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8. Net finance costs

Finance costs and exchange gains/(losses) are presented net of effective cash flow hedges for respective interest bearing and foreign currency borrowings.

The weighted average interest rate applicable to interest on general borrowings capitalised for continuing operations was 12.0% (2007: 11.4%). Financing remeasurements are set out in note 7.

  Before special
items and
remeasurements
After special
items and
remeasurements
Before special
items and
remeasurements
After special
items and
remeasurements
US$ million 2008 2008 2007 2007
Investment income
Interest and other
financial income
324 324 323 323
Expected return on defined
benefit arrangements
215 215 257 257
Dividend income from
financial asset investments
50 50 36 36
Total investment income –
continuing operations
589 589 616 616
Interest expense
Amortisation of discount relating to provisions (33) (33) (36) (36)
Interest and other finance expense (815) (815) (565) (565)
Interest on defined benefit arrangements (201) (201) (229) (229)
Dividend on redeemable preference shares (16) (16) (9) (9)
  (1,065) (1,065) (839) (839)
Less: interest capitalised 215 215 42 42
Total interest expense –
continuing operations
(850) (850) (797) (797)
Other financing (losses)/gains
Net foreign exchange (losses)/gains (173) (145) 59 56
Fair value (losses)/gains on derivatives (2) 21 (1) 12
Net fair value gains/(losses) on fair value hedges 2 2 (6) (6)
Other net fair value (losses)/gains (18) (18) (8) 11
Total other financing (losses)/
gains – continuing operations
(191) (140) 44 73
Net finance costs – continuing operations (452) (401) (137) (108)

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