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## 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 2012. 

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 creates highly integrated, mixed signal integrated circuits (ICs), optimised for personal portable, short-range wireless, lighting, display and automotive applications. The Company provides its customers with flexible and dynamic support, world-class innovation and the assurance of dealing with an established business partner. 

With its focus and expertise in energy-efficient system power management, audio, low energy short-range wireless and VoIP technologies, Dialog brings decades of experience to the rapid development of ICs. 

Dialog’s power management processor companion chips enhance the performance of personal portable devices – including smartphones, tablets and Ultrabooks™ – by extending battery play time and supporting increasingly demanding multimedia applications. Our short-range wireless technology provides connectivity to wireless headsets, microphones and gaming consoles and is enabling the emergence of innovative new smart home applications. 

Dialog Semiconductor Plc is headquartered near Stuttgart, with a global sales, R&D and marketing organisation. In 2012, it had US$774 million in revenue and is one of the fastest growing European public semiconductor companies. At 31 December 2012, the Company had 806 employees. With world-class manufacturing partners, Dialog operates a fabless business model. 

Please refer to “Our business strategy and performance” and “Our products and key customers” sections of this report for further information on the principal activities of the business and the factors affecting future developments. Information on treasury policies and objectives is included in note 25 to these financial statements. 

The Company is listed on the Frankfurt (FWB: DLG) stock exchange and is a member of the German TecDAX index. 

More information about the business is set out in the CEO’s statement, on pages 14 and 15, and in the Business review, on pages 12 and 13. 

## Future developments 

The Group’s stated objective is to be the leading global supplier of integrated mixed signal and analog differentiated power-saving technologies 

addressing high-growth portable platforms. The Company is currently leveraging its expertise to expand its standalone audio product portfolio, capitalising on the success of its low power and high-quality audio ICs, and develop solutions based on new emerging short-range wireless standards and energy-efficient retrofit bulb LED lighting technology. 

## Research and development (R&D) 

The Group 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 researching and developing 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 Application Specific Integrated Circuits (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. 

## Going concern 

After making enquiries, the Directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that the Group has adequate resources to continue for the foreseeable future. The Group holds US$312 million of cash at the year end (2011: US$114 million) and has continued access to a US$45 million borrowing facility. The Group has profitable forecasts and longer-term plans. For these reasons, the Directors have adopted the going concern basis in preparing the financial statements. 

## Dividends 

The Directors do not recommend the payment of a dividend (2011: nil). They are committed to re-investing all profits into the business and believe that this policy is in the best interests of its Shareholders. 

## Purchase of own shares 

The Company operates an Employee Benefit Trust, which purchases shares in the Company for the benefit of employees under the Company’s share option scheme, Long Term Incentive Plan and Executive Incentive 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 2012, the trust held 2,679,768 shares, which represented 3.94% of the total called-up share capital, at a nominal value of £267,977. 

## 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 18 to the consolidated financial statements. 

## Substantial shareholdings 

Details of substantial shareholdings are on page 9 of this annual report. 

## Directors 

The Directors, together with their biographies, are listed on pages 36 and 37 of this annual report. 

## 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 5% on a non-pre-emptive basis. 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 Directors’ remuneration report on pages 46 to 52 of this annual report. No Director had a material interest during the year ended 31 December 2012 in any contract of significance with any Group Company. 

## 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 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. The next Annual General Meeting will be held on 2 May 2013 at 9am. 

## Corporate Governance 

The Company’s Corporate Governance statement is set out on pages 40 to 45 of this annual report. 

## Supplier payment policy 

It is the Group’s policy to pay creditors in accordance with the terms and conditions agreed with them, and in accordance with contractual and other legal obligations. Days payable outstanding for the Group at 31 December 2012 were 81 days (2011: 58 days). 

## 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 Audit Committee 

