Always Moving

Dialog Semiconductor Plc Annual report and accounts 2016 Always moving Dialog Semiconductor Plc Strategic Corporate Financial Additional Annual report and accounts 2016 Contentsreport governance statements information 1 Select these tabs to jump to the start of that section Contents Contents 5 Select from the contents list below, the marked links or the highlighted text throughout the report, to jump to that page or web link Strategic report Corporate governance Additional information Here we set out our investment case – how we Here we describe our governance framework, Glossary of Terms – Technical 159 are structured with the right skills and resources including the role and effectiveness of the Glossary of Terms – Financial 161 in place, how we understand our markets Board and the alignment of the interests of our allowing us to capitalise on opportunities, leaders with long-term value creation. We are Advisers and corporate information 162 how we have a proven track record in terms of committed to strong governance and driving Group directory 163 performance and how our integrated approach a culture of responsibility throughout Dialog. Related undertakings 164 to sustainability and risk management ensures we are a long-term proposition. Committed to Branches and representative offices 165 strong leadership Positioned for success and governance Financial highlights 02 Introduction to governance 57 03 Chairman’s statement 03 Board of Directors 58 Q&A with our CEO 04 Management team 60 At a glance 06 Directors’ report 62 Our business model 08 Corporate governance statement 64 Our culture and values 10 Statement of Directors’ responsibilities 86 Our people 12 Responsibility statement 86 “ Our culture is sustained by a strong Responding to Rewarding the Board with good growth opportunities right behaviour Governance oversight.” Our markets 14 Directors’ remuneration report 70 Richard Beyer Chairman Our strategy 18 Annual report on remuneration 71 Case Studies 20 Directors’ remuneration policy report 80 Agility e Charging ahead 20 10 e Always connected 22 Financial statements The e Always ahead 24 Ideas power Difference Here we explain our annual of... e Always innovating 26 financial performance e Always charging 28 Many Delivering consistent results Performing in The “Spirit of Dialog” is the articulation of our our chosen markets Independent Auditor’s report 87 values and culture. It has helped us to deliver success for our customers, our employees and Segmental review 30 Consolidated statement of income 88 our shareholders. Key performance indicators 38 Consolidated statement of comprehensive income 89 Financial review 40 Consolidated balance sheet 90 08 Ensuring our Consolidated statement of cash flows 91 Our business long-term viability Consolidated statement model of changes in equity 92 Corporate responsibility and sustainability 48 Notes to the consolidated financial statements 93 Managing risk and uncertainty 52 Company balance sheet 145 Company statement of changes in equity 146 Notes to the Company financial statements 147 Financial performance measures 152 18 Our strategy Dialog Semiconductor Plc StrategicStrategic Corporate Financial Additional 1 Annual report and accounts 2016 reportreport governance statements information Powering the smart connected world Our passion for innovation and entrepreneurial spirit ensures we remain at the core of mobile computing and the Internet of Things (“IoT”). Through our collaborative R&D approach and responsible supply chain management, we develop and market highly-integrated power management and power efficient mixed signal integrated circuits (“ICs”). Our technologies contribute to extend battery life in portable devices and efficient connectivity in IoT applications, enhancing consumer experience and enabling our customers to differentiate and move fast to market. You can also read more about our corporate responsibility performance at www.dialog-semiconductor.com/company/ corporate-social-responsibility Dialog Semiconductor Plc Strategic Corporate Financial Additional 2 Annual report and accounts 2016 report governance statements information Financial highlights A transition year of strong cash flow generation and solid strategic progress Against the backdrop of lower year-on-year smartphone volumes, our gross margin and cash flow generation remained strong. In line with our strategic objectives, we sustained a healthy level of R&D investment to generate future profitable growth. Read about our KPIs in detail on Page 38 2016 Financial highlights Revenue decline (US$m) Gross margin (%) Cash flow from operating activities(US$m) -12% 45.7% US$249m 2016 1,198 2016 45.7 2016 249 2015 1,355 2015 46.1 2015 318 Operating margin (%) Diluted EPS (US$) Underlying measures of profitability are non-IFRS measures because they exclude amounts that are included in, or include amounts that are 25.9% US$3.25 excluded from, the most directly comparable measure calculated and presented in accordance 2016 25.9 2016 3.25 with IFRS or are calculated using financial measures that are not calculated in accordance 2015 19.2 2015 2.29 with IFRS. We do not regard non-IFRS measures as a substitute for, or superior to, the equivalent IFRS measures. Underlying measures presented Underlying revenue decline (US$m) Underlying gross margin (%) by Dialog may not be directly comparable with similarly-titled measures used by -12% 46.3% other companies An explanation of the adjustments made to 2016 1,198 2016 46.3 the equivalent IFRS measures in calculating the non-IFRS measures and reconciliations of 2015 1,355 2015 46.7 the non-IFRS measures to the equivalent IFRS measures for each of the periods presented are set out in the section entitled “Financial Underlying operating margin (%) Underlying diluted EPS (US$) performance measures” on pages 152 to 158. 18.5% US$2.09 2016 18.5 2016 2.09 2015 23.4 2015 3.02 Dialog Semiconductor Plc Strategic Corporate Financial Additional 3 Annual report and accounts 2016 report governance statements information Chairman’s statement Embedding the right culture to ensure success “ This year we strengthened our governance practice, and the experience and diversity of the Board.” Richard Beyer Chairman Fellow shareholder, how we interact with all of our stakeholders; industry; provide market-leading innovation 2016 was a year of transition for Dialog. and are the basis for long-term success and for our customers; and drive long-term value Against a backdrop of weaker year-on-year value creation. for shareholders. volume demand for our mobile systems A strong corporate culture is built and sustained The success of our business is attributable to products, we made good progress on delivering by a strong Board with good governance the hard work and commitment of our 1,766 innovative and differentiated energy-efficient oversight. During 2016, we continued to employees around the world – ably led by solutions to power the smart connected world. review and enhance our corporate governance our Executive Team and, in particular, our CEO, The business successfully navigated new practice; and strengthen the experience and Jalal Bagherli. We thank all of our employees challenges brought by the 12% year-on-year diversity of your Board. We welcomed two for their work and dedication to the business revenue decline and delivered the next phase new independent non-executive Directors during the year. to the Board during the year: Nick Jeffery and of high-volume products for our customers. Finally, we would like to thank you, our Mary Chan. Nick brings a wealth of international The underlying strength of our products and shareholders, for your continued support and business experience; having scaled new our business is reflected in our strong cash flow the trust you have placed in us as your Board. enterprise-focused businesses and successfully generation capability which drives our strong We look to 2017 and beyond with confidence. led multiple acquisition and integration projects. balance sheet. We are proud of the business we are building; Mary brings invaluable experience and insight of our employees who work hard to deliver During 2016, the Board and senior management into how pervasive connectivity and the Internet every day; and of the customers whom we serve. team continued to place great emphasis on of Things are driving change across multiple articulating, internally and externally, our culture industries. The appointment of Nick and Mary Sincerely, and values. Embodied in the “Spirit of Dialog”, builds on our appointment of Alan Campbell it is the Board’s responsibility to ensure our and Eamonn O’Hare to the Board over the past Richard Beyer culture and values are shared and understood two years. Our Board today comprises the range Chairman throughout the organisation; and, among our of skills, expertise and international experience suppliers, partners and customers. They inform which we believe will enable us to continue the way we behave towards each other; to position Dialog at the forefront of our Our values Our culture and values Agility encompass our approach to doing business. They guide us in everything we do and ensure the team spirit, dynamism and The a “can do” attitude, essential Ideas power Difference for our continued success. of... Many Read more on Page 10 Dialog Semiconductor Plc Strategic Corporate Financial Additional 4 Annual report and accounts 2016 report governance statements information Q&A with our CEO, Dr Jalal Bagherli Dear shareholder, We can be proud

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