Management’s Discussion and Analysis 2011 versus 2010.
Net revenues in Investing & Lending were $2.14 billion and $7.54 billion for 2011 and 2010, respectively.
During 2011, Investing & Lending results reflected an operating environment characterized by a significant decline in equity markets in Europe and Asia, and unfavorable credit markets that were negatively impacted by increased concerns regarding the weakened state of global economies, including heightened European sovereign debt risk.
Results for 2011 included a loss of $517 million from our investment in the ordinary shares of ICBC and net gains of $1.12 billion from other investments in equities, primarily in private equities, partially offset by losses from public equities.
In addition, Investing & Lending included net revenues of $96 million from debt securities and loans.
This amount includes approximately $1 billion of unrealized losses related to relationship lending activities, including the effect of hedges, offset by net interest income and net gains from other debt securities and loans.
Results for 2011 also included other net revenues of $1.44 billion, principally related to our consolidated investment entities.
Results for 2010 included a gain of $747 million from our investment in the ordinary shares of ICBC, a net gain of $2.69 billion from other investments in equities, a net gain of $2.60 billion from debt securities and loans and other net revenues of $1.51 billion, principally related to our consolidated investment entities.
The net gain from other investments in equities was primarily driven by an increase in global equity markets, which resulted in appreciation of both our public and private equity positions and provided favorable conditions for initial public offerings.
The net gains and net interest from debt securities and loans primarily reflected the impact of tighter credit spreads and favorable credit markets during the year, which provided favorable conditions for borrowers to refinance.
Operating expenses were $2.67 billion for 2011, 20% lower than 2010, due to decreased compensation and benefits expenses, primarily resulting from lower net revenues.
This decrease was partially offset by the impact of impairment charges related to consolidated investments during 2011.
Pre-tax loss was $531 million in 2011, compared with pre-tax earnings of $4.18 billion in 2010.
Investment Management Investment Management provides investment management services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse set of institutional and individual clients.
Investment Management also offers wealth advisory services, including portfolio management and financial counseling, and brokerage and other transaction services to high-net-worth individuals and families.
Assets under supervision include assets under management and other client assets.
Assets under management include client assets where we earn a fee for managing assets on a discretionary basis.
This includes net assets in our mutual funds, hedge funds, credit funds and private equity funds (including real estate funds), and separately managed accounts for institutional and individual investors.
Other client assets include client assets invested with third-party managers, private bank deposits and assets related to advisory relationships where we earn a fee for advisory and other services, but do not have discretion over the assets.
Assets under supervision do not include the self-directed brokerage accounts of our clients.
Assets under management and other client assets typically generate fees as a percentage of net asset value, which vary by asset class and are affected by investment performance as well as asset inflows and redemptions.
In certain circumstances, we are also entitled to receive incentive fees based on a percentage of a fund’s return or when the return exceeds a specified benchmark or other performance targets.
Incentive fees are recognized only when all material contingencies are resolved.
The table below presents the operating results of our Investment Management segment.
## Table 0 ##
$1.9 billion in coverage remaining for Bendix related asbestos liabilities although there are gaps in our coverage due to insurance company insolvencies, certain uninsured periods and insurance settlements, resulting in approximately 50 percent of these claims on a cumulative historical basis being reimbursable by insurance.
Our insurance is with both the domestic insurance market and the London excess market.
While the substantial majority of our insurance carriers are solvent, some of our individual carriers are insolvent, which has been considered in our analysis of probable recoveries.
Projecting future events is subject to various uncertainties that could cause the insurance recovery on asbestos related liabilities to be higher or lower than that projected and recorded.
Given the inherent uncertainty in making future projections, we reevaluate our projections concerning our probable insurance recoveries in light of any changes to the projected liability, our recovery experience or other relevant factors that may impact future insurance recoveries.
See Note 21 of Notes to Financial Statements in “Item 8.
Financial Statements and Supplementary Data’’ for a discussion of management’s judgments applied in the recognition and measurement of insurance recoveries for asbestos related liabilities.
Defined Benefit Pension Plans—We maintain defined benefit pension plans covering a majority of our employees and retirees.
For financial reporting purposes, net periodic pension expense is calculated based upon a number of actuarial assumptions including a discount rate for plan obligations and an expected rate of return on plan assets.
We consider current market conditions, including changes in investment returns and interest rates, in making these assumptions.
We determine the expected long-term rate of return on plan assets utilizing historic plan asset returns over varying longterm periods combined with current market conditions and broad asset mix considerations (see Note 22 of Notes to Financial Statements in “Item 8.
Financial Statements and Supplementary Data’’ for actual and targeted asset allocation percentages for our pension plans).
The expected rate of return on plan assets is a long-term assumption and generally does not change annually.
The discount rate reflects the market rate on our annual measurement date (December 31) for high-quality fixed-income investments with maturities corresponding to our benefit obligations and is subject to change each year.
The expected rate of return on pension assets and discount rate were determined in accordance with consistent methodologies.
Further information on all our major actuarial assumption is included in Note 22 of Notes to Financial Statements in “Item 8.
Financial Statements and Supplementary Data’’.
The key assumptions used in developing our 2005, 2004 and 2003 net periodic pension expense for our U. S.  plans included the following:
## Table 1 ##
The reduction in the discount rate in both 2005 and 2004 reflects the lower market interest rate environment for high-quality fixed income debt instruments.
The discount rate is also volatile because it is determined based upon the prevailing rate as of the measurement date.
Due to continuing declines in interest rates, we will use a 5.75 percent discount rate in 2006.
We plan to continue to use an expected rate of return on plan assets of 9 percent for 2006.
The unrecognized net losses for our U. S.  pension plans were $2.6 billion at both December 31, 2005 and 2004 as a decrease in unrecognized net losses due to loss amortization in 2005 was offset by additional unrecognized net losses due to the lower discount rate and the adoption of the RP2000 Mortality Table as of December 31, 2005.
The unrecognized net losses at December 31, 2005 principally result from the decline each year since 2001 in the discount rate and from actual plan asset returns below expected rates of return during 2000, 2001, 2002 and 2005.
Such unrecognized net losses are being systematically recognized in future net periodic pension expense in accordance with Statement of Financial Accounting Standards No.87, “Employers Accounting for Pensions’’ (SFAS No.87).
Under SFAS No.87, we use the market-related value of plan assets reflecting changes in the fair value of plan assets over a three-year period.
Further, unrecognized net losses in excess of 10 percent of the greater of the market-related value of plan assets or the plans projected benefit obligation are recognized over a six-year period.
Defense and space OE sales increased in both 2005 and 2004 due principally to platform upgrades related to war-related activities, growth in precision munitions and increases in restricted space programs.
Aerospace segment profit in 2005 increased by 15 percent compared with 2004 due primarily to volume growth and the effect of productivity actions, partially offset by an increase in spending for information technology systems.
Aerospace segment profit in 2004 increased by 21 percent compared with 2003 due primarily to volume growth partially offset by higher development expense associated with new programs and an increase in spending for information technology systems.
Trends which may impact Aerospace operating results in 2006 include: ?
Global flying hours improved by 7 percent in 2005 and are expected to increase again in 2006 (5 to 6 percent).  ?
The financial condition of major commercial airlines continues to be a concern due mainly to high fuel costs and intense fare competition.  ?
The level and mix of U. S.  government appropriations for defense and space programs and the nature and level of war-related activities.  ?
Aircraft production rates and delivery schedules in the air transport, business and general aviation end-markets.  ?
The impact of global economic conditions on utilization of business jet and general aviation aircraft.
Automation and Control Solutions
## Table 2 ##
Automation and Control Solutions sales in 2005 increased by 17 percent compared with 2004 due to acquisitions (mainly Novar’s IBS business), net of divestitures, of 13 percent, higher volumes of 4 percent and the favorable effect of foreign exchange of 1 percent, partially offset by the impact of lower prices of 1 percent.
Sales increased by 26 percent for our Products businesses driven primarily by the acquisition of Novar’s IBS business.
The increase was also due to volume growth and other acquisitions in our security and life safety businesses.
Sales for our Building Solutions business increased by 10 percent due primarily to the acquisition of Novar’s IBS business and growth in security and energy retrofits partially offset by the divestiture of our Security Monitoring business in the prior year.
Sales for our Process Solutions business increased by 4 percent primarily due to an acquisition and the favorable effect of foreign exchange.
Automation and Control Solutions sales in 2004 increased by 8 percent compared with 2003 due to higher volumes of 5 percent and the favorable effect of foreign exchange of 4 percent, partially offset by the impact of lower prices of 1 percent.
Sales increased by 9 percent for our Products businesses due principally to strong sales of fire solutions, environmental controls and sensor products, and the favorable effects of foreign exchange and acquisitions.
Sales for our Process Solutions business increased by 8 percent due primarily to the favorable effect of foreign exchange and improvement in industrial production and capital spending.
Sales for our Building Solutions business increased by 5 percent due primarily to the favorable effect of foreign exchange and the impact of investments in sales and marketing initiatives, partially offset by the divestiture of our Security Monitoring business.
Automation and Control Solutions segment profit in 2005 increased by 19 percent compared with 2004 as the favorable effects of productivity actions, acquisitions (principally IBS) and higher sales volume (due in part to new products) more than offset the unfavorable effects of lower prices and investments in sales and marketing initiatives.
Automation and Control Solutions segment profit in 2004 increased by 6 percent compared with 2003 due to the favorable effect of higher sales volumes partially offset by increased investments in sales and marketing initiatives and higher research and
HONEYWELL INTERNATIONAL INC.  NOTES TO FINANCIAL STATEMENTS—(Continued) (Dollars in millions, except per share amounts) and $27 million, respectively, offset by a decrease of $30 million for foreign tax credits which we now believe will be utilized due to the extension of the foreign tax credit carryforward period from five to 10 years under the American Jobs Creation Act of 2004 (Act).
The increase in 2003 was primarily due to an increase in foreign net operating losses that are not expected to be utilized.
The Act, signed into law in October 2004, provides for a variety of changes in the tax law including incentives to repatriate undistributed earnings of foreign subsidiaries, a phased elimination of the extraterritorial income exclusion, and a domestic manufacturing benefit.
More specifically, the Act creates a temporary incentive for U. S.  corporations to repatriate accumulated income earned outside the U. S.  by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations.
In May 2005, the U. S.  Treasury issued guidance clarifying certain provisions of the Act and, accordingly, during the second quarter of 2005 we were able to finalize our assessment of the Act and its impact on Honeywell.
We repatriated approximately $2.7 billion of foreign earnings during the remainder of 2005, of which $2.2 billion receives the benefit under the Act, with an income tax provision of $155 million.
As of December 31, 2005, Honeywell has not provided for U. S.  federal income and foreign withholding taxes on $2.1 billion of undistributed earnings from non-U.
S.  operations.
Such earnings are currently intended to be reinvested indefinitely.
It is not practicable to estimate the amount of tax that might be payable if some or all of such earnings were to be remitted, and foreign tax credits would be available to reduce or eliminate the resulting U. S.  income tax liability.
The extra-territorial income exclusion for foreign sales will be phased-out over two years beginning in 2005.
The deduction for income from qualified domestic production activities will be phased-in from 2005 through 2010.
We do not expect that this legislation will have a material effect on our consolidated tax accruals or effective tax rate.
Note 8—Earnings (Loss) Per Share The following table sets forth the computations of basic and diluted earnings (loss) per share:
## Table 3 ##

<table><tr><td></td><td>Year Ended December</td></tr><tr><td><i>in millions</i></td><td>2012</td><td>2011</td><td>2010</td></tr><tr><td>Management and other fees</td><td>$4,105</td><td>$4,188</td><td>$3,956</td></tr><tr><td>Incentive fees</td><td>701</td><td>323</td><td>527</td></tr><tr><td>Transaction revenues</td><td>416</td><td>523</td><td>531</td></tr><tr><td>Total net revenues</td><td>5,222</td><td>5,034</td><td>5,014</td></tr><tr><td>Operating expenses</td><td>4,294</td><td>4,020</td><td>4,082</td></tr><tr><td>Pre-tax earnings</td><td>$ 928</td><td>$1,014</td><td>$ 932</td></tr></table>
<table><tr><td></td><td> 2005 </td><td> 2004 </td><td> 2003 </td></tr><tr><td>Discount rate</td><td>5.875%</td><td>6.00%</td><td>6.75%</td></tr><tr><td>Assets:</td><td></td><td></td><td></td></tr><tr><td>Expected rate of return</td><td>9%</td><td>9%</td><td>9%</td></tr><tr><td>Actual rate of return</td><td>8%</td><td>13%</td><td>23%</td></tr><tr><td>Actual 10 year average annual compounded rate of return</td><td>10%</td><td>11%</td><td>10%</td></tr></table>
<table><tr><td></td><td> 2005 </td><td> 2004 </td><td colspan="2"> 2003 </td></tr><tr><td></td><td colspan="4"> (Dollars in millions)</td></tr><tr><td>Net sales</td><td>$9,416</td><td>$8,031</td><td>$7,464</td><td></td></tr><tr><td>% change compared with prior year</td><td>17%</td><td>8%</td><td>7%</td><td></td></tr><tr><td>Segment profit</td><td>$1,065</td><td>$894</td><td>$843</td><td></td></tr><tr><td>% change compared with prior year</td><td>19%</td><td>6%</td><td>(2</td><td>)%</td></tr></table>
<table><tr><td></td><td colspan="2"> 2005 </td><td colspan="2"> 2004 </td><td colspan="2"> 2003 </td></tr><tr><td></td><td> Basic </td><td> Assuming Dilution </td><td> Basic </td><td> Assuming Dilution </td><td> Basic </td><td> Assuming Dilution </td></tr><tr><td> Income</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations</td><td>$1,581</td><td>$1,581</td><td>$1,281</td><td>$1,281</td><td>$1,344</td><td>$1,344</td></tr><tr><td>Income from discontinued operations, net of taxes</td><td>95</td><td>95</td><td>—</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Cumulative effect of accounting change, net of taxes</td><td>-21</td><td>-21</td><td>—</td><td>—</td><td>-20</td><td>-20</td></tr><tr><td>Net income</td><td>$1,655</td><td>$1,655</td><td>$1,281</td><td>$1,281</td><td>$1,324</td><td>$1,324</td></tr><tr><td> Average shares</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Average shares outstanding</td><td>848,740,395</td><td>848,740,395</td><td>858,857,721</td><td>858,857,721</td><td>860,671,264</td><td>860,671,264</td></tr><tr><td>Dilutive securities issuable in connection with stock plans</td><td>—</td><td>3,594,592</td><td>—</td><td>3,475,613</td><td>—</td><td>1,423,992</td></tr><tr><td>Total average shares</td><td>848,740,395</td><td>852,334,987</td><td>858,857,721</td><td>862,333,334</td><td>860,671,264</td><td>862,095,256</td></tr><tr><td> Earnings (loss) per share of common stock</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Income from continuing operations</td><td>$1.87</td><td>$1.86</td><td>$1.49</td><td>$1.49</td><td>$1.56</td><td>$1.56</td></tr><tr><td>Income from discontinued operations, net of taxes</td><td>0.11</td><td>0.11</td><td>—</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Cumulative effect of accounting change, net of taxes</td><td>-0.03</td><td>-0.03</td><td>—</td><td>—</td><td>-0.02</td><td>-0.02</td></tr><tr><td>Net income</td><td>$1.95</td><td>$1.94</td><td>$1.49</td><td>$1.49</td><td>$1.54</td><td>$1.54</td></tr></table>

Question: What's the increasing rate of Income from continuing operations for Basic in 2005? (in %)
Answer: 0.23419