24 Dialog Semiconductor Plc | Annual report and accounts 2012 |  Section 2 | Business review Financial review continued 2011 included one-time M&A expenses in  connection with the acquisition of Dialog B.V.,  totalling US$3.2 million. Excluding these one-  time costs, general and administrative expenses  in 2011 were US$21.2 million. Comparing the  US$21.2 million with the amount in 2012 we  saw an increase of US$12.3 million or 57.8%  over 2011. US$3.1 million of this increase was due to  movements in the share price affecting the  National Insurance cost associated with  share-based payment charge. During 2012,  Dialog’s share price increased from €12.36 at 31 December 2011 to an average share price of €15.85 impacting the National Insurance  associated with share options exercised in the  year and new options granted during 2012 –  please refer to note 21 to the consolidated  financial statements. The remaining increase related to higher costs,  mainly personal costs for support functions,  reflecting the growth of the Company.  Underlying 1)  general and administrative expenses  in 2012 were US$29.2 million or 3.8% of  revenue, compared to US$19.9 million or 3.8% in 2011. Whilst the percentage remained  flat year-on-year, general and administrative  expenses as a percentage of revenues continue  to remain amongst best in class in our industry. Research and development expenses consist  principally of design and engineering-related  costs associated with the development of new  Application Specific Integrated Circuits  (“ASICs”) and Application Specific Standard  Products (“ASSPs”). Research and development  expenses (net of customer-funded projects) were US$127.9 million for 2012 (2011: US$90.0 million), an increase of 42.0%. The increase was primarily due to an increased  headcount of our R&D personnel and  investments in advanced silicon and packaging  technologies in support of our ongoing growth  strategy. As a percentage of total revenue,  research and development expenses decreased  from 17.1% in 2011 to 16.5% in 2012. In connection with the acquisition of SiTel in  2011, as explained in note 4 to the consolidated  financial statements, the Company carried out  some reorganisation, resulting in restructuring  costs of US$1.5 million. We reported an operating profit of US$91.0 million  for 2012. This compares to an operating profit  of US$61.6 million in the previous year. This increase of 47.7% primarily resulted from a wider revenue base in 2012, underpinned by our  Mobile Systems  segment. Underlying 1) operating profit in 2012 was US$107.5 million or  13.9% of revenue, compared to US$79.8 million  or 15.1% of revenue in 2011. Interest income and other financial income from  the Company’s investments (primarily short-term  deposits and securities) was US$1.4 million for  2012, compared to US$0.4 million in 2011. The increase is associated with the placement of the proceeds of the convertible bond on interest-bearing accounts. For further  information, please refer to note 18 to the consolidated financial statements.  Interest expense and other financial expense  consists primarily of expenses from capital leases,  hire purchase agreements, the Group’s factoring  arrangement and in 2012 also the interest  expense in relation to the convertible bond.  2012 interest and other financial expenses were  US$6.5 million (2011: US$0.2 million). The amount  in 2012 mainly included two components relating  to the convertible bond: US$1.4 million relating  to a 1% coupon payable on a semi-annual basis to the bondholders and US$4.0 million,  representing the interest expense in connection  with the measurement of financial liability from  the bond using the effective interest method. For 2012, a net tax charge of US$23.6 million  was recorded (2011: US$4.1 million), resulting  in an effective tax rate of 27.4% (2011: 6.6%).  The main reason for the increase of the effective  tax rate was that in 2012, a lower amount of previously unrecognised deferred tax assets  was recognised. The amount in 2012 was  US$4.0 million compared to US$14.6 million in  2011. Excluding these tax benefits, the effective  tax rate in 2012 would have been 32.1%  compared to 30.4% in 2011. This increase  relates to higher operational expenses in the UK, for which no tax benefit was recorded as a result of not recognising deferred tax assets in the UK. For further information, please refer to  note 5 to the consolidated financial statements.  For the reasons described above, net profit in  2012 reached US$62.5 million, compared to  US$57.4 million in 2011, with basic earnings per  share at US$0.97 (2011: US$0.91) and diluted  earnings per share at US$0.93 (2011: US$0.86).  Applying the 2012 effective tax rate of 27.4%  to the 2011 diluted earnings per share would  have reduced it by US$0.19 to US$0.67 – this  better demonstrates the operational leverage  that the Company achieved in 2012. Operating profit Interest income and other financial income Interest expense and other  financial expense Research and development expenses Income tax expense Restructuring expenses Net profit 120 100 80 60 40 20 0 2011 2012 Operating profit  (US$m) 80 60 40 20 0 2011 2012 Net profit  (US$m)