offering. The increase in revenue from customers in Europe was primarily attributable to revenue related to transformation and implementation projects. The increase in revenue from customers in the rest of the world was primarily attributable to our activity in emerging markets. Cost of License and Service. Cost of license and service increased by $16.1 million, or 0.8%, to $2,085.5 million in fiscal 2012, from $2,069.4 million in fiscal 2011. As a percentage of revenue, cost of license and service decreased to 64.2% in fiscal 2012 from 65.1% in fiscal 2011. The decrease in our cost of license and service as a percentage of revenue was primarily attributable to the benefits of efficiencies realized from prior investments in internal training and knowledge building programs for our employees, as well as from various process improvements. This decrease was also attributable to several key customer implementations that required incremental spending during fiscal 2011 and was partially offset by the increase in revenue from customers in emerging markets, as a percentage of total revenue, which is characterized by lower margins. Research and Development. Research and development expense increased by $20.2 million, or 9.1%, to $242.1 million in fiscal 2012, from $221.9 million in fiscal 2011. The increase in research and development expense was primarily attributable to our network control research and development activity. Research and development expense increased as a percentage of revenue from 7.0% in fiscal 2011 to 7.5% in fiscal 2012. Please see “Research and Development, Patents and Licenses.” Selling, General and Administrative. Selling, general and administrative expense increased by $15.2 million, or 3.7%, to $424.7 million in fiscal 2012, from $409.5 million in fiscal 2011. Selling, general and administrative expense is primarily comprised of compensation expense. The increase in selling, general and administrative expense was primarily attributable to increased selling efforts. Amortization of Purchased Intangible Assets and Other. Amortization of purchased intangible assets and other decreased by $20.4 million, or 28.1%, to $52.2 million in fiscal 2012, from $72.6 million in fiscal 2011. The decrease in amortization of purchased intangible assets and other was primarily due to purchased intangible assets that were fully amortized in prior periods, partially offset by amortization of intangible assets related to the fiscal 2011 acquisition of Bridgewater Systems. Operating Income. Operating income increased by $38.1 million, or 9.4%, to $442.5 million in fiscal 2012, from $404.4 million in fiscal 2011. Operating income increased as a percentage of revenue, from 12.7% in fiscal 2011 to 13.6% in fiscal 2012. The increase in operating income as a percentage of revenue was primarily attributable to the increase of cost of service being lower than the increase in revenue, as well as to the decrease in amortization of purchased intangible assets and other. The negative foreign exchange impacts on our revenue were partially offset by positive impacts on our operating expense, resulting in a minor impact on our operating income. Interest and Other Expense, Net. Interest and other expense, net, decreased by $7.7 million to $0.9 million in fiscal 2012, from $8.7 million in fiscal 2011. The decrease in interest and other expense, net, was primarily attributable to a $6.3 million gain resulting from the sale of our minority interest in Longshine, recorded in the three months ended March 31, 2012. Please see Note 15 to our consolidated financial statements. Income Taxes. Income taxes for fiscal 2012 were $50.2 million on pre-tax income of $441.5 million, resulting in an effective tax rate of 11.4%, compared to 12.4% in fiscal 2011. Our effective tax rate may fluctuate between periods as a result of discrete items that may affect a particular period. Please see Note 11 to our consolidated financial statements. Net Income. Net income increased by $44.7 million, or 12.9%, to $391.4 million in fiscal 2012, from $346.7 million in fiscal 2011. The increase in net income was attributable to the increase in operating income and to the decrease in interest and other expense, net, partially offset by an increase in income tax expense. Diluted Earnings Per Share. Diluted earnings per share increased by $0.45, or 24.2%, to $2.31 in fiscal 2012, from $1.86 in fiscal 2011. The increase in diluted earnings per share resulted from the increase in net income and from the change in the diluted weighted average number of shares outstanding resulting primarily from our repurchase of ordinary shares in fiscal 2012 and 2011. Please see Note 20 to our consolidated financial statements. 36