
202,966
215,660
221,924
202,047
215,242
204,176
211,824

Notes:
1 Exchange rate used 2017: GBP 1 = USD 1.35093; EUR 1 = USD 1.19875; 2018: GBP 1 = USD 1.2768; EUR 1 = USD 1.1451.
2 Chris Burke retired from the Board on 3 May 2018.
3 Fees include fees paid in cash and shares.

4. Directors’ shareholdings at 31 December 2018 (audited)

The CEO is expected to establish and hold a shareholding of at least 300% of salary. The CEO currently exceeds this requirement.

Number at
31 December 2018
Dr Jalal Bagherli
Chris Burke
Aidan Hughes
Russ Shaw
Richard Beyer
Mike Cannon
Eamonn O’Hare
Alan Campbell
Nick Jeffery
Mary Chan

Share Awards with
Performance Conditions

Share Awards without
Performance Conditions

10 pence
ordinary
shares
398,557
3,481
33,119
944
11,526
8,693
10,991
8,428
5,213
6,932

Performance
shares
(EIP & LTIP)
566,362
–
–
–
–
–
–
–
–
–

EIP –
invested
shares
38,117
–
–
–
–
–
–
–
–
–

Deferred
shares
130,963
–
–
–
–
–
–
–
–
–

Share
options
(unvested)
–
–
–
–
–
–
–
–
–
–

Share options
(vested &
unexercised)
–
–
2,081
–
–
–
–
–
–
–

Options
exercised
in year
114,373
–
2,293
–
–
–
–
–
–
–

Total
1,248,372
3,481
37,493
944
11,526
8,693
10,991
8,428
5,213
6,932

Dialog Semiconductor PlcAnnual report and accounts 2018Annual report on remuneration for the year
ended 31 December 2018 continued

4. Directors’ shareholdings at 31 December 2018 continued

Further detail on the CEO’s EIP, LTIP and deferred bonus share awards, is set out below.

Share plan

Full Name
Dr Jalal Bagherli Executive incentive plan
Dr Jalal Bagherli Deferred bonus plan
Dr Jalal Bagherli Executive incentive plan
Dr Jalal Bagherli Executive incentive plan
Dr Jalal Bagherli Deferred bonus plan
Dr Jalal Bagherli Executive incentive plan
Dr Jalal Bagherli Deferred bonus plan
Dr Jalal Bagherli Executive incentive plan
Dr Jalal Bagherli LTIP nominal cost option
Dr Jalal Bagherli Deferred bonus plan
Dr Jalal Bagherli LTIP nominal cost option
Dr Jalal Bagherli LTIP nominal cost option
Dr Jalal Bagherli Deferred bonus plan
Dr Jalal Bagherli LTIP nominal cost option

Final
vesting
date

Grant date

Lapse date
16/02/2013 16/02/2016 16/02/2019
18/02/2013 18/02/2016 18/02/2020
18/02/2013 18/02/2016 18/02/2019
16/02/2014 16/02/2017 16/02/2020
18/02/2014 18/02/2017 18/02/2021
18/02/2014 18/02/2017 18/02/2021
12/02/2015 12/02/2018 12/02/2022
12/02/2015 12/02/2018 12/02/2022
01/05/2015 01/03/2018 01/03/2021
03/03/2016 03/03/2019 03/03/2023
03/03/2016 01/03/2019 01/03/2022
01/03/2017 01/03/2020 01/03/2023
05/03/2018 05/03/2021 05/03/2025
05/03/2018 05/03/2021 05/03/2024

Further detail on the NEDs’ remaining share awards is set out below.

Full Name
Aidan Hughes
Aidan Hughes

Share plan
NED 2011 share option
NED 2011 share option

Final
vesting
date

Grant date

Lapse date
21/07/2011 21/04/2014 01/05/2018
18/07/2012 21/04/2015 01/05/2019

Exercise
price
(EUR)
0.12
0.01
0.12
0.12
0.01
0.12
0.01
0.12
0.15
0.01
0.15
0.15
0.01
0.15

Holding at
31 Dec
2017
–
79,735
–
42,611
–
34,638
–
60,850
–
40,153
–
24,690
–
29,913
–
18,395
–
97,329
–
11,772
–
182,648
–
103,788
–
6,514
– 185,550

Lapsed
Granted Exercised
–
79,735
–
–
–
34,638
–
–
–
–
–
–
–
–
–
4,968
– 63,803
–
–
–
–
–
–
–

–
–

Exercise
price
(EUR)
0.15
0.15

Holding at
31 Dec
2017
2,293
2,081

Granted Exercised
2,293
–

–
–

Lapsed
–
–

Holding at
31 Dec
2018
–
42,611
–
60,850
40,153
24,690
29,913
13,427
33,526
11,772
182,648
103,788
6,514
185,550

Holding at
31 Dec
2018
0
2,081

The chart below shows the CEO shareholding as at 31 December 2018 against the shareholding requirement as a % of base salary.

Requirement

CEO

500

1,000

Actual Holding as a % of salary

Deferred shares

Shareholding requirement

5. Percentage change in CEO remuneration

1,657

1,500

544

2,000

2,500

The table below compares the average change in base salary, benefits (excluding pension) and bonus awards for the CEO and for an average
UK employee over the period 2017 to 2018.

Measure
Base salary
Taxable benefits
Annual bonus
Total1

Percentage change from 2017 to 2018

CEO
0.0%
36.0%2
–10.6%
–5.5%

Average UK employee
5.9%
20.9%
–27.0%3
2.6%

1 Represents the sum of base salary, taxable benefits and bonus.
2 There was no change to the benefits provided to the CEO in 2018. However, there was an increase in the value of a portion of the benefits provided in 2018

due to timing of taxes.

3 At the time of preparation for this report, annual bonuses for the Group had yet to be finalised and the numbers presented reflect expected payouts. The annual bonus

for the majority of employees is a plan based on EBIT (underlying operating margin) which was below-target for 2018.

6. Relative importance of spend on pay

The chart below compares the amount spent on employee pay by Dialog to amounts spent by Dialog on research and development and
distributions to shareholders.

2018

2017

100

150

200

250

300

350

124.2

311.2

326.3

274.5

278.8

Employee remuneration for Group

R&D Expenses

Distributions to shareholders

* Please refer back to “Share buyback programme” on page 50.

(US$m)

Dialog Semiconductor PlcAnnual report and accounts 201883

7. Review of past performance

7.1 TSR Chart

The following graph compares Dialog Semiconductor’s TSR performance to that of the same investment in the German TecDAX Index.
This comparison has been chosen because it reflects the local market and industry in which Dialog is listed. We also show a comparison to
the Philadelphia SE Semiconductor Sector Index (Price return) as an additional industry comparator, recognising that Dialog competes with
companies on an international basis. TSR is the measure of the returns that a company has provided for its shareholders, reflecting share
price movements and – where relevant – assuming reinvestment of dividends. Data is averaged over 30 days at the end of each financial year.

6,000

5,000

4,000

3,000

)

d
e
s
a
b
e
r
(

)

(

e
u
a
V

2,000

1,000

31 Dec 08

31 Dec 09

31 Dec 10

31 Dec 11

31 Dec 12

31 Dec 13

31 Dec 14

31 Dec 15

31 Dec 16

31 Dec 17

31 Dec 18

Dialog Semiconductor

German TecDAX Index

Philadelphia Semiconductor Index

This graph shows the value, by 31 December 2018, of US$100 invested in Dialog Semiconductor Plc on 31 December 2008 compared with the value of US$100 invested
in the German TecDAX Index on the same date. Also plotted is the price index for the Philadelphia Semiconductor Sector Index (rebased to 100). Data has been averaged
over 30 days at the end of each financial year.

Source: FactSet.

7.2 Ten-year Chief Executive single figure remuneration

The table below sets out the annual change in the single figure total remuneration provided to the CEO over the previous ten-year period.

Financial year ending
Total remuneration
including unrealised
gains on options in $
(single figure basis)1
Annual bonus
(% of maximum)2
Long-term variable pay
(% of maximum)3

31 Dec 2009 31 Dec 2010 31 Dec 2011 31 Dec 2012 31 Dec 2013 31 Dec 2014 31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018

1,028,853 4,809,398 30,426,678

2,167,224 2,046,555 4,521,143 5,910,729 5,576,750 2,998,070 2,517,223

N/A

100%

91.94%

89.12%

79.25%

34.62%

64.45%

57.65%

95%

100%

78%

81.3%

61.49%

34.44%

23.54%

1 The total remuneration for 2010 and 2011 includes awards made under the 2008 LTIP plan approved by shareholders at the 2008 AGM. The values vested to the CEO
from this plan were US$3,593,299 (2010) and US$29,103,138 (2011), resulting from the exceptional performance and share price growth of the Company, as can be
seen in the TSR performance chart above. There are no further awards under this plan. Total remuneration includes the value of long-term incentive awards at the time
they vest, as required by UK reporting regulations. The actual value realised by the CEO is based on the market value on the date they are permitted (under Directors’
trading restrictions) and/or choose to exercise options or sell shares. The value presented does not therefore reflect exactly that received by the CEO.

2 No maximum bonus was defined prior to 2012.
3 The percentages shown for 2017 and 2018 long-term variable pay are for the LTIP. In 2017 there was a legacy EIP award with a vesting percentage of 44.88%.

8. Statement of implementation for the year ending 31 December 2019

8.1 Executive Director

This section details how remuneration will be implemented for the CEO, following the new remuneration policy that is to be implemented in
2019. The rationale for the changes below can be found in the Remuneration Chairman’s Letter. Both this report and the Chairman’s Letter are
subject to approval at the 2019 AGM.

Base salary
The CEO’s base salary will be subject to review in 2019 with any change being effective from 1 July 2019.

Benefits & pension
No change to benefits. Pension contribution remains at 15% of salary.

Annual Bonus for the year ending 31 December 2019
The maximum bonus potential will continue to be 2x target bonus, however there will be an increase in target bonus from 100% to 125%
of base salary.

The annual bonus will be based on similar metrics to last year. Weightings will be in line with the performance framework set out in the
remuneration policy and aligned to the key strategic priorities for 2019. There will be a significant weighting on financial metrics supported by
appropriate measures of operational and commercial performance.

Dialog Semiconductor PlcAnnual report and accounts 2018

Annual report on remuneration for the year
ended 31 December 2018 continued

8. Statement of implementation for the year ending 31 December 2019 continued

8.1 Executive Director continued

LTIP for the year ending 31 December 2019
Following approval of the policy at the 2019 AGM, target LTIP award will be increased from £2 million to £3 million.

As in prior years, the LTIP award will vest after three years subject to the satisfaction of three performance metrics:
U Dialog TSR performance over the three-year performance period relative to the constituents of the S&P 1500 Select Semiconductor index;
U Dialog revenue in each year of the three-year performance period; and
U Dialog underlying operating margin in each year of the three-year performance period.

Financial targets will be disclosed retrospectively in the year of vesting.

For the relative TSR condition of the 2019 LTIP award, Dialog Semiconductor TSR is measured over the three-year performance period and
compared to the companies in the comparator group. If Dialog TSR is at the median of the comparator group then 0.5x the target award
vests. If Dialog TSR is at the 60th percentile of the comparator group then 1x the target award will vest. If Dialog TSR is at or above the 75th
percentile of the comparator group then 2x the target award will vest. For performance in between these levels, vesting is determined on a
straight-line basis.

Share Ownership Guidelines
Share Ownership Guidelines are required to build and retain a shareholding in Dialog’s shares. Previously, the CEO has been required to hold
the equivalent of 3x base salary in shares, this is to be increased to 4x base salary for 2019.

Holding Period
A post-vesting holding period of two years will normally apply to awards granted under the new policy which will be submitted for shareholder
approval at the 2019 AGM.

8.2 Non-executive Directors

The following table sets out the fee rates for non-executive Directors, which have applied from 2016.

In thousands
Chairman fee
Base fee
Committee Chair fee

Audit
Remuneration
Nominations

Committee membership fee

Audit
Remuneration
Nominations

2019

2018

Cash
£80
£58

£16
£12
£5

£8
£6
£2.5

Shares
£120
£87

–
–
–

Cash
£80
£58

£16
£12
£5

£8
£6
£2.5

Shares
£120
£87

–
–
–

Dialog Semiconductor PlcAnnual report and accounts 201885

9. Governance

9.1 The Remuneration Committee

The Board as a whole is responsible for setting the Company’s policy on Directors’ remuneration. The Board of Directors has established
a Remuneration Committee (the “Committee”) and has delegated authority to this Committee to review and recommend to the Board: the
salaries and incentive compensation of the Company’s officers and its subsidiaries; and provide recommendations for other employees and
consultants as appropriate.

The Committee comprises independent, non-executive Directors. The members are currently Mike Cannon (Chair), Mary Chan and Nick
Jeffery. The Committee’s members have no financial interest in the Company other than as shareholders and through the remuneration paid
to them by the Company.

By invitation, other members of the Board may attend the Committee’s meetings. The CEO and the Senior Vice President, Human Resources
may also attend by invitation but take no part in discussions or decisions on matters relating to their own remuneration. The Committee is free
to seek its own independent advice free from management as it deems appropriate.

During the year, the Committee sought and received general advice relating to remuneration from Aon plc. The Committee is satisfied that
the advice received from Aon is objective and independent and is not subject to any material conflict of interest. Aon is a member of the
Remuneration Consultants Group and is a signatory to its Code of Conduct; all advice received during the year was provided in accordance
with this code. Fees charged by Aon for advice provided to the Committee for 2018 amounted to £240,342.

The Committee also received advice from the Senior Vice President, Human Resources and the Company Secretary. During the year, the
Committee met formally on four occasions; in addition, the Committee Chairman held a number of meetings with advisers.

Responsibilities
The Remuneration Committee’s main responsibilities are to:
U Review and recommend to the Board the salaries and incentive compensation of the Company’s CEO and executive management;
U Provide recommendations for other employees and consultants as appropriate; and
U Administer the Company’s compensation, stock and benefits plan.

The key activities of the Committee during the year were to:
U Review, plan and recommend to the Board CEO and executive management remuneration;
U Review and address Annual General Meeting outcomes;
U Consider market trends; and
U Review the long-term incentive and the structure of the CEO’s remuneration package.

9.2 Statement of Shareholder voting

At the 2018 AGM 99.64% of shareholders supported the advisory resolution to approve the Annual report on remuneration. The table
below summarises the number of votes for and against Annual report on remuneration at the 2018 AGM, and also includes the number of
abstentions (referred to as votes withheld).

Resolution
Approval of Directors’ remuneration report

No of shares
42,965,758

%
99.64%

No of shares
153,125

%
0.36%

No of shares
242,655

No of shares
43,118,883

Votes for1

Votes against1

Votes
withheld2

Total
votes cast

% of voting
capital
instructed3

56.45%

1 Votes “For” and “Against” are expressed as a percentage of votes received.
2 A “Vote withheld” is not a vote in law and is not counted in the calculation of the votes “For” or “Against” a resolution.
3 Total number of shares in issue at 9am BST (10am CEST) on 1 May 2018 was 76,382,139 shares.

9.3 Stakeholder views

Shareholder and proxy advisory groups are engaged when the Company is considering material changes to policy, including approval of any
new share plans.

There is no formal engagement with employees on matters of executive remuneration but employees are encouraged to provide their view on
any aspect of the Company’s operations through the Company’s intranet-based feedback system SVP Blog and the annual Voice of Dialog
employee survey.

Mike Cannon
Chairman, Remuneration Committee
6 March 2019

Dialog Semiconductor PlcAnnual report and accounts 201886

Statement of Directors’ responsibilities

The Directors are responsible for preparing
the Annual report and the Group and parent
company financial statements in accordance
with the applicable law and regulations.

UK company law requires the Directors to
prepare Group and parent company financial
statements for each financial year. Under the
law the Directors are required to prepare the
Group financial statements in accordance
with IFRS as adopted by the EU and Article
4 of the IAS Regulation and have chosen
to prepare the parent company financial
statements in accordance with Financial
Reporting Standard 101 Reduced Disclosure
Framework. Under UK company law the
directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Company and of the profit or loss of
the Company for that period.

In preparing the Group financial statements,
International Accounting Standard 1 requires
that the Directors:
U Properly select and apply

accounting policies;

U Present information, including accounting

policies, in a manner that provides
relevant, reliable, comparable and
understandable information;

U Provide additional disclosures when

compliance with the specific requirements
in IFRS is insufficient to enable users
to understand the impact of particular
transactions, other events and conditions
on the entity’s financial position and
financial performances; and

U Make an assessment of the Company’s
ability to continue as a going concern.

In preparing the parent company financial
statements, the Directors are required to:
U Select suitable accounting policies and

apply them consistently;

U Make judgements and estimates that are

reasonable and prudent;

U State whether Financial Reporting
Standard 101 (Reduced Disclosure
Framework) has been followed, subject
to any material departures disclosed and
explained in the financial statements; and

U Prepare the financial statements on
a going concern basis unless it is
inappropriate to presume that the
Company will continue in business.

The Directors are responsible for keeping
proper accounting records that disclose with
reasonable accuracy at any time the financial
position of the parent company and enable
them to ensure that its financial statements
comply with the Companies Act 2006 and
Article 4 of the IAS Regulation.

They have a general responsibility for
taking such steps as are reasonably open
to them to safeguard the assets of the
Group and to prevent and detect fraud and
other irregularities.

Under applicable law and regulations, the
Directors are also responsible for preparing
a Strategic report, Directors’ report and
Directors’ remuneration report that comply
with that law and those regulations.

The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the UK
governing the preparation and dissemination
of financial statements may differ from
legislations in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:
U the financial statements, prepared in

accordance with International Financial
Reporting Standards as adopted by
the European Union, give a true and fair
view of the assets, liabilities, financial
position and profit or loss of the company
and the undertakings included in the
consolidation taken as a whole;

U the strategic report includes a fair review of
the development and performance of the
business and the position of the company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face; and

U the annual report and financial statements,

taken as a whole, are fair, balanced
and understandable and provide the
information necessary for shareholders
to assess the company’s position
and performance, business model
and strategy.

This responsibility statement was approved
by the board of directors on 6 March 2019
and is signed on its behalf by:

Dr Jalal Bagherli
Chief Executive Officer

Dialog Semiconductor PlcAnnual report and accounts 201887

Independent auditor’s report

to the members of Dialog Semiconductor Plc

Report on the audit of the financial statements

Opinion

In our opinion:
U the financial statements of Dialog Semiconductor Plc (the “Parent Company”) and its subsidiaries (the “Group”) give a true and fair view of
the state of the Group’s and of the Parent Company’s affairs as at 31 December 2018 and of the Group’s profit for the year then ended;

U the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)

as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board (IASB);

U the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice including FRS 101 Reduced Disclosure Framework; and

U the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the

Group financial statements, Article 4 of the IAS Regulation.

We have audited the financial statements which comprise:
U the Consolidated statement of income;
U the Consolidated statement of comprehensive income;
U the Consolidated and Parent Company balance sheets;
U the Consolidated statement of cash flows;
U the Consolidated and Parent Company statements of changes in equity; and
U the related notes 1 to 35 to the Group financial statements and notes 1 to 10 to the Parent Company financial statements.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs
as adopted by the European Union and IFRSs as issued by the IASB. The financial reporting framework that has been applied in the
preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101
Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the Financial Reporting Council’s (the “FRC’s”) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services
prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Dialog Semiconductor PlcAnnual report and accounts 201888

Independent auditor’s report

to the members of Dialog Semiconductor Plc continued

Summary of our audit approach

Key audit matters

Materiality

Scoping

The key audit matters that we identified in the current year were:
U Carrying amount of goodwill – revenue growth forecasts of new products used for the Connectivity CGU
U Capitalisation of development costs

We determined materiality for the Group financial statements to be US$10.7 million, which represents 5.4%
of pre-tax profit.

We conducted full scope audit procedures on the Parent Company as well as the three largest
components, which represent 94% of the Group’s revenue, 83% of the Group’s pre-tax profit and
99% of Group’s net assets. We performed specified audit procedures on two additional components.

Significant changes
in our approach

Our audit approach was consistent with the previous year, except as explained below.

Last year our report included two key audit matters which are not included in our report this year:

Revenue growth assumptions used in the valuation of customer relationships acquired as part of the
Silego acquisition: For 2018, no acquisitions took place and therefore the key audit matter is not applicable.

Revenue recognition: Previously we identified a risk in relation to sales to distributors on “ship and debit”
terms, which we pinpointed to the risk of manual adjustments at year end. With the implementation of IFRS 15
Revenue from Contracts with Customers, such revenue is recognised when the products are released for
collection by the third party distributor rather than when the sale is made to the end customer, therefore the key
audit matter is no longer applicable.

We also identified a risk in relation to direct sales to end customers, which we pinpointed to cut-off based on
contractual terms of sales. We evaluated the results of our previous audits and concluded that this was not a
key audit matter for 2018.

Conclusions relating to going concern

We are required by ISAs (UK) to report in respect of the following matters where:
U the Directors’ use of the going concern basis of accounting in preparation of the financial statements is not appropriate; or
U the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of
at least twelve months from the date when the financial statements are authorised for issue.

We have nothing to report in respect of these matters.

Dialog Semiconductor PlcAnnual report and accounts 201889

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.

Carrying amount of goodwill – revenue growth forecasts of new products used for the Connectivity CGU

Key audit matter description

Goodwill by CGU

Mobile Systems

2. Connectivity

3. Advanced Mixed Signal

24%

20%

56%

How the scope of our audit
responded to the key audit matter

As detailed in Notes 14 and 15 to the financial statements, the Group held
US$439.5 million of goodwill and US$217.4 million of other intangible assets at the
balance sheet date. As detailed in Note 2, the Group is required to, at least annually,
test goodwill for impairment, or when an impairment trigger is identified.

The impairment test involves a number of significant judgements in assessing the
recoverable amount of each cash generating unit (“CGU”), to which goodwill is
allocated, most importantly growth assumptions made within the three-year cash
flow forecasts contained in management’s Strategic Plan.

We have identified the risk of impairment to principally relate to the Connectivity CGU.
High revenue growth rates are assumed in the three-year cashflow forecasts for
Connectivity, with the growth driven by new products in less mature end markets.
The headroom of value in use over the carrying amount of the assets of the CGU is
also lower than that of the other CGUs. We have reviewed management’s sensitivity
analysis and performed our own analysis in concluding on the focus for our key
audit matter.

Given the impact on overall value in use of the high revenue growth rates for new
products, this is considered to be the key judgement and a key audit matter.

We evaluated the design and implementation (D&I) of the key controls that ensure
consistency between the Strategic Plan and forecasts in the impairment test,
and regarding the preparation and review of the impairment assessment.

We reviewed and challenged management’s key assumptions used in the impairment
test for the Connectivity CGU, focusing on the appropriateness of the revenue growth
rates assumed in the three-year cash flow forecasts. Our procedures included:
U Comparing prior year forecast revenue growth to actual performance to assess

historical accuracy of forecasting, with particular focus on assessing the
performance of products previously categorised as new products which have
now launched;

U Agreeing forecasts used to the latest Board approved forecasts as well as

reviewing 2019 trading to date;

U Enquiring of management, including individuals outside of finance, to understand
and challenge the assumptions in the revenue growth forecasts with focus on
products identified in our sensitivity analysis that have the most significant impact
on future performance;

U Obtaining evidence of post-year end order backlogs for new products launched

in 2019; and

U Comparing assumptions in the growth assumed to third party and other market

data, where available, analyst and industry reports.

Key observations

Based on the audit procedures performed, we concur with management that an
impairment was not required in the year ended 31 December 2018.

Dialog Semiconductor PlcAnnual report and accounts 201890

Independent auditor’s report

to the members of Dialog Semiconductor Plc continued

Capitalisation of development costs

Key audit matter description

Analysis of R&D costs (US$m)

2018

2017

2016

326

303

241

100

200

300

400

R&D expensed
R&D expenditure credits
Development costs capitalised

Research and development (“R&D”) activity is an important part of the Group’s
business model to create value in the business, as detailed in the Strategic report
on pages 30 to 31. During 2018, the Group incurred US$351.1 million of research and
development costs, net of R&D expenditure credits of US$5.2 million. Of this amount,
US$24.8 million was capitalised.

In line with IAS 38 Intangible Assets, and as detailed in note 2, development
expenditure is expensed until it can be demonstrated a new product is technically
feasible, commercially viable and management intends to complete the development.

The point of commencement of capitalisation of such costs is an area of
management judgement and there is a risk that costs which should have been
expensed are capitalised. Therefore, we consider this a method by which the
profit for the year could be fraudulently misstated.

How the scope of our audit
responded to the key audit matter

We assessed the D&I of controls in relation to the R&D process, in particular
the tracking of the stage of completion of projects and the determination of
the requirement to capitalise.

We focused our substantive testing on the review of significant projects for
indicators of potential manipulation. Where indicators were identified we challenged
management regarding them, making inquiries with individuals in both finance and
also the project management teams.

Evidence was obtained for all projects with total budgeted costs in excess of a set
threshold which commenced capitalisation during 2018 to support that the timing
of the commencement of capitalisation was in accordance with the requirements
of IAS 38.

A review for contradictory evidence was performed in order to identify indicators
that the stage of completion of a project differed from that reported. This included
a review for inventory build-up or revenue in the period.

Key observations

Based on the audit procedures performed, we did not identify
any material misstatements in relation to the capitalisation of development costs.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group materiality

We determined materiality for the Group to be US$10.7 million (2017: US$10.5 million).

Basis for determining
materiality

Rationale for the
benchmark applied

The materiality for the audit of the Parent Company based on balance sheet
measures would be in excess of Group materiality, therefore we capped the
materiality for the Parent Company at US$10.6 million (2017: US$10.4 million).

Our materiality for the Group represents 5.4% of pre-tax profit of US$196.2 million.
In 2017 our materiality was based on 5.4% of pre-tax profit of US$194.8 million.

Our base for determining materiality is in line with prior year.

We consider pre-tax profit to be a key benchmark for users of the financial
statements, including customers, suppliers and other parties such as tax authorities.

Dialog Semiconductor PlcAnnual report and accounts 201891

Group materiality US$10.7m

Component materiality
range US$4.3m to US$8.6m

Audit Committee reporting
threshold US$0.5m

Pre-tax proﬁt
US$196.2m

Pre-tax proﬁt

Group materiality

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $535,500 (2017: $525,200),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including an understanding of the geographical
positioning of accounting processing, management decision making and the risk of material misstatement at the Group level.

The Group is present in sixteen countries across Europe, North America and Asia; however, the majority of transactional accounting
processing as well as the consolidation is performed in Germany, which co-ordinates closely with the UK head office finance team. In addition,
90% of the Group’s revenue is generated through its German component.

Based on this assessment, we focused on the component located in Germany as well as three components located in the UK where we
performed full scope audits, covering 94% (2017: 98%) of revenue, 83% (2017: 94%) of pre-tax profit and 99% (2017: 96%) of net assets.

For the two other components, which include Silego, we performed specific audit procedures on defined balances and transactions,
which increased our coverage to cover 100% of revenue, 90% of pre-tax profit and 100% net assets as detailed below:

Revenue

Proﬁt before tax

Net assets

Full audit scope

Speciﬁed audit procedures

Review at Group level

94%

Full audit scope

Speciﬁed audit procedures

Review at Group level

83%

10%

Full audit scope

Speciﬁed audit procedures

Review at Group level

99%

Full audit scope

Speciﬁed audit procedures

Review at Group level

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report other
than the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in respect of these matters.

Dialog Semiconductor PlcAnnual report and accounts 201892

Independent auditor’s report

to the members of Dialog Semiconductor Plc continued

Responsibilities of directors

As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.

Details of the extent to which the audit was considered capable of detecting irregularities, including fraud are set out below.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website. This description forms part
of our auditor’s report.

Extent to which the audit was considered capable of detecting irregularities, including fraud

We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and
perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis
for our opinion.

Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, our procedures included the following:
U enquiring of management, internal audit, internal legal counsel and the Audit Committee, including obtaining and reviewing supporting

documentation, concerning the Group’s policies and procedures relating to:
U identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
U detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
U the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations;

U discussing among the engagement team including the component audit team and involving relevant internal specialists, including tax,

valuations, and information technology regarding how and where fraud might occur in the financial statements and any potential indicators
of fraud. As part of this discussion, we identified potential for fraud in the following areas: judgement regarding the point of commencement
of capitalisation of development costs and the identification and interpretation of the contractual terms of new and/or updated revenue
contracts; and

U obtaining an understanding of the legal and regulatory frameworks that the Group operates in, focusing on those laws and regulations

that had a direct effect on the financial statements or that had a fundamental effect on the Group’s operations. The key laws and regulations
we considered in this context included among others, the UK Companies Act, German listing rules and tax legislations (UK, USA
and Germany).

Audit response to risks identified
As a result of performing the above, we identified capitalisation of development costs as a key audit matter. The key audit matters section of
our report explains that matter in more detail and also describes the specific procedures we performed in response to that key audit matter.

In addition to the above, our procedures to respond to risks identified included the following:
U reviewing the financial statement disclosures and testing supporting documentation to assess compliance with relevant laws and

regulations discussed above;

U enquiring of management, the Audit Committee and in-house and external legal counsel concerning actual and potential litigation

and claims;

U performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement

due to fraud;

U reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing regulatory correspondence;
U in addressing the risk of fraud in revenue recognition, assessing the appropriateness of the design and implementation of controls

regarding capturing new contractual terms and reviewing significant new contracts for compliance with IFRS 15; and

U in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other

adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating
the business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal
specialists and the component audit team, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.

Dialog Semiconductor PlcAnnual report and accounts 201893

Report on other legal and regulatory requirements

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:
U the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

U the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and of the Parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the Strategic report or the Directors’ report.

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
U we have not received all the information and explanations we require for our audit; or
U adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received

from branches not visited by us; or

U the Parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not
been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Other matters

Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by Dialog Semiconductor Plc on 25 January 2016 to audit the
financial statements for the year ending 31 December 2015 and subsequent financial periods. The period of total uninterrupted engagement
including previous renewals and reappointments of the firm is four years, covering the years ended 31 December 2015 to 31 December 2018.

Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Alexander Butterworth ACA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Reading, UK
6 March 2019

Dialog Semiconductor PlcAnnual report and accounts 2018Consolidated statement of income

Year ended 31 December

Revenue
Cost of sales
Gross profit
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Other operating income/(expense)
Operating profit
Interest income
Interest expense
Other finance (expense)/income
Profit before income taxes
Income tax expense
Profit after income taxes
Share of loss of associate
Net income
Attributable to:
– Shareholders in the Company
– Non-controlling interests
Net income

Earnings per share (US$)
Basic
Diluted
Weighted average number of shares (in thousands)
Basic
Diluted

Note
5, 33

33
5
5, 33
8
8
8

2018
US$000
1,442,138
(751,070)
691,068
(83,877)
(84,351)
(326,309)
3,176
199,707
9,883
(3,134)
(10,263)
196,193
(55,281)
140,912
(1,113)
139,799

139,799
–
139,799

1.89
1.80

73,959
77,655

2017*
US$000
1,352,841
(707,971)
644,870
(70,412)
(74,850)
(303,013)
(9,578)
187,017
5,995
(1,302)
3,093
194,803
(25,369)
169,434
–
169,434

173,916
(4,482)
169,434

2.34
2.21

74,472
78,611

2016*
US$000
1,197,611
(630,963)
566,648
(62,331)
(70,940)
(261,278)
137,708
309,807
3,665
(3,447)
(4,819)
305,206
(47,090)
258,116
–
258,116

260,940
(2,824)
258,116

3.43
3.25

76,047
80,398

* Certain product development costs have been reclassified from cost of sales to research and development expenses (see note 1).

Dialog Semiconductor PlcAnnual report and accounts 2018Consolidated statement of comprehensive income

Year ended 31 December

Net income
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent periods
Currency translation differences on foreign operations:
– (Loss)/gain recognised in the year
– Gain transferred to profit or loss on deconsolidation of Dyna Image
Income tax relating to currency translation differences on foreign operations
Fair value gain on available-for-sale investments
Income tax relating to available-for-sale investments
Cash flow hedges:
– Fair value (loss)/gain recognised on effective hedges in the year
– Fair value (gain)/loss transferred to profit or loss
Income tax relating to cash flow hedges

Items that will not be reclassified to profit or loss
Fair value loss on equity investments
Income tax relating to equity investments

Other comprehensive (loss)/income for the year
Total comprehensive income for the year
Attributable to:
– Shareholders in the Company
– Non-controlling interests
Total comprehensive income for the year

2018
US$000
139,799

2017
US$000
169,434

2016
US$000
258,116

(527)
–
(78)
–
–

(10,075)
(2,343)
2,376
(10,647)

(23,764)
1,015
(22,749)
(33,396)
106,403

106,403
–
106,403

1,658
(1,144)
180
5,971
(1,015)

16,433
(441)
(3,149)
18,493

–
–
–
18,493
187,927

192,416
(4,489)
187,927

227
–
(47)
2,866
–

(13,264)
8,382
765
(1,071)

–
–
–
(1,071)
257,045

259,769
(2,724)
257,045

Dialog Semiconductor PlcAnnual report and accounts 2018Consolidated balance sheet

As at 31 December

Assets
Cash and cash equivalents
Trade and other receivables
Other current financial assets
Inventories
Income tax receivables
Other current assets

Assets classified as held for sale
Total current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment in associate
Other investments
Other non-current financial assets
Other non-current assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities and equity
Trade and other payables
Other current financial liabilities
Provisions
Income taxes payable
Other current liabilities

Liabilities directly associated with assets held for sale
Total current liabilities
Non-current financial liabilities
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Ordinary shares
Share premium account
Retained earnings
Other reserves
Dialog shares held by employee benefit trusts
Total equity
Total liabilities and equity

Note

2018
US$000

2017
US$000

11
12
18
13

14
15
16
17
17
18
19
9

21
22
23

22
23
9
24

677,848
114,514
202
149,736
2,146
18,306
962,752
11,295
974,047
439,508
217,445
66,359
–
11,538
1,807
398
6,034
743,089
1,717,136

122,140
196,890
5,253
8,193
58,237
390,713
3,167
393,880
841
3,078
7,958
8,872
20,749
14,204
403,660
930,576
(23,419)
(22,514)
1,302,507
1,717,136

479,295
78,186
6,649
168,947
12,739
14,656
760,472
–
760,472
439,508
235,637
83,870
1,100
46,155
2,090
503
7,451
816,314
1,576,786

107,195
16,041
3,474
13,356
59,619
199,685
–
199,685
17,378
3,725
4,017
9,560
34,680
14,204
403,660
915,482
9,977
(902)
1,342,421
1,576,786

These financial statements were approved by the Board of Directors on 6 March 2019 and were signed on its behalf by:

Dr Jalal Bagherli
Director

Dialog Semiconductor PlcAnnual report and accounts 2018Consolidated statement of cash flows

Year ended 31 December

Cash flows from operating activities
Net income
Non-cash items within net income:
– Depreciation of property, plant and equipment
– Amortisation of intangible assets
– Impairment of non-current assets
– Addition to inventory reserve, net
– Share-based compensation expense
– Loss on deconsolidation of Dyna Image
– Other non-cash items
Interest income, net
Income tax expense
Cash generated from operations before changes in working capital
Changes in working capital:
– (Increase)/decrease in trade and other receivables
– Decrease/(increase) in inventories
– Decrease/(increase) in prepaid expenses
– Increase/(decrease) in trade and other payables
– Increase in provisions
– Change in other assets and liabilities
Cash generated from operations
Interest paid
Interest received
Income taxes (paid)/received
Cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of businesses, net of acquired cash
Payment of contingent consideration
Cash held by Dyna Image on deconsolidation
Payments for capitalised development costs
Purchase of other investments, net
(Increase)/decrease in other long-term assets
Cash flow used for investing activities
Cash flows from financing activities
Purchase of own shares into treasury
Currency hedges on share buyback obligation
Capital element of finance lease payments
Purchase of shares by employee benefit trusts
Sale of shares by employee benefit trusts
Issue of shares by a subsidiary to non-controlling interests
Facility arrangement costs
Share issue costs
Cash flow used for financing activities
Net cash inflow/(outflow) during the year
Cash and cash equivalents at beginning of year
Currency translation differences
Cash and cash equivalents at end of year

An analysis of changes in liabilities arising from financing activities is presented in note 22.

Note

2018
US$000

2017
US$000

2016
US$000

139,799

169,434

258,116

31,455
49,130
–
5,643
41,153
–
6,590
(6,749)
55,281
322,302

(36,310)
13,615
56
15,968
3,089
2,852
321,572
(530)
8,714
(41,107)
288,649

(26,145)
(6,197)
(3,480)
(9,360)
–
(24,771)
–
–
(69,953)

–
–
(1,651)
(21,786)
3,617
–
–
–
(19,820)
198,876
479,295
(323)
677,848

30,807
41,969
4,327
1,288
35,320
5,597
(7,904)
(4,693)
25,369
301,514

11,117
(54,377)
1,930
7,819
2,136
473
270,612
(425)
6,221
8,314
284,722

(47,938)
(6,196)
(267,940)
–
(420)
(20,988)
(13,738)
(488)
(357,708)

(125,035)
1,227
(4,283)
(24,301)
7,246
1,107
(988)
(28)
(145,055)
(218,041)
697,167
169
479,295

27,219
35,954
–
4,375
28,167
–
2,118
(218)
47,090
402,821

(8,105)
21,609
(301)
(44,206)
260
13,601
385,679
(3,434)
3,314
(136,799)
248,760

(25,553)
(8,177)
(647)
–
–
(15,802)
(10,000)
227
(59,952)

(61,472)
(1,186)
(3,834)
(3,127)
11,083
–
–
–
(58,536)
130,272
566,809
86
697,167

8
9

3
3
4

Dialog Semiconductor PlcAnnual report and accounts 2018Consolidated statement of changes in equity

Year ended 31 December

As at 31 December 2015
Net income
Other comprehensive (loss)/income
Total comprehensive income/(loss)
Other changes in equity:
– Purchase of own shares into treasury
– Share buyback obligation
– Purchase of shares by employee benefit trusts
– Sale of shares by employee benefit trusts
– Share-based compensation, net of tax
As at 31 December 2016
Net income
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Other changes in equity:
– Purchase of own shares into treasury
– Share buyback obligation
– Cancellation of treasury shares
– Shares issued by Dyna Image
– Deconsolidation of Dyna Image
– Shares issued to employee benefit trust
– Purchase of shares by employee benefit trusts
– Sale of shares by employee benefit trusts
– Share-based compensation, net of tax
As at 31 December 2017
Adjustment on initial application of IFRS 15 (note 35)
Adjusted balance as at 1 January 2018
Net income
Other comprehensive loss
Total comprehensive income/(loss)
Other changes in equity:
– Share buyback obligation
– Purchase of shares by employee benefit trusts
– Sale of shares by employee benefit trusts
– Share-based compensation, net of tax
As at 31 December 2018

Share
premium
Ordinary
account
shares
US$000
US$000
14,402 403,687
–
–
–

–
–
–

–
–
–
–
–

–
–
–
–
–
14,402 403,687
–
–
–

–
–
–

–
–
(571)
–
–
373
–
–
–

–
–
–
–
–
(27)
–
–
–
14,204 403,660
–
14,204 403,660
–
–
–

–
–
–

–

Retained
earnings
US$000
631,548
260,940
–
260,940

(1,643)
(63,077)
–
3,934
31,212
862,914
173,916
–
173,916

Other
reserves
(note 25)
US$000
(7,923)
–
(1,171)
(1,171)

(61,472)
–
–
–
–
(70,566)
–
18,500
18,500

62,584

3,024 (125,050)
–
(186,522) 187,093
–
–
–
–
–
–
9,977
–
9,977
–
(33,396)
(33,396)

361
–
–
–
(37,134)
36,339
915,482
1,541
917,023
139,799
–
139,799

–
–
–
–

–
–
–
–
14,204 403,660

(171,187)
–
3,443
41,498
930,576

–
–
–
–
(23,419)

Dialog
shares held
by employee
benefit trusts
US$000
(24,630)
–
–
–

Equity
attributable to
shareholders in
the Company
US$000
1,017,084
260,940
(1,171)
259,769

Non-
controlling
interests
US$000

Total
US$000
7,801 1,024,885
258,116
(2,824)
(1,071)
100
257,045
(2,724)

–
–
(3,127)
7,149
–
(20,608)
–
–
–

–
–
–
–
–
(373)
(24,301)
44,380
–
(902)
–
(902)
–
–
–

–
(21,786)
174
–
(22,514)

(63,115)
(63,077)
(3,127)
11,083
31,212
1,189,829
173,916
18,500
192,416

(122,026)
62,584
–
361
–
(27)
(24,301)
7,246
36,339
1,342,421
1,541
1,343,962
139,799
(33,396)
106,403

(171,187)
(21,786)
3,617
41,498
1,302,507

–
–
–
–
–

(63,115)
(63,077)
(3,127)
11,083
31,212
5,077 1,194,906
169,434
(4,482)
18,493
(7)
187,927
(4,489)

(122,026)
–
62,584
–
–
–
1,107
746
(1,334)
(1,334)
(27)
–
(24,301)
–
7,246
–
36,339
–
– 1,342,421
–
1,541
– 1,343,962
139,799
–
(33,396)
–
106,403
–

(171,187)
–
(21,786)
–
3,617
–
–
41,498
– 1,302,507

Dialog Semiconductor PlcAnnual report and accounts 201899

Notes to the consolidated financial statements

For the year ended 31 December 2018

1. Background

Description of business

Dialog Semiconductor Plc (“the Company”) is a public limited company that is incorporated in England and Wales and domiciled in the United
Kingdom. The Company’s ordinary shares are listed on the Frankfurt Stock Exchange.

Dialog creates and markets highly-integrated, mixed-signal integrated circuits, optimised for personal, portable, hand-held devices, low energy
short-range wireless, LED solid state lighting and automotive applications. Dialog has four operating segments: Mobile Systems; Connectivity;
Automotive & Industrial; and Advanced Mixed Signal. Segment information is presented in note 33.

Registered office

The Company’s registered office is at Tower Bridge House, St Katharine’s Way, London E1W 1AA, United Kingdom.

Statement of compliance

The consolidated financial statements of the Company and its subsidiaries (together, “Dialog” or “the Group”) set out on pages 98 to 148
have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted for use in the European Union and
those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS and therefore comply with Article 4 of the IAS
Regulation. The consolidated financial statements also comply with IFRS as issued by the International Accounting Standards Board (“IASB”).

Basis of preparation

The consolidated financial statements have been prepared on a going concern basis and in accordance with the historical cost convention,
except that certain investments, derivative financial instruments and contingent consideration are stated at fair value. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Information about assets and liabilities that are measured at fair value is presented in note 29.

The Group’s significant accounting policies are set out in note 2.

Presentation currency

The consolidated financial statements are presented in US dollars (“US$”), which is the functional currency of the Company. All US dollar
amounts are rounded to the nearest thousand (“US$000”), except where stated otherwise.

Approval of the consolidated financial statements

The consolidated financial statements for the year ended 31 December 2018 were authorised for issue by the Board of Directors
on 6 March 2019.

Company financial statements

Separate financial statements for the Company are set out on pages 149 to 155.

Reclassification of certain product development costs

With effect from 1 January 2018, we reclassified within the consolidated statement of income the amortisation of capitalised development
costs, the amortisation of acquired technology-based intangible assets and royalties payable for the use of intellectual property in our
product development activities. Previously, we included these costs within cost of sales. We now include them within research and
development expenses.

We have made this change in order that our results are more comparable with those of our industry peers.

Comparative amounts for 2017 and 2016 have been re-presented on a consistent basis as follows:

Revenue
Cost of sales
Gross profit
Research and development expenses
Operating profit

2017

2016

As previously
reported
US$000

Effect of
reclassification
US$000

As reclassified
US$000

As previously
reported
US$000

Effect of
reclassification
US$000

As reclassified
US$000

1,352,841
(732,188)
620,653
(278,796)
187,017

–
24,217
24,217
(24,217)
–

1,352,841
(707,971)
644,870
(303,013)
187,017

1,197,611
(650,896)
546,715
(241,345)
309,807

–
19,933
19,933
(19,933)
–

1,197,611
(630,963)
566,648
(261,278)
309,807

Dialog Semiconductor PlcAnnual report and accounts 2018100

Notes to the consolidated financial statements continued

1. Background continued

Accounting standards adopted during the year

IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments
We adopted IFRS 15 and IFRS 9 with effect from 1 January 2018. We adopted IFRS 15 and the classification and measurement (including
impairment) requirements of IFRS 9 using the modified retrospective approach, whereby information presented for prior periods has not been
restated. We applied the hedge accounting requirements of IFRS 9 prospectively with effect from 1 January 2018.

An explanation of the changes introduced by IFRS 15 and IFRS 9 and their impact on the Group’s results and financial position are set out
in note 35.

On adoption of IFRS 15, the Group recognised a cumulative effect credit of US$1,541 to retained earnings. During 2018, the Group’s
revenue was US$10,137 higher and its net income US$2,619 higher than it would have been under the predecessor accounting standard,
IAS 18 Revenue.

IFRS 9 had no impact on the Group’s results or financial position.

Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
With effect from 1 January 2018, we adopted amendments to IFRS 2 Share-based Payment which, among other things, clarified the
classification of share-based payment transactions with net settlement features for withholding tax obligations. Adoption of the amendments
had no impact on the Group’s results or financial position.

Accounting standards issued but not adopted as at 31 December 2018

We outline below relevant accounting standards that have been issued by the IASB but not yet adopted by us as at 31 December 2018.

IFRS 16 Leases
IFRS 16 will change the way in which lessees recognise, measure, present and disclose leases. IFRS 16 provides a single lessee accounting
model, requiring lessees to recognise a right-of-use asset and a lease liability for all leases, except those with a short lease term and/
or involving an underlying asset of low value. In summary, for lessees, the distinction between an operating lease and a finance lease
will disappear and most operating leases will be accounted for similarly to the way in which finance leases were accounted for under
the predecessor accounting standard, IAS 17 Leases. IFRS 16 is effective for annual periods beginning on or after 1 January 2019.

We will recognise the following for each contract that is, or contains, a lease on the transition date:
U a lease liability measured at the present value of the remaining lease payments discounted at the lessee’s incremental borrowing rate; and
U a right-of-use asset measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments

that was recognised as at 31 December 2018.

We estimate that the related cumulative effect adjustments will be as follows:

Right-of-use assets
Lease liabilities
Net accrued lease payments

US$ million
66.4
(67.6)
1.2

Subsequent to the transition date, each right-of-use asset will be depreciated over the remaining lease term and will be adjusted for any
remeasurement of the lease liability. Depreciation will be recognised in profit or loss (in arriving at operating profit). Going forward, we expect
that IFRS 16 will be beneficial to operating profit to the extent that depreciation of the right-of-use assets will be lower than the rental expense
that would have been recognised under IAS 17. We expect, however, that operating profit will be only slightly higher in 2019 than it would have
been under IAS 17.

Subsequent to the transition date, each lease liability will be measured by increasing the carrying amount to reflect interest on the lease
liability and reducing the carrying amount to reflect lease payments made. Interest accrued on the lease liability will be recognised in profit
or loss (within interest expense). Lease liabilities will be remeasured to reflect certain changes in the lease payments or lease modifications.
After taking into account the interest expense on the lease liabilities, we expect that net income will be slightly lower in 2019 than it would
have been under IAS 17.

As we progress through 2019, we will show in the notes to our consolidated financial statements the effect of adopting IFRS 16 on our
quarterly and year to date results.

IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 clarifies the application of the recognition and measurement requirements of IAS 12 Income Taxes where there is uncertainty over
income tax treatments. IFRIC 23 specifically considers whether tax treatments should be considered collectively, assumptions with regard
to the examinations by tax authorities, the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax
rates and the effect of changes in facts and circumstances.

IFRIC 23 is effective for annual periods beginning on or after 1 January 2019. We already account for income taxes on a basis consistent
with IFRIC 23 and do not expect it to affect the Group’s results or financial position.

Dialog Semiconductor PlcAnnual report and accounts 2018101

1. Background continued

Definition of a Business (Amendments to IFRS 3)
In October 2018, the IASB issued amendments to IFRS 3 Business Combinations aimed at resolving the difficulties that can arise when
an entity determines whether it has acquired a business or a group of assets. In summary, the amendments clarify that to be considered a
business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly
contribute to the ability to create outputs and narrow the definition of outputs by focusing on goods and services provided to customers.

We will apply the amendments in the future if there is ambiguity as to whether we have acquired a business or a group of assets.

Subject to endorsement for use in the European Union, the amendments will be effective for business combinations with an acquisition date
on or after 1 January 2020.

Definition of Material (amendments to IAS 1 and IAS 8)
In October 2018, the IASB published amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors to clarify the definition of material in those standards and align with the definition used in the Conceptual
Framework. We do not expect that the amendments will cause us to reach a different conclusion as to whether an item is or is not material.

Subject to endorsement for use in the European Union, the amendments will be effective for annual periods beginning on
or after 1 January 2020.

2. Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the results, cash flows and assets and liabilities of the Company and its subsidiaries
and sponsored employee benefit trusts.

A subsidiary is an entity that is controlled, either directly or indirectly, by the Company.

Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the relevant activities of the entity. Generally, such power exists where the Company holds
a majority of the voting rights of an entity. When the Company holds less than a majority of the voting rights of an entity, it considers all
relevant facts and circumstances in assessing whether or not its voting rights are sufficient to give it power to direct the activities that
significantly affect its returns from the entity, including: the size of the Company’s holding of voting rights relative to the size and dispersion
of the holdings of other vote holders; potential voting rights held by the Company, other vote holders or other parties; and rights arising from
other contractual arrangements.

Details of the Company’s subsidiaries as at 31 December 2018 are set out on page 167.

Consolidation of a subsidiary commences when the Company obtains control over the subsidiary and ceases at such time as control over
the subsidiary is lost. Transactions and balances between members of the Group, and any unrealised profits or losses on such transactions,
are eliminated on consolidation.

Non-controlling interests represent the equity in a subsidiary that is not attributable, directly or indirectly, to the Company. Where the equity
in a subsidiary is not wholly-owned by the Company, the subsidiary’s profit or loss and each component of its other comprehensive income
are attributed to the Company and to the non-controlling interests in proportion to their ownership interests.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for within equity.

Business combinations

A business combination is a transaction or other event in which the Company obtains control over a business.

Business combinations are accounted for using the acquisition method.

Goodwill acquired in a business combination is recognised as an intangible asset and represents the excess of the aggregate of the
consideration transferred, including contingent consideration, and the amount of any non-controlling interests in the acquired business
over the net total of the identifiable assets and liabilities of the acquired business at the acquisition date. Any shortfall, negative goodwill,
is recognised immediately as a gain in profit or loss.

Consideration transferred represents the sum of the fair values at the acquisition date of the assets given, liabilities incurred or assumed
and equity instruments issued by the Group in exchange for control over the acquired business.

Acquisition-related costs are charged to profit or loss in the period in which they are incurred.

Identifiable assets and liabilities of the acquired business are measured at their fair value at the acquisition date, except for certain items that
are measured in accordance with the relevant Group accounting policy, such as replacement equity-settled share-based compensation
awards and deferred tax assets and liabilities.

Non-controlling interests that entitle their holders to a proportionate share of the net assets of the acquired business in the event of a
liquidation are measured either at fair value or at the non-controlling interest’s proportionate share of the identifiable assets and liabilities
of the business. Other non-controlling interests are measured at fair value.

Contingent consideration is subsequently measured at fair value unless it is classified as equity. Changes in the fair value of contingent
consideration that result from events after the acquisition date are recognised in profit or loss. Contingent consideration that is classified
as equity is not remeasured and its subsequent settlement is accounted for within equity.

Dialog Semiconductor PlcAnnual report and accounts 2018102

Notes to the consolidated financial statements continued

2. Significant accounting policies continued

Investment in associate

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in financial and
operating policy decisions but not to control or jointly control them. Significant influence generally exists where the Company holds, directly
or indirectly through one or more of its subsidiaries, more than 20% and less than 50% of the shareholders’ voting rights.

Associates are accounted for using the equity method, whereby the Group’s investment is initially recognised at cost and the carrying amount
is increased or decreased to reflect the Group’s share of the profit or loss of the associate. Losses of an associate in excess of the Group’s
interest in the entity are not recognised, except to the extent that the Group has incurred obligations or made payments on behalf
of the associate.

Foreign currency translation

Each entity within the Group has a functional currency, which is normally the currency in which the entity primarily generates and expends
cash. The functional currency of the Company and its principal subsidiaries is the US dollar.

At entity level, a foreign currency is a currency other than the entity’s functional currency. Sales, purchases and other transactions
denominated in foreign currencies are recorded in the entity’s functional currency at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the balance sheet date.
Currency translation differences arising at entity level are recognised in profit or loss.

The Group’s presentation currency is the US dollar. Foreign operations are therefore those of the Company’s subsidiaries and associates
whose functional currency is not the US dollar.

On consolidation, the results of foreign operations are translated into US dollars at the average exchange rate for the period and their assets
and liabilities are translated into US dollars at the exchange rate ruling at the balance sheet date.

Currency translation differences arising on consolidation are recognised in other comprehensive income and taken to the currency translation
reserve. In the event that a foreign operation is sold, the related cumulative currency translation difference recognised in other comprehensive
income is reclassified from equity to profit or loss and is included in calculating the gain or loss on disposal of the foreign operation.

Revenue recognition

We generate revenue principally through the sale of our products. Relatively small amounts of revenue are generated from royalties for the use
of intellectual property assets and from research and development contracts.

Sale of products
Sales of products are mostly made direct to end customers but we also sell to distributors.

Revenue from the sale of products is recognised when the customer obtains control of the products. We consider that control passes when
the products are transferred to the customer. Accordingly, where products are sold on “ex-works” incoterms, revenue is recognised when
the products are released for collection by the customer. Otherwise, revenue is recognised when the products are delivered to the customer.
Where products are supplied on a consignment basis, delivery takes place and revenue is recognised when the products are taken out of the
consignment by the customer.

Revenue recognised on the sale of products is measured at the fair value of the consideration received or receivable, excluding sales taxes
and after making allowance for rebates and product returns.

Where we sell to a distributor on “ship and debit” terms, the distributor may be entitled to a rebate if the distributor sells the product to end
customers at a price lower than the price at which the distributor purchased the products from us. Rebates are estimated using the expected
value method based on actual rebates granted at the distributor and product level during the preceding quarter so as to reflect current
pricing trends.

Prior to adopting IFRS 15, we recognised revenue from sales to distributors on ship and debit terms when the products were sold by the
distributor to end customers by which time the amount of the rebate due to the distributor was known.

Most of our distributor customers are entitled to limited rights of return, referred to as stock rotation rights. Typically, returns are allowed
twice-yearly for a credit of up to a percentage of the value of products shipped by us to the distributor during the preceding six-month period.
Revenue on sales to distributors is recognised after making allowance for stock rotation claims that is estimated based on stock rotation
credits granted at the distributor level during the preceding six-month period.

As permitted by IFRS 15, we do not capitalise the incremental costs of obtaining contracts (such as sales representatives’ commissions)
because the amortisation period of such costs would be one year or less.

Royalties
Revenue from royalties is recognised on an accruals basis in accordance with the terms of the relevant licensing agreements.

Research and development contracts
Revenue from research and development contracts is recognised by reference to the stage of completion of the contract, which is
represented by the costs incurred for work performed to date as a percentage of the estimated total contract costs. If it is probable that
a contract will be loss making, the expected loss is recognised immediately as an expense in profit or loss.

Dialog Semiconductor PlcAnnual report and accounts 2018103

2. Significant accounting policies continued

Research and development expenditure

All research expenditure is expensed as it is incurred.

Development expenditure is also expensed as it is incurred until such time as it can be demonstrated that the product is both technically
feasible and commercially viable and that management intends to complete the development of the product and sell it to customers.
Development expenditure incurred after that time and before the developed product is available to be put into full production is capitalised.
Generally, development expenditure is expensed until relatively late in the development process when prototypes are available for quality
and other tests.

Government grants

Government grants are not recognised until there is reasonable assurance that Dialog will comply with the conditions attaching to them and
that the grants will be received.

A grant that is receivable as compensation for expenses incurred is recognised in profit or loss in the period in which it becomes receivable
and is deducted from the related expense. A grant whose primary condition is that Dialog should purchase, construct or otherwise acquire
a non-current asset is recognised as deferred revenue and transferred to profit or loss on a straight-line basis over the useful life of the
related asset.

Goodwill

Goodwill acquired in a business combination is carried at cost as established at the acquisition date, less impairment losses, if any.

Internally generated goodwill is not recognised as an asset.

Other intangible assets

Other intangible assets comprise identifiable intangibles acquired in business combinations (principally customer-related assets and
developed technology), licences, computer software, patents and product development costs.

Other intangible assets held by the Group have finite useful lives and are therefore carried at cost less accumulated amortisation and
impairment losses, if any. Cost comprises the purchase price of the asset (including non-refundable purchase taxes) and any costs directly
attributable to preparing the asset for its intended use, or, in the case of an asset acquired in a business combination, is its fair value at the
acquisition date.

Other intangible assets are amortised on a straight-line basis so as to charge their cost to profit or loss over their estimated useful lives
as follows:

Customer-related assets
Software, licences and other
Patents
Product development assets

Useful life
1 to 15 years
3 to 10 years
10 years
1 to 10 years

Patents are typically granted for a period of 20 years but they are amortised over the period during which the Group expects to benefit
from them, which is typically ten years.

Estimated useful lives are regularly reviewed and the effect of any change in estimate is accounted for on a prospective basis.

Property, plant and equipment

Property, plant and equipment is carried at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase
price of the asset (including non-refundable purchase taxes) and any costs directly attributable to bringing the asset to the location and
condition necessary to enable its intended use, or, in the case of an asset acquired in a business combination, is its fair value at the acquisition
date. Leasehold improvements include the estimated cost of any obligation to restore the leased property to its original condition at the end
of the lease.

Costs of replacing a significant part of an asset are included in the cost of the asset but routine repairs and maintenance costs are recognised
in profit or loss when they are incurred.

Items of property, plant and equipment are depreciated on a straight-line basis so as to charge their cost, less their estimated residual value,
if any, to profit or loss over their estimated useful lives as follows:

Test equipment
Leasehold improvements
Office and other equipment
Office furniture and fittings

Useful life
3 to 7 years
Shorter of useful life or lease term
1.5 to 5 years
5 to 15 years

Estimated residual values and useful lives are regularly reviewed and the effect of any change in estimate is accounted for
on a prospective basis.

Assets that are under construction and not ready for their intended use are not depreciated.

Dialog Semiconductor PlcAnnual report and accounts 2018104

Notes to the consolidated financial statements continued

2. Significant accounting policies continued

Impairment of tangible and intangible assets

Goodwill, other intangible assets and property, plant and equipment are tested for impairment whenever events or circumstances indicate
that their carrying amounts may not be recoverable. Additionally, goodwill and intangible assets still under development are subject to
an annual impairment test.

An asset is impaired to the extent that its carrying amount exceeds its recoverable amount. An asset’s recoverable amount represents
the higher of the asset’s value in use and its fair value less costs to sell. An asset’s value in use represents the present value of the future
cash flows expected to be derived from the asset in its current use and condition. Fair value less cost to sell is the amount expected to
be obtainable from the sale of the asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount is determined for the cash-
generating unit (“CGU”) to which the asset belongs. An asset’s CGU is the smallest group of assets that includes the asset and generates
cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill does not generate cash flows
independently of other assets and is, therefore, tested for impairment at the level of the CGU or group of CGUs that are expected to benefit
from the synergies of the related business combination.

Value in use is based on estimates of pre-tax cash flows in the periods covered by budgets and/or plans that have been approved by the
Board. Such cash flow estimates are discounted at a pre-tax discount rate that reflects the risks specific to the asset or the CGU or group
of CGUs to which the asset belongs.

Impairment losses are recognised in profit or loss.

Impairment losses recognised in previous periods for assets other than goodwill are reversed if there has been a change in the estimates used
to determine the asset’s recoverable amount, but only to the extent that the carrying amount of the asset does not exceed its carrying amount
had no impairment been recognised in previous periods. Impairment losses in respect of goodwill are not reversed.

Financial instruments

(a) Trade and other receivables
Trade receivables represent the invoiced amount of sales of goods to customers for which payment has not been received, less an allowance
for doubtful accounts. As permitted by IFRS 9, we recognise an allowance for credit losses in respect of trade receivables from initial
recognition measured as the amount of the lifetime expected credit losses. Prior to adopting IFRS 9, we recognised a credit loss allowance
only when there was objective evidence that we may not be able to collect the amount due.

When a trade receivable is determined to be uncollectable it is written off, firstly against any allowance made and then directly to profit or loss.
Subsequent recoveries are credited to profit or loss.

Trade receivables sold under receivables financing facilities are derecognised from the balance sheet because the financial institutions
concerned assume the credit risk associated with them. Retentions held by the financial institutions are recognised as other receivables.

(b) Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, cash available on demand from receivables financing facilities, investments in
money market funds and short-term deposits with an original maturity of three months or less.

Interest income on cash and cash equivalents is accrued on a time basis.

We normally recognise an allowance for credit losses in respect of cash and cash equivalents that is measured as the amount of expected
credit losses over the next 12 months. If, however, the risk of default has increased significantly since initial recognition, we measure the
allowance as the amount of lifetime credit losses. Prior to adopting IFRS 9, we recognised a credit loss allowance only when there was
objective evidence of default.

(c) Equity investments
Equity investments are initially measured at fair value plus transaction costs, if any. Equity investments are subsequently measured at fair
value with resulting gains and losses recognised in profit or loss unless we irrevocably elect for such gains and losses to be recognised in
other comprehensive income. On adoption of IFRS 9, we made this election in respect of our strategic investment in the common shares of
Energous Corporation. Consequently, fair value gains or losses arising subsequent to 1 January 2018 that may be realised on any future sale
of all or part of this investment will not be reclassified to profit or loss.

Prior to adopting IFRS 9, equity investments were classified as available-for-sale investments.

(d) Trade and other payables
Trade payables represent the amount of invoices received from suppliers for purchases of goods and services for which payment has not
been made. Long-term payables are discounted where the effect is material.

(e) Bank and other loans
Bank and other loans are initially measured at fair value plus transaction costs, if any. Such loans are subsequently measured at amortised
cost using the effective interest method.

(f) Derivative financial instruments
We use derivative financial instruments to reduce the Group’s exposure to currency exchange rate movements and hold equity options and
warrants in relation to certain of its strategic investments. We do not hold or issue derivatives for speculative purposes.

All derivative financial instruments are recognised as assets and liabilities measured at fair value. Unless a derivative is in a designated and
effective cash flow hedging relationship, all fair value gains and losses are recognised in profit or loss. Where the fair value of a derivative
on initial recognition differs from the transaction price, if any, the difference is recognised immediately in profit or loss only if the fair value
is evidenced by a quoted price in an active market or is based on a valuation technique that uses only data from observable markets.

Dialog Semiconductor PlcAnnual report and accounts 2018105

2. Significant accounting policies continued

(g) Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet where there is a currently enforceable
legal right to offset the recognised amounts and management intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.

Inventories

Inventories comprise raw materials, work in progress and finished goods.

Inventories are stated at the lower of cost and net realisable value, with due allowance for any excess, defective or obsolete items.

Cost is determined using the first-in, first-out (“FIFO”) method. Cost of finished goods and work in progress includes materials, direct labour,
other direct costs and related production overheads. Net realisable value is the estimated selling price, less estimated costs of completion
and estimated selling, marketing and distribution costs.

Assets classified as held for sale

An asset or group of assets is classified as held for sale if its carrying amount will be recovered by sale rather than by continuing use in the
business, it is available for immediate sale in its present condition and management has committed to, and has initiated, a plan to sell the asset
which, when initiated, was expected to result in a completed sale within 12 months. Assets that are classified as held for sale are measured at
the lower of their carrying amount when classified as held for sale and fair value less costs to sell.

Leases

Leases that confer rights and obligations similar to those that attach to owned assets are classified as finance leases. All other leases are
classified as operating leases.

Assets held under finance leases are recognised as assets within property, plant and equipment, initially measured at the fair value of the
leased asset or, if lower, the present value of the minimum lease payments, and a corresponding liability is recognised. Subsequently, the
assets are depreciated over the shorter of the expected useful life of the asset or the term of the lease. At inception of the lease, the lease
payments are apportioned between a capital element and an interest element so as to achieve a constant periodic rate of interest on the
outstanding liability. Subsequently, the interest element is recognised as an expense in profit or loss while the capital element is applied to
reduce the outstanding liability.

Operating lease payments, net of any incentives receivable, are recognised in profit or loss on a straight-line basis over the term of the lease.

Hedge accounting

The Group uses forward currency contracts to hedge its exposure to exchange rate movements on forecast operating expenses denominated
in foreign currencies, principally the Euro and the pound sterling. Where possible, these contracts are designated as hedging instruments in
cash flow hedge relationships. Changes in the fair value of such hedging instruments are recognised in other comprehensive income to the
extent that the hedges are effective. Ineffective portions are recognised in profit or loss immediately. Cumulative fair value gains and losses
recognised in other comprehensive income are reclassified from equity to profit or loss when the forecast cash flow occurs.

All hedging relationships designated under IAS 39 as at 31 December 2017 met the criteria for hedge accounting under IFRS 9 as at
1 January 2018 and were therefore regarded as continuing hedging relationships.

Hedge accounting is discontinued if we revoke the hedge relationship, when the hedging instrument expires or is sold, terminated or
exercised, or when it no longer qualifies for hedge accounting. If the hedging instrument expires or is sold, terminated or exercised, or if the
hedge relationship no longer meets the conditions for hedge accounting, the cumulative fair value gain or loss remains in equity until the
forecast cash flow occurs. If the hedged forecast cash flow is no longer expected to occur, the cumulative fair value gain or loss is reclassified
from equity to profit or loss immediately.

Income taxes

Current tax is the amount of tax payable or recoverable in respect of the taxable profit or loss for the period. Taxable profit differs from
accounting profit because it excludes income or expenses that are recognised in the period for accounting purposes but are either not taxable
or not deductible for tax purposes or are taxable or deductible in earlier or subsequent periods. Current tax is calculated using tax rates and
laws that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is tax expected to be payable or recoverable on temporary differences between the carrying amount of an asset or liability in the
financial statements and its tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable
that taxable profits will be available in the future against which they can be utilised.

Deferred tax assets and liabilities are not recognised in respect of temporary differences arising from the initial recognition of goodwill or from
the initial recognition of other assets or liabilities in a transaction other than a business combination that affects neither accounting profit nor
taxable profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where we are able
to control the reversal of the temporary difference and it is probable that it will not reverse in the foreseeable future.

Deferred tax assets and liabilities are measured using the tax rates that are expected to apply when the asset is realised or the liability
is settled, based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date.

Dialog Semiconductor PlcAnnual report and accounts 2018106

Notes to the consolidated financial statements continued

2. Significant accounting policies continued

Income taxes continued

Where there is uncertainty concerning the tax treatment of an item or group of items, the amount of current and deferred tax recognised
is based on management’s expectation of the likely outcome of the examination of the uncertain tax treatment by the relevant tax
authorities. Uncertain tax treatments are reviewed regularly and current and deferred tax amounts are adjusted to reflect changes in facts
and circumstances, such as the expiry of limitation periods for assessing tax, administrative guidance given by the tax authorities and
court decisions.

Current tax assets and liabilities are offset when there is a legally enforceable right to set off the amounts and management intends to settle on
a net basis. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

Current tax and deferred tax is recognised in profit or loss unless it relates to an item that is recognised in the same or a different period
outside profit or loss, in which case the related tax is also recognised outside profit or loss, either in other comprehensive income or directly
in equity.

Provisions

Provisions for product warranty claims are established based on historical trends of warranty costs as a percentage of sales.

Dilapidation provisions are established for the cost of restoring leasehold property to its original condition at the end of the lease.
Provisions are also established for surplus leasehold property or otherwise onerous property leases.

Defined contribution pension plans

Contributions to defined contribution and state-funded pension plans are recognised in profit or loss in the period to which the
contributions relate.

Share-based compensation

As described in note 29, the Company operates share-based compensation plans under which it grants options and other awards over
its ordinary shares to employees of its subsidiaries. Awards granted under the existing plans are classified as equity-settled awards.
We recognise a compensation expense that is based on the fair value of the awards measured at the grant date using the Black-Scholes
option pricing formula or a Monte Carlo valuation model. Fair value is not subsequently remeasured unless relevant conditions attaching
to the awards are modified.

Fair value reflects any market performance conditions and all non-vesting conditions. Adjustments are made to the compensation expense
to reflect actual and expected forfeitures due to failure to satisfy service conditions or non-market performance conditions.

We recognise the resulting compensation expense on a systematic basis over the vesting period and a corresponding credit is recognised in
equity. In the event of the cancellation of an option or an award by the Company or by the participating employee, the compensation expense
that would have been recognised over the remainder of the vesting period is recognised immediately in profit or loss.

Payroll taxes are payable in the UK and in certain other jurisdictions on the exercise or vesting of awards. Provision is made for such taxes
based on the intrinsic value of the relevant awards at the balance sheet date so as to accrue for the taxes payable over the vesting period
of the awards.

Shares held by employee benefit trusts

The Group provides finance to two trusts to purchase the Company’s ordinary shares in order to meet its obligations under its share-based
compensation plans. When the trusts purchase such shares, the cost of the shares is debited to equity and subsequent sales or transfers
of the shares by the trusts are accounted for within equity.

Treasury shares

Treasury shares comprise the Company’s ordinary shares that have been purchased under the Company’s share buyback programme and
have not been subsequently sold, transferred or cancelled. Purchases made under the programme are off market and are effected by way of
contingent forward share purchase contracts with third-party brokers. On inception of each tranche, a liability is recognised for the maximum
cost of the shares to be purchased under the tranche and there is a corresponding debit to retained earnings. On intermediate and final
settlement of purchases with the broker, the cost of the shares purchased is credited to retained earnings and debited to treasury shares
within equity. On final settlement, any remaining balance of the liability is credited back to retained earnings.

Subsequent sales, transfers or cancellations of treasury shares by the Company are accounted for within equity.

Dialog Semiconductor PlcAnnual report and accounts 2018107

2. Significant accounting policies continued

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements requires management to make judgements and estimates that affect the reported amount of assets
and liabilities at the date of the financial statements and the reported amount of income and expenses during the reporting period.

(a) Critical judgements in applying accounting policies
Critical judgements are the judgements, apart from those involving estimations, that management has made that have had the most significant
effect on amounts included in the consolidated financial statements.

Product development costs
Product development costs are capitalised from the time when the technical feasibility and commercial viability of the product can be
demonstrated. Management is therefore required to make judgements about the technical feasibility of the product based on engineering
studies and the commercial viability of the product based on expectations concerning the marketability of the product, the product’s useful life
and the extent of future demand from customers.

Uncertain tax treatments
Uncertainty may exist concerning the tax treatment of a specific item or group of items because of, for example, uncertainty as to the meaning
of tax law or to the applicability of tax law to a particular transaction or circumstance, the determination of appropriate arm’s length pricing in
accordance with OECD transfer pricing principles or because the amount of current and deferred tax depends on the results of an ongoing
or future examination of previously filed tax returns by the tax authorities.

Where such an uncertainty exists, management is required to exercise its judgement in forming its expectation as to the likely outcome
of the examination of the uncertain tax treatment by the relevant tax authorities. Due to the complexity of tax laws and their interpretation,
the amount ultimately agreed with the tax authorities may differ materially from the amount of current and deferred tax recognised in the
consolidated financial statements. Accordingly, the resolution of uncertain tax treatments in future periods may give rise to adjustments
to the amounts of current and deferred tax assets and liabilities that may have a material consequential effect on the income tax expense
recognised in future periods.

(b) Key sources of estimation uncertainty
Key sources of estimation uncertainty are those that have a significant risk of resulting in a material adjustment to the carrying amount
of assets and liabilities within the next financial year.

Management considers that there are no key sources of estimation uncertainty underlying the measurement of the carrying amount
of assets and liabilities recognised as at 31 December 2018.

3. Business combinations

Year ended 31 December 2018

Consideration payable for Silego Technology Inc.
Purchase price adjustment
During 2018, we paid a purchase price adjustment of US$692 following the agreement with the vendors of Silego’s cash, debt and working
capital levels on completion.

Deferred consideration
On completion of the acquisition, unvested employee options were converted into deferred cash rights and the fair value of those rights was
apportioned between a deferred consideration element and a future compensation element. During 2018, we paid US$2,788 in settlement
of vested deferred consideration and recognised a credit of US$204 to profit or loss in respect of forfeitures. As at 31 December 2018,
we recognised a liability of US$3,173 in relation to the remaining deferred consideration that is expected to be payable over the period
to March 2021.

Contingent consideration
Contingent consideration of up to US$30,400 was payable for the acquisition of Silego in two instalments based on Silego’s revenue for 2017
and 2018.

Silego’s actual revenue for 2017 confirmed that the first instalment of US$10,000 was payable in full. In February 2018, we paid US$9,360 in
settlement of the amount attributable to the shares and vested options acquired and attributed the balance of the first instalment of US$640
to the deferred cash rights.

Silego’s actual revenue for 2018 showed that US$17,874 was payable in settlement of the second instalment. Since Silego’s actual revenue
for 2018 was lower than our initial estimate, we recognised a credit of US$878 to profit or loss on remeasurement of the fair value of the
contingent consideration. As at 31 December 2018, we recognised a liability of US$16,414 (net of discounting of US$316) for the second
instalment of the contingent consideration attributable to the shares and vested options acquired and attributed the balance of the second
instalment of US$1,144 to the deferred cash rights.

In February 2019, we paid US$16,730 in settlement of the amount of the second instalment attributable to the shares and vested
options acquired.

Dialog Semiconductor PlcAnnual report and accounts 2018108

Notes to the consolidated financial statements continued

3. Business combinations continued

Year ended 31 December 2017

Acquisition of Silego Technology Inc.
On 1 November 2017, we completed the acquisition of 100% of the voting equity interests in Silego Technology Inc. (“Silego”), the leading
provider of Configurable Mixed-Signal ICs (“CMICs”).

Silego’s CMICs integrate multiple analog, logic and discrete component functionalities into a single chip. Silego’s intuitive CMIC software
interface allows customers to easily configure these functions and prototype a custom IC within hours and offers considerable flexibility
in design. Silego’s technology enables manufacturers to reduce board space, simplify their supply chain and reduce time-to-market.
Our acquisition of Silego will complement our business by increasing our content at existing customers and expanding our customer
base. Silego’s broad product portfolio will strengthen our presence in a number of markets, including the IoT, computing, industrial and
automotive markets.

We acquired Silego for US$276,000 on a cash and debt-free basis, subject to adjustments for cash, debt and working capital.
Additional consideration of up to US$30,400 was payable contingent on Silego’s revenues for 2017 and 2018.

We acquired all of Silego’s outstanding common and preferred shares, all “in the money” vested, outstanding, unexercised employee options
over common shares and all “in the money” outstanding preferred share warrants. On completion, we paid initial consideration of US$290,508
in cash, including US$22,527 in respect of Silego’s estimated cash, debt and working capital levels on completion. We estimated that we
would pay a purchase price adjustment of US$692 reflecting Silego’s actual cash, debt and working capital levels on completion.

We paid US$34,500 of the initial consideration into an escrow fund that was available to settle any valid claims that we may have made in
relation to the representations, warranties and indemnities that were provided to us by the sellers.

On completion, all “in the money” outstanding, unvested employee options over common shares were converted into and became the
right to receive cash payments comprising a pro rata share of the initial purchase price less their respective exercise prices, purchase price
adjustments and any payments of contingent consideration. Such rights are subject to the vesting schedule and other terms (including
a service condition) that governed the options that they replaced. We estimated that the acquisition date fair value of the rights was
US$11,545, of which US$6,655 was attributable to employee service rendered before the acquisition date and therefore represents deferred
consideration. We are recognising the balance of US$4,890, less an allowance for expected and actual forfeitures, as compensation expense
on a straight-line basis over the remaining vesting period of the rights.

In November 2017, we paid US$371 in relation to the accelerated vesting of the deferred cash rights in accordance with employee change of
control arrangements.

Contingent consideration was payable in two instalments: the first instalment of up to US$10,000 was payable in March 2018 based on
Silego’s revenue for 2017 and the second instalment of up to US$20,400 was payable in March 2019 based on Silego’s revenue for 2018.
At the acquisition date, we expected that the first instalment would accrue in full and that the amount of the second instalment would be in
the range US$11,652 to US$20,400. Using the expected value method, we estimated that the acquisition date fair value of the contingent
consideration attributable to the shares and vested options acquired was US$23,273 (net of discounting of US$2,974).

Dialog Semiconductor PlcAnnual report and accounts 20183. Business combinations continued

Assets acquired and liabilities assumed

We allocated the purchase consideration to the identifiable assets and liabilities of Silego and goodwill as follows:

Assets acquired
Cash and cash equivalents
Trade and other receivables
Inventories
Intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Total assets acquired
Liabilities assumed
Trade and other payables
Other current liabilities
Provisions
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net identifiable assets acquired
Goodwill arising on acquisition
Consideration

Purchase consideration was satisfied by:
Cash paid on completion
Purchase price adjustment
Initial consideration
Deferred consideration
Contingent consideration

Consideration

109

US$000

32,439
9,957
13,866
122,156
1,481
12,907
1,484
194,290

15,586
5,794
157
41,484
906
63,927
130,363
190,765
321,128

290,508
692
291,200
6,655
23,273

321,128

Trade and other receivables were expected to be collected at their gross contractual amounts.

Identifiable intangible assets acquired comprised customer relationships, developed technology and know-how and the GreenPAK™
trade name.

Deferred tax assets recognised mainly represented tax loss carryforwards.

Goodwill recognised on the acquisition of Silego is attributable to the further development of technology and know-how by the business
in the future, the assembled workforce and future sales to new customers for its products.

None of the goodwill is deductible for tax purposes.

During 2017, Silego contributed US$11,391 to the Group’s revenue and a loss after tax of US$3,575. If Silego had been acquired
on 1 January 2017, the Group’s revenue would have been US$72,942 higher at US$1,425,783 but it is not practicable to estimate what
the Group’s profit after tax would have been because Silego did not previously prepare financial information in accordance with IFRS.

We incurred transaction costs of US$4,439 in relation to the acquisition of Silego (included within general and administrative expenses).

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

3. Business combinations continued

LED backlight business
On 15 November 2017, we purchased ams AG’s LED backlight technology and product portfolio for US$9,500 in cash. As part of the
transaction, we also acquired related intellectual property rights.

Assets acquired

We allocated the purchase consideration to the identifiable assets of the business and goodwill as follows:

Assets acquired
Inventories
Intangible assets
Total identifiable assets acquired
Goodwill arising on acquisition
Consideration

110

US$000

234
5,400
5,634
3,866
9,500

Identifiable intangible assets acquired comprised customer relationships and developed technology.

None of the goodwill is deductible for tax purposes.

We incurred transaction costs of US$100 in relation to the acquisition of this business (included in general and administrative expenses).

Year ended 31 December 2016

Aborted merger with Atmel Corporation
In January 2016, Atmel Corporation (“Atmel”) terminated the merger agreement that existed with Dialog. Under the terms of the agreement,
Atmel paid us a termination fee of US$137,300. We recognised the termination fee as other operating income during 2016.

Also during 2016, we incurred residual transaction costs of US$3,485 (recognised within general and administrative expenses) and
commitment fees of US$1,913 on the borrowing facility that was arranged to finance the transaction prior to the cancellation of the facility
in January 2016 (recognised within interest expense).

Dyna Image Corporation
In June 2016, Dialog paid the equivalent of US$647 as deferred consideration in relation to its initial investment in Dyna Image Corporation
(“Dyna Image”).

Years ended 31 December 2018, 2017 and 2016

Net cash outflow on the purchase of businesses was as follows:

Initial consideration
Purchase price adjustment
Deferred consideration
Consideration paid
Cash and cash equivalents acquired
Cash outflow on purchase of businesses, net of cash acquired

2018
US$000
–
692
2,788
3,480
–
3,480

2017
US$000
300,008
–
371
300,379
(32,439)
267,940

2016
US$000
–
–
647
647
–
647

Contingent consideration of US$9,360 paid during 2018 in relation to the acquisition of Silego was below our initial estimate and is shown
separately within cash flows from investing activities.

Dialog Semiconductor PlcAnnual report and accounts 2018111

4. Deconsolidation of Dyna Image Corporation

We acquired a 45.7% interest in Dyna Image Corporation (“Dyna Image”) in June 2015. We accounted for the investment as a business
combination because we were granted a call option to acquire the shares that we did not already own in Dyna Image that we considered
gave us the power to direct the activities of the entity that will significantly affect its returns.

Subsequent to our initial investment, Dyna Image suffered quality problems that resulted in the loss of a major customer and gave rise
to sustained operating losses. By the end of 2016, Dyna Image was in need of additional funding to enable it to pursue its recovery plan.
We agreed with our fellow shareholders to seek a new investor in the business and, in the meantime, that certain of the existing shareholders
would inject new capital into the business.

In January 2017, we participated in a new issue of shares by Dyna Image. We invested the equivalent of US$1,893. As a result of the share
issue, our shareholding in Dyna Image increased from 45.7% to 48.5%. We reflected the increase in our shareholding as a transfer of US$361
within equity from non-controlling interests to retained earnings.

During 2017, Dyna Image continued to seek new investment but its operating results fell considerably short of the level envisaged in its
recovery plan. In December 2017, negotiations with a potential investor were terminated and the shareholders in Dyna Image decided that it
should be gradually wound down in a way that will safeguard the interests of its creditors.

As a consequence of this decision, we recognised impairment losses totalling US$4,327 in relation to the intangible assets and property, plant
and equipment held by Dyna Image (within other operating expenses). We also derecognised deferred tax assets of US$543 that were no
longer considered to be recoverable. We did not consider that the carrying amount of the goodwill attributable to Dyna Image was impaired
because it was covered by the recoverable amounts of the operating segments to which it had been allocated on acquisition.

We also reviewed the call option over the non-controlling interests in Dyna Image. We observed that the fair value of each share in Dyna
Image has fallen significantly and irretrievably below the minimum exercise price of the option. We concluded that there existed an economic
barrier to our exercising the option prior to its expiry in June 2018 that was so great that the option no longer gives us power over Dyna
Image. We considered that this loss of control occurred during December 2017 and therefore we deconsolidated Dyna Image with effect
from 31 December 2017.

At the end of 2017, we recognised a loss of US$5,597 on the deconsolidation of Dyna Image that was determined as follows:

Assets derecognised
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Goodwill
Total assets derecognised
Liabilities derecognised
Trade and other payables
Other current liabilities
Total liabilities derecognised
Net assets derecognised
Currency translation gain transferred from equity
Non-controlling interests
Fair value of remaining interest
Loss on deconsolidation

We included the loss on deconsolidation of Dyna Image within other operating expenses.

US$000

420
1,428
3,542
426
6,907
12,723

2,958
590
3,548
9,175
(1,144)
(1,334)
(1,100)
5,597

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

112

5. Operating profit

a) Revenue

Revenue may be analysed as follows:

Sale of goods
– Sales direct to end customers
– Sales to distributors
Royalties
Total

2018
US$000

2017
US$000

2016
US$000

1,144,371
296,598
1,169
1,442,138

1,156,451
195,364
1,026
1,352,841

1,023,465
173,063
1,083
1,197,611

Revenue from research and development contracts is included in other operating income.

b) Operating expenses

Operating profit is stated after charging/(crediting):

Cost of inventories included in cost of sales
Write-down of inventories
Research and development costs expensed as incurred
Government incentives (deducted from research and development expenses)
Depreciation of property, plant and equipment
Loss on disposal of fixed assets
Amortisation of intangible assets
Operating lease rentals
Integration costs
Acquisition-related costs
Corporate transaction costs

Amortisation of intangible assets was allocated as follows:

Cost of sales
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Total

2018
US$000
702,078
5,643
331,550
(5,241)
31,455
923
49,130
12,450
2,765
–
11,346

2018
US$000
592
14,231
2,348
31,959
49,130

* Certain product development costs have been reclassified from cost of sales to research and development expenses (see note 1).

c) Other operating income/(expense)

Other operating income/(expense) comprised:

Revenue from research and development contracts
Change in estimate of contingent consideration
Impairment of non-current assets held by Dyna Image (notes 15 & 16)
Loss on deconsolidation of Dyna Image (note 4)
Atmel termination fee (note 3)
Total

2018
US$000
2,298
878
–
–
–
3,176

2017*
US$000
663,216
1,288
310,201
(7,188)
30,807
591
41,969
10,153
2,305
4,539
–

2017*
US$000
701
9,126
2,170
29,972
41,969

2017
US$000
346
–
(4,327)
(5,597)
–
(9,578)

2016*
US$000
592,527
4,375
268,367
(7,089)
27,868
1,569
35,949
9,797
–
–
3,485

2016*
US$000
892
7,779
2,018
25,260
35,949

2016
US$000
408
–
–
–
137,300
137,708

Dialog Semiconductor PlcAnnual report and accounts 20186. Employee information

Employment costs were as follows:

Wages and salaries
Social security costs
Share-based compensation
Compensation element of deferred cash rights
Pension costs from defined contribution plans
Total

113

2018
US$000
224,908
31,051
41,153
1,481
12,609
311,202

2017
US$000
200,222
26,457
35,319
1,409
11,058
274,465

2016
US$000
167,090
24,932
28,167
–
10,154
230,343

Pension costs from defined contribution plans include costs for the state funded pension plan in Germany of US$3,853 (2017: US$3,599;
2016: US$3,400).

Compensation of key management personnel is set out in note 34.

The average number of persons employed by the Group (including the Executive Director) during the year, analysed by category,
was as follows:

Research and development
Production
Sales and marketing
Administration
Information technology
Total

7. Auditor’s remuneration

Fees payable to the Company’s auditors, Deloitte LLP, were as follows:

Assurance services
Audit of the parent company and consolidated financial statements
Audit of subsidiaries
Other assurance services
Other services
Services related to corporate finance transactions
Total

2018
1,371
184
272
200
59
2,086

2017
1,256
172
239
185
55
1,907

2016
1,130
176
235
167
46
1,753

2018
US$000

2017
US$000

2016
US$000

629
423
150

–
1,202

560
370
202

478
1,610

280
320
244

–
844

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

114

8. Finance income/(expense)

a) Interest income

Interest on bank deposits
Interest on money market funds
Other interest income
Total

b) Interest expense

Interest on receivables financing facilities
Interest on finance leases and hire purchase contracts
Facility commitment fees
Amortisation of deferred facility arrangement costs
Unwinding of discount on contingent consideration (note 3)
Unwinding of discount on provisions (note 23)
Other interest expense

Total

2018
US$000
5,619
4,189
75
9,883

2018
US$000
–
(50)
(452)
(315)
(2,220)
(70)
(27)

(3,134)

2017
US$000
3,556
2,423
16
5,995

2017
US$000
–
(289)
(194)
(151)
(436)
(60)
(172)

(1,302)

2016
US$000
3,073
584
8
3,665

2016
US$000
(850)
(560)
(1,913)
–
–
(110)
(14)

(3,447)

During 2017, we incurred arrangement costs of US$988 in relation to the Group’s US$150 million revolving credit facility and are amortising
those costs over the initial three-year period to maturity of the facility in July 2020.

Facility commitment fees incurred during 2016 related to the borrowing facility that was arranged to finance the proposed merger with Atmel
prior to the cancellation of the facility in January 2016.

c) Other finance (expense)/income

Currency translation (loss)/gain, net
Fair value (loss)/gain on Energous warrants (note 17)
Amortisation of gain on initial measurement of Energous warrants (note 17)
Loss on sale of Arctic Sand shares
Fair value loss on Dyna call option
Total

2018
US$000
(994)
(10,853)
1,584
–
–
(10,263)

2017
US$000
1,695
941
776
(177)
(142)
3,093

2016
US$000
(6,017)
1,929
–
–
(731)
(4,819)

Dialog Semiconductor PlcAnnual report and accounts 2018115

9. Income taxes

Income tax recognised in profit or loss

The components of the Group’s income tax expense for the year were as follows:

Current tax
United Kingdom
Foreign
Deferred tax
United Kingdom
Foreign
Income tax expense

Current tax
Current income tax charge
Adjustments in respect of prior years
Deferred tax
Origination and reversal of temporary differences
Recognition of previously unrecognised deferred tax assets
Movement in deferred tax balances following intra-group reorganisation
Movement in deferred tax balances following US tax rate change
Adjustments in respect of prior years

Income tax expense

2018
US$000

2017
US$000

2016
US$000

(15,896)
(33,633)

(321)
(5,431)
(55,281)

379
(33,884)

1,315
6,821
(25,369)

(10,171)
(36,127)

(549)
(243)
(47,090)

2018
US$000

2017
US$000

2016
US$000

(45,587)
(3,942)

(38,643)
5,138

(46,993)
695

(4,663)
–
(1,920)
–
831

(6,353)
9,655
1,977
6,658
(3,801)

(3,922)
–
808
–
2,322

(55,281)

(25,369)

(47,090)

During 2014, we recognised a non-cash deferred tax credit of US$17,759 resulting from an intra-group reorganisation of certain Intellectual
Property that was acquired with iWatt, Inc., which reduced the amount of the related deferred tax liabilities. We recognised further deferred
tax credits of US$808 in 2016 and US$1,977 in 2017 and a deferred tax charge of US$1,920 in 2018 that related to the ongoing impact of the
reorganisation on the deferred tax balances.

Dialog Semiconductor PlcAnnual report and accounts 2018116

Notes to the consolidated financial statements continued

9. Income taxes continued

Factors affecting the income tax expense for the year

The Group’s income tax expense differed from the amount that would have resulted from applying the statutory rate of corporation tax in the
UK to the Group’s profit before income taxes for the reasons shown in the following table:

Profit before income taxes
Income tax expense at UK corporation tax rate of 19.0% (2017: 19.25%; 2016: 20.0%)
Effect of different foreign tax rates
Non-taxable income:
– Atmel termination fee
– Other non-taxable income
Non-deductible expenses:
– Transaction costs
– Non-deductible portion of share-based compensation
– Other non-deductible expenses
Tax benefit from share-based compensation
Tax impact of deconsolidation of Dyna Image Corporation
Tax benefit from Intellectual Property and research and development incentives
Write-down of previously recognised deferred tax assets
Benefit from previously unrecognised deferred tax assets
Additional tax losses for which no deferred tax asset is recognised
Movement in deferred tax balances following intra-group reorganisation
Differences arising from different functional and tax currencies
Tax benefit from US tax rate change
Adjustments in respect of prior years
Other items

2018
US$000
196,193
(37,277)
(6,656)

2017
US$000
194,803
(37,500)
(12,569)

2016
US$000
305,206
(61,041)
(15,434)

–
39

(1,131)
(9,336)
(3,232)
1,997
–
8,633
(1,015)
70
(117)
(1,920)
(2,065)
–
(3,111)
(160)

–
–

27,460
240

–
(9,396)
(2,764)
3,658
(1,938)
6,576
(543)
9,655
(568)
1,977
9,576
6,658
1,337
472

(697)
(7,614)
(3,068)
4,871
–
8,728
–
–
(1,321)
808
(2,976)
–
3,020
(66)

Income tax expense

(55,281)

(25,369)

(47,090)

The Group’s income tax expense for 2018 was US$55,281 (2017: US$25,369; 2016: US$47,090), an effective tax rate for the year of 28.2%
(2017: 13.0%; 2016: 15.4%).

Our effective tax rate is sensitive to the geographic mix of the Group’s profits and reflects a combination of different tax rates in different
countries, in particular higher tax rates in Germany and, in prior years, in the US. Our effective tax rate can also be affected by changes in tax
legislation and tax rates, the impact of acquisitions, disposals and restructuring and currency exchange rate movements, which give rise to tax
effects where an entity’s functional currency differs from the currency in which it is required to calculate and pay income taxes.

Our effective tax rate is reduced because a large proportion of Dialog’s research and development activities are undertaken in the UK and the
Netherlands and we are therefore able to benefit from the UK and Netherlands tax regimes that provide incentives for innovation.

Our income tax expense for 2018 includes a charge of US$2,820 (2017: credit of US$1,465) resulting from the finalisation of prior year tax
items with tax authorities.

Our low effective tax rate for 2017 reflected a non-cash deferred tax credit of US$6,658 resulting from US tax reform and a credit of
US$19,231 due to the tax effects of unpredictable currency exchange rate movements.

Our low effective tax rate for 2016 reflected the tax treatment of the Atmel termination fee of US$137,300. We obtained tax advice that the
termination fee should not be taxable in the UK. We therefore concluded that no tax liability should arise and did not recognise a tax expense
in relation to the termination fee.

Dialog Semiconductor PlcAnnual report and accounts 2018117

9. Income taxes continued

Factors affecting the income tax expense in future years

Factors that may affect the Group’s future tax expense include foreign exchange rate movements, changes in tax legislation and tax rates,
the impact of acquisitions, disposals and restructuring and the resolution of open issues with tax authorities. From 2018, the application to
Dialog of the UK tax regime that provides incentives for innovation has changed, resulting in a limit to the benefits available by reference to the
location of Dialog’s research and development activities. Given the global nature of Dialog’s research and development activities, this may also
affect the Group’s future tax expense.

On 11 October 2018, we announced that we have entered into an agreement with Apple Inc, (“Apple”) to license our power management
technologies and transfer to Apple certain assets and over 300 employees from our design centres in the UK, Germany and Italy.
The transaction is expected to complete in the first half of 2019, subject to applicable regulatory approvals and other customary closing
conditions. Completion of the transaction may affect the geographic mix of the Group’s profits and the location of its research and
development activities, both of which may have an impact on the Group’s future tax expense. We continue to review and assess the potential
impact of this transaction.

The Group maintains provisions for potential tax liabilities where uncertainty exists concerning the amount of current or deferred tax
recognised. Due to the complexity of tax laws and their interpretation, the amounts ultimately agreed with tax authorities in respect of these
uncertainties may differ materially from the amounts provided and may therefore affect the Group’s income tax expense in future periods.

International tax reform remains a key focus of attention, including the OECD’s Base Erosion & Profit Shifting project, the EU’s action plan for
fair and efficient corporate taxation and US tax reform. We continually monitor developments and assess the potential impact for Dialog of
such initiatives. We have concluded that current or announced future tax law changes as a result of such initiatives give rise to no changes
to the principal risks for Dialog.

Income tax recognised outside profit or loss

Income tax recognised in other comprehensive income was as follows:

Items that may be reclassified to profit or loss
Currency translation differences on foreign operations:
– Current tax (expense)/credit
– Deferred tax expense
Equity investments:
– Deferred tax credit/(expense)
Cash flow hedges:
– Current tax credit/(expense)
– Deferred tax expense

Income tax credited/(charged) to other comprehensive income

Income tax recognised directly in equity was as follows:

Share-based compensation:
– Current tax credit
– Deferred tax credit/(expense)

Total tax credited directly to equity

Deferred tax

Analysis of movement in the net deferred tax balance during the year:

As at 31 December 2016
Exchange movements
Recognised in income
Recognised in other comprehensive income
Recognised in equity
Acquisitions
As at 31 December 2017
Exchange movements
Recognised in income
Recognised in other comprehensive income
Recognised in equity
Transfer to current tax

As at 31 December 2018

2018
US$000

2017
US$000

2016
US$000

(78)
–

180
–

1,015

(1,015)

2,376
–

3,313

(3,149)
–

(3,984)

–
(47)

–

1,890
(1,125)

718

2018
US$000

2017
US$000

2016
US$000

281
64

345

1,859
(839)

1,020

2,544
522

3,066

US$000
25,409
319
8,136
(1,015)
(839)
(28,576)
3,434
(77)
(5,752)
1,015
64
(608)

(1,924)

Dialog Semiconductor PlcAnnual report and accounts 2018118

Notes to the consolidated financial statements continued

9. Income taxes continued

Deferred income tax assets and liabilities, before offset of balances within countries, are as follows:

Temporary differences relating to intangible assets
Temporary differences relating to share-based compensation
Temporary differences relating to licence royalties
Other temporary differences
Deferred taxes in relation to tax credits
Net operating loss carryforwards

Total

Amount (charged)/credited
to profit or loss

Net recognised deferred tax
(liability)/asset

2018
US$000
3,388
(580)
–
(1,077)
1,899
(9,382)

(5,752)

As at
31 December
2018
US$000
(23,526)
6,369
–
(473)
11,622
4,084

As at
31 December
2017
US$000
(26,585)
6,885
–
(662)
10,331
13,465

(1,924)

3,434

2017
US$000
21,102
(4,539)
3,312
4,583
1,733
(18,055)

8,136

Deferred tax assets and liabilities are analysed in the consolidated balance sheet, after offset of balances within countries, as follows:

Deferred tax assets
Deferred tax liabilities
Recognised net deferred tax (liabilities)/assets

Tax loss carryforwards, temporary differences and net deferred tax assets are summarised as follows:

As at
31 December
2018
US$000
6,034
(7,958)

As at
31 December
2017
US$000
7,451
(4,017)

(1,924)

3,434

Germany
United Kingdom
Netherlands
USA
Other

Total

As at 31 December 2018

As at 31 December 2017

Tax loss
carryforwards
US$000
–
10,016
7,269
15,459
12,649

Temporary
differences
US$000
(1,015)
13,048
960
(76,739)
4,466

Net deferred tax
(liabilities)/assets
US$000
(288)
2,173
2,014
(2,227)
(3,596)

Tax loss
carryforwards
US$000
–
10,638
13,208
48,229
13,394

45,393

(59,280)

(1,924)

85,469

Temporary
differences
US$000
4,768
7,160
(272)
(108,755)
3,574

(93,525)

Net deferred tax
assets/(liabilities)
US$000
1,353
2,125
3,234
673
(3,951)

3,434

In assessing whether the deferred tax assets can be used, management considers the probability that some, or all, of the deferred tax assets
will not be realised. The utilisation of deferred tax assets depends upon generating taxable profit during the periods in which those temporary
differences become deductible or tax-loss carryforwards can be utilised. Management considers the reversal of deferred tax liabilities,
projected future taxable income, benefits that could be realised from available tax planning strategies and other positive and negative factors
in making this assessment.

As at 31 December 2018, deferred tax assets were not recognised for tax loss carryforwards of US$27,330 (2017: US$22,726), temporary
differences of US$53 (2017: US$849) and tax credits of US$5,781 (2017: US$4,859) in respect of which there is expected to be insufficient
future taxable profit and therefore utilisation is not probable. Unrecognised tax loss carryforwards and temporary differences of US$10,069
(2017: US$5,516) have no expiration date. Tax loss carryforwards in the US of US$4,665 (2017: US$4,665) expire between 2018 and 2025.
Tax losses in Taiwan of US$12,649 (2017: US$13,394) expire between 2023 and 2026. The tax credits expire between 2021 and 2038.

Deferred tax liabilities have not been recognised in respect of undistributed earnings of subsidiaries because no liability is expected to arise
on distribution under applicable tax legislation or because the Group is in a position to control the timing of the reversal of the temporary
differences and it is probable that such differences will not reverse in the foreseeable future.

Dialog Semiconductor PlcAnnual report and accounts 2018119

10. Earnings per share

Basic earnings per share amounts are calculated by dividing the profit for the year attributable to holders of ordinary shares in the Company by
the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the profit attributable to holders of ordinary shares in the Company by the
weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be
issued if all the securities or other contracts to issue ordinary shares were exercised.

Profit attributable to shareholders in the Company and the weighted average number of ordinary shares for calculating basic and diluted
earnings per share were calculated as follows:

Profit attributable to shareholders in the Company
For calculating basic and diluted earnings per share
Weighted average number of ordinary shares
Shares in issue at the beginning of the period
Effect on average number of shares during the period:
– Shares issued to employee benefit trust
– Cancellation of treasury shares
Average number of shares in issue during the period
Deduct:
– Average number of shares held by employee benefit trusts
– Average number of treasury shares
For calculating basic earnings per share
Add:
– Average number of dilutive share options and awards
For calculating diluted earnings per share
Earnings per share (US$)
Basic
Diluted

2018
US$000

2017
US$000

2016
US$000

139,799

173,916

260,940

76,382,139

77,865,955

–
–
76,382,139

2,350,000
(2,329,093)
77,886,862

–
–
77,865,955

(2,422,787)
–
73,959,352

(2,061,901)
(1,352,891)
74,472,070

(1,296,216)
(523,135)
76,046,604

3,695,214
77,654,566

4,139,123
78,611,193

4,351,328
80,397,932

1.89
1.80

2.34
2.21

3.43
3.25

a/b
a/c

During 2018, the average number of anti-dilutive share options outstanding was 830,300 (2017: 375,041; 2016: 423,760).

11. Cash and cash equivalents

Cash and cash equivalents were as follows:

Cash at bank
Cash held by employee benefit trusts
Cash available from receivables financing facilities
Bank deposits
Money market funds
Total

As at
31 December
2018
US$000
3,920
2,829
96,099
325,000
250,000
677,848

As at
31 December
2017
US$000
7,794
1,151
145,100
100,000
225,250
479,295

Short-term deposits are made for varying periods of up to three months.

As at 31 December 2018 and 2017, no amounts had been drawn from the cash available from receivables financing facilities.

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

120

12. Trade and other receivables

Trade and other receivables were as follows:

Trade accounts receivable
Retentions under receivables financing facilities

Total

As at
31 December
2018
US$000
98,234
16,280

As at
31 December
2017
US$000
51,959
26,227

114,514

78,186

Trade accounts receivable are generally on 30 to 60-day credit terms. Trade accounts receivable are regularly reviewed for collectability
and an allowance is established for doubtful accounts against which receivables are written-off when they are no longer considered to
be collectable.

Movements on the allowance for doubtful accounts were as follows:

At the beginning of the year
Allowances charged to profit or loss
Utilised for write-offs
Releases credited to profit or loss
At the end of the year

13. Inventories

Inventories were as follows:

Raw materials
Work in progress
Finished goods
Total

2018
US$000
101
–
(68)
(12)
21

2017
US$000
118
33
(11)
(39)
101

As at
31 December
2018
US$000
36,579
48,416
64,741
149,736

As at
31 December
2017
US$000
12,301
59,704
96,942
168,947

Dialog Semiconductor PlcAnnual report and accounts 201814. Goodwill

Movements on goodwill during the years ended 31 December 2018 and 2017 were as follows:

At the beginning of the year
Acquisition of Silego (note 3)
Acquisition of ams’s LED backlight business (note 3)
Deconsolidation of Dyna Image (note 4)
Effect of movements in foreign currency
At the end of the year

2018
US$000
439,508
–
–
–
–
439,508

Goodwill is monitored by management at the level of the Group’s operating segments and is therefore allocated at that level. As at
31 December 2018 and 2017, goodwill was allocated to operating segments as follows:

Mobile Systems
Connectivity
Advanced Mixed Signal
Total

121

2017
US$000
251,208
190,765
3,866
(6,907)
576
439,508

US$000
107,163
88,198
244,147
439,508

Impairment tests carried out during the year

Goodwill is tested for impairment annually and whenever there is an indication that it may be impaired. Goodwill is tested for impairment at
the level of the operating segments to which it is allocated. Goodwill is impaired if the carrying amount of the operating segment to which it
is allocated exceeds its recoverable amount. In conducting impairment tests of goodwill during 2018, we measured the recoverable amount
of each operating segment to which goodwill is allocated on a value in use basis. Value in use represents the present value of the future cash
flows that we estimate will be generated by the assets allocated to each operating segment in their current use and condition.

Expected future cash flows in the first three years were forecast based on the Group’s Strategic Plan. Cash flows beyond the third year were
estimated by applying a perpetuity growth factor to the forecast cash flow in the third year.

We consider that the key assumptions used in determining value in use are the expected compound annual growth of revenue during the
forecast period, the perpetuity growth rate and the discount rate.

Expected future revenue of each operating segment is based on external forecasts of the future volume of the end-markets for the operating
segment’s products adjusted to reflect factors specific to the operating segment such as its customer base and available distribution
channels, the possibility of new entrants to the market and future technological developments. Cash flows during the forecast period
also reflect the cost of materials and other direct costs, research and development expenditure and selling, general and administrative
expenses. We estimated the cost of materials and other direct and indirect costs based on current prices and market expectations of future
price changes.

We applied a perpetuity growth rate of 2% per annum in estimating the future cash flows of each operating segment in both 2018 and 2017,
which we consider to be the long-term growth rate in the demand for the products of each operating segment in its end-markets.

Discount rates applied to the cash flow projections were determined using a capital asset pricing model and reflected current market interest
rates, relevant equity and size risk premiums and the risks specific to the operating segment concerned. Pre-tax discount rates used were as
follows: Mobile Systems 12.7% (2017: 12.2%); Connectivity 14.2% (2017: 13.6%); and Advanced Mixed Signal 13.5% (2017: 11.0%).

We did not recognise any goodwill impairment during 2018 and the recoverable amount of each operating segment to which goodwill is
allocated was comfortably in excess of its carrying amount.

Dialog Semiconductor PlcAnnual report and accounts 2018122

Notes to the consolidated financial statements continued

15. Other intangible assets

Movements on other intangible assets for the years ended 31 December 2018 and 2017 were as follows:

Cost
As at 31 December 2016
Acquisition of businesses
Additions
Reclassifications
Disposals
Deconsolidation of assets held by Dyna Image (note 4)
Effect of movements in foreign currency
As at 31 December 2017
Additions
Reclassifications
Transfer to assets held for sale
Disposals
Effect of movements in foreign currency
As at 31 December 2018
Amortisation and impairment losses
As at 31 December 2016
Amortisation charge for the period
Disposals
Impairment of assets held by Dyna Image (note 4)
Deconsolidation of Dyna Image (note 4)
Effect of movements in foreign currency
As at 31 December 2017
Amortisation charge for the period
Transfer to assets held for sale
Disposals
Effect of movements in foreign currency
As at 31 December 2018
Net book value
As at 31 December 2017

As at 31 December 2018

Acquired
customer-related
intangible assets
US$000

Purchased
software,
licences and
other
US$000

77,075
95,800
–
–
–
–
–
172,875
–
–
–
–
–
172,875

(40,596)
(8,856)
–
–
–
–
(49,452)
(13,647)
–
–
–
(63,099)

123,423

109,776

72,679
4,028
3,506
(34)
(182)
(243)
35
79,789
3,642
(105)
(3)
(693)
(13)
82,617

(56,706)
(8,410)
22
(100)
243
(15)
(64,966)
(6,015)
3
680
8
(70,290)

14,823

12,327

Product
development
assets
US$000

138,726
27,473
21,027
–
–
(5,819)
486
181,893
24,771
–
–
(123)
–
206,541

(75,078)
(22,884)
–
(2,690)
5,819
(307)
(95,140)
(27,328)
–
103
–
(122,365)

Total
US$000

305,990
127,556
27,187
–
(194)
(6,062)
521
454,998
31,216
–
(296)
(874)
(13)
485,031

(180,371)
(41,969)
29
(2,790)
6,062
(322)
(219,361)
(49,130)
81
816
8
(267,586)

86,753

84,176

235,637

217,445

Patents
US$000

17,510
255
2,654
34
(12)
–
–
20,441
2,803
105
(293)
(58)
–
22,998

(7,991)
(1,819)
7
–
–
–
(9,803)
(2,140)
78
33
–
(11,832)

10,638

11,166

Impairment of assets held by Dyna Image
As explained in note 4, in December 2017, it was decided to wind down the operations of Dyna Image. As a consequence of this decision,
the carrying amount of the intangible assets held by Dyna Image ceased to be recoverable. We therefore reduced the carrying amount
of those assets to nil and recognised a corresponding impairment loss of US$2,790.

Assets held under hire purchase contracts
As at 31 December 2018, the carrying amount of intangible assets held under hire purchase contracts was US$ nil (2017: US$1,840).

Dialog Semiconductor PlcAnnual report and accounts 2018123

Total
US$000

252,643
1,481
45,167
–
(4,333)
(2,982)
1,173
293,149
26,145
–
(19,566)
(3,191)
(748)
295,789

(182,975)
(30,807)
3,626
(1,537)
2,982
(568)
(209,279)
(31,455)
8,797
2,052
455
(229,430)

16. Property, plant and equipment

Movements on property, plant and equipment for the years ended 31 December 2018 and 2017 were as follows:

Test equipment
US$000

Leasehold
improvements
US$000

Office and other
equipment
US$000

Construction in
progress
US$000

Cost
As at 31 December 2016
Acquisition of businesses
Additions
Reclassifications
Disposals
Deconsolidation of assets held by Dyna Image (note 4)
Effect of movements in foreign currency
As at 31 December 2017
Additions
Reclassifications
Transfer to assets held for sale
Disposals
Effect of movements in foreign currency
As at 31 December 2018
Depreciation and impairment losses
As at 31 December 2016
Depreciation charge for the period
Disposals
Impairment of assets held by Dyna Image (note 4)
Deconsolidation of Dyna Image (note 4)
Effect of movements in foreign currency
As at 31 December 2017
Depreciation charge for the period
Transfer to assets held for sale
Disposals
Effect of movements in foreign currency
As at 31 December 2018
Net book value
As at 31 December 2017

As at 31 December 2018

149,999
367
25,915
63
(1,566)
(2,709)
417
172,486
8,250
187
(3,080)
(699)
(109)
177,035

(118,918)
(14,614)
1,560
(1,347)
2,709
(209)
(130,819)
(14,989)
1,023
577
127
(144,081)

41,667

32,954

21,901
118
2,605
172
(1,343)
–
174
23,627
4,050
2,008
(6,371)
(405)
(115)
22,794

(11,612)
(4,064)
1,198
–
–
(93)
(14,571)
(3,363)
1,202
400
42
(16,290)

9,056

6,504

79,439
651
12,881
393
(1,365)
(113)
571
92,457
12,107
1,335
(10,085)
(1,401)
(524)
93,889

(52,445)
(12,129)
868
(30)
113
(266)
(63,889)
(13,103)
6,572
1,075
286
(69,059)

28,568

24,830

1,304
345
3,766
(628)
(59)
(160)
11
4,579
1,738
(3,530)
(30)
(686)
–
2,071

–
–
–
(160)
160
–
–
–
–
–
–
–

Impairment of assets held by Dyna Image
As explained in note 4, in December 2017, it was decided to wind down the operations of Dyna Image. As a consequence of this decision,
the carrying amount of the property, plant and equipment held by Dyna Image ceased to be recoverable. We therefore reduced the carrying
amount of those assets to nil and recognised a corresponding impairment loss of US$1,537.

4,579

2,071

83,870

66,359

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

124

17. Investments

Investments were as follows:

Investment in associate
Other investments
Equity investments:
– Energous shares
Derivative financial instruments:
– Energous warrants
Total other investments
Total investments

Investment in associate

As at
31 December
2018
US$000
–

As at
31 December
2017
US$000
1,100

10,073

33,837

1,465
11,538
11,538

12,318
46,155
47,255

As at 31 December 2018, the Group held a 48.5% ownership interest in Dyna Image Corporation (“Dyna Image”), which is an entity whose
principal place of business and country of incorporation is Taiwan. As explained in note 4, Dyna Image was formerly accounted for as a
subsidiary but the Company lost the power to direct its relevant activities in December 2017 and it was deconsolidated with effect from
31 December 2017.

On deconsolidation, the Group’s investment in Dyna Image was measured at its fair value of US$1,100, which equated to the Group’s share
of the carrying amount of Dyna Image’s net assets.

Dyna Image is now accounted for as an associate using the equity method.

During 2018, Dyna Image continued to make losses. We recognised our share of those losses in profit or loss until the carrying amount of our
investment was reduced to nil during the fourth quarter of 2018.

During early 2018, the shareholders in Dyna Image were approached by a potential acquirer of the business. On 7 December 2018, each of
the shareholders in Dyna Image entered into an agreement to dispose of their respective interests in a transaction that is expected to complete
in the first half of 2019, subject to applicable regulatory approvals. Accordingly, we have reclassified the Group’s investment in Dyna Image as
an asset held for sale at its carrying amount of nil.

We expect to receive consideration of between US$2.4 million and US$5.0 million in exchange for our shareholding in Dyna Image.

Other investments

Energous shares and warrants
Energous Corporation (“Energous”) is the developer of WattUp®, a wire-free charging technology. In November 2016, we entered into a
strategic alliance with Energous. At that time, we subscribed for 763,552 common shares in Energous and were granted warrants to purchase
up to 763,552 common shares that are exercisable in full or in part on a cashless basis at any time between May 2017 and November 2019.
We initially recognised the warrants at their grant date fair value of US$4,695 and an equivalent deferred credit within non-current liabilities.
We will amortise the deferred credit to profit or loss in relation to the royalties that may be payable for the use of Energous’ Intellectual Property
over the initial seven-year term of the strategic alliance. Amortisation of the deferred credit has not yet commenced.

On 5 July 2017, we subscribed for a further 976,139 common shares in Energous at a cost of US$15,000 and were granted a second tranche
of warrants to purchase up to 654,013 common shares that are exercisable in full or in part on a cashless basis at any time between January
2018 and July 2020. We initially recognised the second tranche of the warrants at their grant date fair value of US$4,753 and an equivalent
deferred credit within non-current liabilities. We are amortising the deferred credit to profit or loss over the three-year period from the grant
date to the expiry of the warrants.

During 2018, we recognised a fair value loss on the shares of US$23,764 (2017: gain of US$5,971) in other comprehensive income and
recognised a fair value loss of US$10,853 (2017: gain of US$941) on the warrants in profit or loss (as other finance (expense)/income).
Also during 2018, we recognised a credit of US$1,584 (2017: credit of US$776) in profit or loss on the amortisation of the fair value on initial
recognition of the second tranche of the warrants (as other finance income).

18. Other financial assets

Other financial assets were as follows:

Current
Currency derivatives in designated hedging relationships
Non-current
Rental and other deposits
Total

As at
31 December
2018
US$000

As at
31 December
2017
US$000

202

6,649

1,807
2,009

2,090
8,739

Dialog Semiconductor PlcAnnual report and accounts 201819. Other assets

Other assets were as follows:

Current
Prepaid expenses
Other tax receivables
Deferred facility arrangement costs
Other assets
Total current
Non-current
Deferred facility arrangement costs
Total

125

As at
31 December
2018
US$000

As at
31 December
2017
US$000

6,720
1,787
250
9,549
18,306

398
18,704

6,810
3,904
319
3,623
14,656

503
15,159

20. Assets classified as held for sale

Transfer of design centre assets to Apple Inc.

On 11 October 2018, we entered into an agreement with Apple Inc. (“Apple”) to license our power management technologies and transfer to
Apple certain assets and over 300 employees from our design centres in the UK, Germany and Italy. Apple will pay US$300 million for the
licence and asset transfers. The transaction is expected to complete in the first half of 2019, subject to applicable regulatory approvals and
other customary closing conditions. Accordingly, we have reclassified as held for sale the design centre assets that will be transferred to Apple
and the liabilities that are directly associated with them.

Design centre assets that will be transferred to Apple are included in the Mobile Systems operating segment. We expect that the carrying
amount of the assets will be recovered in full by the transfer proceeds.

Assets held for sale and directly associated liabilities were as follows:

Assets held for sale
Other current assets
Other intangible assets
Property, plant and equipment

Liabilities directly associated with assets held for sale
Trade and other payables
Income taxes payable
Other current liabilities
Provisions

Investment in associate

As at
31 December
2018
US$000

311
215
10,769

11,295

100
63
1,721
1,283

3,167

As explained in note 17, the Group’s investment in Dyna Image Corporation was also classified as held for sale as at 31 December 2018 but
had a carrying amount of nil.

21. Trade and other payables

Trade and other payables were as follows:

Trade accounts payable
Other payables
Total

As at
31 December
2018
US$000
105,039
17,101
122,140

As at
31 December
2017
US$000
90,025
17,170
107,195

Trade accounts payable are non-interest bearing and are normally settled on 30 to 70-day terms. Other payables are non-interest bearing and
have a term of less than three months.

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

126

22. Other financial liabilities

Other financial liabilities were as follows:

Current
Finance lease and hire purchase obligations
Currency derivatives in designated hedging relationships
Currency derivatives hedging share buyback obligation
Deferred consideration
Contingent consideration
Share buyback obligation
Total current
Non-current
Deferred consideration
Contingent consideration
Total non-current
Total

Future minimum payments under finance leases and hire purchase obligations are as follows:

Within one year
Between one and two years
Total minimum payments
Less: future finance charges
Present value of minimum payments

Changes in liabilities arising from financing activities were as follows:

As at 31 December 2015
Additions
Releases
Changes in fair value
Changes in currency exchange rates
Changes from financing cash flows
As at 31 December 2016
Additions
Releases
Changes in fair value
Changes in currency exchange rates
Changes from financing cash flows
As at 31 December 2017
Additions
Changes in fair value
Changes in currency exchange rates
Changes from financing cash flows
As at 31 December 2018

2018
US$000
–
–
–
–
–

Derivatives
hedging share
buyback
obligation
US$000
–
–
–
4,250
–
(1,186)
3,064
–
–
(4,291)
–
1,227
–
–
301
–
–
301

Finance
lease and
hire purchase
obligations
US$000
8,596
1,172
–
–
–
(3,834)
5,934
–
–
–
–
(4,283)
1,651
–
–
–
(1,651)
–

Share buyback
obligation
US$000
–
139,501
(15,313)
–
(1,643)
(61,472)
61,073
79,407
(18,469)
–
3,024
(125,035)
–
171,173
–
590
–
171,763

As at
31 December
2018
US$000

As at
31 December
2017
US$000

–
6,080
301
2,332
16,414
171,763
196,890

841
–
841
197,731

Minimum payments

1,651
97
–
5,456
8,837
–
16,041

2,506
14,872
17,378
33,419

2017
US$000
1,701
–
1,701
(50)
1,651

Total
US$000
8,596
140,673
(15,313)
4,250
(1,643)
(66,492)
70,071
79,407
(18,469)
(4,291)
3,024
(128,091)
1,651
171,173
301
590
(1,651)
172,064

Dialog Semiconductor PlcAnnual report and accounts 2018127

23. Provisions

Movements on provisions were as follows:

As at 31 December 2016
Acquisition of businesses
Additions charged to profit or loss
Utilised during the year
Releases credited to profit or loss
Unwinding of discount
Currency translation differences
As at 31 December 2017
Additions charged to profit or loss
Utilised during the year
Releases credited to profit or loss
Unwinding of discount
Transfer to held for sale
Currency translation differences
As at 31 December 2018

Product
warranties
US$000
1,104
76
1,285
(1,011)
(9)
–
–
1,445
2,629
(1,361)
–
–
–
–
2,713

Leasehold
property
US$000
2,618
–
985
(159)
(59)
60
180
3,625
462
(808)
(121)
70
–
(106)
3,122

Legal
claims
US$000
–
–
750
–
–
–
–
750
394
(220)
(30)
–
–
–
894

Contractual
severance
US$000
753
–
202
–
–
–
99
1,054
1,985
(107)
–
–
(1,283)
(47)
1,602

Other
provisions
US$000
372
100
95
(220)
(23)
–
1
325
–
(308)
–
–
–
(17)
–

Total
US$000
4,847
176
3,317
(1,390)
(91)
60
280
7,199
5,470
(2,804)
(151)
70
(1,283)
(170)
8,331

Provisions are presented in the Group’s balance sheet as follows:

Current liabilities
Non-current liabilities
Total

As at
31 December
2018
US$000
5,253
3,078
8,331

As at
31 December
2017
US$000
3,474
3,725
7,199

Product warranties
Dialog provides contractual product warranties under which it guarantees the performance of its products. Product warranty provisions
are based on historical warranty data and are expected to be utilised within one year of the balance sheet date.

Leasehold property
Leasehold property provisions include dilapidation provisions for the costs of restoring leasehold properties to their original condition
at the end of the lease and provisions for onerous leases. Leasehold property provisions will be utilised over the remaining terms
of the relevant leases, which expire up to five years from the balance sheet date.

Contractual severance
Provision is made for contractual severance payments that are payable to employees in certain countries when they leave
the Group’s employment.

24. Other liabilities

Other liabilities were as follows:

Current
Obligations for personnel and social expenses
Advances received in relation to research and development contracts
Deferred income
Other liabilities
Total current
Non-current
Deferred royalty credits (note 17)
Deferred gain on initial measurement of warrants (note 17)
Accrued expenses
Other liabilities
Total non-current
Total

As at
31 December
2018
US$000

As at
31 December
2017
US$000

33,291
2,801
17,124
5,021
58,237

4,695
2,392
207
1,578
8,872
67,109

41,462
3,801
5,840
8,516
59,619

4,695
3,976
410
479
9,560
69,179

Dialog Semiconductor PlcAnnual report and accounts 2018128

Notes to the consolidated financial statements continued

25. Share capital and reserves

a) Ordinary shares

As at 31 December 2018, 2017 and 2016, the authorised share capital of the Company comprised 104,311,860 ordinary shares with a nominal
value of £0.10 per share.

The number of allotted and fully paid ordinary shares was as follows:

As at 31 December 2015 and 2016
Shares issued to employee benefit trust
Cancellation of treasury shares
As at 31 December 2017 and 2018

Number of shares
77,865,955
3,000,000
(4,483,816)
76,382,139

Nominal value
US$000
14,402
373
(571)
14,204

Ordinary shareholders have no entitlement to share in the profits of the Company except for dividends that may be declared and in the event
of the Company’s liquidation.

Ordinary shareholders have the right to attend, and vote at, general meetings of the Company or to appoint a proxy to attend and vote at such
meetings on their behalf. Ordinary shareholders have one vote for every share held.

b) Share premium account

The share premium account represents the difference between the nominal value of shares issued and the fair value of the consideration
received. The share premium account is not distributable but may be used for certain purposes specified by United Kingdom law,
including to write off expenses on any issue of shares and to pay up fully paid bonus shares.

c) Other reserves

Currency translation reserve
The currency translation reserve represents the cumulative gains and losses recognised on the translation into US dollars of the Group’s net
investments in foreign operations.

Fair value reserve
The fair value reserve represents the unrealised gains and losses recognised on equity investments that are measured at fair value through
other comprehensive income.

Cash flow hedge reserve
The cash flow hedge reserve represents the cumulative gains and losses on effective cash flow hedging instruments that will be recycled
to profit or loss on the occurrence of the hedged cash flows.

Treasury shares
Treasury shares were shares purchased under the Company’s share buyback programme. Details of the purchases made under
the programme are set out in note 26.

Capital redemption reserve
On 23 June 2017, the Company cancelled all of the treasury shares that it held following completion of the third tranche of the share buyback
programme. On cancellation, the total cost of the treasury shares was transferred from treasury shares and set against retained earnings and
the nominal value of the shares cancelled of US$571 was transferred from share capital to a non-distributable capital redemption reserve.

Dialog Semiconductor PlcAnnual report and accounts 201825. Share capital and reserves continued

Movements on other reserves were as follows:

As at 31 December 2015
Other comprehensive income/(loss):
– Currency translation differences on foreign operations
– Fair value loss on available-for-sale investments
– Cash flow hedges:

Fair value loss recognised on effective hedges
Fair value loss transferred to profit or loss

– Income tax credit/(expense)
Other changes in equity:
– Purchase of own shares into treasury
As at 31 December 2016
Other comprehensive income/(loss):
– Currency translation differences on foreign operations
– Gain transferred to profit or loss on deconsolidation of Dyna Image
– Fair value loss on available-for-sale investments
– Cash flow hedges:

Fair value gain recognised on effective hedges
Fair value loss transferred to profit or loss

– Income tax credit/(expense)
Other changes in equity:
– Purchase of own shares into treasury
– Cancellation of treasury shares
As at 31 December 2017
Other comprehensive loss:
– Currency translation differences on foreign operations
– Fair value loss on equity investments
– Cash flow hedges:

Fair value loss recognised on effective hedges
Fair value gain transferred to profit or loss

– Income tax (expense)/credit
As at 31 December 2018

129

Total
US$000
(7,923)

127
2,866

(13,264)
8,382
718

Capital
redemption
reserve
US$000
–

Currency
translation
reserve
US$000
(4,480)

Fair value
reserve
US$000
–

Hedging
reserve
US$000
(3,443)

Treasury
shares
US$000
–

–
–

–
–
–

–
–

–
–
–

–
571
571

–
–

–
–
–
571

127
–

–
–
(47)

–
(4,400)

1,665
(1,144)
–

–
–
180

–
–
(3,699)

–
2,866

–
–

–
–
–

(13,264)
8,382
765

–
–

–
–
–

–
2,866

–
–
5,971

–
–
(1,015)

–
–
7,822

–
(7,560)

(61,472)
(61,472)

(61,472)
(70,566)

–
–
–

16,433
(441)
(3,149)

–
–
–

1,665
(1,144)
5,971

16,433
(441)
(3,984)

–
–
5,283

(125,050)
186,522
–

(125,050)
187,093
9,977

(527)
–

–
(23,764)

–
–

–
–
(78)
(4,304)

–
–
1,015
(14,927)

(10,075)
(2,343)
2,376
(4,759)

–
–

–
–
–
–

(527)
(23,764)

(10,075)
(2,343)
3,313
(23,419)

Dialog Semiconductor PlcAnnual report and accounts 2018130

Notes to the consolidated financial statements continued

26. Share buyback programme

Share buyback authority

At the Company’s 2016 AGM, the Directors were granted an authority to purchase up to 7,786,595 ordinary shares in the capital of the
Company. During 2016 and 2017, 4,483,816 ordinary shares were purchased under the 2016 AGM authority at a total cost of US$186,522
(including transaction costs of US$1,866). The 2016 AGM authority expired on 3 May 2017.

At the Company’s 2017 AGM, the Directors were granted a new authority to purchase up to 7,808,280 of our ordinary shares in further
tranches. We did not announce any purchases under the 2017 AGM authority and it expired on 2 May 2018.

At the Company’s 2018 AGM, the Directors were granted the authority to purchase up to 7,638,214 of our ordinary shares, representing
approximately 10% of the issued ordinary share capital of the Company as at 21 March 2018. Such authority shall (unless previously renewed,
varied or revoked) expire on the day before the next AGM of the Company or on 30 June 2019, whichever is the earlier.

Purchases made under the share buyback programme are off-market and are effected by way of contingent forward purchase
contracts entered into with brokers. Barclays, Goldman Sachs, HSBC or Merrill Lynch may be appointed as brokers for purchases
under the 2018 AGM authority.

Shares purchased during 2016

On 9 May 2016, the Company announced details of the first tranche of the share buyback programme pursuant to the 2016 AGM authority
under which it committed to purchase shares with a minimum cost of €37.5 million and a maximum cost of €50 million. Final settlement and
conclusion of the first tranche took place on 28 September 2016. We purchased a total of 1,332,158 shares under the first tranche at a cost
of €37.5 million (US$42,024).

On 8 November 2016, the Company announced details of the second tranche of the share buyback programme pursuant to the 2016 AGM
authority under which it committed to purchase shares with a minimum cost of €56.25 million and a maximum cost of €75.0 million.

We completed the first intermediate settlement of the second tranche on 30 December 2016 purchasing 473,592 shares at an initial cost of
€17.45 million (US$18,383). As at 31 December 2016, we held 1,805,750 shares purchased under the first and second tranches in treasury
at a total cost of US$61,472 (including transaction costs of US$1,063).

As at 31 December 2016, we recognised a debit to equity amounting to US$63,077 in relation to the maximum remaining obligation
to purchase shares under the second tranche of €57.55 million (US$62,759) and related transaction costs.

Shares purchased during 2017

We made a further intermediate settlement of the second tranche on 9 February 2017 and final settlement and conclusion of the tranche took
place on 17 February 2017. In these further settlements, we purchased 977,456 shares at a cost of €38.8 million (US$41,385) and incurred
transaction costs of US$270. On conclusion of the second tranche, we credited back to retained earnings the remainder of the obligation
to purchase shares initially recognised of US$19,961 and related transaction costs.

On 27 February 2017, the Company announced details of the third tranche of the share buyback programme pursuant to the 2016 AGM
authority under which it committed to purchase shares with a minimum cost of €56.25 million and a maximum cost of €75.0 million.
We initially recognised a debit to retained earnings amounting to US$79,407, which comprised the maximum obligation to purchase shares
of €75.0 million (US$79,012) and related transaction costs.

We made intermediate settlements of the third tranche on 25 April 2017 and 2 June 2017 and final settlement and conclusion of the tranche
took place on 23 June 2017. We purchased 1,700,610 shares under the third tranche at a cost of €74.9 million (US$82,862) and incurred
transaction costs amounting to US$533. On conclusion of the third tranche, we credited back to earnings the remainder of the obligation
to purchase shares initially recognised of US$71 and related transaction costs.

During 2017, we showed a credit to retained earnings of US$3,024, which mirrored the loss recognised in profit or loss on the translation into
US dollars of the Euro-denominated liability that existed in relation to shares that were purchased during the period. We hedge the currency
translation exposure on outstanding liabilities to purchase shares using currency forwards and swaps. After taking into account hedging, we
recognised a net currency translation loss of US$237 in profit or loss in relation to liabilities to purchase shares under the second and third
tranches during 2017.

Dialog Semiconductor PlcAnnual report and accounts 2018131

26. Share buyback programme continued

First tranche pursuant to the 2018 AGM authority

On 6 November 2018, the Company announced details of a tranche of the share buyback programme pursuant to the 2018 AGM authority
under which it committed to purchase shares with a minimum cost of €100.0 million and a maximum cost of €150.0 million. On initiation of this
tranche, we recognised a liability and a corresponding debit to retained earnings of €150.0 million (US$171,173) in respect of the maximum
obligation to purchase shares. We also debited transaction costs incurred of US$14 to retained earnings.

During the remainder of 2018, we recognised a currency translation loss of US$576 on the retranslation of the Euro-denominated liability into
US dollars. As at 31 December 2018, the carrying amount of the liability was €150.0 million (US$171,763).

We have not yet been required by the appointed broker to make any intermediate settlements in relation to this tranche, under which the
broker may continue to purchase shares until 21 May 2019.

27. Non-controlling interests

We hold a 48.5% ownership interest in Dyna Image Corporation (“Dyna Image”). As explained in note 4, Dyna Image was formerly accounted
for as a subsidiary but the Company lost the power to direct its relevant activities in December 2017 and it was deconsolidated with effect
from 31 December 2017.

In January 2017, the Group’s ownership interest in Dyna Image increased from 45.7% to 48.5% and there was a corresponding decrease from
54.7% to 51.5% in the ownership interests held by non-controlling interests.

Summarised financial information about Dyna Image for periods before it ceased to be a subsidiary is presented below:

Summary comprehensive (loss)/income
Revenue
Expenses
Loss for the year
Loss attributable to owners of the Company
Loss attributable to the non-controlling interests
Loss for the year
Other comprehensive (loss)/income attributable to owners of the Company
Other comprehensive (loss)/income attributable to the non-controlling interests
Other comprehensive (loss)/income for the year
Total comprehensive loss attributable to owners of the Company
Total comprehensive loss attributable to the non-controlling interests
Total comprehensive loss for the year
Summary of cash flows
Cash flow used for operating activities
Cash flow used for investing activities
Cash flow from financing activities
Net decrease in cash and cash equivalents

All other subsidiaries of the Company are wholly-owned.

2018
US$000

2017
US$000

2016
US$000

–
–
–
–
–
–
–
–
–
–
–
–

–
–
–
–

5,474
(17,870)
(12,396)
(7,914)
(4,482)
(12,396)
(7)
(7)
(14)
(7,921)
(4,489)
(12,410)

(4,769)
(47)
3,000
(1,816)

9,409
(14,195)
(4,786)
(1,962)
(2,824)
(4,786)
69
100
169
(1,893)
(2,724)
(4,617)

(1,025)
(29)
–
(1,054)

Dialog Semiconductor PlcAnnual report and accounts 2018132

Notes to the consolidated financial statements continued

28. Pension schemes

The Group operates defined contribution pension schemes in most of the countries in which it operates. Contributions payable by the Group
to the plans amounted to US$8,756 (2017: US$7,458; 2016: US$6,754). As at 31 December 2018, the Group had not paid over to the plans
contributions due amounting to US$1,596 (2017: US$2,408; 2016: US$1,802). All contributions due for the period were paid over subsequent
to the balance sheet date. Pension costs also include payments to the state funded pension plan in Germany in the amount of US$3,853
(2017: US$3,599; 2016: US$3,400).

29. Share-based compensation

The Company operates a number of share-based compensation plans under which it grants options and awards over its ordinary shares
to certain of the Group’s employees.

a) Plans without performance conditions

Stock Option Plan
Shareholders approved the Stock Option Plan (“SOP”) at the Company’s 1998 AGM.

Options granted under the SOP before 31 October 2006 vested over periods of one or five years from the grant date provided the
participant remained in employment by the Group at the vesting date and, if unexercised, expired on the tenth anniversary of the grant date.
Options granted after 31 October 2006 vest monthly over four years provided the participant remains in employment by the Group at the
vesting date but may not be exercised until the first anniversary of the grant date and, if unexercised, expire on the seventh anniversary of
the grant date.

Unless otherwise determined by the Remuneration Committee, options granted under the SOP have an exercise price not less than
the market price of the Company’s ordinary shares on the grant date.

Employee Share Plan
Shareholders approved the Employee Share Plan (“ESP”) at the Company’s 2013 AGM. The ESP operates alongside the SOP.

Options granted under the ESP vest over a three-year period with one third of each award vesting on the first, second and third anniversary
of the grant date provided the participant remains in employment by the Group at the vesting date and, if unexercised, expire on the seventh
anniversary of the grant date.

Options granted under the ESP have a nominal exercise price.

Fair value of awards
The fair value of options granted under the ESP was measured using the Black-Scholes option pricing model. The weighted average fair value
of options granted during the years ended 31 December 2018, 2017 and 2016 and the principal assumptions made in measuring those fair
values were as follows:

Weighted average fair value
Principal assumptions:
– Share price on grant date
– Exercise price
– Expected volatility of the Company's shares
– Expected option life
– Dividend yield on the Company's shares
– Risk-free interest rate

Grant in 2018
€21.95

Grant in 2017
€33.31

Grant in 2016
€34.86

€22.06
€0.11
44%
3 – 6 years
0%
(0.3)%

€33.40
€0.10
42%
3 – 6 years
0%
(0.3)%

€34.96
€0.10
41%
3 – 6 years
0%
(0.3)%

Expected volatility was determined based on the historical volatility of the market price of the Company’s ordinary shares over the expected life
of the options.

Dialog Semiconductor PlcAnnual report and accounts 2018133

29. Share-based compensation continued

b) Performance-based plans

Executive Incentive Plan
Shareholders approved the Executive Incentive Plan (“EIP”) at the Company’s 2010 AGM.

Awards under the EIP vested three years from the grant date provided certain performance conditions were satisfied and the participant
remained in employment by the Group at the end of the vesting period.

a) Share price increase
One quarter of each award accrued in equal annual instalments on the anniversary of grant date provided the market price of the Company’s
ordinary shares on the relevant anniversary date exceeded the higher of the market price of the shares on the grant date and on any
preceding anniversary date.

Awards that had accrued vested and became exercisable on the third anniversary of the grant date.

b) Group performance conditions
Up to three-eighths of each award vested depending upon the compound annual growth of the Group’s revenue over the three-year
performance period. Up to three-eighths of each award vested depending on the compound annual growth of the Group’s EBIT (operating
profit) over the three-year performance period. Even if the revenue and EBIT targets were met, however, the number of awards that vested
were reduced by up to 20% if customer diversification targets were not also met.

The EIP expired for the purpose of new awards in May 2015.

Long-Term Incentive Plan
Shareholders approved the Long-Term Incentive Plan (“LTIP”) at the Company’s 2015 AGM. The LTIP replaced the EIP. All employees are
eligible to participate in the plan but in practice awards will be targeted at the Executive Director level and others in senior roles.

Awards granted under the LTIP take the form of either a nil or nominal cost share option, a conditional share award, a market price share
option or, in jurisdictions where it is not feasible to deliver shares to employees, a cash-settled award linked to the market value of the
Company’s shares.

Awards under the LTIP generally vest three years from the grant date provided certain performance conditions are satisfied and the participant
remains in employment by the Group at the end of the vesting period.

a) Total shareholder return (“TSR”)
Up to one third of each award vests depending on the TSR on the Company’s ordinary shares relative to the TSR of the constituents of the
S&P 1500 Select Semiconductor Index over the three-year performance period. If the TSR on the Company’s ordinary shares is negative over
the vesting period, vesting is capped at one half of this element of the award irrespective of the whether the TSR on the Company’s ordinary
shares has exceeded the TSR of the constituents of the S&P 1500 Select Semiconductor Index.

b) Group Performance Conditions
Up to one half of each award vests depending upon the Group’s revenue in each year of the three-year performance period. Up to one half
of each award vests depending on the Group’s underlying operating margin in each year of the three-year performance period.

Notwithstanding the performance conditions, the Remuneration Committee may apply a downward adjustment to the number of awards
that vest if it considers this to be necessary taking into account the Group’s financial performance and overall financial health.

Fair value of awards
The fair value of awards made under the EIP and the LTIP was measured using a variant of the Monte Carlo valuation model. The weighted
average fair value of options granted during the years ended 31 December 2018, 2017 and 2016 and the principal assumptions made in
measuring those fair values were as follows:

Grant in 2018
€23.23

Grant in 2017
€44.86

Grant in 2016
€29.26

€25.25
€0.09
44%
6 years
0%
(0.3)%

€50.32
€0.10
42%
6 years
0%
(0.3)%

€33.41
€0.10
41%
6 years
0%
(0.3)%

Expected volatility was determined based on the historical volatility of the market price of the Company’s ordinary shares over the expected life
of the awards.

Dialog Semiconductor PlcAnnual report and accounts 2018134

Notes to the consolidated financial statements continued

29. Share-based compensation continued

c) Share options

Movements in the total number of share options outstanding during the years ended 31 December 2018 and 2017 were as follows:

Outstanding at the beginning of the year
Granted
Exercised
Forfeited
Outstanding at the end of the year
Options exercisable at the end of the year

2018

2017

Weighted average
exercise price
€
1.50
0.10
3.05
0.19
0.65
2.71

Options
4,303,195
2,536,355
(1,010,647)
(356,268)
5,472,635
1,155,481

Options
4,469,977
1,345,455
(1,240,297)
(271,940)
4,303,195
1,302,600

Weighted average
exercise price
€
2.90
0.10
5.30
0.29
1.50
4.71

When share options were exercised during 2018, the weighted average of the Company’s share price was €22.71 (2017: €45.50).

The weighted average contractual life and exercise price of share options outstanding as at 31 December 2018 and 2017 were as follows:

Range of exercise prices
€0.0 – 1.00
€1.00 – 8.00
€8.00 – 16.85
€0.00 – 16.85

2018

2017

Number
outstanding
5,270,419
–
202,216
5,472,635

Weighted average
remaining
contractual life
(in years)
4.73
n/a
0.97
4.59

Number
outstanding
3,883,067
–
420,128
4,303,195

Weighted average
remaining
contractual life
(in years)
4.58
n/a
1.60
4.29

d) Dialog shares held by employee benefit trusts

Movements in the number of shares held by the trusts during the years ended 31 December 2018 and 2017 were as follows:

At the beginning of the year
Purchase of shares in the market
Subscription for newly-issued shares
Sale or transfer of shares
At the end of the year

2018

2017

Number of shares
2,791,027
826,879
–
(1,010,647)
2,607,259

Cost
US$000
902
21,786
–
(174)
22,514

Number of shares
574,600
456,724
3,000,000
(1,240,297)
2,791,027

Cost
US$000
20,608
24,301
373
(44,380)
902

Dialog Semiconductor PlcAnnual report and accounts 2018135

30. Commitments

Operating lease and software licence commitments

The Group rents all of its office and development facilities and some production, office and test equipment under operating leases.
Future minimum lease payments under non-cancellable operating leases and software licences are as follows:

Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Thereafter
Total minimum payments

Operating leases
2018
US$000
15,505
14,749
14,056
13,042
8,078
13,202
78,632

Software licences
2018
US$000
25,616
15,158
3,900
2,552
75
–
47,301

Operating leases
2017
US$000
12,600
11,261
9,711
6,605
4,902
10,247
55,326

Software licences
2017
US$000
15,286
7,420
5,669
2,300
2,385
–
33,060

During 2018, the Group recognised in profit or loss an operating lease expense of US$12,450 (2017: US$10,153; 2016: US$9,797)
and software licence fees of US$13,854 (2017: US$9,944; 2016: US$7,384).

Capital commitments

As at 31 December 2018, the Group has contractual commitments for the acquisition of property, plant and equipment of US$5,874
(2017: US$7,022) and for the acquisition of intangible assets of US$4,391 (2017: US$5,311).

31. Additional disclosures on financial instruments

Analysis by class and category

In the following tables, the carrying amounts of the financial assets and financial liabilities held by the Group as at 31 December 2018
and 2017 are analysed by class and category:

Financial assets
Cash and cash equivalents
Trade and other receivables
Energous shares
Energous warrants
Other investments
Currency derivatives
Rental and other deposits
Other financial assets
Total financial assets

Financial liabilities
Trade and other payables
Currency derivatives
Share buyback obligation
Deferred consideration
Contingent consideration
Other financial liabilities
Total financial liabilities

As at 31 December 2018

Amortised
cost
US$000

At fair value
through profit
or loss
US$000

At fair value
in designated
hedges
US$000

At fair value
through other
comprehensive
income
US$000

Net book
value
US$000

Fair value
US$000

677,848
114,514
–
–
–
–
1,807
1,807
794,169

(122,140)
–
(171,763)
(3,173)
–
(174,936)
(297,076)

–
–
–
1,465
1,465
–
–
–
1,465

–
(301)
–
–
(16,414)
(16,715)
(16,715)

–
–
–
–
–
202
–
202
202

–
(6,080)
–
–
–
(6,080)
(6,080)

–
–
10,073
–
10,073
–
–
–
10,073

–
–
–
–
–
–
–

677,848
114,514
10,073
1,465
11,538
202
1,807
2,009
805,909

(122,140)
(6,381)
(171,763)
(3,173)
(16,414)
(197,731)
(319,871)

677,848
114,514
10,073
1,465

202
1,807

(122,140)
(6,381)
(171,763)
(3,173)
(16,414)

Currency derivatives that are not in designated hedging relationships are held to hedge the currency translation exposure
on the Euro-denominated share buyback liability (note 26).

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

31. Additional disclosures on financial instruments continued

136

As at 31 December 2017

Amortised
cost
US$000

At fair value
through profit
or loss
US$000

At fair value
in designated
hedges
US$000

At fair value
through other
comprehensive
income
US$000

479,295
78,186
–
–
–
–
2,090
2,090
559,571

(107,195)
(1,651)
–
(7,962)
–
(9,613)
(116,808)

–
–
–
12,318
12,318
–
–
–
12,318

–
–
–
–
(23,709)
(23,709)
(23,709)

–
–
–
–
–
6,649
–
6,649
6,649

–
–
(97)
–
–
(97)
(97)

–
–
33,837
–
33,837
–
–
–
33,837

–
–
–
–
–
–
–

Fair value
US$000

479,295
78,186
33,837
12,318

6,649
2,090

(107,195)
(1,651)
(97)
(7,962)
(23,709)

Net book
value
US$000

479,295
78,186
33,837
12,318
46,155
6,649
2,090
8,739
612,375

(107,195)
(1,651)
(97)
(7,962)
(23,709)
(33,419)
(140,614)

Financial liabilities
Trade and other payables
Hire purchase and finance lease obligations
Currency derivatives
Deferred consideration
Contingent consideration
Other financial liabilities
Total financial liabilities

Fair value measurement

a) Financial instruments carried at fair value
All financial instruments that are carried at fair value are revalued on a recurring basis. We have not chosen to designate any financial
instruments at fair value through profit or loss on initial recognition.

Details of our investment in the Energous shares and warrants are set out in note 17. We measured the fair value of these financial assets
using the following methods and assumptions:
U Energous shares (listed on NASDAQ) – measured at the quoted bid price at the close of business on the balance sheet date; and
U Energous warrants – measured using a Black Scholes valuation model based on the quoted bid price of Energous’ common shares
and other inputs such as implied share price volatility that is modelled based on historical price data for Energous’ common shares.

Fair value of currency derivatives represents the present value of the future contractual cash flows, which is estimated using observable spot
exchange rates and by applying a discount rate that is based on the yield curves of the respective currencies and reflects the credit risk
of the counterparties.

Contingent consideration in respect of the acquisition of Silego was payable in two tranches based on Silego’s revenue for 2017 and 2018.
As at 31 December 2017, the fair value of the contingent consideration was measured based on the expected value of a range of possible
outcomes of Silego’s revenue for 2017 and 2018. As at 31 December 2018, the fair value of the contingent consideration is based on Silego’s
actual revenue for 2017 and 2018.

In the following table, the financial instruments that are carried at fair value are categorised into one of three levels in a fair value hierarchy
according to the nature of the significant inputs to the valuation techniques that are used to determine their fair value as follows:
U Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
U Level 2 – Inputs other than Level 1 that are observable either directly (as market prices) or indirectly (derived from market prices).
U Level 3 – Unobservable inputs, such as those derived from internal models or using other valuation methods.

Dialog Semiconductor PlcAnnual report and accounts 2018137

31. Additional disclosures on financial instruments continued

Financial assets carried at fair value
Investments:
– Energous shares
Derivative financial instruments:
– Currency derivatives
– Energous warrants
Total financial assets carried at fair value

Financial liabilities carried at fair value
Derivative financial instruments:
– Currency derivatives
Contingent consideration
Total financial liabilities carried at fair value

As at 31 December 2018

As at 31 December 2017

Level 1
US$000

Level 2
US$000

Level 3
US$000

Total
US$000

Level 1
US$000

Level 2
US$000

Level 3
US$000

Total
US$000

10,073

–

10,073

33,837

–

33,837

–
–
10,073

202
–
202

–
1,465
1,465

202
1,465
11,740

–
–
33,837

6,649
–
6,649

–
12,318
12,318

6,649
12,318
52,804

–
–
–

(6,381)
–
(6,381)

–
(16,414)
(16,414)

(6,381)
(16,414)
(22,795)

–
–
–

(97)
–
(97)

–
(23,709)
(23,709)

(97)
(23,709)
(23,806)

During 2018, there were no transfers between Level 1 and Level 2.

In the following table, we present a reconciliation of the changes in the Level 3 fair values:

Financial assets carried at fair value
At the beginning of the year
Additions:
– Energous warrants
Unrealised fair value (loss)/gain recognised in profit or loss (other finance (expense)/income):
– Energous warrants
– Dyna Image call option
At the end of the year
Financial liabilities carried at fair value
At the beginning of the year
Contingent consideration:
– Additions
– Change in estimate (other operating income)
– Unwinding of discount recognised in profit or loss (interest expense)
– Settlements
At the end of the year

2018
US$000

2017
US$000

2016
US$000

12,318

6,766

873

–

4,753

4,695

(10,853)
–
1,465

941
(142)
12,318

1,929
(731)
6,766

(23,709)

–

(653)
808
(2,220)
9,360
(16,414)

(23,273)
–
(436)
–
(23,709)

–

–
–
–
–
–

We estimate that if the implied volatility of 118.5% incorporated in the valuation of the first tranche of Energous warrants and that of 109.8%
incorporated in the second tranche as at 31 December 2018 had been ten percentage points higher or lower, the fair value of the warrants
would have been US$333 higher at US$1,798 or US$318 lower at US$1,147, respectively. In each case, the effect of the increase/(decrease)
in fair value would have been recognised in profit or loss as other finance income/(expense).

b) Financial instruments not carried at fair value
Finance lease and hire purchase obligations attract fixed interest rates that are implicit in the lease rentals. For disclosure purposes, the fair
value of these obligations has been calculated as the present value of the future contractual cash flows using observable yield curves (Level 2).

Other financial assets and financial liabilities that are not carried at fair value are of short maturity and/or bear floating rate interest. We therefore
consider that their carrying amounts approximate to their fair values (Level 2).

Dialog Semiconductor PlcAnnual report and accounts 2018138

Notes to the consolidated financial statements continued

32. Financial risk management

Background

The Group’s central treasury function is responsible for ensuring that adequate funding is available to meet the Group’s requirements and
for maintaining an efficient capital structure, together with managing the Group’s counterparty credit risk, foreign currency and interest rate
exposures. All treasury operations are conducted within strict policies and guidelines that are approved by the Board.

We use currency derivatives to manage currency risk and we hold certain equity options and warrants for strategic reasons. We do not hold
or issue derivative financial instruments for speculative purposes.

Credit risk

Credit risk is the risk that a customer or a counterparty financial institution fails to meet its contractual obligations as they fall due causing the
Group to incur a financial loss. The Group is exposed to credit risk in relation to receivables from its customers and cash and cash equivalents
and other financial assets held with financial institutions.

Before accepting a new customer, we assess the potential customer’s credit quality and establish a credit limit. Credit quality is assessed
using data maintained by reputable credit agencies, by checking references included in credit applications, and, where they are available,
by reviewing the customer’s recent financial statements. Credit limits are subject to multiple levels of authorisation and are reviewed on a
regular basis.

The Group depends on a relatively small number of customers for a substantial part of its revenue. As at 31 December 2018, trade accounts
receivable amounted to US$98,234 (2017: US$51,959), including US$62,207 (2017: US$34,038) due from our largest customer.

We utilise uncommitted non-recourse receivables financing facilities provided by two financial institutions in an aggregate amount
of US$240 million. The principal facility is for US$220 million and matures on 31 October 2019.

Receivables sold under these facilities are derecognised from the Group’s balance sheet because the financial institutions concerned assume
all credit risk associated with them. When a receivable is sold, the Group is credited with the majority of the invoice amount with the balance
credited on the earlier of the date on which the customer pays the amount due or 120 days after the receivable becomes due for payment.
As at 31 December 2018, cash and cash equivalents included a benefit of US$96,099 (2017: US$145,100) in relation to receivables sold under
these facilities and trade and other receivables included US$16,280 (2017: US$26,227) retained by the financial institutions.

Cash deposits and cash equivalent investments are placed only with reputable financial institutions that satisfy the criteria set out in our Board
approved treasury policy, including a requirement that each has a median credit rating of not less than A- (Standard & Poor’s), A3 (Moody’s)
or A- (Fitch). Credit risk is further limited by investing only in liquid instruments.

Market risk

Market risk is the risk that the fair value of, or cash flows associated with, a financial instrument will fluctuate because of changes in market
prices. Market risk comprises three types of risk: currency risk (due to changes in currency exchange rates), interest rate risk (due to changes
in market interest rates) and other price risk.

a) Currency risk
The US dollar is the functional currency of the Company and its principal subsidiaries.

Currency risk arises on transactions that are denominated in a currency other than the functional currency of the entity that enters into them.
Nearly all of the Group’s sales and cost of materials are denominated in US dollars but certain operating expenses and tax cash flows are
denominated in currencies other than the US dollar, in particular the Euro and the pound sterling. It is the Group’s policy to hedge a proportion
of the currency risk associated with highly probable forecast cash flows on a rolling 12-month basis. As the timing of the forecast cash flows
draws nearer, the proportion of the currency risk that is hedged increases within set parameters.

Where possible, forward currency contracts that are entered into to hedge forecast cash flows are designated as hedging instruments in
cash flow hedge relationships. During 2018, a loss of US$10,075 (2017: gain of US$16,433; 2016: loss of US$13,264), was recognised in other
comprehensive income representing the change in the fair value of currency derivatives in effective hedging relationships and a cumulative
gain of US$2,343 (2017: gain of US$441; 2016: loss of US$8,382) was reclassified to profit or loss on the occurrence of the hedged cash flows.

Dialog Semiconductor PlcAnnual report and accounts 201832. Financial risk management continued

Currency derivatives held to hedge forecast cash outflows were as follows:

Maturity
0 – 3 months
4 – 6 months
7 – 9 months
10 – 12 months
Total
Weighted average exchange rate US$ =

139

As at 31 December 2018
Net notional amount

Euro
000

Pound sterling
000

Japanese Yen
000

26,750
21,500
18,000
8,000
74,250
0.82

11,000
9,250
3,750
1,750
25,750
0.74

207,500
115,000
140,000
50,000
512,500
107.99

As at 31 December 2017
Net notional amount

Euro
000

Pound sterling
000

Japanese Yen
000

33,500
27,500
20,000
11,000
92,000
0.86

11,650
10,000
6,500
4,000
32,150
0.77

185,000
120,000
135,000
60,000
500,000
109.97

Chinese
Renminbi
000

19,000
10,000
10,500
4,000
43,500
6.71

Chinese
Renminbi
000

16,000
9,000
13,000
6,000
44,000
6.83

During the year, the following amounts were recognised in profit or loss in relation to forward currency contracts in cash flow
hedge relationships:

Gain/(loss) reclassified from hedging reserve
Hedged item affected profit or loss:
– Cost of sales
– Selling and marketing expenses
– General and administrative expenses
– Research and development expenses
– Income tax expense
Cash flow no longer expected to occur:
– Other finance expense

Hedge ineffectiveness
– Other finance (expense)/income

Hedge ineffectiveness was determined as follows:

Change in fair value of designated hedging instruments
Change in value of hedged item used to determine hedge ineffectiveness
Hedge ineffectiveness recognised in profit or loss

2018
US$000

2017
US$000

2016
US$000

436
47
96
1,422
342

–
2,343

(13)

2018
US$000
(12,431)
12,418
(13)

(77)
(3)
(69)
(124)
743

(29)
441

2017
US$000
16,006
(15,992)
14

(1,196)
(328)
(1,023)
(5,543)
(292)

–
(8,382)

(3)

2016
US$000
(4,885)
4,882
(3)

If the US dollar was to depreciate or appreciate by 10% against each of the foreign currencies in respect of which there were effective
cash flow hedges in place as at 31 December 2018, there would be an incremental fair value gain of US$33,497 (2017: US$18,367)
or an incremental fair value loss of US$27,407 (2017: US$15,027), respectively, recognised in other comprehensive income that would
be reclassified to profit or loss on the occurrence of the hedged cash flows.

Currency translation risk arises on financial assets and liabilities that are denominated in a currency other than the functional currency of the
entity that holds them. The Group’s policy allows for such exposures to be hedged using currency derivatives.

During 2018 and 2017, we used forward currency contracts and currency swaps to hedge the translation exposure on the Euro-denominated
liabilities that arose in relation to successive tranches of the Company’s share buyback programme. At the end of 2018, we held outstanding
contracts to purchase €150.0 million at an average rate of US$1 = €0.86 as a hedge of the maximum obligation outstanding in relation to the
uncompleted tranche of share purchases.

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

32. Financial risk management continued

After taking into account currency hedging activities, the currency profile of the Group’s net financial assets/(liabilities) was as follows:

140

US dollar
Euro
Pound sterling
Taiwanese dollar
Other
Total

As at
31 December
2018
US$000
482,967
(6,434)
7,420
768
1,752
486,473

As at
31 December
2017
US$000
484,493
(10,637)
(4,104)
186
1,823
471,761

If the US dollar was to appreciate or depreciate by 10% against each of the foreign currencies in which financial assets and financial liabilities
were denominated as at 31 December 2018, there would be an exchange loss of US$351 (2017: gain of US$1,273) or an exchange gain of
US$351 (2017: loss of US$1,273), respectively, recognised in arriving at the Group’s profit before tax.

Currency translation risk also arises on consolidation in relation to the translation into US dollars of net investments in foreign operations but
the exposure is not significant because the US dollar is the functional currency of the Company and each of its principal subsidiaries.

b) Interest risk
The interest rate profile of the Group’s financial assets and liabilities was as follows:

Financial assets
Cash and cash equivalents
Trade and other receivables
Investments
Other financial assets
Total financial assets
Financial liabilities
Trade and other payables
Other financial liabilities
Total financial liabilities

As at 31 December 2018

Interest-bearing

Floating rate
US$000

Fixed rate
US$000

Non-interest
bearing
US$000

581,749
–
–
–
581,749

–
–
–

–
–
–
–
–

–
–
–

96,099
114,514
11,538
2,009
224,160

(122,140)
(197,731)
(319,871)

As at 31 December 2017

Interest-bearing

Floating rate
US$000

Fixed rate
US$000

Non-interest
bearing
US$000

334,195
–
–
–
334,195

–
–
–
–
–

–
–
–

–
(1,651)
(1,651)

145,100
78,186
46,155
8,739
278,180

(107,195)
(31,768)
(138,963)

Total
US$000

677,848
114,514
11,538
2,009
805,909

(122,140)
(197,731)
(319,871)

Total
US$000

479,295
78,186
46,155
8,739
612,375

(107,195)
(33,419)
(140,614)

The Group’s principal exposure to interest rate risk is in relation to interest income on investments in money market funds and short-term
deposits, which attract US dollar interest rates.

When applied to the Group’s floating interest rate exposures as at 31 December 2018, an increase or decrease of 50 basis points in market
interest rates would increase or decrease the Group’s profit before tax by US$2,875 (2017: US$1,645), respectively.

Dialog Semiconductor PlcAnnual report and accounts 2018141

32. Financial risk management continued

c) Other price risk
In November 2016 and July 2017, the Company subscribed for common shares and was granted warrants to purchase common shares
in Energous Corporation (“Energous”). Energous’ common shares are listed on NASDAQ. At the end of 2018, the fair value of the shares
held was US$10,073 and the fair value of the warrants was US$1,465. Changes in the fair value of the shares are recognised in other
comprehensive income and changes in the fair value of the warrants are recognised in profit or loss.

Assuming all other factors remain constant, the effect of a 10% increase in Energous’ share price as at 31 December 2018 would be to
increase the Group’s profit before tax by US$314 (2017: US$2,079) and to increase other comprehensive income by US$1,007 (2017:
US$3,384) and the effect of a 10% decrease in the share price would be to reduce the Group’s profit before tax by US$289 (2017: US$1,998)
and to reduce other comprehensive income by US$1,007 (2017: US$3,384).

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with its financial liabilities.

We regularly monitor cash flows at both Group and entity level. As at 31 December 2018, cash and cash equivalents amounted
to US$677,848 (2017: US$479,295).

In July 2017, the Company and certain of its subsidiaries, as guarantors, entered into a US$150 million three-year revolving credit facility
provided by four financial institutions. The facility is committed and available for general corporate purposes. In June 2018, the facility was
extended by a year at a reduced amount of US$112.5 million from July 2020 until it matures in July 2021. On the second anniversary of the
facility, we have the option to extend the facility for a further year subject to the consent of the lenders. We also have the option to increase
the amount of the facility by US$75 million subject to certain conditions. The credit agreement contains various provisions, covenants and
representations that are customary for such a facility.

The facility remained undrawn as at 31 December 2018.

Contractual undiscounted future cash flows related to the Group’s financial liabilities were as follows:

Trade and other payables
Finance lease and hire purchase obligations
Deferred consideration
Contingent consideration
Share buyback obligation
Other non-derivative liabilities
Cash flows on non-derivative liabilities
Cash flows on derivative liabilities
– Payments
– Receipts
Cash flows on financial liabilities

Capital management

As at 31 December 2018

As at 31 December 2017

Within 3 months
US$000
122,140
–
712
16,730
171,763
189,205
311,345

3 to 12 months
US$000
–
–
1,620
–
–
1,620
1,620

1 to 5 years
US$000
–
–
841
–
–
841
841

Within 3 months
US$000
107,195
834
3,144
9,343
–
13,321
120,516

3 to 12 months
US$000
–
817
2,312
–
–
3,129
3,129

1 to 5 years
US$000
–
–
2,506
17,626
–
20,132
20,132

49,875
(46,018)
315,202

253,620
(248,172)
7,068

–
–
841

4,618
(4,552)
120,582

45,256
(44,882)
3,503

–
–
20,132

The Group’s capital is represented by its total equity. As at 31 December 2018, the Group’s total equity was US$1,302,507
(2017: US$1,342,421).

We seek to maintain a capital structure that supports the ongoing activities of our business and its strategic objectives in order to
deliver long-term returns to shareholders. We allocate capital to support organic and inorganic growth, investing to support research
and development and our product pipeline. We will fund our growth strategy using a mix of equity and debt after giving consideration
to prevailing market conditions.

In May 2016, we initiated a share buyback programme as part of our strategy to deliver shareholder returns. Between May 2016
and June 2017, we returned €168.65 million (US$184,656) to shareholders under the first three tranches of the programme.
In November 2018, we announced details of a further tranche of the programme under which we have committed to purchase
shares with a minimum cost of €100.0 million and a maximum cost of €150.0 million.

We will seek renewal of the share buyback authority at the Company’s 2019 AGM. We will consider initiating further tranches of share
purchases in the context of our regular assessment of the Group’s future growth opportunities and its strategic objectives.

Dialog Semiconductor PlcAnnual report and accounts 2018142

Notes to the consolidated financial statements continued

33. Segment and geographic information

a) Analysis by operating segment

Segment information is presented in the financial statements on a basis consistent with the information presented to the Management Team
(the “chief operating decision-maker”) for the purposes of allocating resources within the Group and assessing the performance of the Group’s
businesses. Members of the Management Team are identified on pages 60 and 61.

The Group’s reportable segments are determined based on the nature of the products that they provide to our customers and are as follows:
Mobile Systems; Automotive & Industrial; Connectivity; and Advanced Mixed Signal.
U Mobile Systems provides power management and audio chips designed to meet the needs of the wireless systems markets and a range

of advanced driver technologies for low power display applications – from PMOLEDs to electronic paper and MEMS displays.

U Automotive & Industrial’s products address the safety, management and control of electronic systems in cars and for industrial applications.
U Connectivity’s products include short-range wireless, digital cordless, Bluetooth® and VoIP technology.
U Advanced Mixed Signal’s products include CMICs, AC/DC converter solutions for smaller, fast charging power adaptors for portable

devices as well as LED drivers for solid state lighting products.

No operating segments have been aggregated in determining our reportable segments. Each operating segment has a manager who
is responsible for its performance and is accountable to the Chief Executive Officer.

The Management Team uses operating profit as the principal measure of the profitability of each of the Group’s operating segments.
Operating profit is, therefore, the measure of segment profit presented in the Group’s segment disclosures. Whilst the Management Team
also uses underlying operating profit to measure segment profitability, this is used as a supplement to operating profit. In addition to our
reportable segments, we present information for Corporate activities. Corporate activities do not meet the definition of an operating segment.
Corporate activities principally comprise the costs of operating central corporate functions, the Group’s share-based compensation
expense and certain other unallocated costs. In 2016, Corporate activities also included the termination fee of US$137,300 that was
paid to us by Atmel.

Revenue and operating profit by segments are as follows:

Mobile Systems
Connectivity
Automotive & Industrial
Advanced Mixed Signal
Total segments
Corporate activities
Total Group
Interest income
Interest expense
Other finance (expense)/income
Profit before income taxes

2018
US$000
1,029,561
148,772
32,686
229,840
1,440,859
1,279
1,442,138

Revenue⁽¹⁾

2017
US$000
1,042,908
136,443
32,975
132,714
1,345,040
7,801
1,352,841

2016
US$000
922,946
118,334
30,014
116,808
1,188,102
9,509
1,197,611

Operating profit/(loss)

2018
US$000
248,440
16,924
11,706
1,822
278,892
(79,185)
199,707
9,883
(3,134)
(10,263)
196,193

2017
US$000
271,716
14,276
12,575
(15,127)
283,440
(96,423)
187,017
5,995
(1,302)
3,093
194,803

2016
US$000
239,859
5,342
10,126
(7,535)
247,792
62,015
309,807
3,665
(3,447)
(4,819)
305,206

1 Revenue is from sales to external customers (there were no inter-segment sales).

Dialog Semiconductor PlcAnnual report and accounts 2018143

33. Segment and geographic information continued

Other segment information is as follows:

Year ended 31 December 2018
Research and development expenses
Write-down of inventories
Fixed assets⁽¹⁾:
– Additions⁽²⁾
– Depreciation/amortisation
– Loss on disposal
Integration costs
Corporate transaction costs

Year ended 31 December 2017
Research and development expenses⁽³⁾
Write-down of inventories
Fixed assets⁽¹⁾:
– Additions⁽²⁾
– Depreciation/amortisation
– Loss on disposal
Impairment of non-current assets held by Dyna Image
(notes 15 & 16)
Loss on deconsolidation of Dyna Image (note 4)
Acquisition-related costs
Integration costs

Year ended 31 December 2016
Research and development expenses⁽³⁾
Write-down of inventories
Fixed assets⁽¹⁾:
– Additions⁽²⁾
– Depreciation/amortisation
– Loss on disposal
Atmel termination fee (note 3)
Corporate transaction costs

Mobile
Systems
US$000

Connectivity
US$000

Automotive &
Industrial
US$000

Advanced
Mixed Signal
US$000

Total
segments
US$000

Corporate
activities
US$000

Total Group
US$000

193,672
4,336

36,051
41,844
788
–
–

40,114
225

9,558
10,261
4
–
–

179,990
39

36,230
327

43,939
41,609
414

9,198
9,193
2

–
–
–
–

1,583
(59)

55,154
1,073

290,523
5,575

35,786
68

326,309
5,643

262
694
–
–
–

1,217
60

163
620
3

–
–
–
–

9,703
27,262
27
1,385
–

55,574
80,061
819
1,385
–

1,787
524
104
1,380
11,346

57,361
80,585
923
2,765
11,346

35,796
944

253,233
1,370

49,780
(82)

303,013
1,288

11,467
19,092
–

64,767
70,514
419

–
–
–
–

7,587
2,262
172

(4,327)
(5,597)
4,539
2,305

72,354
72,776
591

(4,327)
(5,597)
4,539
2,305

160,113
2,236

33,260
238

1,236
165

29,274
1,652

223,883
4,291

37,395
84

261,278
4,375

33,915
36,695
305
–
–

7,137
6,892
–
–
–

192
702
–
–
–

4,647
17,294
145
–
–

45,891
61,583
450
–
–

8,047
2,234
1,119
137,300
3,485

53,938
63,817
1,569
137,300
3,485

1 Non-current assets excluding investments and deferred tax assets.
2 Additions to fixed assets comprise the cost of items acquired separately and the fair value of items acquired in business combinations.
3 Certain product development costs have been reclassified from cost of sales to research and development expenses (see note 1).

b) Geographic information

Revenue by shipment destination
United Kingdom
Other European countries
Mainland China
Hong Kong
Other Asian countries
Rest of the world
Total

2018
US$000

2017
US$000

2016
US$000

647
40,816
1,027,976
288,838
72,642
11,219
1,442,138

529
46,432
1,034,847
196,722
61,111
13,200
1,352,841

421
48,063
884,187
212,261
41,013
11,666
1,197,611

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

33. Segment and geographic information continued

144

Non-current assets⁽¹⁾ by location
United Kingdom
Germany
Netherlands
USA
Taiwan
Rest of the world
Total

1 Non-current assets excluding investments and deferred tax assets.

c) Information about major customers

As at
31 December
2018
US$000

As at
31 December
2017
US$000

As at
31 December
2016
US$000

47,909
43,511
56,501
568,755
1,507
7,334
725,517

48,761
58,782
52,791
589,753
2,222
9,299
761,608

96,890
44,992
49,982
236,245
13,196
6,444
447,749

During each of the years ended 31 December 2018, 2017 and 2016, there was only one customer, Apple Inc. (“Apple”), that accounted for
more than 10% of the Group’s revenue. In 2018, revenue from Apple was US$1,081,532, of which US$1,015,630 was recognised in the Mobile
Systems segment and US$65,902 was recognised in the Advanced Mixed Signal segment. In 2017, revenue from Apple was US$1,042,669,
of which US$1,035,412 was recognised in the Mobile Systems segment and US$7,257 was recognised in the Advanced Mixed Signal
segment. In 2016, revenue from Apple was US$889,904, which was recognised wholly in the Mobile Systems segment.

34. Transactions with related parties

Key management personnel

For the purpose of these disclosures, the Group’s key management personnel comprise the Management Team (which includes the
Company’s Executive Director) and the Company’s non-executive Directors.

Compensation of the Group’s key management personnel was as follows:

Short-term employee benefits
Post-employment benefits
Share-based compensation
Total

2018
US$000
9,196
237
11,952
21,385

2017
US$000
6,712
267
10,895
17,874

2016
US$000
7,278
224
10,751
18,253

Current members of the Company’s Board are identified on pages 58 and 59 and current members of the Management Team are identified
on pages 60 and 61.

Statutory information about Directors’ remuneration is presented in the Directors’ remuneration report on pages 70 to 85.

During 2018, the aggregate emoluments payable to Directors in respect of qualifying services to the Company amounted to US$2,947
(2017: US$3,370; 2016: US$2,262). Share options and awards granted to the Executive Director under long-term incentive plans that
have vested or will vest based on the Group’s and/or the Executive Director’s performance over a period ending during the year had
an estimated value on vesting of US$1,068 (2017: US$1,399; 2016: US$4,529).

Other related party transactions

During the years ended 31 December 2018, 2017 and 2016, there were no other related party transactions that are required to be reported
in these consolidated financial statements.

Dialog Semiconductor PlcAnnual report and accounts 2018145

35. Adoption of IFRS 15 and IFRS 9

Introduction

We adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments with effect from 1 January 2018. We explain
below the changes that were made to the Group’s significant accounting policies as a consequence of the adoption of these standards and
their effect on the Group’s results and financial position.

IFRS 15 Revenue from Contracts with Customers

Background
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18
Revenue, IAS 11 Construction Contracts and related interpretations.

IFRS 15 provides a single, principles-based five-step model to be applied to all contracts with customers. The five steps in the model are
as follows: identify the contract with the customer; identify the performance obligations in the contract; determine the transaction price;
allocate the transaction price to the performance obligations in the contract; and recognise revenue when (or as) the performance obligations
are satisfied.

Changes in revenue recognition policy
We generate revenue principally through the sale of our products. Relatively small amounts of revenue are generated from royalties for the use
of intellectual property assets and from research and development contracts.

Sale of products
Prior to adopting IFRS 15, revenue from the sale of products was recognised when the significant risks and rewards of ownership had
been transferred to the customer, the amount of revenue could be measured reliably and it was probable that payment would be received.
We considered that these conditions were met when the products were transferred to the customer, except in the case of sales to distributors
on “ship and debit” terms.

Where we sell to a distributor on ship and debit terms, the distributor may be entitled to a rebate if the distributor sells the product to end
customers at a price lower than the price at which the distributor purchased the products from us. We therefore consider that we retain
significant risks of ownership and therefore did not recognise revenue until the distributor had sold the products to end customers.

Under IFRS 15, revenue from the sale of products is recognised when the customer obtains control of the products. We consider that control
passes when the products are transferred to the customer. Accordingly, where products are sold on “ex-works” incoterms, revenue is
recognised when the products are released for collection by the customer. Otherwise, revenue is recognised when the products are delivered
to the customer. Where products are supplied on a consignment basis, delivery takes place and revenue is recognised when the products are
taken out of the consignment by the customer.

IFRS 15 had no effect on the recognition and measurement of revenue from the sale of products, except in relation to sales to distributors on
ship and debit terms. Revenue on sales to distributors on ship and debit terms is now recognised when the products are transferred to the
distributor rather than when the products are sold by the distributor to end customers. Revenue from sales to distributors on ship and debit
terms is therefore now recognised earlier than it would have been prior to the adoption of IFRS 15.

Revenue recognised on the sale of products is measured at the fair value of the consideration received or receivable, excluding sales taxes
and after making allowance for rebates and product returns.

Rebates are estimated using the expected value method based on actual rebates granted at the distributor and product level during
the preceding quarter so as to reflect current pricing trends. As a consequence of our pricing policy, allowances for rebates on sales to
distributors on ship and debit terms typically represent a significant proportion of the list price of the products.

Other revenue
IFRS 15 did not affect the recognition and measurement of royalty income and income from research and development contracts.

Revenue from royalties is recognised on an accruals basis in accordance with the terms of the relevant licensing agreements.

Revenue from research and development contracts is recognised by reference to the stage of completion of the contract, which is
represented by the costs incurred for work performed to date as a percentage of the estimated total contract costs. If it is probable that
a contract will be loss making, the expected loss is recognised immediately as an expense in profit or loss.

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the consolidated financial statements continued

35. Adoption of IFRS 15 and IFRS 9 continued

Financial effect of adopting IFRS 15
We adopted IFRS 15 with effect from 1 January 2018 using the modified retrospective approach, whereby information for prior periods has not
been restated but a cumulative effect adjustment was made to the opening balance of retained earnings which represented the cumulative
effect of the earlier recognition of revenue sales to distributors on ship and debit terms.

As at 1 January 2018, we recognised a credit to equity of US$1,541 on adoption of IFRS 15, which may be analysed as follows:

146

Deferred revenue
Sales rebate allowance
Returns liability
Revenue recognised in equity
Deferred cost of sales
Returns asset
Royalty allowance
Cost of sales recognised in equity
Credit to equity before income taxes
Income tax expense
Credit to equity after income taxes

In the following tables, we summarise the effect of adopting IFRS 15 on the consolidated statement of income for the year ended
31 December 2018 and on the consolidated balance sheet as at 31 December 2018. The adoption of IFRS 15 had no effect on other
comprehensive income or on the statement of cash flows.

Consolidated statement of income for the year ended 31 December 2018

US$000
8,578
(3,367)
(1,156)
4,055
(2,738)
659
(24)
(2,103)
1,952
(411)
1,541

Revenue
Cost of sales
Gross profit
Operating profit
Profit before income taxes
Income tax expense
Profit after income taxes
Net income
Earnings per share (US$)
Basic
Diluted

Consolidated balance sheet as at 31 December 2018

Assets
Other current assets
Total current assets
Total non-current assets
Total assets
Liabilities and equity
Income taxes payable
Other current liabilities
Total current liabilities
Total non-current liabilities
Retained earnings
Total equity
Total liabilities and equity

As reported
under IFRS 15
US$000
1,442,138
(751,070)
691,068
199,707
196,193
(55,281)
140,912
139,799

Adjustment for
effect of IFRS 15
US$000
(10,137)
6,896
(3,241)
(3,241)
(3,241)
622
(2,619)
(2,619)

Amounts under
IAS 18
US$000
1,432,001
(744,174)
687,827
196,466
192,952
(54,659)
138,293
137,180

1.89
1.80

(0.04)
(0.03)

1.85
1.77

As reported
under IFRS 15
US$000

Adjustment for
effect of IFRS 15
US$000

Amounts under
IAS 18
US$000

18,306
974,047
743,089
1,717,136

8,193
58,237
393,880
20,749
930,576
1,302,507
1,717,136

(637)
(637)
–
(637)

(1,032)
4,555
3,523
–
(4,160)
(4,160)
(637)

17,669
973,410
743,089
1,716,499

7,161
62,792
397,403
20,749
926,416
1,298,347
1,716,499

Dialog Semiconductor PlcAnnual report and accounts 2018147

35. Adoption of IFRS 15 and IFRS 9 continued

IFRS 9 Financial Instruments

Background
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial
items. It replaced IAS 39 Financial Instruments: Recognition and Measurement.

IFRS 9 introduced a new model for classification and measurement of financial assets and financial liabilities, a single, forward-looking
“expected loss” model for measuring impairment of financial assets (including trade receivables) and a new approach to hedge accounting
that is more closely aligned with risk management activities.

Classification and measurement of financial assets and liabilities
IFRS 9 largely retained the requirements of IAS 39 for the classification of financial liabilities but changed the classification of financial assets.

Under IFRS 9, a financial asset must be classified on initial recognition as measured at amortised cost, fair value through other comprehensive
income (“FVOCI”) or fair value through profit or loss (“FVTPL”). IFRS 9 eliminated the IAS 39 categories for financial assets of held to maturity,
loans and receivables and available-for-sale.

Classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its
contractual cash flow characteristics. A financial asset is measured at amortised cost if it is held with the objective of collecting the contractual
cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding. All other financial assets are measured at fair value.

We have a strategic investment in the common shares of Energous Corporation that we intend to hold for the long term. As permitted by
IFRS 9, we have irrevocably elected to present changes in the fair value of this equity investment in other comprehensive income rather than
in profit or loss. Consequently, fair value gains or losses arising subsequent to 1 January 2018 that may be realised on any future sale of all
or part of this investment will not be reclassified to profit or loss.

We have not chosen to designate any financial assets or financial liabilities at FVTPL that would otherwise be classified as measured at
amortised cost or FVOCI.

In the following table, we present the previous classification under IAS 39 of financial assets and financial liabilities held by the Group as at
1 January 2018 and their new classification under IFRS 9. It can be seen that there was no change in the basis of measurement of the financial
assets or financial liabilities held by the Group as a result of their reclassification in accordance with IFRS 9.

Financial assets
Cash and cash equivalents
Trade and other receivables
Investments:
– Energous shares
– Energous warrants
Other financial assets:
– Currency derivatives
– Rental and other deposits

Financial liabilities
Trade and other payables
Other financial liabilities:
– Hire purchase and finance lease obligations
– Currency derivatives
– Deferred consideration
– Contingent consideration

Classification under IAS 39

Classification under IFRS 9

Loans and receivables (amortised cost) Amortised cost
Loans and receivables (amortised cost) Amortised cost

Available-for-sale
FVTPL

FVOCI – equity instrument
FVTPL

Fair value – hedging instruments
Loans and receivables (amortised cost) Amortised cost

Fair value – hedging instruments

Amortised cost

Amortised cost
Fair value – hedging instruments
Amortised cost
FVTPL

Impairment of financial assets
Where appropriate, financial assets that are measured at amortised cost are stated net of an allowance for credit losses. IFRS 9 replaced
the “incurred loss” model in IAS 39 with an “expected credit loss” model.

Trade receivables
As permitted by IFRS 9, we recognise an allowance for credit losses in respect of trade receivables from initial recognition measured as the
amount of the lifetime expected credit losses. We previously recognised a credit loss allowance only when there was objective evidence that
we may not be able to collect the amount due.

Dialog is a business-to-business supplier with many established customers, several of which are large multi-national businesses, and has
a record of insignificant credit losses. Before accepting a new customer, we assess the potential customer’s credit quality and establish a
credit limit. Credit quality is assessed using data maintained by reputable credit rating agencies, by checking references included in credit
applications and, where they are available, by reviewing the customer’s recent financial statements. Credit limits are subject to multiple levels
of authorisation and are reviewed on a regular basis.

Against this background, we determined that there was no appreciable difference between the credit loss allowance that we recognised
against trade receivables using the incurred loss model under IAS 39 and that recognised using the expected credit loss model on adoption
of IFRS 9.

Dialog Semiconductor PlcAnnual report and accounts 2018148

Notes to the consolidated financial statements continued

35. Adoption of IFRS 15 and IFRS 9 continued

Cash and cash equivalents
Under IFRS 9, we normally recognise an allowance for credit losses in respect of cash and cash equivalents that is measured as the
amount of expected credit losses over the next 12 months. If, however, the risk of default has increased significantly since initial recognition,
we measure the allowance as the amount of lifetime credit losses. We previously recognised a credit loss allowance only when there was
objective evidence of default.

Hedge accounting
We use forward currency contracts principally to hedge our exposure to exchange rate movements on forecast operating expenses and tax
cash flows denominated in foreign currencies, principally the Euro and the pound sterling. Where possible, these contracts are designated as
hedging instruments in cash flow hedge relationships.

We have elected to adopt the new general hedge accounting model in IFRS 9, which requires us to ensure that hedge accounting
relationships are aligned with our risk management objectives and strategy and to apply a more qualitative and forward-looking approach to
assessing hedge effectiveness than was the case under IAS 39. Whilst hedges must still be expected to be highly effective on inception and
in subsequent periods, the requirement of IAS 39 for the actual effectiveness of the hedge to be within a specified range in order for hedge
accounting to continue has been removed under IFRS 9.

We applied the hedge accounting requirements of IFRS 9 prospectively with effect from 1 January 2018. All hedging relationships designated
under IAS 39 as at 31 December 2017 met the criteria for hedge accounting under IFRS 9 as at 1 January 2018 and were therefore regarded
as continuing hedging relationships.

Financial effect of adopting IFRS 9
We adopted the classification and measurement (including impairment) requirements of IFRS 9 with effect from 1 January 2018 using the
modified retrospective approach, whereby information for prior periods has not been restated to reflect these requirements.

We recognised no changes in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 and,
therefore, there was no cumulative effect adjustment to the opening balance of equity as at 1 January 2018.

Dialog Semiconductor PlcAnnual report and accounts 2018Company balance sheet

As at 31 December

Assets
Cash and cash equivalents
Other financial assets
Income tax receivable
Amounts owed by group undertakings
Other current assets

Assets classified as held for sale
Total current assets
Investments in subsidiaries
Other investments
Intangible assets
Other non-current assets
Total non-current assets
Total assets
Liabilities and equity
Amounts owed to group undertakings
Trade and other payables
Other financial liabilities
Income tax payable
Other payables
Total current liabilities
Non-current liabilities
Ordinary shares
Share premium account
Retained earnings
Other reserves
Dialog shares held by employee benefit trusts
Total equity
Total liabilities and equity

149

Note

2018
US$000

2017
US$000

577,945
202
612
32,593
2,618
613,970
1,944
615,914
855,299
11,538
190
398
867,425
1,483,339

377,757
3,158
178,146
–
89
559,150
7,087
14,204
403,660
536,108
(14,356)
(22,514)
917,102
1,483,339

326,543
6,649
–
179,618
723
513,533
–
513,533
840,109
47,034
318
503
887,964
1,401,497

363,923
3,119
97
4,938
124
372,201
8,671
14,204
403,660
595,270
8,393
(902)
1,020,625
1,401,497

4
5

These financial statements were approved by the Board of Directors on 6 March 2019 and were signed on its behalf by:

Dr Jalal Bagherli
Director

Dialog Semiconductor PlcAnnual report and accounts 2018Company statement of changes in equity

Year ended 31 December

150

As at 31 December 2016
Net income
Other comprehensive income
Total comprehensive income
Other changes in equity:
– Shares issued to employee benefit trust
– Purchase of own shares into treasury
– Share buyback obligation
– Cancellation of treasury shares
– Purchase of shares by employee benefit trusts
– Sale of shares by employee benefit trusts
As at 31 December 2017
Net income
Other comprehensive loss
Total comprehensive income/(loss)
Other changes in equity:
– Share buyback obligation
– Purchase of shares by employee benefit trusts
– Sale of shares by employee benefit trusts
As at 31 December 2018

Ordinary
shares
US$000
14,402
–
–
–

373
–
–
(571)
–
–
14,204
–
–
–

–
–
–
14,204

Share
premium
account
US$000
403,687
–
–
–

(27)
–
–
–
–
–
403,660
–
–
–

–
–
–
403,660

Retained
earnings
US$000
456,350
296,968
–
296,968

–
3,024
62,584
(186,522)
–
(37,134)
595,270
108,582
–
108,582

(171,187)
–
3,443
536,108

Other
reserves
(note 8)
US$000
(58,606)
–
4,956
4,956

–
(125,050)
–
187,093
–
–
8,393
–
(22,749)
(22,749)

–
–
–
(14,356)

Dialog shares
held by
employee
benefit trusts
US$000
(20,608)
–
–
–

(373)
–
–
–
(24,301)
44,380
(902)
–
–
–

–
(21,786)
174
(22,514)

Total
US$000
795,225
296,968
4,956
301,924

(27)
(122,026)
62,584
–
(24,301)
7,246
1,020,625
108,582
(22,749)
85,833

(171,187)
(21,786)
3,617
917,102

Dialog Semiconductor PlcAnnual report and accounts 2018151

Notes to the Company financial statements

For the year ended 31 December 2018

1. Background

Description of business

Dialog Semiconductor Plc (“the Company”) is a public limited company that is incorporated and domiciled in the United Kingdom.
The Company’s ordinary shares are listed on the Frankfurt Stock Exchange.

The Company is the ultimate parent of a group of companies that creates and markets highly-integrated, mixed-signal integrated circuits,
optimised for personal, portable, hand-held devices, low energy short-range wireless, LED solid state lighting and automotive applications.

Statement of compliance

The Company’s separate financial statements on pages 149 to 155 have been prepared in accordance with FRS 101 Reduced Disclosure
Framework and those parts of the Companies Act 2006 that are applicable to companies reporting under FRS 101. Accordingly, the
Company’s separate financial statements comply with the recognition and measurement requirements of IFRS as adopted for use in the
European Union but they exclude certain disclosures that would otherwise be required under that body of accounting standards.

Basis of preparation

The Company’s separate financial statements have been prepared on a going concern basis and in accordance with the historical cost
convention, except that certain investments and derivative financial instruments are stated at their fair value.

The Company’s significant accounting policies are set out in note 2.

Presentation currency

The Company’s separate financial statements are presented in US dollars (“US$”), which is the Company’s functional currency. All US dollar
amounts are rounded to the nearest thousand (“US$000”), except where otherwise stated.

Disclosure exemptions utilised under FRS 101

In preparing the Company’s separate financial statements, the Directors utilised the following exemptions from the disclosure requirements
of IFRS adopted for use in the European Union that are available to them under FRS 101:
U Paragraphs 45(b) (number and weighted average exercise prices of share options) and 46 to 52 (determination of fair value of options

and awards granted and financial effect of share-based compensation) of IFRS 2 Share-based Payment.

U IFRS 7 Financial Instruments – Disclosures.
U Paragraphs 91 to 99 (disclosure requirements) of IFRS 13 Fair Value Measurement.
U Paragraph 38 of IAS 1 Presentation of Financial Statements with regard to comparative information requirements in respect of paragraph

79(a)(iv) of IAS 1 (reconciliation of the number of the Company’s shares outstanding at the beginning and end of the period).

U Paragraphs 10(d) (statement of cash flows), 16 (statement of compliance with IFRS), 38(A to D) (comparative information),
111 (statement of cash flows) and 134 to 136 (disclosures about capital) of IAS 1 Presentation of Financial Statements.

U IAS 7 Statement of Cash Flows.
U Paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (discussion of IFRSs issued by the IASB

but not yet adopted by the Company).

U Paragraph 17 of IAS 24 Related Party Disclosures (compensation of key management personnel) and the further requirement in IAS 24

to disclose related party transactions entered into with a subsidiary, provided the subsidiary is wholly-owned by the Company.

Approval of the financial statements

The Company’s separate financial statements for the year ended 31 December 2018 were authorised for issue by the Board of Directors
on 6 March 2019.

Accounting standards adopted during the year

IFRS 9 Financial Instruments
The Company adopted IFRS 9 with effect from 1 January 2018.

The Company adopted the classification and measurement (including impairment) requirements of IFRS 9 using the modified retrospective
approach, whereby information presented for prior periods has not been restated. An explanation of the changes introduced by IFRS 9
is provided in note 35 to the consolidated financial statements.

The Company also adopted the hedge accounting requirements of IFRS 9 but does not currently apply hedge accounting to any
of its economic hedges.

Adoption of IFRS 9 had no impact on the Company’s results or financial position.

Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
With effect from 1 January 2018, the Company adopted amendments to IFRS 2 Share-based Payments which, among other
things, clarified the classification of share-based payment transactions with net settlement features for withholding tax obligations.
Adoption of the amendments had no impact on the Company’s results or financial position.

IFRS 15 Revenue from Contracts with Customers
The Company adopted IFRS 15 with effect from 1 January 2018. Since the Company does not currently enter into contracts that fall
within the scope of IFRS 15, its adoption had no impact on the Company’s results or financial position.

Dialog Semiconductor PlcAnnual report and accounts 2018152

Notes to the Company financial statements continued

2. Significant accounting policies

Investments in subsidiaries

A subsidiary is an entity that is controlled, either directly or indirectly, by the Company. Control exists when the Company is exposed, or has
rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities
of the entity that significantly affect its returns.

Investments in subsidiaries represent interests in the Company’s subsidiaries that are directly owned by the Company. Unless classified as
held for sale, investments in subsidiaries are stated at cost less provision for impairment.

Investment in associate

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in financial
and operating policy decisions but not to control or jointly control them. Significant influence generally exists where the Company holds,
directly or indirectly through one or more of its subsidiaries, more than 20% and less than 50% of the shareholders’ voting rights.

Prior to its reclassification as held for sale, the Company’s investment in its associate was stated at cost less provision for impairment.

Foreign currency translation

Transactions denominated in foreign currencies are recorded in US dollars at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the balance sheet date.
Currency translation differences are recognised in profit or loss.

Financial instruments

(a) Amounts owed by/to group undertakings
Amounts owed by/to group undertakings are initially measured at fair value and are subsequently measured at amortised cost using the
effective interest method.

(b) Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, investments in money market funds and short-term deposits with an original
maturity of three months or less.

(c) Equity investments
Equity investments are initially measured at fair value plus transaction costs, if any. Equity investments are subsequently measured at fair value
with resulting gains and losses recognised in profit or loss unless the Company irrevocably elects on initial recognition for such gains and
losses to be recognised in other comprehensive income. The Company has made this election in respect of its investment in the common
shares of Energous Corporation.

(d) Derivative financial instruments
The Company holds derivative financial instruments that are used to reduce its exposure or that of its subsidiaries to currency exchange rate
movements. The Company also holds equity options and warrants in relation to certain of its strategic investments. The Company does not
hold or issue derivatives for speculative purposes.

All derivative financial instruments held by the Company are measured at fair value. All fair value gains and losses are recognised in profit or
loss. Where the fair value of a derivative on initial recognition differs from the transaction price, if any, the difference is recognised immediately
in profit or loss only if the fair value is evidenced by a quoted price in an active market or is based on a valuation technique that uses only data
from observable markets.

Assets classified as held for sale

An asset is classified as held for sale if its carrying amount will be recovered by sale, it is available for immediate sale in its present condition
and management has committed to, and has initiated, a plan to sell the asset which, when initiated, was expected to result in a completed
sale within 12 months. Assets that are classified as held for sale are measured at the lower of their carrying amount when classified as held
for sale and fair value less costs to sell.

Dialog Semiconductor PlcAnnual report and accounts 2018153

2. Significant accounting policies continued

Income taxes

Current tax is the amount of tax payable or recoverable in respect of the taxable profit or loss for the period.

Share-based compensation

The Company operates share-based compensation plans under which it grants options and other awards over its ordinary shares
to employees of its subsidiaries. Awards granted under the existing plans are classified as equity-settled awards.

The Company recognises a compensation expense that is based on the fair value of the awards measured at the grant date using
the Black-Scholes option pricing formula or a Monte Carlo valuation model.

Shares held by employee benefit trusts

The Company provides finance to two trusts to purchase the Company’s ordinary shares in order to meet its obligations under its share-based
compensation plans. When the trusts purchase such shares, the cost of the shares is debited to equity and subsequent sales or transfers of
the shares by the trusts are accounted for within equity.

Treasury shares

Treasury shares comprise the Company’s ordinary shares that have been purchased under the Company’s share buyback programme.
Purchases made under the programme are off market and are effected by way of contingent forward share purchase contracts with third-
party brokers. Subsequent sales, transfers or cancellations of treasury shares held by the Company are accounted for within equity.

3. Income statement

As permitted by section 408 of the Companies Act 2006, the Company’s income statement has not been included in these financial
statements. The Company’s profit after tax was US$108,582 (2017: US$296,968).

During 2018, the Company had no employees (2017: none).

Directors’ remuneration is set out in the Directors’ remuneration report on pages 70 to 85.

Fees payable to the Company’s auditors, Deloitte LLP, are set out in note 7 to the consolidated financial statements.

4. Investments in subsidiaries

Movements in the carrying amount of subsidiaries owned directly by the Company were as follows:

As at 31 December 2017
Additions
Reclassification as asset held for sale (note 6)
As at 31 December 2018

Details of the Company’s subsidiaries as at 31 December 2018 are set out on page 167.

US$000
840,109
15,203
(13)
855,299

Dialog Semiconductor PlcAnnual report and accounts 2018Notes to the Company financial statements continued

5. Other investments

Other investments were as follows:

Investment in associate (note 6)
Strategic investments
Equity investments:
– Energous shares
Derivative financial instruments:
– Energous warrants
Total strategic investments
Total other investments

Energous shares and warrants

154

2018
US$000
–

2017
US$000
879

10,073

33,837

1,465
11,538
11,538

12,318
46,155
47,034

In November 2016, the Company entered into a strategic alliance with Energous Corporation (“Energous”), the developer of WattUp®,
a wire-free charging technology. At that time, the Company subscribed for 763,552 common shares in Energous and was granted warrants
to purchase up to 763,552 common shares that are exercisable in full or in part on a cashless basis at any time between May 2017 and
November 2019. The Company initially recognised the warrants at their grant date fair value of US$4,695 and an equivalent deferred credit
within non-current liabilities. The Company will amortise the deferred credit to profit or loss in relation to the royalties that may be payable
for the use of Energous’ Intellectual Property over the initial seven-year term of the strategic alliance. Amortisation of the deferred credit
has not yet commenced.

On 5 July 2017, the Company subscribed for a further 976,139 common shares in Energous at a cost of US$15,000 and was granted a
second tranche of warrants to purchase up to 654,013 common shares that are exercisable in full or in part on a cashless basis at any time
between January 2018 and July 2020. The Company initially recognised the second tranche of the warrants at their grant date fair value of
US$4,753 and an equivalent deferred credit within non-current liabilities. The Company is amortising the deferred credit to profit or loss over
the three-year period from the grant date to the expiry of the warrants.

During 2018, the Company recognised a fair value loss on the shares of US$23,764 (2017: gain of US$5,971) in other comprehensive income
and a fair value loss of US$10,853 (2017: gain of US$941) on the warrants in profit or loss. Also during 2018, the Company recognised
a credit of US$1,584 (2017: credit of US$776) in profit or loss on the amortisation of the fair value on initial recognition of the second tranche
of the warrants.

6. Assets classified as held for sale

Investment in subsidiary

On 11 October 2018, the Company entered into an asset transfer agreement into with Apple Inc. (“Apple”), pursuant to which it will sell to
Apple its shareholding in its wholly-owned subsidiary, Dialog Semiconductor (Italy) S.R.L. The transaction is expected to complete in the first
half of 2019, subject to regulatory approvals and other customary closing conditions. Accordingly, the Company has reclassified its investment
as an asset held for sale at its carrying amount of US$13.

Investment in associate

As at 31 December 2018, the Company held a 38.7% ownership interest in Dyna Image Corporation (“Dyna Image”). Details of the associate
are set out on page 167.

On 7 December 2018, the Company entered into an agreement to dispose of its shareholding in Dyna Image for which it expects to receive
consideration of between US$1.9 million and US$4.2 million. On entering into the sale agreement, the carrying amount of the investment was
remeasured with the effect that US$1,052 of the impairment loss recognised on the investment in previous years was reversed as a credit
to profit or loss. The transaction is expected to complete in the first half of 2019, subject to applicable regulatory approvals. Accordingly,
the Company has reclassified its investment in Dyna Image as an asset held for sale at its carrying amount of US$1,931.

7. Income tax

As at 31 December 2018, there was current tax receivable of US$612 representing tax overpaid. As at 31 December 2017, there was
current tax payable of US$4,938, which arose because UK tax laws restricted the utilisation of available tax loss carryforwards to offset
the Company’s taxable profit.

As at 31 December 2017, deferred tax assets were recognised for tax loss carryforwards of US$5,971 to offset deferred tax liabilities
recognised in relation to remeasurement gains on equity investments. During 2018, the remeasurement gains were eliminated due to a
significant decline in the fair value of the investments and the related deferred tax liabilities and deferred tax assets were derecognised.
As at 31 December 2018, no deferred tax assets were recognised.

As at 31 December 2018, deferred tax assets were not recognised for tax loss carryforwards of US$10,016 (2017: US$3,783) and deductible
temporary differences of US$53 (2017: US$135) because it is not considered probable that taxable profits will be available in the future against
which they can be utilised.

Dialog Semiconductor PlcAnnual report and accounts 2018155

8. Share capital and reserves

a) Share capital and share premium account

Details of the Company’s share capital are set out in note 25 to the consolidated financial statements.

The share premium account represents the difference between the nominal value of shares issued and the fair value of the consideration
received. The share premium account is not distributable but may be used for certain purposes specified by United Kingdom law, including to
write off expenses on any issue of shares and to pay up fully paid bonus shares.

b) Other reserves

Movements on other reserves were as follows:

As at 31 December 2016
Other comprehensive income/(loss):
– Fair value loss on available-for-sale investments
– Income tax expense
Other changes in equity:
– Purchase of own shares into treasury
– Cancellation of treasury shares
As at 31 December 2017
Other comprehensive loss:
– Fair value loss on equity investments
– Income tax credit
As at 31 December 2018

Capital
redemption
reserve
US$000
–

–
–

–
571
571

–
–
571

Fair value
reserve
US$000
2,866

5,971
(1,015)

–
–
7,822

(23,764)
1,015
(14,927)

Treasury
shares
US$000
(61,472)

–
–

(125,050)
186,522
–

–
–
–

Total
US$000
(58,606)

5,971
(1,015)

(125,050)
187,093
8,393

(23,764)
1,015
(14,356)

Treasury shares were shares purchased under the Company’s share buyback programme.

On 23 June 2017, the Company cancelled all of the treasury shares that it held following completion of the third tranche of the share buyback
programme. On cancellation, the total cost of the treasury shares was transferred from treasury shares and set against retained earnings and
the nominal value of the shares cancelled of US$571 was transferred from share capital to a non-distributable capital redemption reserve.

c) Distributable profits

Profits available for distribution by the Company comprise its accumulated realised profits less its accumulated realised losses, subject
to the restriction that a distribution may not reduce the Company’s net assets below the aggregate of its called up share capital and its
undistributable reserves.

The Directors consider that the Company’s distributable profits as at 31 December 2018 amounted to US$670,430 (2017: US$582,780).

d) Share buyback programme

Details of tranches initiated under the Company’s share buyback programme are set out in note 26 to the consolidated financial statements.

On 6 November 2018, the Company announced details of the latest tranche of the share buyback programme. On initiation of this tranche,
the Company recognised a liability and a corresponding debit to retained earnings of €150.0 million (US$171,173) in respect of the maximum
obligation to purchase shares. We also debited transaction costs incurred of US$14 to retained earnings.

We have not yet been required by the appointed broker to make any intermediate settlements in relation to this tranche, under which the
broker may continue to purchase shares until 21 May 2019.

e) Dialog shares held by employee benefit trusts

The Company provides finance to two trusts to purchase its ordinary shares in order to meet its obligations under its share-based
compensation plans. As at 31 December 2018, the trusts held 2,607,259 ordinary shares (2017: 2,791,027 ordinary shares). An analysis of
movements in the number of shares held by the trusts is presented in note 29 to the consolidated financial statements.

9. Share-based compensation

A description of the share-based compensation plans operated by the Company, together with information about share options exercised
and outstanding is presented in note 29 to the consolidated financial statements.

10. Guarantees

General guarantees have been issued by the Company under Article 403, Book 2 of the Dutch Civil Code in respect of its Dutch subsidiaries,
in order that they do not have to file annual accounts in the Netherlands.

Dialog Semiconductor PlcAnnual report and accounts 2018156

Financial performance measures

Use of non-IFRS measures

We use a number of measures to assess our financial performance, to ensure our performance is aligned to strategy and continued
alignment with shareholders’ interests. We consider certain of these measures to be particularly important and identify them as
“key performance indicators” (KPIs). We have identified the following financial measures as KPIs: revenue growth; gross margin,
operating expenses as a percentage of revenue; operating profit margin; diluted EPS and free cash flow. We monitor the profit or
loss measures that are KPIs on both an IFRS basis and an underlying basis.

Underlying measures of performance and free cash flow are non-IFRS measures because they exclude amounts that are included in,
or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with IFRS
or are calculated using financial measures that are not calculated in accordance with IFRS. We do not regard non-IFRS measures as
a substitute for, or superior to, the equivalent IFRS measures. Non-IFRS measures presented by Dialog may not be directly comparable
with similarly-titled measures used by other companies.

Underlying measures of performance

We report underlying measures of performance because we believe they provide both management and investors with useful additional
information about the financial performance of our businesses. Underlying measures of performance represent the equivalent IFRS measures
adjusted for specific items that are considered by us to hinder comparison of the financial performance of our businesses either from one
period to another or with other similar businesses.

Underlying measures of performance exclude items that can have a significant effect on the Group’s profit or loss. We compensate for these
limitations by monitoring separately the items that are excluded from the equivalent IFRS measures in calculating the underlying measures.

We outline below the specific items of income and expense that are recognised in profit or loss in accordance with IFRS but are excluded
from our underlying results and their related tax effects.

Share-based compensation

We exclude the share-based compensation expense recognised in relation to options and awards granted under the Company’s share-based
compensation plans because the awards are equity-settled and therefore have no immediate effect on shareholders’ returns. We additionally
exclude the effect on profit or loss of changes in the accrual for payroll taxes payable on the exercise or vesting of such options and awards
because the accrual fluctuates with the Company’s share price and the effect on profit or loss is therefore not necessarily indicative of
our trading performance.

Business combinations

We exclude those effects of applying the acquisition method of accounting under IFRS that we consider are not indicative of the Group’s
trading performance, including the accounting for transaction costs; the fair value adjustment to inventories of acquired businesses;
the recognition of certain elements of the purchase price as compensation expense; and the recognition of remeasurements of contingent
consideration in profit or loss.

In 2018 and 2017, we excluded from our underlying results the following in relation to the accounting for the acquisitions of Silego
and ams AG’s LED backlight business:
U acquisition-related costs;
U the recognition in cost of sales of the consumption of the fair value uplift to inventory held by the acquired businesses

at the acquisition date;

U the element of deferred amounts payable for Silego that is recognised as compensation expense;
U the credit recognised on the forfeiture of deferred consideration payable for Silego; and
U the credit arising from the change in estimate of the liabilities for the contingent consideration payable for Silego and the interest

expense recognised on the unwinding of the discount on the liabilities.

We also exclude from our underlying results the amortisation of identifiable intangible assets that are recognised in business
combinations in order that the performance of those businesses that we have acquired may be compared fairly with those
businesses that we have developed on an organic basis.

Integration costs

We exclude the costs of integrating acquired businesses that are considered by us to hinder the assessment of the financial performance
of those businesses.

In 2018 and 2017, we excluded the costs that we incurred in relation to the integration of Silego.

Corporate transaction costs

We exclude significant transaction costs and other non-recurring items recognised in relation to corporate transactions other than
business combinations.

In 2018, we excluded from our underlying results the costs that we incurred in relation to the acquisition discussions with Synaptics
Incorporated and the licence and asset transfer agreements that we entered into with Apple Inc.

In 2016, we excluded the fee that we received from Atmel Corporation on their termination of the merger agreement that existed between
us and residual transaction costs and facility commitment fees that we incurred prior to termination.

Dialog Semiconductor PlcAnnual report and accounts 2018157

Underlying measures of performance continued

Effective interest on financial liabilities

We adjusted our interest expense to exclude the non-cash element of the interest expense recognised in relation to a patent licensing
agreement that was accounted for as a hire purchase contract within other intangible assets. We considered that the cash interest payments
are more indicative of the effect of this arrangement on shareholders’ returns.

Strategic investments

We exclude the effect on profit or loss of the measurement at fair value of our strategic investments (comprising the shares and the warrants
that we hold in Energous, the call option that we held over the shares that we do not own in Dyna Image prior to its expiry in June 2018
and, until they were sold in May 2017, the shares that we held in Arctic Sand). We hold these instruments for strategic reasons linked to our
commercial partnerships with these companies. Since we do not hold these instruments for trading purposes, we exclude fluctuations in their
fair values when assessing our trading performance.

In December 2017, we recognised impairment losses totalling US$4,327 in relation to the intangible assets and property, plant and equipment
held by Dyna Image and ceased to account for it as a subsidiary, recognising a loss of US$5,597 on deconsolidation. Since these were
discrete non-recurring losses, we excluded them from our underlying results.

Income tax effect of underlying adjustments

We calculate the income tax effect of underlying adjustments by considering the specific tax treatment of each item and by applying the
relevant statutory tax rate to those items that are taxable or deductible for tax purposes.

US tax reform

In December 2017, the US President signed into law significant reforms of the US tax system, including a reduction of the Federal corporate
income tax rate from 35% to 21%. Our income tax expense for 2017 reflected a non-cash deferred tax credit of US$6,658 resulting from
the remeasurement of US deferred tax balances at the lower tax rate. Since this was a discrete non-recurring benefit, we excluded it from
our underlying results.

Reconciliation of underlying measures to equivalent IFRS measures

Reconciliations of the underlying measures of performance to the equivalent IFRS measures for the years ended 31 December 2018,
2017 and 2016 are presented in the following tables:

Year ended 31 December 2018

US$000 unless stated otherwise
Revenue
Cost of sales
Gross profit
Gross margin %
SG&A expenses
R&D expenses
Other operating income
Operating profit
Operating margin %
Net finance (expense)/income
Profit before income taxes
Income tax expense
Profit after income taxes
Share of loss of associate
Net income
EBITDA
EBITDA margin %

IFRS
basis
1,442,138
(751,070)
691,068
47.9%
(168,228)
(326,309)
3,176
199,707
13.8%
(3,514)
196,193
(55,281)
140,912
(1,113)
139,799
n/a
n/a

Share-based
compensation
and related
payroll taxes
–
1,791
1,791

Accounting
for business
combinations
–
3,129
3,129

Integration
costs
–
13
13

Corporate
transaction
costs
–
–
–

Effective
interest
–
–
–

Strategic
investments
–
–
–

17,163
22,699
–
41,653

–
41,653
(2,108)
39,545
–
39,545

14,757
9,148
(877)
26,157

2,220
28,377
(3,448)
24,929
–
24,929

2,524
228
–
2,765

–
2,765
(555)
2,210
–
2,210

11,346
–
–
11,346

–
11,346
(1,024)
10,322
–
10,322

–
–
–
–

50
50
(9)
41
–
41

–
–
–
–

9,269
9,269
(746)
8,523
–
8,523

Underlying
basis
1,442,138
(746,137)
696,001
48.3%
(122,438)
(294,234)
2,299
281,628
19.5%
8,025
289,653
(63,171)
226,482
(1,113)
225,369
339,584
23.5%

Dialog Semiconductor PlcAnnual report and accounts 2018158

Financial performance measures continued

Reconciliation of underlying measures to equivalent IFRS measures continued

Year ended 31 December 2017

US$000 unless stated otherwise
Revenue
Cost of sales*
Gross profit
Gross margin %
SG&A expenses
R&D expenses*
Other operating (expense)/income
Operating profit
Operating margin %
Net finance income
Profit before income taxes
Income tax expense
Net income
EBITDA
EBITDA margin %

Year ended 31 December 2016

US$000 unless stated otherwise
Revenue
Cost of sales*
Gross profit
Gross margin %
SG&A expenses
R&D expenses*
Other operating income
Operating profit
Operating margin %
Net finance expense
Profit before income taxes
Income tax expense
Net income
EBITDA
EBITDA margin %

Share-based
compensation
and related
payroll taxes
–
1,219
1,219

Accounting
for business
combinations
–
2,306
2,306

Integration
costs
–
–
–

Effective
interest
–
–
–

Strategic
investments
–
–
–

16,285
17,994
–
35,498

–
35,498
(3,476)
32,022

14,358
8,050
–
24,714

436
25,150
(4,187)
20,963

1,121
1,184
–
2,305

–
2,305
(701)
1,604

–
–
–
–

289
289
(56)
233

–
–
9,924
9,924

(1,398)
8,526
1,889
10,415

IFRS
basis
1,352,841
(707,971)
644,870
47.7%
(145,262)
(303,013)
(9,578)
187,017
13.8%
7,786
194,803
(25,369)
169,434
n/a
n/a

US tax
reform
–
–
–

–
–
–
–

–
–
(6,658)
(6,658)

Underlying
basis
1,352,841
(704,446)
648,395
47.9%
(113,498)
(275,785)
346
259,458
19.2%
7,113
266,571
(38,558)
228,013
315,773
23.3%

Share-based
compensation
and related
payroll taxes
–
1,120
1,120

Accounting
for business
combinations
–
–
–

Aborted
merger with
Atmel
–
–
–

Effective
interest
–
–
–

Strategic
investments
–
–
–

15,826
13,570
–
30,516

–
30,516
(4,686)
25,830

7,473
7,029
–
14,502

–
14,502
(351)
14,151

3,485
–
(137,300)
(133,815)

1,913
(131,902)
(383)
(132,285)

–
–
–
–

526
526
(105)
421

–
–
–
–

(1,199)
(1,199)
386
(813)

IFRS
basis
1,197,611
(630,963)
566,648
47.3%
(133,271)
(261,278)
137,708
309,807
25.9%
(4,601)
305,206
(47,090)
258,116
n/a
n/a

Underlying
basis
1,197,611
(629,843)
567,768
47.4%
(106,487)
(240,679)
408
221,010
18.5%
(3,361)
217,649
(52,229)
165,420
269,681
22.5%

* Certain product development costs have been reclassified from cost of sales to research and development expenses (see note 1 to the consolidated financial statements).

Accounting for business combinations

We excluded from the underlying measures of performance the following specific items arising from business combinations accounting
under IFRS:

US$000
Acquisition-related costs
Amortisation of acquired intangible assets
Consumption of the fair value uplift of acquired inventory
Consideration accounted for as compensation expense
Forfeiture of deferred consideration
Remeasurement of contingent consideration
Increase in operating profit
Unwinding of discount on contingent consideration
Increase in profit before income taxes
Income tax credit
Increase in net income

2018
–
22,629
3,129
1,481
(204)
(878)
26,157
2,220
28,377
(3,448)
24,929

2017
4,539
16,461
2,305
1,409
–
–
24,714
436
25,150
(4,187)
20,963

2016
–
14,502
–
–
–
–
14,502
–
14,502
(351)
14,151

Dialog Semiconductor PlcAnnual report and accounts 2018159

Explanation of financial performance measures

Change in revenue

We monitor the change in revenue from one period to another and the trend in revenue over time because they are important measures of
the growth in our business. During the periods presented, there were no differences between revenue determined in accordance with IFRS
and on an underlying basis. During each period, the change in revenue was as follows:

US$000 unless stated otherwise
IFRS and underlying measures
Revenue in the period
Revenue in the comparative period
Increase/(decrease) in revenue

Gross margin

2018

2017

2016

1,442,138
1,352,841
6.6%

1,352,841
1,197,611
13.0%

1,197,611
1,355,312
(11.6)%

Gross margin is gross profit expressed as a percentage of revenue. We monitor gross margin because we believe it provides a measure
of the value that we add to our products. Gross margin determined in accordance with IFRS and on an underlying basis was as follows:

US$000 unless stated otherwise
IFRS measures
Revenue
Gross profit
Gross margin
Underlying measures
Revenue
Gross profit
Gross margin

2018

2017

2016

1,442,138
691,068
47.9%

1,442,138
696,001
48.3%

1,352,841
644,870
47.7%

1,352,841
648,395
47.9%

1,197,611
566,648
47.3%

1,197,611
567,768
47.4%

Operating expenses as a percentage of revenue

We monitor operating expenses as a percentage of revenue because we believe it provides a measure of our effort in innovation and the
efficiency of our operating structure. Operating expenses comprise selling, general and administrative (“SG&A”) expenses and research and
development (“R&D”) expenses. Operating expenses as a percentage of revenue determined in accordance with IFRS and on an underlying
basis was as follows:

US$000 unless stated otherwise
IFRS measures
Revenue
Operating expenses
Operating expenses as a percentage of revenue
Underlying measures
Revenue
Operating expenses
Operating expenses as a percentage of revenue

Change in operating profit

2018

2017

2016

1,442,138
(494,537)
34.3%

1,442,138
(416,672)
28.9%

1,352,841
(448,275)
33.1%

1,352,841
(389,283)
28.8%

1,197,611
(394,549)
32.9%

1,197,611
(347,166)
29.0%

We monitor the change in operating profit from one period to another and the trend in operating profit over time because we believe they are
important measures of the performance of our operations. Operating profit growth determined in accordance with IFRS and on an underlying
basis was as follows:

US$000 unless stated otherwise
IFRS measures
Operating profit in the period
Operating profit in the comparative period
Increase/(decrease) in operating profit
Underlying measures
Operating profit in the period
Operating profit in the comparative period
Increase/(decrease) in operating profit

2018

2017

2016

199,707
187,017
6.8%

281,628
259,458
8.5%

187,017
309,807
(39.6)%

259,458
221,010
17.4%

309,807
259,746
19.3%

221,010
317,656
(30.4)%

Dialog Semiconductor PlcAnnual report and accounts 2018Financial performance measures continued

Explanation of financial performance measures continued

Operating profit margin

Operating profit margin is operating profit expressed as a percentage of revenue. We monitor operating profit margin because we believe
it provides a measure of the overall profitability of our operations. Operating profit margin determined in accordance with IFRS and on an
underlying basis was as follows:

160

US$000 unless stated otherwise
IFRS measures
Revenue
Operating profit
Operating profit margin
Underlying measures
Revenue
Operating profit
Operating profit margin

2018

2017

2016

1,442,138
199,707
13.8%

1,442,138
281,628
19.5%

1,352,841
187,017
13.8%

1,352,841
259,458
19.2%

1,197,611
309,807
25.9%

1,197,611
221,010
18.5%

Underlying EBITDA and EBITDA margin

Underlying EBITDA is a non-IFRS measure that we define as underlying net income before net finance expense, income tax expense and
depreciation and amortisation expenses. Underlying EBITDA margin is a non-IFRS measure that represents underlying EBITDA expressed
as a percentage of revenue. We present underlying EBITDA and underlying EBITDA margin because we believe these measures are useful
to investors and other users of our financial information in evaluating the sensitivity of our underlying trading performance to changes in
variable operating expenses. Underlying EBITDA may be reconciled to net income determined in accordance with IFRS as follows:

US$000
Net income
Net finance expense/(income)
Income tax expense
Depreciation expense
Amortisation expense
EBITDA
Share-based compensation and related payroll taxes
Acquisition-related costs
Consumption of the fair value uplift of acquired inventory
Consideration accounted for as compensation expense
Forfeiture of deferred consideration
Remeasurement of contingent consideration
Corporate transaction costs
Integration costs
Share of loss of associate
Impairment of intangible assets
Impairment of property, plant and equipment
Loss on deconsolidation of Dyna Image
Merger termination fee
Underlying EBITDA

Underlying EBITDA margin was as follows:

US$000 unless stated otherwise
Underlying measures
Revenue
EBITDA
EBITDA margin

2018
139,799
3,514
55,281
31,455
49,130
279,179
41,653
–
3,129
1,481
(204)
(878)
11,346
2,765
1,113
–
–
–
–
339,584

2017
169,434
(7,786)
25,369
30,807
41,969
259,793
35,498
4,539
2,305
1,409
–
–
–
2,305
–
2,790
1,537
5,597
–
315,773

2016
258,116
4,601
47,090
27,219
35,954
372,980
30,516
–
–
–
–
–
3,485
–
–
–
–
–
(137,300)
269,681

2018

2017

2016

1,442,138
339,584
23.5%

1,352,841
315,773
23.3%

1,197,611
269,681
22.5%

Dialog Semiconductor PlcAnnual report and accounts 2018161

Explanation of financial performance measures continued

Earnings per share

We monitor basic and diluted earnings per share (“EPS”) on an IFRS basis and on an underlying basis. We believe that underlying EPS
measures are useful to investors in assessing our ability to generate earnings and provide a basis for assessing the value of the Company’s
shares (for example, by way of price earnings multiples). Earnings for calculating IFRS and underlying EPS measures were calculated
as follows:

US$000
IFRS measures
Net income
Loss attributable to non-controlling interests
Earnings for calculating basic and diluted EPS
Underlying measures
Net income*
Loss attributable to non-controlling interests
Earnings for calculating basic and diluted EPS

2018

2017

2016

139,799
–
139,799

225,369
–
225,369

169,434
4,482
173,916

228,013
1,425
229,438

258,116
2,824
260,940

165,420
2,299
167,719

* Underlying net income is reconciled to net income determined in accordance with IFRS basis in the tables set out under the heading “Reconciliation of underlying

measures to equivalent IFRS measures”.

Underlying and diluted EPS measures are calculated using the weighted average number of shares that are used in calculating the equivalent
measures under IFRS as presented in note 10 to the consolidated financial statements.

Basic and diluted EPS on an IFRS basis and on an underlying basis were as follows:

US$
IFRS earnings per share
Basic
Diluted
Underlying earnings per share
Basic
Diluted

Free cash flow

2018

1.89
1.80

3.05
2.90

2017

2.34
2.21

3.08
2.92

2016

3.43
3.25

2.20
2.09

Free cash flow is a non-IFRS measure that represents cash flow from operating activities, less capital expenditure. We believe that
free cash flow is useful to investors because it provides a measure of the cash generated by our business that is available for expansion,
to make strategic investments in, or acquire, other businesses, to repay borrowings and to fund distributions to shareholders.

Free cash flow was calculated as follows:

US$000
Cash flow from operating activities
Purchase of property, plant and equipment
Purchase of intangible assets
Payments for capitalised development costs
Capital element of finance lease payments
Free cash flow

2018
288,649
(26,145)
(6,197)
(24,771)
(1,651)
229,885

2017
284,722
(47,938)
(6,196)
(20,988)
(4,283)
205,317

2016
248,760
(25,553)
(8,177)
(15,802)
(3,834)
195,394

Dialog Semiconductor PlcAnnual report and accounts 2018162

Glossary of Terms – Technical

Technical glossary

Analog A type of signal in an electronic
circuit that takes on a continuous range of
values rather than only a few discrete values.

Appcessories A physical device and
counterpart application for a mobile device
typically controlled via Bluetooth®.

ASIC An Application Specific Integrated
Circuit is an integrated chip, custom-
designed for a specific application.

ASSP An Application Specific Standard
Product is a semiconductor device
integrated circuit (“IC”) dedicated to a specific
application and sold to more than one user.

Audio CODEC The interface between analog
signals (such as the human voice) and the
digital data processing inside a mobile phone,
determining voice quality.

BCD process platform The incorporation
of analog components (“Bipolar”), digital
components (“CMOS”) and high-voltage
transistors (“DMOS”) on the same die to
reduce the number of components required
in the bill of materials, minimise board space,
costs and the parasitic losses in comparison
to a non-integrated solution.

BOM Bill of materials.

Bluetooth® Smart Bluetooth® Smart
is a wireless personal area network
technology designed and marketed by the
Bluetooth Special Interest Group aimed
at novel applications in the healthcare,
fitness, beacons, security, and home
entertainment industries.

Buck converter A DC-to-DC buck converter
accepts a direct current input voltage and
produces a direct current output voltage to
a plurality of channels.

CAD Computer Aided Design usually
refers to a software tool used for designing
electronics hardware or software systems.

CDMA Code Division Multiple Access is an
alternative to GSM technology for mobile
wireless networks.

Chips Electronic integrated circuits.

CMOS Complementary Metal Oxide
Semiconductor: the most popular class of
semiconductor manufacturing technology.

CMIC Configurable Mixed-Signal IC
A category of ICs comprising a matrix
of analog and digital blocks which are
configurable through a programmable
(“OTP”) non-volatile memory.

Digital A type of signal used to transmit
information that has only discrete levels of
some parameter (“usually voltage”).

Digital Enhanced Cordless
Telecommunications (“DECT”) is a wireless
connectivity standard technology originated
in Europe for cordless telephony.

Fabless A company that designs and
delivers semiconductors by outsourcing the
fabrication (“manufacturing”) process.

FET A Field Effect Transistor uses an electric
field to control the shape and hence the
conductivity of a channel of one type of
charge carrier in a semiconductor material.

Foundry A manufacturing plant where silicon
wafers are produced.

Hi-Fi High-Fidelity is the reproduction of
sound with little or no distortion.

High power density In the context of travel
adapters, chargers and power supplies,
high power density is the ability to put higher
power AC/DC conversion capability inside
smaller form-factor adapter cases and power
supply housings while avoiding thermal
issues that can occur when operating high
power electronics in confined, small spaces.
High power density is achieved by enabling
the use of smaller components that are also
more highly efficient.

GaN Gallium Nitride.

IC Integrated Circuit An electronic device
with numerous components on a single chip.

FPGA A Field-programmable gate array
is an integrated circuit designed to be
configured by a customer or a designer
after manufacturing.

Imaging The capture and processing of
images via an image sensor for use by an
electronic device to send to a display for
viewing by a user.

Internet of Things (“IoT”) The Internet of
Things is an environment where everyday
items, such as smartphones, wearable health
meters, light bulbs, and lighting, security and
HVAC systems, are all connected via the
Internet, allowing them to send and receive
data and be controlled wirelessly.

Internet of My Things It refers to the
consumer segment of the Internet of Things.

LDO Low dropout voltage regulators are
used in battery operated systems, where
the output voltage is typically lower than the
input voltage.

LED A Light Emitting Diode is a
semiconductor device that emits light when
charged with electricity, often used for LCD
display backlights.

Liquid Crystal Display (“LCD”) A display
technology found in many portable
electronics products, including personal
organisers, cellular handsets and
notebook computers.

LTE Long-Term Evolution is a standard for
wireless communication of high-speed data
for mobile phones and data terminals.

Mixed-signal A combination of analog and
digital signals being generated, controlled or
modified on the same chip.

OEM An Original Equipment Manufacturer
that builds products or components that are
used in products sold by another company.

Original Design Manufacturer (“ODM”)
An original design manufacturer designs and
produces products that are specified and
then rebranded by OEMs.

PMIC Power Management IC.

Power Management The management
of the power requirements of various
subsystems, important in hand-held and
portable electronics equipment.

PrimAccurate™ Dialog’s patented control
technology that uses digital algorithms on
the primary side of an isolated power supply
eliminating the need for a secondary side
regulator and optical feedback isolator to
lower the total BOM cost, reduce the overall
solution size and improve reliability.

Rapid Charge™ A Dialog product which
enables substantially faster battery charging
of portable devices via USB AC/DC
power adapters.

Semiconductor A base material halfway
between a conductor and an insulator, which
can be physically altered by mixing in certain
atoms. Semiconductors form the basis for
present-day electronics.

Silicon A semi-metallic element used to
create a wafer – and the most common
semiconductor material – in about 95%
of all manufactured chips.

SmartBond™ Dialog’s SmartBond™
family is the simplest route to delivering the
most power-friendly and flexible Bluetooth®
Smart connected products to the market.
Highly-integrated, SmartBond™ delivers the
smallest, most power-efficient Bluetooth®
Smart solutions available – and enables the
lowest system costs.

SmartDefender™ Dialog’s advanced
cycle-by-cycle, hiccup mode technology
that addresses soft short circuits in adapter
cables and connectors helping to prevent
excessive heat build-up and damage.

Dialog Semiconductor PlcAnnual report and accounts 2018163

USB Universal Serial Bus: a universal
interface standard to connect different
electronics devices.

USB Power Delivery (“USB PD”)
A communication protocol developed by
the USB Implementers Forum. The USB
PD protocol is added on top of the USB
Type-C™ connector specification to enable a
single USB cable/connector solution that can
be used ubiquitously for power or charging
across mobile devices, tablets, laptops, and
even power tools, networking devices, and
USB wall receptacles. The specification
supports scalable power and performance
for new and emerging electronic products.
The USB PD specification provides flexible
power delivery and data transfer up to 100W.

USB Type-C™ cable and connector
specification A universal cable and
connector specification developed by the
USB Implementers Forum that addresses
new, smaller, thinner, lighter form factor
computing platforms and devices. It provides
for a slim, sleek and standard connector
form-factor and high-power cable.
Combined with the USB Power Delivery
specification, USB Type-C enables a single
USB cable/connector solution that can be
used ubiquitously for power or charging
across mobile devices, tablets, laptops, and
even power tools, networking devices, and
USB wall receptacles. The specification
supports scalable power and performance
for new and emerging electronic products.

Voice Over IP Our energy-efficient multicore
VoIP processors interact with Bluetooth®,
Wi-Fi and DECT to enable headset and
handset connectivity while combining
industry-leading power consumption with the
flexibility and processing capacity to handle
a wealth of enterprise VoIP applications.

Wafer A slice of silicon from a 4, 5, 6
or 8 inch diameter silicon bar and used
as the foundation on which to build
semiconductor products.

4G Wireless broadband standard.

SmartMirror™ A technology patented
by Dialog Semiconductor which simplifies
circuit design and provides very low current
consumption in Power Management circuits.

Smartphone A mobile phone offering
advanced capabilities, often with pc-
like functionality (“PC-mobile handset
convergence”). A smartphone runs complete
operating system software providing a
standardised interface and platform for
application developers.

SmartPulse™ A series of wireless sensors,
actuators and base station devices enables
the easy creation of wireless sensor networks
for the home automation, security, healthcare
and energy monitoring consumer markets.

SmarteXite™ Dialog’s brand name for its
intelligent LED lighting technology platform.

SmartXtend™ A technology patented by
Dialog Semiconductor that extends the life
and reduces power consumption of high-
resolution, passive matrix OLED displays.

Solid State Lighting A type of lighting in
which light-emitting diodes (“LEDs”) replaces
conventional incandescent and fluorescent
lamp for general lighting purposes.

Subcontractor A business that signs
a contract to perform part or all of the
obligations of another’s contract.

Synchronous Rectifier An integrated circuit
that can replace diodes to improve efficiency
and power density in power conversion
applications, such as power supplies.

SoC System on Chip An integrated circuit
with all the necessary electronic circuits and
parts for a given system.

System-on-Chip An IC that integrates
all components of a computer or other
electronic system into a single chip. It may
contain digital, analog, mixed-signal, and
often radio-frequency functions – all on a
single chip substrate.

Tablet PC A tablet PC refers to a slate-
or tablet-shaped mobile computer device,
equipped with a touchscreen or stylus.

TAM Total addressable market, TAM
measures the potential market for your
product – and your product only – assuming
you could reach 100% of your customers.

Ultrabook™ A higher-end, compact sub-
notebook that is designed to be compact,
thin and light without compromising
performance and battery life. Ultrabooks™
typically feature low power processors and
solid-state drives.

Dialog Semiconductor PlcAnnual report and accounts 2018164

Glossary of Terms – Financial

Financial glossary

AGM Annual General Meeting of the
Company’s shareholders.

BaFin the Federal Financial Supervisory
Authority in Germany (Bundesanstalt
für Finanzdiensleistungsaufsicht).

Basis point or bp one hundredth of one
percentage point.

CAGR Compound Annual Growth Rate,
a method of assessing the average growth
of a value over time.

CEO Chief Executive Officer.

CFO Chief Financial Officer.

the Companies Act 2006 the Companies
Act 2006 of England and Wales, as amended.

the Company Dialog Semiconductor Plc.

COSO Committee of Sponsoring
Organizations, whose mission is to provide
thought leadership on risk management,
internal control and fraud deterrence
to improve organisational performance
and governance.

Cost of sales consists of material costs,
the costs of outsourced production and
assembly, related personnel costs (including
share-based compensation), applicable
overhead and depreciation of test and
other equipment.

Dialog used for convenience to refer to the
Company and its subsidiaries, unless the
context requires otherwise.

the DTRs the Disclosure & Transparency
Rules of the UKLA.

EBIT Earnings before interest and taxes
(also known as operating profit).

EBITDA Earnings before depreciation,
amortisation, interest and taxes.

the EU the European Union.

Euro (€) the common currency used in the
majority of member countries of the EU.

the Frankfurt Stock Exchange the largest
of the seven regional securities exchanges
in Germany.

Free-float The proportion of an issuer’s
share capital that is available for purchase
in the public equity markets by investors.

General and administrative expenses
consist primarily of personnel costs
(including share-based compensation)
and costs for our finance, human resources
and other business support functions.

IFRS International Financial Reporting
Standards, comprising accounting standards
issued by the IASB.

KPIs Key Performance Indicators, a range
of indicators to assess performance, to
ensure performance is aligned to strategy,
and to ensure continued alignment with
shareholder interests.

LTIP Long-Term Incentive Plan.

NASDAQ the National Association
of Securities Dealers and
Automated Quotations.

OECD Organisation for Economic
Co-operation and Development.

Other operating income consists of income
from customer-specific R&D contracts and
other income that is not classified as revenue,
less other operating expenses.

Pound sterling (£) the currency of the UK.

Prime Standard a market segment of
the Frankfurt Stock Exchange that lists
companies which comply with international
transparency standards, including periodic
reporting in German and English, application
of international accounting standards,
publication of a financial calendar, staging of
at least one analyst conference a year and ad
hoc disclosure also in German and English.

R&D research and development.

R&D expenses consist principally of
personnel costs (including share-based
compensation) and other design and
engineering-related costs associated with
the development of new ASICs and ASSPs.

Selling and marketing expenses consist
primarily of personnel costs (including share-
based compensation), travel expenses,
sales commissions, advertising and other
marketing costs, together with amortisation
expenses in relation to identifiable intangible
assets such as customer relationships, key
customers and order backlog acquired in
business combinations.

SG&A selling, general and administrative.

the TecDAX stock index that tracks the
performance of the 30 largest companies
by market capitalisation from the technology
sector that are listed on the Frankfurt
Stock Exchange.

UK the United Kingdom of Great Britain
and Northern Ireland.

the UKLA the UK Listing Authority.

US the United States of America.

the Group the Company and its subsidiaries.

US dollar (US$) the currency of the US.

the IASB the International Accounting
Standards Board.

Dialog Semiconductor PlcAnnual report and accounts 2018Advisers and corporate information

165

Registered office

Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK
Website: www.dialog-semiconductor.com

Registered number

3505161

Financial calendar

Annual General Meeting
Q1 2019 Results
Q2 2019 Results
Q3 2019 Results
Preliminary results for 2019

2 May 2019
9 May 2019
1 August 2019
6 November 2019
February 2020

Company Registrar

Link Market Services (Frankfurt) GmbH
Mergenthalerallee 15-21
65760 Eschborn
Germany

Advisers and corporate
information

Public relations

FTI Consulting
200 Aldersgate
Aldersgate Street
London EC1A 4HD
UK

FTI Consulting
Park Tower
Bockenheimer Anlage 44
60322 Frankfurt am Main
Germany

Legal adviser

Reynolds Porter Chamberlain LLP
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK

Auditors

Deloitte LLP
Abbotts House
Abbey Street
Reading
RG1 3BD
UK

Principal bankers

HSBC Bank Plc
Large Corporates, South Region
Thames Tower
Station Road
Reading
Berkshire RG1 1LX
UK

Designated sponsors

Oddo Seydler
Schillerstrasse 27-29
60313 Frankfurt am Main
Germany

Kepler Cheuvreux
Taunusanlage 19
60325 Frankfurt am Main
Germany

Information on the Company’s shares and
on significant shareholdings can be found
on page 67.

Dialog Semiconductor PlcAnnual report and accounts 2018166

Group directory

Germany

Japan

Dialog Semiconductor GmbH

Dialog Semiconductor K.K.

Neue Strasse 95
73230 Kirchheim/Teck-Nabern
Germany
Phone: (+49) 7021 805-0
Fax: (+49) 7021 805-100
Email: dialog.nabern@diasemi.com

United Kingdom

Dialog Semiconductor (UK) Ltd

Delta 200
Delta Business Park
Welton Road
Swindon
Wiltshire SN5 7XB
United Kingdom
Phone: (+44) 1793 757700
Fax: (+44) 1793 757800
Email: dialog.swindon@diasemi.com

100 Longwater Avenue
Green Park
Reading RG2 6GP
United Kingdom
Phone: +44 1793 757700
Fax: +44 1189 450219
Email: info@diasemi.com

The Netherlands

Dialog Semiconductor B.V.

Het Zuiderkruis 53
5215 MV ‘s-Hertogenbosch
The Netherlands
Phone: (+31) 73 640 88 22
Fax: (+31) 73 640 88 23
Email: dialog.nl@diasemi.com

North America

Dialog North America

2560 Mission College Boulevard
Santa Clara
California 95054
USA
Phone: (+1) 408 845 8500
Fax: (+1) 408 727 3205
Email: NA_sales_enquiries@diasemi.com

Dialog Semiconductor Inc.

675 Campbell Technology Parkway Suite 150
Campbell
California 95008
USA

8F, W-Building 1-8-15 Konan
Minato-ku
Tokyo 108-0075
Japan
Phone: (+81) 3 5769-5100
Fax: (+81) 3 5769-5101
Email: dialog.tokyo@diasemi.com

China

Dialog Semiconductor
Trading (Shanghai) Ltd

Room 703, 7F, Kehui Building
No.1188 North Quinzhou Road
Shanghai
200233
China
Phone: (+86) 215 4249 058

Dialog Semiconductor (Shenzhen) Ltd

25F, Lifetech Scientific Building
South 12 Road, Southern District in
High-tech Zone
Nanshan District
Shenzhen
518057
China
Phone: (+86) 755 2981 3669

Taiwan

Dialog Semiconductor GmbH

Taiwan Branch
7F, 392 Ruiguang Road
Neihu District
Taipei City 11493
Taiwan, R.O.C.
Phone: (+886) 281 786 222
Fax: (+886) 281 786 220
Email: dialog.taiwan@diasemi.com

Korea

Dialog Semiconductor
Operations Services Limited

Korea Branch
6 FL, Deokmyeong Building
Teheran-ro 625
Gangnam-gu
Seoul, 06173
Korea
Phone: (+82) 2 3469 8200
Fax: (+82) 2 3469 8291
Email: dialog.korea@diasemi.com

Dialog Semiconductor PlcAnnual report and accounts 2018Related undertakings

The Company’s related undertakings as at 31 December 2018 were as follows:

167

Country

Name
Dialog Argo Holdings, Inc.
Dialog Integrated Circuits (Tianjin) Limited1

Dialog Semiconductor (Italy) S.R.L.
Dialog Semiconductor (Shenzhen) Limited1

Registered Address
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle, DE 19801 United States
Rooms 2701-2, No. 2 Building, TEDA Service Outsourcing Industrial Park,
No. 19 XinHuanxi West Road, TEDA, Tianjin, 300457
Via Gaetano D’Alesio No.2, 57126, Livorno
25F, Lifetech Scientific Building, South 12 Road, Southern District
in High-tech Zone, Nan Shan District, Shenzhen, 518057
Tower Bridge House, St Katharine’s Way, London E1W 1AA
Istanbul Technical University, Ayazaga Campus, ARI 6 Building,
Maslak, Istanbul, 34469
Het Zuiderkruis 53, 5215 MV’s-Hertogenbosch
Het Zuiderkruis 53, 5215 MV’s-Hertogenbosch
Neue Strasse 95, 73230 Kirchheim unter Teck-Nabern
Megaro Xenia, Achilleos 8 & Lambrou Katsoni, Kallithea, Athens, 17674

Dialog Semiconductor (UK) Limited
Dialog Semiconductor Arastırma Gelistirme
ve Ticaret Anonim Sirketi
Dialog Semiconductor B.V.
Dialog Semiconductor Finance B.V.
Dialog Semiconductor GmbH
Dialog Semiconductor Hellas Societe
Anonyme of Integrated Circuits1
Dialog Semiconductor Holdings 1 Limited
Dialog Semiconductor Hong Kong Limited1 Units 515-517, 5/F., Building 12W, No.12, Science Park West Avenue, Phase

Netherlands
Netherlands
Germany
Greece

Tower Bridge House, St Katharine’s Way, London E1W 1AA

Italy
China

China

United Kingdom
Turkey

Three, Hong Kong Science Park, Pak Shek Kok, N.T.
Corporation Trust Centre, 1209 Orange Street, Wilmington,
New Castle, DE 19801
8F W-Building 1-8-15, Minato-ku, Tokyo 108-0075
Tower Bridge House, St Katharine’s Way, London E1W 1AA

United Kingdom
Hong Kong

United States

Japan
United Kingdom

Dialog Semiconductor Inc.1

Dialog Semiconductor K.K.
Dialog Semiconductor Operations
Services Limited1
Dialog Semiconductor Trading
(Shanghai) Limited1
Dyna Image Corporation2
iWatt B.V.1
iWatt Cayman1
iWatt Coöperatief U.A.1
iWatt HK Limited1

iWatt L.L.C.1
Powerventure Semiconductor Limited
Silego Korea Inc.1
Silego (Hefei) Technology, Inc.1
Silego Technology Japan, Inc.1
Limited Liability Company Silego
Technology (Ukraine)1
Silego Technology Inc.1

China

Room 703, 7F Kehui Building, No.1188 North Quinzhou Road, Xuhui District,
Shanghai 200231
8F., No.233-2, Baoqiao Rd., Xindian Dist., New Taipei City, 23145
Het Zuiderkruis 53, 5215 MV’s-Hertogenbosch
PO Box 309, Ugland House, Grand Cayman, KY1-1104
Het Zuiderkruis 53, 5215 MV’s-Hertogenbosch
Units 515-517, 5/F., Building 12W, No.12, Science Park West Avenue,
Phase Three, Hong Kong Science Park, Pak Shek Kok, N.T.
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle, DE 19801 United States
Tower Bridge House, St Katharine’s Way, London E1W 1AA
6FL, Deokmyeong Building, Teheran-ro 625, Gangnam-gu, Seoul, 06173
Room 303, Building 2, No. 3 Tian Yuan Road, High-Tech Zone, Hefei, 230088
8F W-Building 1-8-15 Konan, Minato-ku, Tokyo, 108-0075
Kamyanetska Str. 33, Lviv 79034

Taiwan
Netherlands
Cayman Islands
Netherlands
Hong Kong

United Kingdom
Korea
China
Japan
Ukraine

Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle, DE 19801 United States

1 Held indirectly.
2 Dyna Image Corporation is an associate in which the Company has a direct ownership interest of 38.7% and an indirect ownership interest of 9.8% that is held by a

wholly-owned subsidiary.

All subsidiaries are wholly-owned.

Dialog Semiconductor PlcAnnual report and accounts 2018168

Branches and representative offices

Name
Dialog Integrated Circuits (Tianjin)
Limited Beijing Branch
Dialog Semiconductor (UK) Limited,
Korea Branch
Dialog Semiconductor GmbH
Austria Branch
Dialog Semiconductor GmbH
Singapore Branch
Dialog Semiconductor GmbH
Taiwan Branch
Dialog Semiconductor Operations
Services Limited Korea Branch
Dialog Semiconductor Operations
Services Limited Thailand
Representative Office
Dialog Semiconductor Operations
Services Limited Taiwan Branch
Powerventure Semiconductor
Limited, Taiwan Branch
Silego Technology Inc., Shanghai
Representative Office
Silego Technology Inc.,
Taiwan Branch

Entity Type
Branch Office

Branch Office

Registered Address
Room 902-904, Zhong Guan Cun Crowne Plaza Office Building,
No. 106 ZhiChun Road, Haidian District, Beijing, 100086
6 FL, Deokmyeong Building, Teheran-ro 625, Gangnam-gu,
Seoul, 06173
Kärntner Strasse 518, 8054 Graz-Seiersberg

Country
China

Korea

Austria

Branch Office

51 Anson Road, #12-51 Anson Centre, Singapore 079904

Singapore

Branch Office

7F., No.392, Ruiguang Rd., Neihu Dist., Taipei City 114

Branch Office

Representative Office

6 FL, Deokmyeong Building, Teheran-ro 625, Gangnam-gu,
Seoul, 06173
26th Floor, Sathorn City Tower, 175 South Sathorn Road,
Thungmahamek, Sathorn,10120 Bangkok

Taiwan

Korea

Thailand

Branch Office

7F., No.392, Ruiguang Rd., Neihu Dist., Taipei City 114

Taiwan

Branch Office

7F., No. 1, Taiyuan 1st St., Zhubei City, Hsinchu County 302

Taiwan

Representative Office

Branch Office

Room 2102 J, LT Square, 500 North Chengdu Rd., Juangdu
District, Shanghai
7F., No. 392, Ruiguang Rd., Neihu Dist., Taipei City 114

China

Taiwan

Dialog Semiconductor PlcAnnual report and accounts 2018169

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Radley Yeldar | www.ry.com

Financial statements partially created in-house
with firesys.

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Dialog Semiconductor PlcAnnual report and accounts 2018Registered office

Dialog Semiconductor Plc
Tower Bridge House
St Katharine’s Way
London E1W 1AA
UK
www.dialog-semiconductor.com