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## Notes to the consolidated financial statements 

For the year ended 31 December 2012 

## 18. Convertible bond 

During Q1-2012, the Company launched a 5 year Convertible Bond Offering raising gross proceeds of US$201 million. The offering closed on 12 April 2012. The bonds, which are listed on the Luxembourg Stock Exchange’s Euro MTF market, will be convertible into ordinary shares of Dialog Semiconductor Plc., listed on the Regulated Market of the Frankfurt Stock Exchange. 1,005 Bonds with a principal amount of US$200,000 each were issued at 100% with a coupon of 1.0% per-annum payable semi-annually in arrear s. The initial conversion price is US$29.5717 (€22.367), representing a premium of 35 per cent above the volume-weighted average price on XETRA of Dialog Semiconductor Plc’s ordinary shares to the time of pricing on 8 March 2012. 

The net proceeds of issuing the Bonds, after deducting US$4,369,000 of commission and other costs incurred in connection with the bond issuance were US$196,631,000. In accordance with IAS 32, US$163,607,000 of gross proceeds was allocated to financial liabilities and US$37,393,000 was allocated to equity. The debt component of convertible bonds is measured using the market interest rate obtainable on a similar debt instrument but one that is not convertible. This debt component is measured as liabilities at amortised cost until it is converted into equity or becomes due for repayment. The component of the net proceeds allocated to equity represents the fair value of the conversion right. 

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The equity component is presented under additional paid-in capital in equity. The financial liability rises over the 5 year lifetime to the principal amount of the bonds. Transaction costs related to the issue of the instrument were allocated to the debt and equity components of the convertible bonds in proportion to the capital extended to the Group by the instrument. Of the total transaction costs an amount of US$814,000 was allocated to equity and an amount of US$3,555,000 was allocated to financial liabilities. 

## Final Redemption 

Unless previously purchased and cancelled, redeemed or converted, the Bonds will be redeemed at their principal amount on the final maturity date. 

## Redemption at the option of Dialog 

The Bonds may only be redeemed at the option of Dialog prior to the final maturity date in the following cases: 

## Optional Redemption 

The Company will have the option to call all outstanding Bonds from approximately 3 years after the Closing Date until maturity, in the event that the value of the Shares underlying a Bond exceeds 130% of the principal amount over a certain period. Dialog will also have the option to redeem all outstanding bonds if redemptions have been effected in respect of 85% or more of the bonds originally issued. In these cases the bonds will be redeemed at their principal amount, together with accrued interest to such date. 

## Redemption for Taxation Reasons 

In the event that Dialog will become obliged to pay additional amounts as a result of any change in, or amendment to, the laws or regulations of the United Kingdom or any political subdivision or any authority thereof or therein having power to tax, and such obligation cannot be avoided by Dialog by taking reasonable measures, Dialog will have the option to call all outstanding bonds. In this case the bonds will be redeemed at their principal amount, together with accrued interest to such date. 

## Redemption at the Option of Bondholders upon a Change of Control 

Following the occurrence of a Change of Control, the holder of each Bond will have the right to require Dialog to redeem the Bond at its principal amount, together with accrued and unpaid interest to such date. 

## Earnings per share 

In 2012 the potential ordinary shares of the convertible bond were antidilutive as their conversion to ordinary shares would increase earnings per share. . 

