
4.	INCOME TAXES

The tables below reflect the components of the tax charge for the three and six months ended June 30, 2011:


	Three months ended June 30, 2011
	Income					Effective
	before tax		Tax			tax rate
	(millions, except percentages)

Ordinary income taxed at estimated annual effective tax rate	$	123	$	(31	)		25	%

As reported	$	123	$	(31	)		25	%


	Six months ended June 30, 2011
	Income						Effective
	before tax			Tax			tax rate
	(millions, except percentages)

Ordinary income taxed at estimated annual effective tax rate	$	317		$	(79	)		25	%
Items where tax effect is treated discretely:
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs		(171	)		47			27	%
Non-taxable gain on disposal of operations		4			—			—	%

As reported	$	150		$	(32	)		21	%

For interim income tax reporting purposes, the Company generally determines its best estimate of an annual effective tax rate and applies that rate on a year-to-date basis applicable to its ordinary income. The Company’s estimated annual effective tax rate excludes significant, unusual or infrequently occurring items and certain other items excluded pursuant to the US GAAP authoritative guidance where applicable. The income tax expense (or benefit) related to all other items is individually computed and recognized when the items occur.

The estimated annual effective tax rate applicable to ordinary income of 25 percent includes the tax benefit of expenses relating to the 2011 Operational Review, which are generally relieved at a higher rate than the Company’s annual effective tax rate calculated excluding these expenses, and the impact of the UK Financial Services Authority (‘FSA’) regulatory fine for which no tax relief is available. The tax rate effect of these items broadly nets out such that, after adjusting for their impact, the effective tax rate for the six months ended June 30, 2011 would also have been approximately 25 percent.