Costs

Operating expenses totalled £211 million (2005: £177 million). The increase over last year reflects higher variable remuneration costs arising on the improvement in total returns and costs associated with implementing new strategic initiatives. Operating expenses include a charge in respect of share-based payments, to reflect the fair value of options and other share-related rewards granted to employees, of £8 million (2005: £6 million).

Net interest payable for the year was £17 million, reflecting the considerable fall in net borrowings resulting from our net realisation proceeds and an increase in the proportion of borrowing in non-sterling currencies for which interest rates were more favourable during the year.