Liquidity and Capital Resources Cash Flows
## Table 0 ##
We have generated annual cash provided by operating activities in amounts greater than net income in 2006, 2005 and 2004 due primarily to non-cash charges to earnings and the tax benefit on the exercise of stock options.
Non-cash charges to earnings included stock-based compensation, depreciation and amortization on our long-term assets, provision for doubtful accounts and authorized credits resulting from increasing revenues and the provision for transaction losses related to PayPal.
Prior to adopting FAS 123(R), we presented all tax benefits resulting from the exercise of stock options as operating cash flows in the consolidated statement of cash flows.
FAS 123(R) requires cash flows resulting from excess tax benefits to be classified as a part of cash flows from financing activities.
Excess tax benefits represent tax benefits related to exercised options in excess of the associated deferred tax asset for such options.
As a result of adopting FAS 123(R), $92.4 million of excess tax benefits for 2006 have been reported as a cash inflow from financing activities.
In addition, as a substantial portion of the company’s net operating losses and carryforward credits have now been utilized, cash will be required for tax payments in the U. S.  going forward.
Total U. S.  and foreign income tax payments will be dependent on our taxable income and are estimated to be in the range of $650- $700 million in 2007.
In 2007, we expect operating cash flows to increase, primarily driven by higher net income.
The net cash provided by investing activities in 2006 was primarily due to the movement of investments to cash and cash equivalents to fund our stock repurchase program.
The net cash used in investing activities in 2005 and 2004 reflected primarily the movement of cash and cash equivalents between cash and cash equivalents and investments, the purchase of property and equipment, and acquisitions.
Purchases of property and equipment, net totaled $515.4 million in 2006, $338.3 million in 2005, and $292.8 million in 2004.
Purchases of property and equipment in 2006, 2005 and 2004 related mainly to purchases of computer equipment and software to support our site operations, customer support and international expansion.
Cash expended for acquisitions, net of cash acquired, totaled approximately $45.5 million in 2006, $2.7 billion in 2005, and $1.0 billion in 2004.
In 2006, net cash payments for acquisitions consisted of the cash payment, net of cash acquired, for the acquisition of Tradera.
com.
In 2005, net cash payments for acquisitions consisted primarily of the cash payment, net of cash acquired for the acquisition of Rent.
com, certain international classifieds websites, Shopping.
com, Skype and the payment gateway business acquired from VeriSign.
In 2004, our cash acquisitions included the acquisition of mobile.
de, Baazee.
com, and Marktplaats.
nl, as well as an additional ownership interest in Internet Auction Co.
In 2007, we expect to continue to purchase property and equipment and we may acquire businesses with cash that would impact investing cash flows.
The net cash flows used in financing activities of $1.3 billion in 2006 was primarily due to the repurchase of approximately 54.5 million shares of common stock for an aggregate purchase price of approximately $1.7 billion, offset by the proceeds from stock options totaling $313.5 million.
Prior to 2006, we had not repurchased our common stock under a stock repurchase program.
The net cash flows provided by financing activities in 2005 and 2004 were due primarily to proceeds from stock option exercises.
Proceeds from stock option exercises totaled $599.8 million in 2005 and $650.6 million in 2004.
Our future cash flows from stock options are difficult to project
Payments cost of net revenues increased $183.9 million, or 18%, in 2009 compared to 2008.
The increase in cost of net revenues was primarily due to the inclusion of costs attributable to Bill Me Later as well as the impact from our growth in net TPV.
Payments cost of net revenues as a percentage of Payments net revenues increased during 2009 compared to 2008 due primarily to the impact of lower take rates and increased investment in our site operations, partially offset by a more favorable geographic and payment processor mix.
Communications On November 19, 2009, we completed the sale of Skype to an investor group.
Accordingly, Skype’s cost of net revenue is not consolidated in our 2010 results.
Communications cost of net revenues increased $6.7 million or 2%, in 2009 compared to 2008.
The increase in cost of net revenues was due to an increase in SkypeOut minutes.
Communications cost of net revenues as a percentage of Communications net revenues decreased in 2009 compared to 2008 due primarily to higher volume and changes in product mix.
Summary of Operating Expenses, Non-Operating Items and Provision for Income Taxes The following table summarizes changes in operating expenses, non-operating items and provision for income taxes:
## Table 1 ##
Sales and Marketing Sales and marketing expenses consist primarily of advertising costs and marketing programs (both online and offline), employee compensation, contractor costs, facilities costs and depreciation on equipment.
Online marketing expenses represent traffic acquisition costs in various channels such as paid search, affiliates marketing and display advertising.
Offline advertising includes brand campaigns, buyer/seller communications and general public relations expenses.
Sales and marketing expense increased by $61.1 million, or 3% in 2010 compared to 2009.
The increase was due primarily to higher employee-related expenses (including consultant costs, facility costs and equipmentrelated costs), marketing program costs and costs attributable to Gmarket, partially offset by the exclusion of costs attributable to Skype.
A significant portion of our sales and marketing expense is attributable to our efforts to enhance our online marketing programs, primarily paid search, in order to drive traffic to our Marketplaces and Payments websites.
and the operational and tax efficiency of our corporate structure, as well as the long-term cash flows and cash needs of our different businesses.
These transactions may impact our overall tax rate and/or result in additional cash tax payments.
The impact in any period may be significant.
These transactions may be complex and the impact of such transactions on future periods may be difficult to estimate.
We are regularly under examination by tax authorities both domestically and internationally.
We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations, although we cannot assure you that this will be the case given the inherent uncertainties in these examinations.
Due to the ongoing tax examinations, we believe it is impractical to determine the amount and timing of these adjustments.
Liquidity and Capital Resources Cash Flows
## Table 2 ##
Operating Activities We generated cash from operating activities of $3.8 billion , $3.3 billion and $2.7 billion in 2012 , 2011 and 2010 , respectively.
The increase in cash provided by operating activities in 2012 compared to 2011 was due primarily to higher income from operations resulting from growth in revenues.
The increase in cash provided by operating activities in 2011 compared to 2010 was due primarily to a decrease in cash paid for taxes in 2011.
Cash paid for taxes in 2010 included a cash payment for taxes of approximately $207 million related primarily to a legal entity restructuring completed in the fourth quarter 2009.
Cash paid for income taxes in 2012 , 2011 and 2010 was $789 million , $373 million and $646 million , respectively.
Investing Activities The net cash used in investing activities of $3.8 billion in 2012 was due primarily to net cash paid for purchases of investments of $3.1 billion , purchases of property and equipment, net, of $1.3 billion and the purchase of consumer loan receivables (net of collections) originated through our Bill Me Later merchant network of $727 million , partially offset by proceeds of $1.4 billion for sales of investments.
The net cash used in investing activities of $3.3 billion in 2011 was due primarily to net cash paid for acquisition of businesses of $3.2 billion, purchases of investments of $2.3 billion, purchases of property and equipment, net, of $963 million and the purchase of consumer loan receivables (net of collections) originated through our Bill Me Later merchant network of $587 million, partially offset by proceeds of $2.3 billion related to the sale of our remaining 30 percent interest in Skype and $1.6 billion from maturities and sales of investments.
Financing Activities The net cash provided by financing activities of $2.0 billion in 2012 was due primarily to cash inflows of approximately $3.0 billion from the issuance of senior notes, $483 million from the issuance of common stock in connection with the exercise of stock options and our employee stock purchase plan, and $130 million in excess tax benefits from stock-based compensation.
These cash inflows were partially offset by outflows of $898 million in cash paid to repurchase our common stock, $550 million for the net repayment of commercial paper, and $186 million in cash paid for tax withholdings related to net share settlements of restricted stock units and nonvested share awards.
We used a portion of the net proceeds from the issuance of our senior notes to repay the commercial paper referred to above.
State Street Bank Issuances: State Street Bank currently has authority to issue up to an aggregate of $1 billion of subordinated fixed-rate, floating-rate or zero-coupon bank notes with a maturity of five to fifteen years.
With respect to the 5.25% subordinated bank notes due 2018, State Street Bank is required to make semi-annual interest payments on the outstanding principal balance of the notes on April 15 and October 15 of each year, and the notes qualify as Tier 2 capital under regulatory capital guidelines.
With respect to the 5.30% subordinated notes due 2016 and the floating-rate subordinated notes due 2015, State Street Bank is required to make semi-annual interest payments on the outstanding principal balance of the 5.30% notes on January 15 and July 15 of each year beginning in July 2006, and quarterly interest payments on the outstanding principal balance of the floating-rate notes on March 8, June 8, September 8 and December 8 of each year beginning in March 2006.
The notes qualify as Tier 2 capital under regulatory capital guidelines.
Note 10.
Commitments and Contingencies Off-Balance Sheet Commitments and Contingencies: Credit-related financial instruments include indemnified securities financing, unfunded commitments to extend credit or purchase assets and standby letters of credit.
The total potential loss on unfunded commitments, standby and commercial letters of credit and securities finance indemnifications is equal to the total contractual amount, which does not consider the value of any collateral.
The following is a summary of the contractual amount of credit-related, off-balance sheet financial instruments at December 31.
Amounts reported do not reflect participations to unrelated third parties.
## Table 3 ##
On behalf of our customers, we lend their securities to creditworthy brokers and other institutions.
In certain circumstances, we may indemnify our customers for the fair market value of those securities against a failure of the borrower to return such securities.
Collateral funds received in connection with our securities finance services are held by us as agent and are not recorded in our consolidated statement of condition.
We require the borrowers to provide collateral in an amount equal to or in excess of 100% of the fair market value of the securities borrowed.
The borrowed securities are revalued daily to determine if additional collateral is necessary.
We held, as agent, cash and U. S.  government securities totaling $527.37 billion and $387.22 billion as collateral for indemnified securities on loan at December 31, 2006 and 2005, respectively.
Approximately 81% of the unfunded commitments to extend credit and liquidity asset purchase agreements expire within one year from the date of issue.
Since many of the commitments are expected to expire or renew without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
In the normal course of business, we provide liquidity and credit enhancements to asset-backed commercial paper programs, or “conduits.
” These conduits are more fully described in Note 11.
The commercial paper issuances and commitments of the conduits to provide funding are supported by liquidity asset purchase agreements and backup liquidity lines of credit, the majority of which are provided by us.
In addition, we provide direct credit support to the conduits in the form of standby letters of credit.
Our commitments under liquidity asset purchase agreements and backup lines of credit totaled $23.99 billion at December 31, 2006, and are included in the preceding table.
Our commitments under

<table><tr><td></td><td colspan="3">Year Ended December 31,</td></tr><tr><td></td><td>2004</td><td>2005</td><td>2006</td></tr><tr><td></td><td colspan="3">(In thousands)</td></tr><tr><td> Consolidated Cash Flow Data:</td><td></td><td></td><td></td></tr><tr><td>Net cash provided by (used in):</td><td></td><td></td><td></td></tr><tr><td>Operating activities</td><td>$1,285,315</td><td>$2,009,891</td><td>$2,247,791</td></tr><tr><td>Investing activities</td><td>-2,013,220</td><td>-2,452,731</td><td>228,853</td></tr><tr><td>Financing activities</td><td>647,669</td><td>471,606</td><td>-1,260,687</td></tr><tr><td>Effect of exchange rates on cash and cash equivalents</td><td>28,768</td><td>-45,231</td><td>133,255</td></tr><tr><td>Net increase (decrease) in cash and cash equivalents</td><td>$-51,468</td><td>$-16,465</td><td>$1,349,212</td></tr></table>
<table><tr><td></td><td colspan="3">Year Ended December 31,</td><td colspan="2">Change from 2008 to 2009</td><td colspan="2">Change from 2009 to 2010</td></tr><tr><td></td><td>2008</td><td>2009</td><td>2010</td><td>in Dollars</td><td>in %</td><td>in Dollars</td><td>in %</td></tr><tr><td></td><td colspan="7">(In thousands, except percentage changes)</td></tr><tr><td>Sales and marketing</td><td>$1,881,551</td><td>$1,885,677</td><td>$1,946,815</td><td>$4,126</td><td>—%</td><td>$61,138</td><td>3%</td></tr><tr><td>Product development</td><td>725,600</td><td>803,070</td><td>908,434</td><td>77,470</td><td>11%</td><td>105,364</td><td>13%</td></tr><tr><td>General and administrative</td><td>998,871</td><td>1,418,389</td><td>1,079,383</td><td>419,518</td><td>42%</td><td>-339,006</td><td>-24%</td></tr><tr><td>Provision for transaction and loan losses</td><td>347,453</td><td>382,825</td><td>392,240</td><td>35,372</td><td>10%</td><td>9,415</td><td>2%</td></tr><tr><td>Amortization of acquired intangible assets</td><td>234,916</td><td>262,686</td><td>189,727</td><td>27,770</td><td>12%</td><td>-72,959</td><td>-28%</td></tr><tr><td>Restructuring</td><td>49,119</td><td>38,187</td><td>21,437</td><td>-10,932</td><td>-22%</td><td>-16,750</td><td>-44%</td></tr><tr><td>Interest and other income (expense), net</td><td>107,882</td><td>1,422,385</td><td>44,876</td><td>1,314,503</td><td>1,218%</td><td>-1,377,509</td><td>-97%</td></tr><tr><td>Provision for income taxes</td><td>-404,090</td><td>-490,054</td><td>-297,486</td><td>-85,964</td><td>21%</td><td>192,568</td><td>-39%</td></tr></table>
<table><tr><td></td><td colspan="3">Year Ended December 31,</td></tr><tr><td></td><td>2012</td><td>2011</td><td>2010</td></tr><tr><td></td><td colspan="3">(In millions)</td></tr><tr><td>Net cash provided by (used in):</td><td></td><td></td><td></td></tr><tr><td>Operating activities</td><td>3,838</td><td>3,274</td><td>2,746</td></tr><tr><td>Investing activities</td><td>-3,763</td><td>-3,307</td><td>-2,284</td></tr><tr><td>Financing activities</td><td>1,951</td><td>-838</td><td>1,235</td></tr><tr><td>Effect of exchange rates on cash and cash equivalents</td><td>100</td><td>-15</td><td>-120</td></tr><tr><td>Net increase/(decrease) in cash and cash equivalents</td><td>2,126</td><td>-886</td><td>1,577</td></tr></table>
<table><tr><td>(In millions)</td><td>2006</td><td>2005</td></tr><tr><td>Indemnified securities financing</td><td>$506,032</td><td>$372,863</td></tr><tr><td>Liquidity asset purchase agreements</td><td>30,251</td><td>24,412</td></tr><tr><td>Unfunded commitments to extend credit</td><td>16,354</td><td>14,403</td></tr><tr><td>Standby letters of credit</td><td>4,926</td><td>5,027</td></tr></table>

Question: what is the percentage change in the balance of indemnified securities financing from 2005 to 2006?
Answer: 0.35715