ANNUAL REVIEW 2001

Growing our business

In accordance with generally acceptedaccounting practice amongst listedinsurance companies in the UK, theresults of the Group’s life and pensionsbusiness have been separately analysedbetween an operating profit, whichincludes investment earnings calculatedusing longer-term investment rates ofreturn, and a profit before tax, separatelyidentifying the short-term fluctuations ininvestment returns.

In addition there were other itemsaffecting the Group’s 2001 results whencompared to 2000. During 2001 therewere exceptional restructuring costs insupport of the Group’s extensiveefficiency programme, acquisition costsrelating to the proposed acquisition ofAbbey National, a profit on the sale ofLloyds TSB Asset Management S.A., andthe impact of a provision for redress topast purchasers of pension policies(‘pension provisions’). During 2000changes in the economic assumptionsapplied to our long-term assurancebusiness and a one-off charge relating to stakeholder pensions were alsosignificant. To facilitate comparisons ofthe results, certain financial informationand commentaries have been presentedon a ‘business as usual operating profit’basis, which excludes the effect of theseexceptional items.

2001 2000*

£ million £ milliondaaaaaasfff daaaaaasfff

UK Retail Banking 633 776

Mortgages 955 889

Insurance and Investments 1,601 1,425daaaaaasfff daaaaaasfff

UK Retail Financial Services 3,189 3,090

Wholesale Markets 937 746

International Banking 444 477

Central group items (108) (118)daaaaaasfff daaaaaasfff

Business as usual operating profit 4,462 4,195

Short-term fluctuations in investment returns (648) (94)

Exceptional restructuring costs (217) (188)

Abbey National offer costs (16) –

Profit on sale of Lloyds TSB

Asset Management S.A. 39 –

Pension provisions (70) (100)

Changes in economic assumptions – 127

Stakeholder pension related charge – (80)daaaaaasfff daaaaaasfff

Statutory profit before tax 3,550 3,860asfffffffs asfffffffsStatutory earnings per share 45.2p 49.3p

* restated to reflect the implementation of Financial Reporting Standard 18 ‘Accounting Policies’

by main businesses presentation of results

2 LLOYDS TSB GROUP

a final dividend

of 23.5p per sharewill be paid on 1 May2002. This makes atotal dividend for 2001of 33.7p, an increase of 10 per cent.

profit before tax

dividends per share (pence)

1997

1998

1999

2000

2001

17.2

22.2

26.6

30.6

33.7

LLOYDS TSB GROUP 3

Growing our business...

Lloyds TSB is a leading UK-basedfinancial services group, whosebusinesses provide a comprehensiverange of banking and financial servicesin the UK and overseas. At the end of2001 total group assets were £237 billion and there were over 81,000 employees. Marketcapitalisation was £41.5 billion.

The main businesses and activities ofthe Group during 2001 are describedbelow:

UK Retail BankingA full range of banking and financialservices to 16 million personal andsmall business customers through2,300 branches throughout the UK, as well as telephone and internetbanking services. Profit before tax fromUK Retail Banking was £633 million in 2001.

MortgagesCheltenham & Gloucester is the Group’sspecialist residential mortgage provider,selling its products through branches ofC&G and Lloyds TSB Bank in Englandand Wales, as well as through thetelephone, internet and postal service,C&G TeleDirect. The Group is the thirdlargest mortgage lender in the UK, witha market share of 9.5 per cent. Pre-taxprofit from Mortgages was £955 million.

Insurance and InvestmentsScottish Widows is the Group’sspecialist provider of life assurance,pensions and investment products,distributed through the Lloyds TSBbranch network, through independentfinancial advisers and directly via thetelephone and the internet. Insuranceand Investments also includes generalinsurance underwriting and broking,and fund management. Operating profitwas £1,601 million.

Wholesale MarketsBanking, treasury, large value leasefinance, share registration, venturecapital, factoring and invoicediscounting, and other related servicesfor major UK and multinationalcompanies, banks and institutions, andmedium-sized UK businesses; andLloyds TSB Asset Finance. In 2001,pre-tax profit from Wholesale Marketswas £937 million.

International BankingBanking and other financial servicesoverseas in four main areas: TheAmericas, New Zealand, Europe andOffshore Banking. Profit before tax fromInternational Banking was £444 million.

This Annual Review, including thesummary financial statement onpages 10 to 12, does not containsufficient information to allow as fullan understanding of the results andstate of affairs of Lloyds TSB Groupas would be provided by the fullreport and accounts. Shareholderswho would like more detailedinformation may obtain a copy of thefull report and accounts, free ofcharge, by completing the requestform which accompanies this Review.

the group

our governing objective is to maximiseshareholder value over time

To meet our governing objective we aim:

•To be a leader in our chosen markets

•To be the first choice for our 16 million customers

•To reduce day-to-day operating costs through increased effectiveness

4 LLOYDS TSB GROUP

through investment...

For the world as a whole, 2001 wasparticularly challenging. The tragicevents of September 11 furtherenhanced the recessionary tendenciesthat were clearly becoming visible inmany OECD economies, after aprolonged period of continuedeconomic growth. Concerted andsignificant action by Governmentsand monetary authorities has, however,provided confidence that signs of aneconomic rebound should becomevisible in the second half of 2002.

In the UK, the combination oflower interest rates and continued

increases in consumer spending, aidedby a further rise in house prices, hasunderpinned the domestic economy.While there is some concern about theviability of continued consumerspending, a recovery in other worldeconomies should help to keep growthin the UK economy at acceptable, albeit lower, levels in 2002.

our resultsThe Group’s results for 2001 weresatisfactory with business as usualoperating profit up by 6 per cent to£4,462 million, in part building on the

In my first year as Chairman of Lloyds TSB I am pleased

to be able to report that the Group has performed well,

particularly against the weakening economic backdrop in

the UK and other global economies and the impact on our

business of lower stockmarkets.

chairman’s statement

various investments we have made togrow our businesses. On a statutorybasis, however, after taking into accounta number of special items includingnegative short-term fluctuations ininvestment returns of £648 million, profitbefore tax for the year fell by 8 per cent to£3,550 million. We are under no illusionthat we will need to continue to do wellto achieve our shareholder valueobjectives and in so doing underpin ourgoverning objective of maximising valuefor shareholders over time.

our strategic aimsTo support this objective our threestrategic aims are clear: to be a leader inour chosen markets; to be first choice forour customers; and to drive down ourday-to-day operating costs. This takesenergy and it takes creativity; valueswhich Lloyds TSB has in abundance.

We are the UK’s number one retailbank with the largest branch network inthe UK and one of the largest telephonebanking and internet banking operationsin Europe. Through Cheltenham &Gloucester, we are one of the largestmortgage lenders in the UK with some£56 billion of mortgages on our balancesheet. Lloyds TSB is also a market leaderin the provision of insurance andinvestment products through ScottishWidows, our specialist provider of lifeassurance, pensions and long-term

Maarten van den Bergh

shareholder valueDuring the year our share price rose

by 5 per cent, outperforming both the

FTSE All-Share index and the FTSE

bank sector index. We have increased

the dividend by 10 per cent.

Taking share price appreciation and

dividend income together, the total

return to shareholders was

10.1 per cent.

LLOYDS TSB GROUP 5

in service...customer focusDuring 2001 we sold more products

to more people than ever before.

Our vision for Lloyds TSB remains

constant – to create value for our

customers. In creating such value for

our customers we are able to create,

and maximise, value for our

shareholders.

savings and investment products. In allof these areas we are well positioned forfurther income growth.

Whilst income generation is criticalto our success, so is cost management.Our focus on maintaining and improvingour efficiency has continued unabatedand, as a consequence, we expect thatour business as usual costs will grow ata slower rate than business as usualrevenues, over the next few years.

We are also seeking to grow theGroup through acquisitions thatcomplement our good organicstrategies, and help provide newopportunities for profitable growth.

We were naturally disappointed bythe decision of the Secretary of State toblock our proposed acquisition of AbbeyNational. We did not agree with thedecision as competition in financialservices has never been more fierce.We were absolutely right to pursueAbbey National when they putthemselves in play as the transactionwould have delivered additional valuefor shareholders and integratingcompanies is something we do very well.

We have made no secret of ourdesire to achieve an overseas deal.We have talked with our counterpartsfrom many financial servicescompanies, particularly in Europe andthe US, and there is no doubt that

Lloyds TSB is highly regarded for itsconsiderable selling skills, its costmanagement and its ability to managechange effectively. We have a great dealwe can contribute to any cross-bordermerger or acquisition, and we do expectthat potential opportunities will arise indue course as consolidation throughoutEurope accelerates. However, weremain very clear that any such deal willhave to add value for our shareholders.

our peopleI have been tremendously impressedby the dedication and professionalismof the staff I have met during the year.It is the staff and the management ofLloyds TSB who continue to deliver thecompany’s success and I thank themmost warmly for their continued hardwork and great effort.

During the year, we were pleasedto welcome DeAnne Julius as a non-executive director and Eric Daniels asGroup Executive Director, UK RetailBanking, and we look forward to April2002, when Gavin Gemmell willbecome a non-executive director andchairman of our Scottish Widowssubsidiary.

Dennis Holt left at the end ofAugust, and Lawrence Urquhart willretire from the board and as chairman of Scottish Widows at the annualgeneral meeting. We greatly appreciate

the contribution they have made to the Group.

Sir Brian Pitman, my predecessoras Chairman, retired in April and tributewas paid to him in last year’s report forhis unique contribution to the LloydsTSB Group and British banking. I havepleasure in reiterating our specialthanks for the significant part he playedin this organisation’s development.

our futureThe Lloyds TSB Group is in goodshape. We have a number of verystrong divisions, all of which aresubstantial businesses in their ownright and which continue to makea very significant contribution to theGroup’s overall earnings. We havedeveloped the building blocks on which to grow our business and,notwithstanding the economicslowdown, continuing stockmarketvolatility and the very competitiveenvironment likely to be experienced in the UK in 2002, we are confidentthat we will continue to maximise valuefor our shareholders.

Maarten van den BerghChairman14 February 2002

6 LLOYDS TSB GROUP

distribution...

The clear focus of Lloyds TSB is on meeting our future

vision; with total clarity of direction. Whilst we have a very

successful track record of performance, the past is the past

and it holds little interest for us.

group chief executive’sreview

multi-channeldistribution• 16 million customers

• largest branch network in the UK

• one of the largest telephone banking

operations in Europe

• LloydsTSB.com is one of the most

visited financial websites in Europe

The success of the Lloyds TSB Groupin recent years has been undoubted.The combination of the skill, dedicationand hard work of our 80,000 staffaround the world, a large anddiscerning customer base, and some ofthe best brands in the financialservices industry, together with ourtotal focus on maximising value forshareholders, has helped to create anorganisation valued at over £41 billionat the end of 2001, over three timesmore than our Group was worth justbefore the Lloyds TSB merger wasannounced in 1995.

However, that is history. It has norelevance except as an indicator that a

proven track record will help us todeliver in the future. Our vision of thefuture is about a business whichunderstands and meets the needs ofour customers better and moreeffectively than any of our competitors.It is a vision of a business whichcreates value for all our customers,thus encouraging them to give us theprivilege of looking after more of theirbusiness. If we continue to createvalue for the customer the naturaloutcome will be to maximise value forour shareholders, and the scope forgrowth remains substantial.

The Lloyds TSB Group benefits byhaving a total clarity of strategy. Our

governing objective is to maximiseshareholder value over time and thethree strategic aims by which we havemanaged our business over recentyears remain as relevant today as theyhave ever been.

First, we need to be a leader inour chosen markets; second, we needto be first choice for our customers byunderstanding and meeting their needsbetter than any of our competitors and,third, we need to drive down our day-to-day costs to improve our efficiencyand to enable us to continue to investfor future growth. In addition, as weoperate increasingly in a global marketplace, we need to be world class inthree vital areas: in customerrelationship management, in the waywe manage and lead our people, andin the way we manage change whichis now an endemic and permanentpart of business life.

Considerable progress has beenmade in the last 12 months to meetour strategic aims and world classaspirations.

a leader in our chosen marketsWe strengthened our position in thelife and pensions market following the acquisition of Scottish Widows and we are seeing a growth in

Peter Ellwood CBE

LLOYDS TSB GROUP 7

market share in what has beena troubled market in 2001. Theacquisition of Chartered Trust has also given us market leadership in theasset finance business. We are nowclose to our overall objective of being in the top three in every marketand business in which we operate.There is clear evidence that marketleaders enjoy higher returns than other players.

first choice for our customersWe have made good progress in manyareas by focusing on improving ourservice to customers. During 2001we completed the implementation ofa new online real-time personalbanking system which has cost us£250 million over the last three years.Over the next 12-18 months we willcomplete the process of moving allcorrespondence and telephone callsout of branches to specialist servicecentres thus enabling staff in branchesto do what they do best – to servecustomers face-to-face. We have setourselves a goal of raising customerservice to record levels by the end of2002, partly by increasing the numberof customer facing staff, and to bedemonstrably better than our majorcompetitors by the end of 2003.

We are totally committed to achievingthat objective.

We recruited a record numberof new customers during the year, ourcross-selling rates are better than anyof our peers and the level of customerattrition remains well below theindustry average. We have continuedto improve our product range and in2001 the number of customers whochose to pay for their added valuecurrent accounts increased to over3 million. Our successful segmentationstrategies have been developed morefully in our retail, business bankingand middle market corporatebusinesses. We have increased theaverage number of products ourcustomers hold with us to 2.4 productsper customer against an industryaverage today of some 1.9.

driving down our day-to-day costsWe have continued to demonstrate ourability in this area by restricting costgrowth to a lower level than incomegrowth and by seeing absolute costs inthe second half of 2001 at a lowerlevel than in the first half of the year. In2002 we will continue with our aim todrive down day-to-day costs and tohelp achieve this objective we areexpanding our efficiency programme,

with the objective of keeping 2002business as usual cost growth to nomore than the rate of inflation.

We have made good progress withour three strategic aims and we havealso made progress with our threeworld class aspirations where we areseen as being world class in manyaspects of customer relationshipmanagement; managing and leadingour people; and managing change.The exciting thing about the future isthe very real opportunity to excel evenmore in all these areas as we continueto grow our business.

So, how did our actions flowthrough into the figures for 2001?

Against a background of significantturbulence and uncertainty in globaleconomies and stockmarkets, theGroup has continued to perform well.On a business as usual basis, incomerose by 10 per cent and operatingprofit increased by 6 per cent, with thetrading profit before bad debtsincreasing by 11 per cent. Customerlending increased by 7 per cent,customer deposits increased by 7 per cent and the Group’s efficiencyratio improved to 42.9 per cent. Ourreturn on equity was 29.1 per centand return on assets 1.84 per cent.Our statutory profits fell, but this wasafter adverse investment fluctuations

customer relationshipmanagementOur CRM systems are beginning to

generate substantially more sales leads than

ever before and our in-branch information

systems have materially enhanced the

ability of our staff to identify individual

customers’ needs and to fulfil those needs.

During 2001, retail banking product sales

increased by 14 per cent.

8 LLOYDS TSB GROUP

products.productsWe have continued to improve our

product range to one that is more

innovative and attractive than it has ever

been. We are the clear market leader in fee

based added value accounts. During 2001,

we recruited a record number of new

current account customers and levels of

customer attrition remain low, and well

below the industry average.

following the substantial fall in theFTSE All-Share index. If these short-term investment fluctuationswere excluded, our statutory profitswould have increased by 6 per cent.

This good performance has beenachieved against a background ofsignificant change both internally andexternally. Internally, the change andinvestment programmes in retailbanking in particular have led to alower retail banking profit figure in2001, but with these programmes nowlargely behind us we are confident ofrobust profit growth in 2002. Ourprovisions were heavily influenced byan increase of £100 million in supportof our exposure to the ongoingdifficulties in Argentina, which we havetaken as a prudent and precautionarymeasure. Asset quality remains good,our total non-performing debt is atsimilar levels to that seen last year andwe remain well positioned to combatany potential downturn in theeconomy.

performanceThe Group’s performance over the lastfew years can only be described as amodern day success story. Business asusual profit has broadly doubled overthe last five years. We have one of thehighest returns on equity in the world.

We are the only major shareholderowned bank in the world with a ‘triple A’ rating from Moody’s.

We announced at the end ofJanuary how Scottish Widows will infuture deal with guaranteed annuityrate policies following the EquitableLife vs Hyman judgement. When weacquired Scottish Widows in March2000, an Additional Account was setup within the With Profits Fund. ThisAccount had a value, at 31 December2001, of approximately £1.7 billionand is available to meet any additionalcosts of providing guaranteed benefitson transferred policies, includingguaranteed annuity option policies. Weexpect that the Additional Account willbe sufficient to meet this cost, as wellas other contingencies. This action,which helps to protect bothpolicyholders and shareholders,continues to demonstrate the prudenceand strength of the Group.

Going forward, we have no shredof complacency. Our restless pursuit ofperfection means we are cognisant ofthe challenges facing us – of the needto grow short-term profits whilstcontinuing to invest for the future; ofthe need to continue to develop ourpeople and to get ever closer tounderstanding and meeting the needsof our customers; and of the need to

maintain asset quality, grow qualityincome and optimally manage ourcosts. The organic opportunities forcontinued robust growth in the Groupare very real, and we go forward withconfidence to turn those opportunitiesinto reality.

Peter Ellwood CBEGroup Chief Executive14 February 2002

LLOYDS TSB GROUP 9

As one of the UK’s leading companies, Lloyds TSB

believes that business success should go hand-in-hand

with social responsibility.

our community

That is why we have the largestcommunity investment programme inthe UK.

This year the four independent LloydsTSB Foundations will receive £36 million to distribute to grassrootscharities which help disadvantagedand disabled people to play a fuller rolein their communities. The Foundationsare among the UK’s largest generalgrant-making trusts, and receive oneper cent of the Group’s pre-tax profits,averaged over three years, in lieu oftheir shareholder dividend.

And, of course, many of our staff investtheir own time in the community –sitting on committees, helping activelyor raising money. In 2002, theFoundations will make £1.2 millionavailable to match funds raised, andtime given, by staff to charities throughthe Matched Giving Scheme.

Many of our staff are parents and seeeducation as crucial to their children’sdevelopment. To reflect this, we havemade education a key focus of ourcommunity involvement. We supportschool management in their efforts toraise standards through Quality in

Education, a self-assessment andimprovement programme using theEFQM Excellence Model. Working inpartnership with local educationauthorities, local learning and skillscouncils and professional teacherassociations, we have introducedQuality in Education to nearly 4,000schools so far. And the programmecarries the active endorsement of boththe Department for Education andSkills and the Cabinet Office.

Learning also continues in theworkplace and investing in ouremployees is equally important. TheUniversity for Lloyds TSB embodies ourcommitment to career-long learningand continuous development and wehave shared our expertise throughsponsorship of the Goodison Groupwhich is recommending priorities tothe government in the field of lifelonglearning.

In addition to our educationprogramme, we also want to improvethe condition of local communitiesbecause healthy communities meanhealthy business. Lloyds TSB’sprogramme of regeneration initiatives

aims to foster economic and socialregeneration by creating access tofinance for people in disadvantagedcommunities, backing for smallbusiness and by encouragingentrepreneurship.

In 2001, Lloyds TSB won twoDepartment of Trade and Industrysponsored Business in the Communityawards for our role in developing thePortsmouth Area Regeneration Trust.This groundbreaking model of acommunity-based financial institutiontackles the effects of financial exclusionand provides disadvantaged peoplewith the first step into mainstreamfinancial services. The initiative is sosuccessful that it is now beingreplicated across the country in bothurban and rural locations.

distribution to the Lloyds TSB Foundations (£m)

1997

1998

1999

2000

2001

21

27

31

34

36

2001 2000*

£ million £ millionaaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Net interest income 4,944 4,587

Other income 3,952 4,037

Pension provisions (70) (100)

Total other income 3,882 3,937aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Total income 8,826 8,524

Exceptional restructuring costs 217 188

Other operating expenses 4,107 3,764

Total operating expenses 4,324 3,952aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Trading surplus 4,502 4,572

General insurance claims 174 142

Provisions for bad and doubtful debts 747 541

Amounts written off fixed asset investments 60 32aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Operating profit 3,521 3,857

Income from associated undertakings and joint ventures (10) 3

Profit on sale of businesses 39 –aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Profit on ordinary activities before tax 3,550 3,860

Tax on profit on ordinary activities 971 1,105aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Profit on ordinary activities after tax 2,579 2,755

Minority interests 79 49aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Profit for the year attributable to shareholders 2,500 2,706

Dividends 1,872 1,683aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Retained profit 628 1,023asffffffffdfffffffffffffffffffffffffff asffffffffdfffffffffffffffffffffffffffEarnings per share 45.2p 49.3p

Diluted earnings per share 44.8p 48.8p

£000 £000aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Directors’ emoluments 5,749 5,048

10 LLOYDS TSB GROUP

summary consolidatedprofit and loss accountfor the year ended 31 December 2001

summary financial statement

2001 2000*

£ million £ millionaaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

Assets

Cash and liquid funds 5,652 2,736

Loans and advances to banks 15,224 15,290

Loans and advances to customers 122,935 114,432

Investments 24,489 14,861

Intangible fixed assets 2,566 2,599

Tangible fixed assets 3,365 3,037

Other assets† 9,345 8,524

Long-term assurance business attributable to the shareholder 6,574 6,549aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

190,150 168,028

Long-term assurance assets attributable to policyholders 46,389 51,085aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

236,539 219,113asffffffffdfffffffffffffffffffffffffff asffffffffdfffffffffffffffffffffffffffLiabilities

Deposits by banks 24,310 16,735

Customer accounts 109,116 101,989

Debt securities in issue 24,420 17,899

Other liabilities† 12,890 13,319

Subordinated liabilities (loan capital) 7,657 7,510

Minority interests 997 552

Shareholders’ funds (equity) 10,760 10,024aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

190,150 168,028

Long-term assurance liabilities to policyholders 46,389 51,085aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff aaffffffaaaffffffffffffffffffffffaafffffffffffffffffffffffff

236,539 219,113asffffffffdfffffffffffffffffffffffffff asffffffffdfffffffffffffffffffffffffffMemorandum items††

Contingent liabilities 7,963 5,147

Commitments 53,342 42,589

* Figures for 2000 have been restated to reflect the implementation of FRS 18, ‘Accounting Policies’, and the reclassification of

certain sundry assets and liabilities.

† Other assets and other liabilities comprise mainly foreign exchange and interest rate contracts and items in course

of transmission.

†† Contingent liabilities comprise mainly guarantees; commitments include undrawn formal standby facilities, credit lines and

other commitments to lend.

The summary financial statement on pages 10 to 12 was approved by the directors on 14 February 2002.

M A van den Bergh P B Ellwood CBE M K AtkinsonChairman Group Chief Executive Group Finance Director

LLOYDS TSB GROUP 11

summary consolidatedbalance sheetat 31 December 2001

summary financial statement

12 LLOYDS TSB GROUP

directors’ & auditors’reports

summary financial statement

summarydirectors’ report

An interim dividend of 10.2p perordinary share was paid on 10 October2001 and a final dividend of 23.5pper ordinary share will be paid on1 May 2002.

The Company is a holding companyand its subsidiaries provide a widerange of banking and financial servicesthrough branches and offices in the UKand overseas.

A review of the business and anindication of future developments aregiven on pages 3 to 9.

Biographical details of directors areshown on pages 14 and 15.Mr Linaker and Sir Brian Pitman retiredat the annual general meeting in April 2001 and Mr Holt left the boardon 31 August 2001. Mr Urquhart willretire at the annual general meetingin 2002.

Dr Julius and Mr Daniels joined the board on 1 October 2001 and1 November 2001, respectively, andMr Gemmell will join the board on17 April 2002.

Particulars of the directors’ emolumentsand their interests in shares in theCompany are shown in the full reportand accounts.

forward lookingstatements

This document contains forwardlooking statements with respect to thebusiness, strategy and plans of theLloyds TSB Group, its current goalsand expectations relating to its futurefinancial condition and performance.By their nature, forward lookingstatements involve risk and uncertaintybecause they relate to events anddepend on circumstances that willoccur in the future. Lloyds TSB Group’sactual future results may differmaterially from the results expressed orimplied in these forward lookingstatements as a result of a variety offactors, including UK domestic andglobal economic and businessconditions, risks concerning borrowercredit quality, market related risks suchas interest rate risk and exchange raterisk in its banking business and equityrisk in its insurance businesses,changing demographic trends,unexpected changes to regulation orregulatory actions, changes incustomer preferences, competition andother factors. Please refer to theRegistration Statement on Form 20-Fof Lloyds TSB Group filed with the USSecurities and Exchange Commissionfor a discussion of such factors.

auditors’ report

The auditors’ report on the fullaccounts for the year ended31 December 2001 was unqualifiedand did not include a statement undersections 237(2) (accounting records orreturns inadequate or accounts notagreeing with records and returns) or237(3) (failure to obtain necessaryinformation and explanations) of theUK Companies Act 1985.

auditors’ statement to the members ofLloyds TSB Group plc

We have examined the summaryfinancial statement on pages 10 to 12.

respective responsibilitiesof directors and auditorsThe directors are responsible forpreparing the annual review. Ourresponsibility is to report to you ouropinion on the consistency of thesummary financial statement within the annual review with the annualfinancial statements and directors’report and its compliance with therelevant requirements of section 251 of the UK Companies Act 1985 and theregulations made thereunder. We alsoread the other information contained inthe annual review and consider theimplications for our report if we becomeaware of any apparent misstatementsor material inconsistencies with thesummary financial statement.

basis of opinionWe conducted our work in accordancewith Bulletin 1999/6 ‘The auditors’statement on the summary financialstatement’ issued by the AuditingPractices Board.

opinionIn our opinion the summary financialstatement on pages 10 to 12 isconsistent with the annual financialstatements and directors’ report ofLloyds TSB Group plc for the year ended31 December 2001 and complies withthe applicable requirements of section251 of the Companies Act 1985, andthe regulations made thereunder.

PricewaterhouseCoopers, CharteredAccountants and Registered Auditors,Southampton.

14 February 2002

2001 2000 1999 1998 1997aaffffffffaffffffffffffffffffffffffaffffffffffffffffffffffffffffffffff aaffffffffaffffffffffffffffffffffffaffffffffffffffffffffffffffffffffff aaffffffffaffffffffffffffffffffffffaffffffffffffffffffffffffffffffffff aaffffffffaffffffffffffffffffffffffaffffffffffffffffffffffffffffffffff aaffffffffaffffffffffffffffffffffffaffffffffffffffffffffffffffffffffff

Results – business as usual £mTotal income 9,544 8,671 8,022 7,547 7,465Operating expenses 4,091 3,764 3,417 3,466 3,768Operating profit 4,462 4,195 3,826 3,379 3,061

Results – statutory £mProfit before tax 3,550 3,860 3,656 3,053 2,790Profit after tax 2,579 2,755 2,545 2,159 2,044Profit attributable to shareholders 2,500 2,706 2,539 2,146 2,030Economic profit 1,543 1,839 1,777 1,424 1,441

Share informationEarnings per share 45.2p 49.3p 46.6p 39.7p 38.0pDividends per share (net) 33.7p 30.6p 26.6p 22.2p 17.2pMarket price (year-end) 746p 708p 774p 855p 789pNet assets per share 191p 180p 159p 137p 116pNumber of shareholders (thousands) 981 1,026 1,024 1,028 1,047Average shares in issue (millions) 5,533 5,487 5,445 5,400 5,341

Performance measures %Post-tax return on average shareholders’ equity 23.5 28.1 30.0 29.7 34.5Post-tax return on average assets* 1.46 1.74 1.72 1.55 1.51Post-tax return on average risk-weighted assets* 2.53 3.10 3.04 2.70 2.52Efficiency ratio 49.0 46.4 42.8 48.8 55.7

Balance sheet £mShareholders’ equity 10,760 10,024 8,829 7,563 6,326Assets* 190,150 168,028 150,508 144,942 138,757Total assets 236,539 219,113 177,050 168,634 158,803Risk asset ratio: total capital (%) 9.2 9.4 15.2 11.4 10.9

tier 1 capital (%) 8.4 8.5 10.2 8.8 8.0

* Assets exclude long-term assurance assets attributable to policyholders.

Figures for 2000 and earlier years have been restated to reflect the implementation of FRS12, “Provisions, Contingent Liabilities and Contingent Assets”,FRS15, “Tangible Fixed Assets”, FRS18, “Accounting Policies”, and other minor adjustments.

LLOYDS TSB GROUP 13

five yearfinancial summary

Excluding central group items

WholesaleMarkets

20% (2000: 17%)

Insurance & Investments

35% (2000: 33%)

Mortgages21%

(2000: 21%)

UK Retail Banking

14% (2000: 18%)

quality of earnings

InternationalBanking

10% (2000: 11%)

14 LLOYDS TSB GROUP

the boardexecutive directors

Maarten A van den BerghChairmanJoined the Group in 2000 as deputy chairman andwas appointed chairman in 2001. Joined the RoyalDutch/Shell Group of companies in 1968 and aftera number of senior and general managementappointments in that group, became group managingdirector in 1992. Appointed president of Royal DutchPetroleum Company and vice chairman of thecommittee of managing directors of the RoyalDutch/Shell Group in 1998 and continued in theseroles until 2000. A non-executive director of RoyalDutch Petroleum Company and BT Group. Aged 59.

Alan E Moore CBEDeputy ChairmanJoined Lloyds Bank International in 1980. Helda number of senior and general managementappointments in that company and in Lloyds Bankbefore becoming a director of Lloyds Bank in 1989and deputy chief executive and treasurer in 1994.Following the merger with TSB Group in 1995,became deputy group chief executive of Lloyds TSBGroup and then deputy chairman in 1998. JoinedGlyn Mills & Co in 1953, holding seniorappointments there until his secondment, as directorgeneral, to the Bahrain Monetary Agency from 1974to 1979. Aged 65.

Peter B Ellwood CBEGroup Chief ExecutiveJoined TSB Bank in 1989 as chief executive, retailbanking. Appointed a director of TSB Group in 1990and became group chief executive in 1992.Following the merger with Lloyds Bank in 1995,became deputy group chief executive of Lloyds TSBGroup and then group chief executive in 1997.Joined Barclays Bank in 1961 and held a numberof senior and general management appointments,including chief executive of Barclaycard from 1985to 1989. Chairman of the Industrial Society. Formerchairman of Visa International. Aged 58.

Michael E FaireyDeputy Group Chief ExecutiveJoined TSB Group in 1991 and held a number ofsenior and general management appointments beforebeing appointed to the board in 1997 and deputygroup chief executive in 1998. Joined Barclays Bankin 1967 and held a number of senior and generalmanagement appointments, including managingdirector of Barclays Direct Lending Services from1990 to 1991. Aged 53.

Michael D Ross CBEDeputy Group Chief ExecutiveJoined the board in 2000. Joined Scottish Widows in1964 and following a number of senior and generalmanagement appointments became group chiefexecutive of that company in 1991. Chairman of theAssociation of British Insurers. Aged 55.

M Kent AtkinsonGroup Finance DirectorJoined Bank of London & South America in 1964,which became a Lloyds Bank subsidiary in 1971,and held a number of senior and general managementappointments, including positions in Latin Americaand the Middle East, before being appointed to theboard in 1997. A non-executive director of Coca-ColaHBC SA. Aged 56.

J Eric DanielsGroup Executive Director, UK Retail BankingJoined the board in 2001. Served with Citibank from1975 and held a number of senior and generalmanagement appointments in the USA, South Americaand Europe before becoming chief operating officer ofCitibank Consumer Bank in 1998. Following theCitibank/Travelers merger in 1998, he was chairmanand chief executive officer of Travelers Life and Annuityuntil 2000. Chairman and chief executive officer ofZona Financiera from 2000 to 2001. Aged 50.

Archie G KaneGroup Executive Director, IT and OperationsJoined TSB Commercial Holdings in 1986 and helda number of senior and general managementappointments in the Group before being appointed tothe board in 2000. After some 10 years in theaccountancy profession, joined General Telephone &Electronics Corporation in 1980, serving as financedirector in the UK from 1983 to 1985. Chairman ofthe council of the Association for Payment ClearingServices. Aged 49.

David P PritchardGroup Executive Director,Wholesale and International BankingJoined TSB Group in 1995 as group treasurer. Secondedto the Securities and Investments Board as head ofsupervision & standards, markets & exchanges, from1996 to 1998. Appointed to the board in 1998.Held senior and general management appointmentswith Citicorp from 1978 to 1986 and Royal Bank ofCanada from 1986 to 1995. A non-executivedirector of The London Clearing House. Aged 57.

LLOYDS TSB GROUP 15

independent non-executive directors

Ewan Brown CBE FRSEChairman of Lloyds TSB ScotlandA director since 1999. A non-executive directorof Lloyds TSB Scotland since 1997. Executivedirector of Noble Grossart since 1971. Chairmanof the court of Heriot-Watt University and anon-executive director of Stagecoach Holdings.Former chairman of Dunedin Income GrowthInvestment Trust. Aged 59.

A Clive ButIerA director of TSB Group since 1993. Joined Unileverin 1970 and following a number of senior andgeneral management appointments was appointed anexecutive director of Unilever in 1992. Aged 55.

Sheila M ForbesA director of TSB Group since 1994. Chairs theboard of governors of Thames Valley University andis a civil service commissioner. Head of personnel forUnigate from 1980 to 1988 and personnel directorfor Storehouse from 1988 to 1992. Director ofhuman resources at Reed Elsevier (UK) from 1992to 1996. Aged 55.

Gavin J N Gemmell CBE(from 17 April 2002)Chairman (designate) of Scottish WidowsJoins the board on 17 April 2002. A non-executivedirector of Scottish Widows since 1984. Seniorpartner of Baillie Gifford & Co from 1989 to 2001,having held a number of appointments since joiningthe firm in 1964. A non-executive director of ScottishEnterprise Edinburgh and Lothian. Aged 60.

Christopher S Gibson-SmithA director since 1999. Chairman of National AirTraffic Services and a non-executive director ofPowergen. Managing director of BP from 1997 to2001, having held senior and general managementappointments in the UK, USA, Canada and Europe,since joining that company in 1970. Aged 56.

DeAnne S Julius CBEJoined the board in 2001. Held a number of seniorappointments in the UK and USA with the WorldBank, Royal Dutch/Shell Group and British Airways,before membership of the Bank of England MonetaryPolicy Committee from 1997 to 2001. Chaired HM Treasury’s banking services consumer codesreview group. A non-executive director of the Bank of England, BP and Serco Group. Aged 52.

Thomas F W McKillopA director since 1999. Joined ICI in 1969 and helda number of senior and general managementappointments before the demerger in 1993, whenZeneca was created. Chief executive of ZenecaPharmaceuticals from 1994 to 1999 and chiefexecutive of AstraZeneca from 1999. Pro-chancellorof Leicester University. Aged 58.

The Earl of Selborne KBE FRSA director since 1995, having been a director of Lloyds Bank since 1994. Managing director of The Blackmoor Estate, his family business.Chancellor of Southampton University since 1996.President of the Royal Geographical Society from1997 to 2000. Aged 61.

Lawrence M Urquhart(retiring at the annual general meeting on 17 April 2002)Chairman of Scottish WidowsJoined the board in 2000. Chairman of BAA and anon-executive director of Imerys SA. Joined BurmahCastrol in 1977 and held a number of senior andgeneral management appointments in that company,including chief executive from 1985 to 1993 andchairman from 1990 to 1998. Former chairman ofEnglish China Clays. Aged 66.

Company SecretaryAlastair J Michie FCIS FCIBS

information for shareholders

financial calendar 2002

15 FebruaryResults for 2001 announced

27 FebruaryEx-dividend date for 2001 final dividend

1 MarchRecord date for final dividend

3 AprilFinal date for joining or leaving the dividend

reinvestment plan for the final dividend

17 AprilAnnual general meeting in Edinburgh

1 MayFinal dividend paid

2 AugustResults for half-year to 30 June 2002

announced

14 AugustEx-dividend date for 2002 interim dividend

16 AugustRecord date for interim dividend

11 SeptemberFinal date for joining or leaving the dividend

reinvestment plan for the interim dividend

9 OctoberInterim dividend paid

Head office71 Lombard StreetLondon EC3P 3BS

Registered officeHenry Duncan House120 George StreetEdinburgh EH2 4LHRegistered in Scotland no 95000

RegistrarLloyds TSB RegistrarsThe CausewayWorthingWest Sussex BN99 6DA

Internetwww.lloydstsb.com

Share price informationIn addition to information published in thefinancial pages of the press, the latest priceof Lloyds TSB shares on the London StockExchange can be obtained by telephoning0906 8771515. These telephone calls arecharged at 60p per minute, including VAT.

Share dealing facilitiesThe Company provides a low cost,execution only, postal dealing service for thepurchase and sale of Lloyds TSB sharesthrough Lloyds TSB Registrars. The currentrate of commission for purchases is 0.75%,minimum £10, and for sales is 0.75%, nominimum. For full details please contactLloyds TSB Registrars. Telephone 08706060302.

The Company also provides a telephonedealing service through Lloyds TSBStockbrokers for the purchase and sale ofLloyds TSB shares on preferentialcommission terms. The current rate for bothpurchases and sales is 0.75%, minimum£18.50 maximum £75, for transactions upto £75,000. For full details please contactLloyds TSB Stockbrokers. Telephone0845 7888100.

American Depositary Receipts (ADRs)Lloyds TSB shares are traded in the USAthrough an NYSE-listed sponsored ADRfacility, with The Bank of New York as thedepositary. The ADRs are traded on theNew York Stock Exchange under the symbolLYG. The CUSIP number is 539439109and the ratio of ADRs to ordinary shares is1:4. For details please contact The Bank ofNew York, Investor Relations, PO Box11258, Church Street Station, New York,NY 10286-1258. Telephone (1) 888 BNYADRS (US toll free), international callers(1) 610 312 5315. Email Shareowner–svcs@bankofny.com

Individual Savings Accounts (ISAs)The Company provides a facility forinvesting in Lloyds TSB shares through anISA. For details please contact Lloyds TSBPrivate Banking ISAs, Freepost, PO Box149, Haywards Heath, West Sussex RH163BR. Telephone 0845 7418418.

The community and our businessInformation about the Group’s role in thecommunity and copies of the Group’s codeof business conduct and its environmentalreport may be obtained by writing to PublicAffairs, Lloyds TSB Group plc, 71 LombardStreet, London EC3P 3BS. This informationis also available on the Group’s website (see below).

Shareholder enquiriesThe Company’s share register is maintainedby Lloyds TSB Registrars, The Causeway,Worthing, West Sussex BN99 6DA.Telephone 0870 6003990; textphone0870 6003950. Please contact them if youhave enquiries about your Lloyds TSBshareholding, including those concerningthe following matters:

• change of name or address

• loss of share certificate, dividend warrantor tax voucher

• to obtain a form for dividends to be paiddirectly to your bank or building societyaccount (tax vouchers will still be sent toyour registered address unless yourequest otherwise)

• to obtain details of the dividendreinvestment plan which enables you touse your cash dividends to buy LloydsTSB shares in the market

• request for copies of the report andaccounts in alternative formats forshareholders with disabilities.

Lloyds TSB Registrars operates a web basedenquiry and portfolio management servicefor shareholders. Visit www.shareview.co.ukfor details.

Designed by Starling Design/The Team. Printed in the UK by St Ives Burrups. This document is printed on paper produced from sustainable managed forests using an elemental chlorine free process and an

Environmentally Responsible Approach (ERA).

The information about Lloyds TSB Stockbrokers’ services is approved by Lloyds TSB Stockbrokers Limited. Lloyds TSB Stockbrokers is a member of the London Stock Exchange and is regulated by the FSA.