We’ve had a
nice year
Let’s have a look
Thanks for popping in
Egg plc Annual Report 2002 Avery nice year. A 
on all fronts.In this
highlighted 12 key 
have helped drive 
49 Consolidated statement of total
recognised gains and losses
50 Consolidated balance sheet
51 Company balance sheet
52 Consolidated cash flow
statement
53 Notes to the financial
statements
86 Five-year summary of results
86 Financial calendar
87 Average balance sheet
87 Average yields
Contents
01 Financial highlights
04  Chairman’s statement
10 Chief Executive’s review
20 Business review
22 Your Board
26 Financial review
32 Directors’ report
48 Independent auditors’ report
to the members of Egg plc
49 Consolidated profit and 
loss account
Note: This annual report contains certain forward-looking statements with respect to the financial condition,
results of operations, and businesses of the Egg Group. These statements and forecasts involve risk and
uncertainty because they relate to events that depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or developments to differ materially from
those expressed or implied by these forward-looking statements and forecasts. The statements have been
made with reference to forecast price changes, economic conditions and the current regulatory environment.
Nothing in this annual report should be construed as a profit forecast. year of progress
report we have
attributes that
our success.
01 Egg plc Annual Report 2002
Financial highlights
31 December 31 December 
2002 2001
£m £m
Operating income 327 .3 189.4
Loss on ordinary activities before tax (16.6) (87 .8)
Retained loss for the financial period (18.8) (62.1)
Basic and diluted loss per share (pence per share) (2.3p) (7 .6p)
Total assets 10,565.4 8,083.6
Share capital, share premium and capital reserve 877 .1 875.5
Profit and loss account (416.9) (399.6) 02 Egg plc Annual Report 2002 03 Egg plc Annual Report 2002
01
constantly
perform
Sustainably profitable in the UK In each quarter of the year, 
Egg has reported increased profitability of the UK business. 
We have done this through consistently offering market-leading
products as well as continually improving our marketing and 
operational cost efficiencies.  Roberto Mendoza
04 Egg plc Annual Report 2002
“tremen
Chairman’s statement 05 Egg plc Annual Report 2002
2002 was an important and
successful year for Egg. In last
year’s report, we made three
important commitments to you,
our shareholders, which I am
delighted to report that we have
achieved. Firstly, we committed
to developing a sustainably
profitable UK business; you will
see in the Financial review that
the UK has reported a profit
before tax of some £35 million
(compared to a £76 million loss
in 2001). Secondly, we committed
to developing an international
business; during the year, we
completed our acquisition of
French online bank Zebank, 
and in November, launched 
our first Egg product in France.
Early data suggests we have
successfully established a
presence in France with Egg
brand awareness already having
reached 55%. Thirdly, we
committed to innovation. 
We have provided enhanced
technology to both improve our
service and relationship with 
our customers, for example 
by helping them understand 
and manage their money 
more effectively through Egg
Money Manager.
Egg is now a company of 
scale. Independent audience
measurement data from Nielsen
Net Ratings has ranked Egg
recently as the largest pure online
bank in the world. We take our
privileged position as market
leader seriously and are aware 
that this means we have even
more reason to set an example 
in our field. This applies to all
aspects of our business – from 
our stand on responsible lending
to customers, to our policies 
in the workplace. 
Egg people have worked 
hard and enthusiastically this 
year, and on behalf of the Board 
I thank them sincerely for their
commitment and energy. It is 
also appropriate for me to thank
the Board for their contribution 
to the Company’s strategic
development and resulting
success. During the year, we 
said good bye to non-executive
director, David Smilow. David
made a very positive contribution
to Egg, for which we thank him,
but he felt he should step down
from his responsibilities at Egg
due to increased business
interests in the United States. 
I am delighted to announce that
during the year, the Board was
further strengthened by the
appointment of Dr. Juan Rada,
whose knowledge and
international experience will be 
of great value to our Board as 
we continue to lead the digital
financial services industry and
develop the business
internationally. We also appointed
Pascal Cagni to the Board of 
Egg Banking plc as non-executive
director, and as you will see from
the enclosed voting cards, we are
proposing at our AGM in April for
him to join the Egg plc Board of
Directors. I heartily recommend
this appointment to you, on the
basis that I believe his wide
experience in international
business and technology will
complement well the existing skills
of your Board.
We have much to do in 
2003, in what is proving to be 
an uncertain and challenging
environment. However, Egg
remains intent on its mission 
to deliver long-term shareholder
value, through building a profitable
international business of scale.
dous” 06 Egg plc Annual Report 2002 Revolutionising customer service We know it is important to invest time
and money in giving customers not only great value products, but also
the best possible service and relationship. We don’t always get it right –
but we try hard to resolve problems quickly and efficiently and to learn
from our mistakes. And we will keep on trying and improving.
02
go that little 
bit further
07 Egg plc Annual Report 2002 08 Egg plc Annual Report 2002 09 Egg plc Annual Report 2002
03
broaden horizons
We’ve launched in France From the outset, the intention has been 
for Egg to become an international business of scale. We launched 
our first product, la Carte Egg, in France in November and are 
pleased with its success to date.  10 Egg plc Annual Report 2002
“strongg
Chief Executive’s review
Paul Gratton 11 Egg plc Annual Report 2002
rowth”
I am delighted to report that
Egg has achieved substantial
growth once again in 2002 and
has made important steps in
developing an international
business of scale. Our progress
has been rapid and today, we
are ranked as the world’s
largest pure online bank
(Nielsen Net Ratings). This is 
a responsible position but also
further strengthens our belief
that customers are demanding 
a better relationship with 
their money.
In the UK we acquired 610,000 
net new customers during the
year, principally through our 
credit card business, which has
now captured over 5% of total
balances in the UK card market.
The UK business has
demonstrated it is sustainably
profitable, successfully growing
customer numbers and revenues
each quarter in a challenging 
and increasingly competitive
marketplace, whilst at the same
time reducing both unit operating
costs and marketing acquisition
costs. Credit quality remains 
strong and benchmarks continue
to show Egg’s card portfolio
significantly outperforming the 
rest of the industry in terms of
lower arrears rates.
During the year we refreshed
the Egg branding which has
proved to be a very positive move,
resulting in achieving increased
momentum to our customer
acquisition campaign in the
second quarter. There were three
key reasons behind our decision
to refresh. Firstly, to have a design
that was capable of being used
globally. Secondly to position Egg
as firmly on the consumers’ side 
and thirdly, to communicate our
desire to make things simple and
straightforward for customers. 
We sought to do all of this 
without losing the edge that Egg
advertising has become known 
for and while still using the
intelligent humour that customers 
found engaging.
We made significant
developments in innovation during
the year, specifically in the area of
helping our customers understand
and manage their money more
effectively. We launched our
aggregation service, Egg Money
Manager, which to many of our
customers has already established
itself as an essential tool for
handling their financial affairs. We
continue to introduce enhanced
functionality to this service. 
Continued 04
offer a choice
We offer a wider range of services Egg aims to offer a 
portfolio of leading banking and investment products, 
supported by state of the art technology.  
12 Egg plc Annual Report 2002 13 Egg plc Annual Report 2002 14 Egg plc Annual Report 2002
In France, we launched
successfully in November 2002,
and we are satisfied with our
achievements to date. We are
particularly pleased that brand
awareness and consideration,
which were the key focus for us in
this launch phase, have reached
55% and 23% respectively, both
metrics above their UK equivalents
two months after launch. We have
had 69,000 people apply for our
first product, la Carte Egg, in the
first two months. Of these 44,000
have been accepted, subject to
completing all verification
requirements, and we expect
27,000 of these to become
customers following that process.
This gives us a total Egg customer
base in France of approximately
90,000, following the selective
migration of customers from the
acquired Zebank portfolio. 
We are pleased with the
quality of customers we have
attracted to date; early findings
from our research shows
customers using their card 
an average of 15 times per 
month, and that la Carte Egg
is establishing itself as 
“front of wallet”. 
Outlook
We remain committed to delivering
long-term value to shareholders
through building an international
business of scale and leading the
industry for innovation in financial
services to the ultimate benefit of
our customers.
In 2003, Egg UK remains
committed to its key strategic
goals of maximising value from 
our unsecured lending business 
in what we believe could be
challenging market conditions. 
We take our responsibility as a
lender seriously and believe we
offer customers simple, flexible,
good-value products to help them
manage their finances. In addition,
we will seek to implement
innovations, particularly in
technology, to deliver the best
possible service to, and
relationship with, our customers.
We are also looking to revamp 
our investments business to
address the increased challenge
facing consumers with regard to
saving for their futures. 
In France, we intend to
enhance and extend our product
range in line with developing a
profitable business of scale in this
market. Our next major product, to
be launched next month, will be a
new loan account. We are excited 
about the opportunity to continue 
to revolutionise the credit market in
France, building on la Carte Egg,
and are determined to help
customers to understand how to
manage their borrowing more
productively and to get better value
than is currently available from 
our competitors.
We remain committed to
developing Egg as a global
business and have been
researching different territories
throughout 2002. Specifically, we
have been exploring potential
entry strategies for the US market
and have embarked on some
qualitative and quantitative
consumer research in Q1 2003 
to establish the scale of the
opportunity available.
Finally, I would like to thank 
all Egg People for their continued
hard work, good humour and
dedication during what has 
been another challenging and
productive year. 
Chief Executive’s review continued 15 Egg plc Annual Report 2002
05
move with
the times
We are continually updating our technology T echnology has to be
relevant – not technology for technology’s sake. But we remain firm in
our view that technology can help people understand and manage their
money better. This is why we have introduced services such as Egg
Money Manager this year – a secure one page personal balance sheet
which can show you all your financial holdings. 16 Egg plc Annual Report 2002 06
be distinctive
17 Egg plc Annual Report 2002
Strong, distinctive and effective marketing Egg was launched to provide
customers a different, and better, way of managing and understanding 
their money. We try to communicate with customers in an engaging and
distinctive way; using simple, clear language. In the same way that we strive
to offer customers a different – better – relationship with their bank. 07
be passionate
A well managed business Ambitious companies require strong
leadership, particularly at Board and senior management levels. 
Of equal importance to us, however, is to ensure that all Egg people 
are empowered, motivated and rewarded – making Egg a company 
for whom they want to work.
18 Egg plc Annual Report 2002 19 Egg plc Annual Report 2002 Egg UK
31 December 31 December 
2002 2001
Total Egg Customers
(1) (2) (3)
2,561,167 1,950,624
Egg Customers by product
(1)
– Credit Card
(4)
1,912,526 1,368,642
– Savings
(3)
7 40,506 625,720
– Mortgages
(3)
29,947 24,827
– Personal loans
(3)
14 7 ,453 102,72 7
– Egg Invest
(3)
55,909 36,659
– Egg Insure
(3)
85,468 23,665
Notes:
(1) Cumulative as at the date indicated.
(2) If a customer holds more than one Egg product they are treated
as a single customer for the purposes of this line item.
(3) Joint holders are treated as two or more customers.
(4) Includes second cardholders and individuals whose applications
have been accepted in principle and who have been allocated 
a credit limit but for whom the application process has not yet
been completed.
Customer acquisition
Egg UK had another year of strong growth as evidenced
by the 610,000 net new customers acquired during
2002, leading to a year-end total of 2.56 million. 
This total exceeded the net new 600,000 customers
acquired in 2001. This continued success against the
background of an increasingly competitive marketplace
is particularly pleasing and demonstrates the clear
advantage that our brand and proposition have created. 
The quarterly trend differs this year as tactically we held
back marketing money in Q1 2002 in readiness for 
our brand refresh which delivered the planned boost 
to sales in the second quarter. The third quarter saw the
traditional dip for the summer months of July and August
although September 2002 was an improvement on the
prior year which was affected by 9/11. The final quarter 
of the year with 141,000 customers acquired was in line
with Q4 2001 (147 ,000) despite lower marketing spend. 
We achieved over 620,000 product cross sales in 2002
compared to 550,000 in 2001. This led to a year-end
cross-holdings ratio of 1.5 products per customer. 
This growth in cross-holdings among the customer 
base has contributed to a strong growth in revenue 
per customer from £112 on average in 2001 up to 
£142 on average in 2002.
Product balances: 
31 December 31 December 
2002 2001
£m £m
– Credit Cards 2,330 1,769
– Egg Mortgages 1,233 1,002
– Egg Personal Loans 967 586
– Egg Savings 7, 7 08 5,656
– Prudential Savings 236 289
– Prudential Mortgages 1,1 27 1,425
– Prudential Personal Loans 5 11
Unsecured lending
The UK credit card business attracted 544,000 net new
customers in 2002 with card balances standing at 
£2.33 billion at year end. Egg Card now accounts for 
5% market share of total card balances in the UK and 
an impressive 8% of VISA balances. 
Personal loan customers increased by 45,000 in the 
year with record disbursements of £829 million in 2002
compared with £419 million the previous year.
Our focus remains on cross-selling loans to the credit
card base, offering an holistic approach to unsecured
lending and, looking at the unsecured portfolio in total, 
we have seen a 40% increase in balances in 2002 to
£3.3 billion, with £936 million net growth across cards
and loans. This continues to be a healthy growth rate
and a pleasing reflection on our continuing ability to
differentiate the Egg proposition in a competitive market
which includes a proliferation of 0% introductory offers
following our lead.
In addition the unsecured book is driving significant 
profit as the card base matures and yields improve. 
This increasing maturity in the book as we have achieved
scale is reflected in the fact that the average percentage
of credit card balances on incentive offers in 2002 
was 27% compared with 37% in the previous year.
Loans, which represent an increasing element of the total
unsecured lending balance, are also value-enhancing
with upfront income earned from selling associated
insurance products.
20 Egg plc Annual Report 2002
Business review
250,000
200,000
150,000
100,000
50,000
0
Q1 Q2 Q3 Q4
Net new customers acquired 2002
Net new customers acquired 2001 21 Egg plc Annual Report 2002
Savings
This year saw Egg return to the savings market with a
strategy executed between March and August to raise
deposits via a bonus account to provide a cost-effective
alternative to wholesale funding over the next 12 to 18
months as we continue to grow in the UK and develop
our French business. This was highly successful with
£3.0 billion inflows to the bonus account and thus far
minimal attrition of balances since the customers 
moved off the bonus rate onto our standard internet
savings rate, which is base rate guaranteed until 2007 .
However throughout the year there were continuing
outflows, totalling £1.4 billion, on the telephone based
savings accounts, which are now priced 150 basis points
below our internet offering as we seek to incentivise
customers to move online. 
The net effect of these movements for the full year 2002
was net inflows totalling £2.1 billion (2001: £1.1 billion
outflow) and Egg acquiring 114,000 new savings
customers (2001: 5,000). 
Other products
In 2002 we disbursed £485 million of Egg Mortgages
compared to £363 million in 2001 and the product
remains competitive in the standard variable rate market
and continues to win awards for value and flexibility.
With the stock markets remaining volatile, Egg Invest 
has continued to experience the effect of low consumer
confidence in equity based products, which in turn 
has affected sales. For the full year we saw £72 million
new funds invested (2001: £90 million). 
During Q4 Prudential plc acquired a 15% stake in
Investment Funds Direct Holdings Limited (“Fundsdirect”)
satisfied by the issue of new shares. Egg has recognised
a profit of £3.5 million on the transaction, which is 
shown as an exceptional item in the Group profit and
loss account. Fundsdirect, which was acquired by Egg 
in March 2002 serves the business-to-business
marketplace and is developing a business-to-IFA
offering. The investment by Prudential represents secured
new funding for Fundsdirect and will help accelerate the
growth of the business. 
Egg Insure added a record number of customers during
the final quarter (23,000) and now has a customer base
of over 85,000. 
Egg France
Following the launch in November, we received 69,000
applications to the end of the year and accepted 44,000
of them. We expect 27 ,000 of these to go on and
successfully complete the full process which involves
significant amounts of verification data to comply with
French money-laundering rules. This gives Egg a total
customer base in France of approximately 90,000
following the selective migration of customers from the
acquired Zebank portfolio.
We are pleased with the customer profile we have
attracted in this market which combined with the high
brand awareness and consideration we have achieved,
gives us a strong foundation to build on in the next
phase of our development in France. The average salary
of our French customers is approximately £30,000 which
is similar to our UK base.
We are constantly optimising our marketing activity, using
a mix between the different media and channels
available. To date, we have found direct marketing to be
a highly effective channel with our advertising, mailing
and links to portals driving traffic to the website. 
We are targeting in the region of 250,000-300,000
customers in France by the end of 2003, based on
current market conditions. In our first few weeks of
trading, which included the Christmas period, the
conversion time from acceptance to card issuance 
took longer than originally anticipated. As a result, we
had 14,000 cards in circulation by the end of December.
Encouragingly, early data shows these customers to 
be using their card more frequently than expected, 
with a usage rate of approximately 15 transactions 
per month. Total card balances had reached a13 
million at year-end which represented a healthy 
a900 approximately per account. 
Consistent with our commitment to further strengthen the
management team for our new French business, we are
delighted that Marc Luet joined us in January as the new
Chief Executive of Egg France. Marc, 39, joins Egg from
Citigroup where he was most recently CEO of Citibank in
Belgium. During his 11-year career with Citigroup, Marc
held a variety of pan-European senior management
positions in Europe and North America including Director
of New Markets Development in Paris, where he was
responsible for setting up new bankcards businesses in
Western Europe. In addition we are pleased to announce
that Charles McArthur will join later in the year as Chief
Financial Officer in France. Charles has held various
senior finance roles across Europe and the US, most
recently for Orange SA where he was Group Treasurer.
Business review continued 1. Roberto Mendoza
2. Mike Harris
3. Paul Gratton
4. Stacey Cartwright
5. Derek Higgs 
6. Richard Delbridge
7. Jonathan Bloomer
8. Leslie Priestley
9. Juan Rada
22 Egg plc Annual Report 2002
Y our Board
1.
4. 3.
2. 23 Egg plc Annual Report 2002
7.
8.
9. 6.
5. 24 Egg plc Annual Report 2002
1. Roberto Mendoza
Chairman, non-executive director (Age 57) 
Roberto has been a director and the Chairman since 
1 0 May 2000. He is a non-executive director of Prudential
plc and of ACE Limited, Reuters Group plc and Vitro SA. He
is also Chairman of Integrated Finance Limited. 
He was previously Vice Chairman and director and a
member of the Corporate Office of JP Morgan & Co, Inc.,
and a managing director of Goldman Sachs.
2. Michael Harris
Executive Vice-Chairman, director (Age 53)
Mike has been a director since 29 October 1 999. 
Mike joined Prudential as Chief Executive Officer of 
Egg Banking plc (formerly Prudential Banking plc) in 
July 1 995. On 1 January 200 1 he stepped down 
as Chief Executive of Egg plc and took on the role 
of Executive Vice Chairman of the Board. Previously, 
he served as Chief Executive Officer of Mercury
Communications Limited, a division of Cable and Wireless
plc, from 1 991 to 1 994, and as Chief Executive of First
Direct from 1 988 to 1 991. He was Chairman 
of Lost Wax Media Limited until October 2002. 
3. Paul Gratton
Chief Executive Officer, director (Age 43) 
Paul has been a director since 26 January 2000. 
He joined Egg Banking plc in January 1 996 as Operations
Director, becoming Chief Operating Officer 
in August 1 998. He served first as Chief Operating Officer,
then as Deputy Chief Executive, of Egg from 
its launch in October 1 998 until December 2000. 
On 1 January 200 1, he became Chief Executive Officer of
Egg. Before joining the Prudential Group, he worked 
at First Direct, where he served in a variety of positions,
including Financial Services Director, from 1 989. 
4. Stacey Cartwright
Chief Financial Officer, director (Age 39) 
Stacey has been a director since 26 January 2000. Before
joining Egg in November 1999 Stacey worked 
at Granada Group PLC from 1 988 to 1 999, serving in 
a variety of roles, including Director of Finance and
Corporate Development from 1 995 to 1 997 and
Commercial Director, Granada Media, from 1 998 
to 1 999. She is a chartered accountant.
5. Derek Higgs
Non-executive director (Age 58) 
Derek has been a director since 1 7 May 2000 and a former
director of Prudential plc. Prior to this Derek was with the
S.G Warburg Group. He is Chairman of Partnerships UK
plc, Deputy Chairman of The British Land Company PLC
and a non-executive director of Allied Irish Banks plc, Jones
Lang LaSalle Inc. and London Regional Transport. He is
also a member of the Financial Reporting Council and a
Senior Adviser in the UK to UBS Warburg. During 2002
Derek was asked by the Secretary of State for Trade and
Industry and the Chancellor of the Exchequer to conduct a
review of the role and effectiveness of non-executive
directors. He is a chartered accountant.
6. Richard Delbridge 
Senior non-executive director (Age 60)
Richard has been a director since 10 May 2000. 
He was Group Chief Financial Officer and a director of
National Westminster Bank plc from 1996 to April 2000.
Previously, Richard was Group Finance Director, HSBC
Holdings plc from 1993 to 1995, Director, Group Finance,
at Midland Bank plc from 1989 to 1992, held various
positions at J.P. Morgan & Co. from 1976 to 1989,
including Managing Director and General Manager for
the United Kingdom, and was a partner of Arthur
Andersen from 197 4 to 1976. He is a non-executive
director of Balfour Beatty plc, Cazenove Group plc,
Gallaher Group Plc and Tate & Lyle PLC. He is a
chartered accountant.
7. Jonathan Bloomer
Non-executive director (Age 48) 
Jonathan has been a director since 31 March 1999 and
a non-executive director of Egg Banking plc since March
1996. He has been Group Chief Executive of Prudential
plc since March 2000. He also served as Group Finance
Director of Prudential plc from 1995 to May 1999, when
he became Deputy Group Chief Executive. He is Deputy
Chairman of the Practitioner Panel of the Financial
Services Authority and a member of the Association of
British Insurers Board. He is a chartered accountant.
8. Leslie Priestley
Non-executive director (Age 69) 
Leslie has been a director since 10 May 2000 and 
non-executive director of Egg Banking plc since 
13 August 1996. He was Chief Executive, TSB England
and Wales plc and a director of TSB Group plc from
1986 to 1989, following 35 years in Barclays Bank where
he held senior appointments relating to Banking,
Insurance and Credit Cards. He has also been Secretary
General, Committee of London Clearing Bankers, a
member of the Monopolies and Mergers Commission
and a director of London Electricity plc and the Civil
Aviation Authority. Currently he is Chairman of the Civil
Aviation Authority Pension Scheme, director of a number
of other companies and Vice Chairman of the Guernsey
Financial Services Commission. 
9. Juan Rada
Non-executive director (Age 51) 
Juan has been a director since 19 November 2002. 
He is Senior Vice President of Oracle Industries for
Europe, Middle East and Africa. During his career, Juan
has held senior roles at leading international companies,
including Digital Equipment Corporation and AT&T. 
Prior to these roles, he was Professor of Technology
Management and Dean of the International Management
Institute (IMD) in Switzerland. He is Chairman of the
Lombard Odier Darier Hentsch Infology Fund Advisory
Board, and is also a member of the World Conservation
Union (IUCN) Council.
Your Board continued 25 Egg plc Annual Report 2002
08
don’t go
overboard
25 Egg plc Annual Report 2002
Operating costs control Keeping operating costs under control and
reducing customer acquisition costs during the year was an important
focus for Egg. We were successful in achieving this. At the same time
we are keeping a watchful eye on our customers’ credit quality. 26 Egg plc Annual Report 2002
Financial review
“perform
Stacey Cartwright Overview
Analysis of Group profit and loss account
2002 2001
£m £m
Egg UK 34.8 (75.7)
Egg France (46.7) –
Other International (3.4) (5.4)
Subsidiaries/associates/JVs (1.3) (4.0)
Restructuring – (2.7)
Total loss before tax (16.6) (87 .8)
The Egg UK business made a profit before tax of 
£34.8 million this year, an improvement of £110.5 million
year on year, after achieving breakeven during the fourth
quarter of 2001. This profit growth was driven primarily
from the unsecured lending business where card
balances have increased by £561 million to £2.33 billion
and card yields have improved from 7 .4% in 2001 to
9.0% in 2002. In addition Egg has successfully 
cross-sold personal loans to card customers. 
Within the UK business revenues have grown by 
70% while costs have been well controlled increasing 
by just 5% in a year where average customer 
numbers were 35% higher. 
As planned we launched in France in November 2002
with the £46.7 million loss representing the upfront
investment in brand and marketing, the development
costs associated with launch and the ongoing costs of
the former Zebank business as we migrated it to
become Egg France. 
We continue to invest in international research and
development as we seek to identify the next markets 
to which Egg might expand and convert some of our
technology and product platforms for broader 
European use.
Within the subsidiaries, associates and joint ventures line
are the results of Fundsdirect (85% subsidiary), MSMS
(50% joint venture with Marlborough Stirling) and 
IfOnline Group (38% associate) plus the amortisation 
of goodwill on these investments to reflect their impact
on Egg Group profit. Q4 saw an exceptional profit of 
£3.5 million arising from the investment by Prudential plc
in 15% of Fundsdirect. Excluding this item, these
companies contributed a loss of £4.8 million in 2002,
which represents £2.0 million of goodwill charge and the
remaining £2.8 million reflecting Egg’s share of their
operating losses.
There were no restructuring charges in 2002 following
the £2.7 million spent in the prior year. 
27 Egg plc Annual Report 2002
ance” Consolidated profit and loss account
Existing 
operations Acquisitions
2002 2002 2002 2001
£m £m £m £m
Interest receivable 662.3 2.4 664.7 604.7
Interest payable (439.1) (1.7) (440.8) (459.0)
Net interest income 223.2 0.7 223.9 145.7
Fees and commissions receivable 11 4.9 1.1 116.0 69.5
Fees and commissions payable (25.0) (2.1) (27 .1) (30.1)
Other operating income 12.6 1.9 1 4.5 4.3
Operating income 325.7 1.6 327 .3 189.4
Administrative expenses
– operational expenses (136.9) (22.0) (158.9) (132.0)
– brand and marketing costs (34.6) (1 4.0) (48.6) (35.8)
– development costs (17 .4) (8.7) (26.1) (1 6.7)
Total administrative expenses (188.9) (44.7) (233.6) (184.5)
Depreciation and amortisation (18.7) (3.0) (21.7) (20.7)
Amounts written off fixed asset investment (3.1) – (3.1) –
Provisions for bad and doubtful debts (84.1) (1.3) (85.4) (68.0)
Operating profit/(loss) 30.9 (47 .4) (16.5) (83.8)
Share of operating loss of joint ventures (0.1) (0.1)
Share of operating loss of associated undertaking 
and amortisation of goodwill (3.5) (3.9)
Profit on partial disposal of continuing operation 3.5 –
Loss on ordinary activities before tax (16.6) (87 .8)
Tax (charge)/credit on loss on ordinary activities (2.2) 25.7
Retained loss for the financial year (18.8) (62.1)
Basic and diluted loss per share (pence per share) (2.3p) (7 .6p)
The acquisitions column relates to the results of Egg SA (formerly Zebank SA) for the period from date of acquisition
(22 May 2002) plus the incremental costs incurred in the development of Egg France and the results of the
Fundsdirect group for the period post-acquisition (15 March 2002).
Net Interest Income
2002 net interest margins 
Quarterly 
margin
March 2.68%
June 2.51%
September 2.19%
December 2.28%
Net interest income increased by 54% to £223.9 million
for the period reflecting an increase in the full year UK
net interest margin to 2.40% (31 December 2001:
1.90%) and the growth in retail asset balances (2002: 
£5.7 billion, 2001: £4.8 billion). The margin improvement
has resulted from both changes to product pricing on
Egg Card and telephone savings over the past year and
the fact that the card base is more mature with, on
average, a smaller percentage of customers on incentive
offers this year compared to 2001. During the year we
experienced a short-term dilution in margins following
the tactical decision to introduce the bonus savings
account which raised £3.0 billion of funds on six-month
incentive rates and the success of the brand refresh in
Q2 which led to over 200,000 new customers, mainly
through credit cards with 0% introductory offers. Q4 has
seen an increase in margin as most customers have
rolled onto the standard internet deposit rate and come
out of their introductory period on cards.
Other operating income
Other operating income increased by £59.7 million to
£103.4 million primarily reflecting fees and commissions
earned from the larger credit card book, and the
reduction in cashback on the credit card (£37 .0 million
increase). In addition there has been a £14.0 million
increase in commissions earned from selling creditor
insurance at point of sale on personal loans with
significantly higher volumes of new loans sold and the
28 Egg plc Annual Report 2002
Financial review continued benefit of profit share emerging on the older book 
of business. Finally gains on disposal of treasury
investments at £9 million in 2002 were £8 million 
higher than in 2001.
Administrative expenses
Operational expenses increased by £26.9 million to
£158.9 million and can be attributed to the operational
costs associated with running Egg France. Core UK
operating costs (£133.5 million) were up only 5% on
2001 (£126.8 million), despite average customers
increasing by 35%. This reflects increasing operational
cost efficiencies allowing Egg UK to absorb its strong
business growth. Overheads have also been tightly
managed. Other operating costs relating to international
research and development expenditure were £3.4 million
(2001: £5.4 million).
Brand and marketing costs increased by £12.8 million to
£48.6 million at Group level (2001: £35.8 million). Within
this total Egg France costs were £14.0 million (2001: nil),
while there was a £1.3 million reduction in UK marketing
costs. It should be noted however that the mix of costs 
in the UK has changed significantly. This year saw a
significantly scaled back ISA campaign compared to
2001 with the £5 million saving being directed into the
brand refresh exercise and a major TV advertising
campaign in Q2 2002.
Development costs increased to £26.1 million at Group
level (2001: £16.7 million), largely due to the Egg France
development programme (£8.7 million). 
Depreciation and amortisation at £21.7 million is broadly
in line with the previous year (2001: £20.7 million) with
the increase attributable to Egg France. 
Amounts written off fixed asset investment of £3.1 million
(2001: nil) represents a provision made against one
specific debt security which has been downgraded by
the rating agencies to below investment grade and thus
in line with our internal policy is now held for resale and
shown at its net realisable value rather than at cost. 
Bad and doubtful debts
The charge for bad and doubtful debts at £85.4 million
(2001: £68.0 million) reflects the continuing growth in
credit card balances and personal loan balances which
has resulted in a change in mix of the retail asset book,
with a much higher proportion of unsecured lending.
Underlying credit quality remains strong. The average
loan-to-value ratio in the mortgage book is 60%, based
on valuation at time of approval, and default levels are
minimal. Impaired balances as a percentage of total
balances in the secured portfolio remained constant at
0.32% at end 2002. For the unsecured portfolio the
figures were 2.93% at end 2002 and 2.41% at end 2001.
The increase represents the fact that loans form a higher
proportion of the portfolio and the average maturity of the
card book increasing.
Associates and joint ventures
The £3.5 million (2001: £3.9 million) loss for associates
reflects both Egg’s share of the operating losses of
IfOnline Group Limited and also goodwill amortisation 
of £1.8 million, which included £0.7 million as an
accelerated charge reflecting a dilution of Egg’s
shareholding. The £0.1 million (2001: £0.1 million) 
charge for joint ventures relates to Marlborough 
Stirling Mortgage Services Limited.
T axation
The tax charge was £2.2 million (2001: tax credit of
£25.7 million). This largely reflects the fact that the UK
business is now generating profits and no tax relief has
been reflected for losses incurred in France. 
Shareholders’ funds
Shareholders’ funds at 31 December 2002 were 
£460.2 million (2001: £475.9 million). The principal
elements of the movement on shareholders’ funds
during the year were the retained losses of £18.8 million.
The loss per share improved to 2.3p (2001: 7 .6p). 
No dividend is proposed.
Accounting policies
The accounting policies are presented on pages 53 
to 55. There have been no material changes to the
policies during the year.
Capital resources
The following table analyses the Group’s capital
resources at 31 December in accordance with
supervisory requirements:
2002 2001
£m £m
Capital base
Tier 1 capital 512.3 500.3
Tier 2 capital 200.0 152.3
Total capital 7 12.3 652.6
Less: investments in certain 
subsidiaries, associated undertakings 
and other supervisory deductions (60.0) (6 7 .1)
652.3 585.5
Risk-weighted assets
On balance sheet 4,932.0 4,281.0
Off balance sheet 12.2 6.6
4,944.2 4,287 .6
Risk asset ratio
%%
Tier 1 9.9 12.0
T otal 13.2 13.6
It is the Group’s policy to maintain an appropriate capital
base and to utilise it efficiently throughout its activities
with the aim of optimising the return to shareholders
29 Egg plc Annual Report 2002 whilst maintaining a prudent relationship between the
capital base and the underlying risks of the business. In
carrying out this policy a guiding factor is the supervisory
requirements of the Financial Services Authority. We are
required to maintain a minimum capital adequacy ratio,
the risk asset ratio, expressed in terms of the ratio of
capital to the risk-weighted value of assets and
contingent liabilities. 
During the year, Egg Banking completed a securitisation
transaction to transfer £500 million of credit card
receivables to a special purpose vehicle Arch (Term)
Limited. This transaction was carried out primarily for
capital efficiency reasons and as a result, these
receivables are not required to be included as risk
weighted assets in our capital adequacy calculations 
for regulatory purposes.
In addition Egg currently has in place further capital
efficiency initiatives, with a credit derivative on £1.1 billion
of asset-backed securities within our treasury investment
portfolio and a credit derivative covering £1.7 billion 
of mortgages.
Investment policy
Surplus retail and wholesale liabilities are invested 
in debt securities, including certificates of deposit,
government gilts and other high investment grade 
assets as demonstrated by the table below.
Risk management
Through its normal operations, the Group is exposed to a
number of risks, the most significant of which are credit,
operational, liquidity, market and currency risk. The overall
risk appetite of the Group is set by the Board and
responsibility for managing these risks is vested in the
Executive Committee. The exposure to specific risks is
monitored by separate committees: Credit Committee is
responsible for credit risk, Risk and Controls Committee
for operational risk and Asset and Liability Committee
(“ALCO”) for liquidity, market and currency risk. 
Credit risk
Credit risk is the risk that counterparties will not be able
to meet their obligations as they fall due. The most
important step in managing this risk is the initial decision
whether or not to extend credit. The Group Credit
Committee defines the policies, procedures and 
sets limits for accepting credit risk. The day-to-day
management of credit risk is devolved to the Retail Credit
and Wholesale Credit functions. Within the Retail Credit
function full use is made of software technology in credit
scoring new lending applications. Collections activity is
centralised and systems are used to prioritise actions.
The Wholesale Credit team performs regular appraisals
of counterparty credit quality through the analysis of
qualitative and quantitative information. Group Credit
Committee sets limits for exposures to individual
countries, sectors and corporate and financial institutions
and compliance with these limits is monitored by the
Wholesale Credit function, which is independent of
Treasury front office.
Operational risk
Operational risk is caused by failures in business
processes or the systems or physical infrastructure that
support them that have the potential to result in financial
loss or reputational damage. This includes human error,
omissions, systems failure, lack of resources or physical
assets and deliberate acts such as fraud.
The management of such risk is an intrinsic part of 
every business manager’s role. In addition a number 
of specialist support functions provide centralised
expertise in operational risk areas such as fraud, 
financial services compliance, information security 
and business continuity planning.
Our approach is to ensure business managers identify,
assess, prioritise and effectively manage all substantive
risks. A central risk management unit supports this
activity to ensure that a co-ordinated and cost-effective
approach is taken and reports to the Risk and Controls
Committee on a monthly basis. Each department and
business line has compiled a risk profile, which sets 
out the internal assessment of risk together with
appropriate risk responses and where necessary any
actions required to reduce, transfer or avoid the risk.
These profiles are subject to regular review by the central
risk management team and validation by Group Internal
Audit department according to the priorities implied.
Liquidity risk
The Group’s liquidity is managed by the Treasury
department and monitored by ALCO. The Group 
keeps its liquidity within limits agreed with the 
Financial Services Authority.
30 Egg plc Annual Report 2002
Financial review continued
AAA 
48%
Unrated and <A-
1%
 
Wholesale asset exposure by credit rating 
as at 31 December 2002 
AA 
41%
 A 
10% Liquidity risk is defined as the Group not having sufficient
financial resources available to meet its obligations as
they fall due, or can secure them only at excessive cost.
Treasury uses various methods including predictions of
daily cash positions to monitor and manage its liquidity
risk. Maturity mismatches between lending and funding
are managed within internal risk policy limits. Treasury
ensures that it holds sufficient assets, which are
immediately realisable into cash without significant
exposure to market risks or costs, to cover a realistic
estimate of retail funds that could be withdrawn. While a
significant proportion of retail savings balances are on
instant access terms, in practice the majority of such
funds represent a relatively stable and consistent funding
base for the Group.
Market risk
The primary market risk of the Group is interest rate risk.
Interest rate risk arises in the Group’s balance sheet 
as a result of fixed rate, variable rate and non-interest
bearing assets and liabilities. Exposure to interest 
rate movements arises when there is a mismatch
between interest rate sensitive assets and liabilities. 
The composition of interest rate risk is closely monitored
and managed on a day-to-day basis by Treasury where
professional expertise and systems exist to control it. 
This is primarily done via asset and liability models 
that look at the sensitivity of earnings to movements 
in interest rates to measure overall exposure which 
may then be hedged in accordance with policy limits 
set by ALCO.
Currency risk
The risks arising from assets and liabilities denominated
in foreign currencies are managed by Treasury within
agreed limits set by ALCO. During the year cash flows
generated by the foreign currency assets and liabilities
are hedged using derivatives contracts to manage
exposure to exchange rate fluctuations.
Positions in foreign currencies also arise from the
investment that the Group has made in 2002 in Egg SA.
The management of funding such investments in
overseas subsidiaries is carried out by Treasury. 
The Group has followed the normal practice of setting 
up a separate currency balance sheet whereby the
foreign currency (euro) denominated assets are 
matched closely to the corresponding liabilities.
Derivatives
The Group uses derivative instruments for the purpose 
of supporting the strategic and operational business
activities of the Group and reducing and eliminating the
risk of loss arising from changes in interest rates and
foreign exchange rates. Derivatives are used solely to
hedge risk exposure and the Group takes no trading
position in derivatives.
For the purpose of reducing interest rate risk, the Group
uses a number of derivative instruments, comprised of
interest rate swaps, interest rate options, caps, futures
and forward rate agreements. Additionally swaps are
used to provide caps to the funding costs of the credit
card product.
General use has also been made of credit derivatives to
manage credit risk without changing the underlying
product or investment portfolios.
For the purpose of reducing currency risk, the Group
uses forward foreign exchange contracts, currency swaps
and currency options.
ALCO regularly reviews the Group’s policies relating to
the use of derivatives and the controls and procedures in
place to manage risk exposure.
All the Group’s derivatives activity is contracted with
authorised financial institutions.
31 Egg plc Annual Report 2002 The directors have pleasure in presenting their report and
audited financial statements for Egg plc and its related
entities (“the Group”) and for Egg plc (“the Company”) for
the year ended 31 December 2002. 
Results for the year
The Group made a loss after tax of £18.8 million for the
year ended 31 December 2002 (2001: £62.1 million
loss). This loss was consistent with the directors’
expectations based on the growth in new customers
achieved in the UK and the launch in France. A full
explanation of the results is presented in the business
and financial review sections.
Financial statements and dividends
The consolidated balance sheet on page 50 shows 
the state of affairs of the Group at 31 December 2002.
The Company’s balance sheet appears on page 51 and
the consolidated profit and loss account on page 49.
There is a five-year review of the Group on page 86.
The directors do not recommend payment of a dividend.
Principal activity and business review
Egg plc is the holding company of the Group and the
principal undertakings of its subsidiaries are retail
banking in the UK and France. 
A review of the business is shown in the Business and
Financial Reviews on pages 20 and 26. 
Share capital
During the year, the ordinary share capital was increased
by the issue of 1,125,354 ordinary shares allotted as a
result of the exercise of options under the Company’s
share schemes. 
Substantial shareholdings 
As at 21 February 2003 the Company has been notified
of the following interests of 3% or more in its issued
share capital.
Percentage 
Number of of issued 
ordinary ordinary
Shareholder shares share capital 
Prudential plc 
and certain subsidiaries 650,666,326 79.3%
Directors’ responsibilities
The directors have a duty to report to shareholders on
the performance and financial position of the Company
and the Group and are responsible for preparing the
financial statements of the Group on pages 49 to 85.
Company law requires the directors to prepare financial
statements for each financial year which give a true 
and fair view of the state of affairs of the Company and
the Group and of the results for the period and which
comply with the Companies Act 1985. In preparing those
statements the directors ensure that suitable accounting
policies are selected and applied consistently, that
reasonable and prudent judgements and estimates are
made and that applicable accounting standards are
followed. They also ensure that appropriate accounting
records are maintained which disclose with reasonable
accuracy at any time the financial position of the
Company and that they take such steps as are
reasonably open to safeguard the assets of the
Company and Group and to prevent and detect fraud
and other irregularities.
Directors
The present directors of the Company are listed on
pages 22 to 24. 
Details of the interests in the share capital of the
Company of the directors in office as at 31 December
2002 are set out in the remuneration section of this
report on pages 35 to 45.
Employees 
The Group has a policy framework and procedures that
ensures compliance with employment legislation in
addition to reflecting the culture and values of Egg.
Company policy is to recruit, develop and employ staff
on the basis of the suitability of their qualifications and
experience for the work to be performed, regardless of
sex, marital status, creed, race, nationality or disability. 
Full consideration is given to continuing the employment
of staff who become disabled and to provide training
and career development opportunities to disabled
employees. The requirements of the Disability
Discrimination Act 1996 have been put into effect.
The Group has effective communication channels
whereby information on the Group’s affairs is passed to
employees and through which employees’ views are
sought on issues that concern them. The Group’s
intranet enables easy access for all to policies, job
vacancies, news and other company information. In
addition, quarterly road shows allow employees regular
access to senior managers, for an update on current and
future business plans and for an open forum question
and answer session. 
Corporate governance
The directors support the Combined Code on Corporate
Governance annexed to the Listing Rules issued by the
Financial Services Authority (the “Code”) and Egg is
committed to high standards of corporate governance.
The Company has complied throughout the year ended 
31 December 2002 with all the Code provisions set out
in Section 1 of the Code, except in relation to the
requirement for the Remuneration Committee to
comprise solely of independent non-executive directors.
This Committee has comprised both independent and
non-independent non-executive directors throughout the
year. The reasons for this departure are discussed later in
this report, in the section dealing with the membership
and objectivity of this committee.
32 Egg plc Annual Report 2002
Directors’ report
For the year ended 31 December 2002 During 2002, Egg plc acquired as a subsidiary, Zebank
SA, a French internet bank which was subsequently
renamed Egg SA. The high level control framework for
the Egg Group (including the governance structures) has
been reviewed during the year and, where appropriate,
amendments have been made to reflect the needs of
the enlarged Group. During the year, Egg SA maintained
a corporate governance structure to meet its French
corporate governance and regulatory requirements. 
The Conseil de Surveillance operated as the senior
Board in France, with the Directoire as the executive
Board. Representatives of Egg’s Executive Committee 
sat on the French Boards and a Chief Executive Officer
for Egg France was in place. Reporting lines and
authorities were established for Egg SA to reflect its
position as a subsidiary of Egg plc.
Board of Directors
The primary objective of the management structures
within Egg, headed by the Board of Directors and led by
the Chairman, is to deliver sustainable long-term value to
shareholders. Implementation of the strategy set by the
Board is delegated to the Chief Executive Officer, who is
supported by a committee of senior executives.
The Board is made up of nine members, consisting of
three executive directors and six non-executive directors.
In November 2002, Dr Juan Rada was appointed to
replace David Smilow who resigned in April 2002. A
resolution will be put forward at the AGM in April 2003
proposing a change to the Articles of Association to
allow for the appointment of Pascal Cagni as an
additional non-executive director to widen further the
breadth of experience on the Board, as appropriate 
for a rapidly growing international Group. 
The relationship between the Company and Prudential
plc is documented in a relationship agreement, which
has been approved by the Board of Directors. Under this
agreement Prudential plc is entitled to nominate one
person to be a director of the Company. Jonathan
Bloomer, one of the non-executive directors, has been
nominated by the Prudential accordingly. Prudential plc 
is also entitled to appoint any director to be Chairman 
of the Board. Roberto Mendoza, another of the
non-executive directors, has been so appointed. 
Both are also directors of Prudential plc.
All the remaining non-executive directors are
independent and accordingly the Board is of the 
view that throughout the period, a majority of the 
non-executive directors were independent. 
The senior non-executive director is Richard Delbridge. 
The full Board met eleven times during the year. 
The Board has a clearly documented schedule of
matters reserved to it, including the agreement of
strategy and budgets, the approval of major capital
expenditure, policies covering treasury operations, 
and authority levels for expenditure. All directors have 
full and timely access to relevant information and have
access to the advice of the Company Secretary and 
to independent professional advice where needed in
furtherance of their duties at the Company’s expense.
The Board ensures that a clear organisation structure
with which to manage the business is in place. 
This structure includes appropriate delegation of authority
and accountability with regard to acceptable levels of 
risk and these are documented in the Group’s high 
level controls framework which is reviewed by the 
Board on an annual basis. 
Principal Board Committees
The Board has established a number of committees,
each with specific terms of reference, consisting of
certain directors and senior executives. The following 
are the principal committees:
Executive Committee
The Executive Committee meets regularly and acts 
as a general management committee under the
delegated authority of the Chief Executive Officer. 
The Committee is responsible for implementing Group
policy, monitoring business performance, managing 
risks and ensuring the effectiveness of internal controls,
approving budgets and capital expenditure for
recommendation to the Board and ensuring efficient 
and effective management of the Group. 
Audit Committee
The Audit Committee assists the Board in meeting its
responsibilities for reviewing the effectiveness of the
system of internal control and for approving the
accounting policies and financial statements of the
Group. The Audit Committee also considers the plans
and findings of the Internal Audit and the Compliance
department. It provides a direct channel of
communication between the external auditors and the
Board, helping to ensure that the external audit is
conducted in a thorough and effective manner and that
reports by the external auditors are actioned as
appropriate. The Committee reviews the plans and
results of the external audit and its cost effectiveness as
well as the independence and objectivity of the external
auditors.
The Group has adopted a policy on the independence of
auditors. The policy includes guidelines on the provision 
of non-audit services and the Audit Committee will monitor
(and in some cases must approve) expenditure on non-
audit work to enable the Committee to satisfy itself that
auditor independence is not being compromised.
The Committee is comprised of four independent non-
executive directors and met six times during the year.
After each meeting, the Chairman of the Audit
Committee reports to the Board. 
33 Egg plc Annual Report 2002 The members of the Audit Committee are Richard
Delbridge (Chairman), Leslie Priestley, Derek Higgs, 
and Juan Rada. Senior Executives, as well as Egg’s
senior financial, internal audit, compliance and risk
management executives and the external auditor attend
meetings as requested by the Committee. From time to
time, the Audit Committee meets in private with the
internal and external auditors.
Remuneration Committee
The Remuneration Committee considers the terms of
employment for certain senior executives, including the
executive directors. In particular it makes decisions
regarding grants under share plans and decisions
concerning the salaries, incentive compensation and
other terms of employment. The Remuneration
Committee is chaired by Roberto Mendoza who, as
indicated above, has been nominated by the Prudential
as Chairman of the Board. It includes as members both
the independent non-executive directors and the non-
executive director nominated by Prudential. The Board
believes that the Chairman of the Remuneration
Committee and the non-executive director nominated 
by Prudential are sufficiently independent from the 
day-to-day activities of the business to objectively 
assess the remuneration of the Group’s senior executives. 
Nominations Committee
The Nominations Committee meets as required to 
carry out the process of nominating candidates to 
fill vacancies on the Board. Nominations will then be
considered by the Board. All directors are subject to
election by shareholders at the Annual General Meeting
following their appointment and to re-election at least
every three years. The Nominations Committee is chaired
by Roberto Mendoza and includes as members all of the
non-executive directors. 
Internal control
The Board is ultimately responsible for internal control in
the Company and its related entities and for reviewing its
effectiveness. Systems and procedures have been
designed to facilitate effective and efficient operations
and help ensure the quality of external reporting,
compliance with applicable laws, regulations and to
monitor internal policies with respect to conduct of
business. Such systems are designed to manage, 
rather than to eliminate, the risk of failure to achieve
business objectives and can only provide reasonable
and not absolute assurance against material errors,
losses or fraud.
The key procedures the directors have established are
designed to provide effective control in accordance with;
Internal Control: Guidance for Directors on the
Combined Code (the Turnbull guidance). There is an
ongoing process for identifying, evaluating and managing
the significant risks faced by the Group and for ensuring
there are appropriate controls in place to manage them.
The procedures implemented have remained in place up
to 21 February 2003, the date of approval of the Annual
Report and Accounts by the Board. The Board has
undertaken an annual assessment of the effectiveness
of internal control based on a comprehensive 
self-assessment programme by senior line and
functional managers, co-ordinated by the Risk
Management Department and reviewed and evaluated
by the Internal Audit Department.
The Group’s key internal control procedures include 
the following:
• Authority to manage the businesses that constitute Egg
is delegated to the Chief Executive Officer within limits
set by the Board. There are Group-wide policies,
procedures and manuals in place covering financial
controls, business processes, information security, credit
policy and compliance with regulatory and legislative
requirements. In addition, delegated limits apply to all
transactions and risk positions to ensure that exposures
are controlled. The accountabilities of key managers are
designed to ensure appropriate segregation of duties.
• In each of the key business areas, regular independent
checks are made on operating performance and
customer service to ensure that control procedures are
being observed.
• Systems and procedures are in place to identify, control
and report on the major risks including credit, changes
in the market prices of financial instruments, liquidity,
operational errors and fraud. Exposure to these risks
throughout the Group is monitored by each of the
Group Risk and Controls Committee, the Asset 
and Liability Committee (“ALCO”), the Group Retail
Credit Committee and the Group Wholesale Credit
Committee. They are also monitored by subsidiary
company boards of directors and by the 
Executive Committee. 
• Risk assessments are also completed as part of all
project appraisals, and risk is considered within the
budget and business planning exercises, which are
reviewed and approved by the Board.
• There is a system of financial reporting to the Board
based on an annual plan, with monthly reports of actual
results, analysis of variances from plan, review of key
performance indicators, and regular updates to
forecasts. The annual plan and revised forecasts are
both reviewed against overall business strategy on a
regular basis by the Executive Committee and the
Board. Market and competitor intelligence reports are
received and reviewed.
• The Internal Audit Department monitors compliance
with Group policies and procedures and the
effectiveness of internal control structures across the
Group as a whole. The work of Internal Audit is
34 Egg plc Annual Report 2002
Directors’ report continued
Corporate governance continued focussed on the areas of greatest risk. The Chief
Internal Auditor reports to the Chief Financial Officer, 
the Chief Executive Officer and the Audit Committee.
These internal controls procedures apply to Egg plc and
its subsidiary companies. The Egg Group also includes
an associated company, IfOnline Group Limited and a
joint venture company Marlborough Stirling Mortgage
Services Limited (MSMS). During the year, the
shareholding in MSMS was reduced so that Marlborough
Stirling plc now owns more than 50% of the equity and
MSMS has adopted the Internal Control procedures
operated by the Marlborough Stirling Group. IfOnline
Group Limited has a number of significant investors and
applies its own internal control processes to meet the
needs of all of its significant investors, rather than
adopting the Internal Control procedures of Egg. 
The Group Risk and Controls Committee meets regularly
under the delegated authority of the Chief Executive
Officer. This Committee ensures that the Group’s risk
management framework is effective, and that a sound
system of internal controls is in place, remains effective
and is embedded throughout the organisation. 
The Group Risk and Controls Committee is chaired 
by the Chief Executive Officer and includes as 
members certain members of the Executive Committee
and other senior executives. 
The Audit Committee keeps under review the
effectiveness of the system of internal control and 
reports regularly to the Board to assist in its review of
effectiveness of the system of internal control. The Audit
Committee receives an annual confirmation, through the
Risk Director, from senior line and functional managers
that there have been no material losses, contingencies
or uncertainties caused by any weakness in 
internal controls.
Communication with shareholders
Communication with shareholders is given a high priority.
Extensive information about Egg’s activities is provided 
in the Annual Report and Accounts and the Interim
Report, which are sent to shareholders. Further investor
information is accessible on the Egg website,
www.egg.com. There is a regular dialogue with
institutional investors. Enquiries from individuals on
matters relating to their shareholdings and the business of
Egg are dealt with in an informative and timely manner. 
Remuneration
Remuneration Committee
The Remuneration Committee (“the Committee”)
operates within specific terms of reference in order to
review matters of general policy in relation to the
remuneration and terms and conditions of service of
executive directors of the Group, and to make
recommendations to the Board as considered
appropriate. The members of the Committee are Roberto
Mendoza (Chairman), Jonathan Bloomer, Richard
Delbridge, Derek Higgs, Leslie Priestley and Juan Rada
(who joined the Committee in November 2002). The
Committee has appointed Watson Wyatt LLP (Actuaries
and Consultants)
1
to review and provide independent
advice to the Committee on the remuneration of its
executive directors and other senior managers.
Throughout the year Watson Wyatt LLP also provide the
Group with market data for use in benchmarking the
Group’s salary structure, together with other remuneration
related advice. In addition, the Committee is advised by
Andy Craggs, (Chief People Officer) on matters
concerning the overall pay structure and the balance of
the different elements of the package. 
The Committee meets at least three times a year and
the Chief Executive Officer and the Chief People Officer
are also in attendance. The Chief Executive Officer
advises the Committee specifically on the performance
and reward recommendations for his executive team,
and leaves the meeting when his own compensation 
is discussed.
1 Watson Wyatt has given and has not withdrawn its written consent
to the inclusion of its name in this document in the form and context
within which it appears.
Remuneration policy
It is the policy of the Committee to provide remuneration
packages for the executive directors that are sufficiently
competitive to attract and retain scarce executive talent,
and which align the interests of executive directors with
those of shareholders. Base pay, bonus and share plans
are each designed to provide an overall package that
provides significant scope for linking reward to individual
performance. Consequently, variable elements provide a
relatively high proportion of total reward. For all executive
directors, assuming target performance, base salary
represents approximately one third of the target value 
of the total remuneration package taking into account 
the value of long-term incentives as explained later in 
the report.
Performance underpins the reward strategy so that base
salary is positioned approximately at median against the
relevant comparator group with variable pay taking total
cash into upper quartile levels, based on meeting
stretching individual and Group targets. The structure of
the remuneration package is reviewed as necessary with
the above factors in mind. 
Comparator group
As a uniquely successful Financial Services internet start-
up business, Egg does not have a natural comparator
group of companies. The Committee has accordingly
chosen a set of appropriate comparator groups against
which to measure different aspects of executive reward.
Base pay and total cash use a comparator group of
companies suitably comparable to Egg, which provides
35 Egg plc Annual Report 2002 36 Egg plc Annual Report 2002
09
size matters
We are the largest pure online bank in the world Egg is now the largest
pure online bank in the world, according to research from Nielsen Net
Ratings. We take this position seriously, and do not underestimate the
need to continue to lead the field in offering the best services and
products we can to our customers. 37 Egg plc Annual Report 2002 38 Egg plc Annual Report 2002
Directors’ report continued
Remuneration continued
roles that are similar in size when applying benchmark
gradings. The companies and roles are chosen to
provide appropriate comparators for Egg based on a
combination of size, similarity of operations and industry
sector, and similarity of roles.
Two further comparator groups are used for the purposes
of long-term incentive awards. The Remuneration
Committee has selected a comparator group of retail
banks in the FTSE 350 for the purpose of determining
the level of awards and a further comparator group of the
FTSE 350 (excluding investment trusts) for measuring
company performance when applying performance
conditions on long-term share plans. The basis for 
long-term incentive awards is outlined later in 
this section.
Salary
The Remuneration Committee reviews annually the salaries
of the executive directors, taking into account individual
accountabilities and contribution, in addition to business
results and market data on remuneration in comparator
companies. The target positioning for fully competent
performance is market median of the relevant comparator
group, with actual positioning being dependent on
individual skills, experience and performance.
Annual bonus
The annual bonus scheme is focused on the key
strategic aims of the Group for the period. It provides
executive directors with an incentive based on meeting
annual quantitative and qualitative financial and business
targets. The achievement of qualitative targets is decided
by the Committee, and this is based on evidence
provided by the Chief Executive Officer. Executive
directors participate at a level of up to 100% of base
salary, based on both Group and individual achievement.
In 2002, the proportion of bonus based on individual
targets was increased from 20% to 40% of the overall
bonus. On target achievement against stretching
objectives would lead to a bonus of 75% and is
designed to achieve upper quartile market total cash
positioning. Any annual bonus payment is receivable in
the form of a taxable, non-pensionable cash payment
following the announcement of the annual results for the
relevant year.
Benefits in kind
Each executive director is provided with a company car,
medical and life assurance, none of which is pensionable.
T able 1: Directors’ emoluments
2
Other T otal T otal
Salary Bonus benefits 2002 2001
Director £’000 £’000 £’000 £’000 £’000
Executive
Mike Harris 276 234 17 527 501
Paul Gratton 368 312 20 700 67 1
Stacey Cartwright 255 217 11 483 457
T otal 2002 899 763 48 1,710 n/a
Total 2001 842 758 29 n/a 1,629
2
Tables 1 to 11 in the Remuneration report are those items described in the auditors’ report on page 48 as having been audited.
The highest paid director for 2002 was Paul Gratton whose emoluments for 2002 were £681,660. Additionally in
2002 the Group made pension contributions of £32,568 on his behalf to a defined benefit pension scheme. 
(The highest paid director in 2001 was Paul Gratton whose emoluments for 2001 were £670,783, in addition to 
a pension contribution of £58,420 to a defined benefit pension scheme). 
Pensions
All of the executive directors have individual pension arrangements to which the Group makes contributions. Paul
Gratton participates in a defined benefit pension scheme whilst Mike Harris and Stacey Cartwright have defined
contribution schemes. 
In the event of Paul Gratton’s early retirement, he will be entitled to an early retirement pension, which shall be at an
annual accrual rate of one thirtieth of his final pensionable remuneration. This will be reduced by an early retirement
factor calculated by an actuary. Upon Paul’s death after retirement a pension will be paid to his spouse equal to 
two-thirds of the pension he was in receipt of on the day of his death. The pension payable to Paul will be increased
in line with the Retail Price Index. T able 2: Defined Benefit Pension Schemes
Change in Transfer Transfer
accrued value of value of Transfer
Y ears of entitlement Accrued accrued accrued Change in value of the
pensionable in period to entitlement at entitlement at entitlement at transfer the increase
Age at service at 31 December 31 December 31 December 1 January value at in accrued
31 December 31 December 2002 2002* 2002 2002 31 December entitlement
2002 2002£££££ £
6 years
Paul Gratton 43 11 months 22,639 76,050 276,263 200,471 75,792 68,443
*The accrued entitlement combines both approved and unapproved benefits. The unfunded element of the defined benefit pension scheme at 
31 December 2002 amounted to £282,000 (2001: £211,500) which has been fully provided.
T able 3: Pre tax contribution or salary supplements
Y ear to Year to
31 December 31 December 
2002 2001
Director £’000 £’000
Executive
Mike Harris 83 78
Stacey Cartwright** 49 46
T otal 132 124
** Includes pre tax contributions to a Self Invested Pension Plan of 20% of Inland Revenue Earnings Cap (“the Cap”) plus taxable salary supplements
of 20% of earnings in excess of the Cap.
Remuneration of non-executive directors
The fees of the non-executive directors are determined by the Board, and are set at a level that, historically, has been
sufficient to attract and retain individuals of the appropriate calibre. Jonathan Bloomer was remunerated by Prudential.
His services to the Group were of a non-executive nature and his emoluments were deemed to be wholly
attributable to his services to Prudential for the period. The fees shown are for services as director of Egg plc and its
subsidiaries from 1 January 2002. 
David Smilow resigned from his position as non-executive director of Egg plc on 26 April 2002. The fees for 2002
below are therefore prorated. Juan Rada joined the Egg plc Board on 19 November 2002 and the fees for 2002 are
therefore prorated.
T able 4: Non-executive directors’ fees
T otal T otal
2002 2001
Director £’000 £’000
Non-executive
Roberto Mendoza (Chairman) 75 75
Jonathan Bloomer – –
Richard Delbridge 35 35
Derek Higgs 33 33
Leslie Priestley 33 33
David Smilow 10 30
Juan Rada 4 –
T otal 190 206
39 Egg plc Annual Report 2002 40 Egg plc Annual Report 2002
Directors’ report continued
Directors’ service contracts
It is the policy of the Group not to allow service contracts with more than 12 months written notice. Each executive
director’s service contract is dated 22 May 2000 and is terminable by either side giving 12 months written notice of
termination. In either case, the Group will not require the individual to carry out their normal duties under the contract
for more than six months. The Committee has discretion over any compensation for any unvested long-term
incentives in the case of loss of office by an executive. 
Long-term incentives
The Group operates a restricted share plan (the “Restricted Share Plan”) and an employee share option plan 
(the “Share Option Plan”).
Awards were granted to the executive directors under both plans at the time of the Initial Public Offering. These
awards were designed to take into account the inherent value accumulated under a previous cash based long-term
incentive arrangement (“Long-term Incentive Plan”) in the 18 months prior to flotation. For this reason performance
conditions were not applied to these grants. This plan terminated upon flotation. 
It has been the policy of the Remuneration Committee to grant awards of long-term incentives annually, under the
Restricted Share Plan and the Share Option Plan. It is intended that the level of awards will be maintained in 2003,
with the awards being delivered wholly in restricted shares. 
Performance conditions apply to the grant of awards under both plans. Performance conditions are based on 
the delivery of Egg’s business plan for the year, and the individual responsibilities necessary to deliver the plan. 
The targets for the Egg business plan were achieving profit, sales and revenue targets, and a successful launch 
of Egg in France; individual responsibilities were in support of that plan. For executive directors, the key individual
responsibilities are:- Paul Gratton – ensuring delivery of the Group’s operating plan and achieving the optimal
positioning of information technology, brand and cost base necessary for both the year and for Egg’s future plans;
Stacey Cartwright – achieving financial targets incorporated in the Group’s operating plan, integrity of results and
sound risk management; Mike Harris – devising Egg’s future strategic plans. These are subject to the discretion of
the Remuneration Committee. Performance conditions were not applied to the vesting of awards granted under the
Restricted Share Plan before 2002 or under the Share Option Plan. 
With effect from awards made in 2002, performance conditions apply to restricted shares on vesting. T otal Shareholder
Return (“TSR”) against the FTSE 350 was felt to be the most appropriate measure in the absence of specific
comparators for Egg’s stage of growth. This is a general index and outperforming this is a reasonable measure of
providing return to shareholders. 
The proportion of the initial award that vests will be determined by the Committee’s assessment of Egg’s TSR ranked
against the FTSE 350 at the end of the measurement period. The measurement period begins on the date of the
award and ends on the third anniversary thereof. Depending on positioning against this group, the actual number of
restricted shares received will be based on a multiplier of between 0 and 4 times the basic award shown in Table 5.
The basic award will normally be given at median ranking against the TSR results for the FTSE 350, with straight-line
interpolation rising to twice the basic award if performance is at upper quartile ranking, and quadruple the basic
award if performance is at top ranking (illustrated Figure 1 below). Egg’s performance against the FTSE 350 is shown
in Figure 2 below.
120
100
80
60
40
20
0 12 June
2000
31 Dec
2000
31 Dec
2001
31 Dec 
2002
Figure 2: Illustrative performance graph 
from Egg’s IPO at 12 June to 31 December 2002
Egg Total Cumulative Shareholder Return compared against  
Total Shareholder Return of FTSE 350 Actuaries Share Index
Total shareholder return measures the percentage change
in the value of a share assuming dividends to have been reinvested Egg plc FTSE 350
4.0
3.0
2.0
1.0
0 102030405060 708090 100
Figure 1: Percentile TSR ranking vs FTSE 350
Award units (multiples) In 2002 awards were made to executive directors under both long-term incentive plans, with an expected normative
maximum value calculated using PEV (see below) of 1 75% of salary, with 40% of the value being in restricted shares
and 60% of the value in share options. The positioning for on target achievement against stretching objectives is
validated with reference to the median of total direct compensation, for the comparator group of retail banks in the
FTSE 350 outlined earlier. Exceptionally in 2002 the Committee made enhanced awards of 200% of salary to five
people, including the three executive directors, reflecting the achievement of targets set at IPO.
From 2002 Watson Wyatt’s Present Economic Value (PEV) methodology has been applied to arrive at long-term
incentive award levels. This builds on the mathematical and economic principles underlying the Black-Scholes option
pricing model. The advantage of this methodology is that it allows the Remuneration Committee to value consistently
all types of long-term incentives taking into account features relating to the expected future share price volatility and
dividends, performance and exercise conditions. 
A minimum shareholding requirement has been introduced from 2003, whereby executive directors are required to
hold shares to the value of twice their annual salary after seven years, with an interim requirement to hold shares to
the value of their annual salary after three years.
Egg Restricted Share Plan
On 25 April 2000, the Group adopted the Restricted Share Plan, under which executive directors of the Group may be
awarded shares in Egg plc. The awards are conditional until the vesting date. 
Details of the conditional awards of shares in Egg plc under the plan are shown below. These shares represent the
conditional awards out of which allocations will be made. 
T able 5: Egg Restricted Share Plan
Market price
Conditional of shares Market price Conditional
share awards conditionally Number of of shares share awards
outstanding at Conditionally awarded in shares vested in outstanding at
1 January awarded in 2002 vested in 2002 31 December Release 
Director 2002 2002
†
(£)** 2002**** (£)*** 2002 year
Executive
Mike Harris 107 ,803 –– 10 7 ,803 1 .79 – 2002
200,139 –––– 200,139 2003
218,606 –––– 218,606 2004
161 ,9 72 –––– 1 61,972 2004
– 81,7 75 1 .46 1 7 –– 81,775 2005
688,520 662,492
Paul Gratton* 90,306 –– 90,306 1.79 – 2002
159,404 –––– 159,404 2003
173,224 –––– 173,224 2004
255,962 –––– 255,962 2004
– 126,534 1.4617 –– 126,534 2005
678,896 71 5, 1 24
Stacey Cartwright 80,392 –– 80,392 1.79 – 2002
1 49,644 –––– 1 49,644 2003
163,495 –––– 163,495 2004
150,235 –––– 150,235 2004
– 75,596 1.4617 –– 75,596 2005
543,766 538,970
*The figures shown for Paul Gratton include awards made to his wife, who is a senior manager at Egg.
**The market price of shares conditionally awarded in 2002 is based on the market price of the shares on the day of the award.
***The market price of shares vested in 2002 is based on the market price of the shares on the day of vesting.
****There were no performance conditions attaching to the awards vested in 2002. As a result rights were granted over 100% of the shares
conditionally awarded.
†The shares conditionally awarded in 2002 are subject to the performance conditions outlined in the previous section.
41 Egg plc Annual Report 2002 Egg Employee Share Option Plan
On 25 April 2000, the Group adopted the Share Option Plan, under which executive directors of the Group may be
granted options over shares. The grants are conditional until the vesting date. Details of the option grants under the
plan are shown below. 
T able 6: Egg Employee Share Option Plan
Market
Granted Lapsed Exercised price of Exercise Earliest Latest
1 January during the during the during the shares at 31 December price exercise exercise
Director 2002 period† period period exercise 2002 (£) date date
Executive
Mike Harris 500,000 –––– 500,000 1.60 2003 2010
563* –––– 563* 1.65 2003 2010
247 ,206 –––– 247 ,206 1.278 2004 2011
22,7 47* –––– 22,747* 1.278 2004 2011
– 384,825 ––– 384,825 1.4617 2005 2012
7 70,516 1 , 155,341
Paul Gratton** 475,000 –––– 475,000 1.60 2003 2010
1,1 26* –––– 1,1 26* 1.65 2003 2010
399,443 –––– 399,443 1.278 2004 2011
45,494* –––– 45,494* 1.278 2004 2011
– 583,101 ––– 583,101 1.4617 2005 2012
921,063 1,504, 1 64
Stacey Cartwright 363,281 –––– 363,281 1.60 2003 2010
563* –––– 563* 1.65 2003 2010
227 ,644 –––– 227 ,644 1.278 2004 2011
22,7 47* –––– 22,747* 1.278 2004 2011
– 355,750 ––– 355,750 1.4617 2005 2012
61 4,235 969,985
*Egg Employee Share Option Plan (Approved Part).
**Figures shown for Paul Gratton include options held by his wife, who is a senior manager at Egg.
†The options granted during 2002 were subject to individual performance conditions on grants as described above.
The market price of Egg plc shares at 31 December 2002 was £1.44. The highest price during the year was £1.90 and
the lowest price during the year was £1.15. 
Egg Savings-Related Share Option Scheme 
On 6 September 2001 Egg launched a savings-related share option scheme (“Sharesave”). A second invitation was
issued under this plan in October 2002. This is open to permanent employees of Egg and its subsidiaries. Options up
to the Inland Revenue limits are granted at a 20% discount and cannot normally be exercised until a minimum of three
years has elapsed.
42 Egg plc Annual Report 2002
Directors’ report continued
Remuneration continued T able 7: Egg Savings-Related Share Option Scheme
Granted Lapsed Exercised Exercise Earliest Latest
1 January during the during the during the 31 December price exercise exercise
Director 2002 period period period 2002 (£) date date
Executive
Paul Gratton 4,457 ––– 4,457 1.304 2004 2005
– 3,298 –– 3,298 1.1 46 2005 2006
4,457 7,7 55
Directors’ Long-term Incentive Schemes in Prudential plc (“Prudential”)
Prudential operates long-term incentive schemes for its executive directors and senior employees in the form of the
Prudential Restricted Share Plan and the Prudential Share Participation Plan. The executive directors of Egg plc
ceased to be eligible to receive new awards under these schemes on 1 January 1999. 
Prudential Restricted Share Plan 
This is a long-term incentive plan, operated by Prudential. It is designed to provide reward contingent upon the
achievement of predetermined returns to shareholders. Under this plan directors of Egg plc were granted annually a
conditional award of shares in Prudential which are held in trust for three years. The conditional award is equivalent to
a percentage of salary at the time of the award, valuing the shares at their average share price during the preceding
calendar year.
The number of shares that the directors are allocated out of the conditional award after three years depends on the
total return to shareholders relative to other companies in the FTSE-100 share index over the three years. In addition,
the Prudential Remuneration Committee must be satisfied with the overall financial performance of Prudential. 
The right to receive allocations may then be exercised by the director concerned at any time during the following
seven years.
In respect of the 1999 Restricted Share Plan, Prudential’s Total Shareholder Return was ranked 43rd out of the 84
relevant comparator companies (i.e. 51st percentile) for the three year performance period ended on 31 December
2001. As a result, rights were granted over 22.5% of the shares conditionally awarded.
T able 8: Prudential Restricted Share Plan
Conditional Market price Conditional
share awards of rights share awards
outstanding at Conditionally Rights Rights vesting in outstanding at
1 January awarded in vested in lapsed in 2002 31 December Release
Director 2002 2002 2002 2002 (£)* 2002 year
Non-executive
Jonathan Bloomer 36,308 – 8,170 28,138 7 .195 – 2002
63,470 –––– 63,470 2003
135,301 –––– 135,301 2004
– 177 , 1 1 0 ––– 177 ,1 10 2005
235,079 375,881
*The market price of rights vested in 2002 is based on the market price of the shares on the day of the vesting.
The Prudential Restricted Share Plan replaced the Executive Share Option Scheme in 1995 as Prudential’s long-term
incentive plan. Outstanding options under the Executive Share Option Scheme remain in force and are set out below
together with options under the Savings-Related Share Option Scheme. The latter scheme is open to all employees
and options up to the Inland Revenue limits are granted at a 20% discount and cannot normally be exercised until a
minimum of three years has elapsed.
43 Egg plc Annual Report 2002 T able 9: Prudential Executive and Savings-Related Share Option Schemes
Market
Granted Lapsed Exercised price on Exercise Earliest Latest
1 January during the during the during the date of 31 December price exercise exercise
Director 2002 period period period exercise*** 2002 (£) date date
Executive
Paul Gratton** 1,327* –––– 1,327* 7 .30 2002 2003
924* – 924 –– – 7 .30 2004 2005
2,251 1,327
Non-executive
Jonathan Bloomer 196,750 –––– 196,7 50 3.15 1998 2005
226,750 –––– 226,750 3.15 2000 2005
7,6 7 7* –– 7 ,67 7* 6.515 – 2.54 2002 2002
2,247* –––– 2,247* 7 .51 2005 2005
433,424 425,7 47
*Savings-Related Share Option Scheme.
**Figures shown for Paul Gratton include options held by his wife, who is a senior manager at Egg.
***The market price on the date of exercise is the market price of the shares on the day of exercise. The shares listed have not yet been sold.
The market price of Prudential plc shares at 31 December was £4.39. The highest price during the year was £8.24 and
the lowest price during the year was £3.33. 
Directors’ shareholdings in Egg plc
The beneficial interests of directors and related parties in shares of Egg plc, including awards allocated under the
Restricted Share Plan, but excluding conditional awards under the Restricted Share Plan, are shown below. The
directors hold no non-beneficial interests in shares of Egg plc. There have been no changes in directors’ interests from
31 December 2002 to the date of the approval of the financial statements.
T able 10: Directors’ shareholdings in Egg plc
1 January
2002 
(or date of 
appointment 31 December
Director if later) 2002
Executive
Mike Harris 59,854 124,535
Paul Gratton* 126,034 190,217
Stacey Cartwright 44,243 92,478
Non-executive
Roberto Mendoza 200,000 225,000
Jonathan Bloomer 470 9,092
Richard Delbridge 20,000 20,000
Derek Higgs 470 5,470
Leslie Priestley 940 940
Juan Rada – –
*Figures shown for Paul Gratton include shares held by his wife, who is a senior manager at Egg.
44 Egg plc Annual Report 2002
Directors’ report continued
Remuneration continued Directors’ shareholdings in Prudential plc
The beneficial interests of directors and related parties in shares of Prudential plc, including awards under the
Prudential Share Participation Plan and allocated under the Prudential Restricted Share Plan, but excluding
conditional awards under the Prudential Restricted Share Plan, are shown below. The directors hold no non-beneficial
interests in shares of Prudential plc. There have been no changes in directors’ interests since 31 December 2002 to
the date of the approval of the financial statements. 
T able 11: Directors’ shareholdings in Prudential plc
1 January
2002 
(or date of 
appointment 31 December
Director if later) 2002
Executive
Mike Harris 32,041 32,041
Paul Gratton 20,224 20,411
Stacey Cartwright – –
Non-executive
Roberto Mendoza 3,444 45,933
Jonathan Bloomer 152,623 176,493
Richard Delbridge – –
Derek Higgs 41 ,344 41 ,344
Leslie Priestley 138 138
Juan Rada – –
Corporate Social Responsibility 
We believe the way we interact with our people, the communities in which we operate, our customers and the
broader society – our Corporate Social Responsibility (CSR) – has a bearing on our overall financial performance. 
Our core values are honesty, integrity and respect for people. We believe in challenging the conventions of our
industry to provide better products and services. We aspire to be vibrant, imaginative and fair in everything we do. 
We respect our people’s individuality and diversity, encouraging them to develop their careers in a stimulating
environment in keeping with our values.
Our customers are the reason we exist and we constantly look to offer them the products and services that put them
in control of their money. 
Our shareholders own the business and must be fairly rewarded for their investment.
We work co-operatively with our suppliers and business partners, choose those who share our values and strive for
mutual trust and benefit. 
We behave as good neighbours in our local communities and as a responsible citizen of society.
We respect and protect the environment.
We are a young, fast-growing company. Our focus has been on building the business and developing good
relationships with our customers, staff and the communities in which we operate. 
We continue to develop our strategy on social issues. Updates are posted on our website. We are listed in the
FTSE4Good index series for socially responsible investment designed by the FTSE, one of the world’s leading global
index providers.
45 Egg plc Annual Report 2002 Environment
Our environmental impacts are direct, such as the use of transport, energy and paper, or indirect, such as our
decisions on investment and insurance. We are a retail bank and do not make commercial loans.
We have a corporate environmental policy and a main board member with specific responsibility for the environment.
We set environmental improvement targets.
We are committed to: 
• Comply with the law and, if possible, exceed minimum legal requirements.
• Ensure that managers consider the environment when making decisions.
• Raise environmental awareness among our people to encourage them to help improve our environmental performance. 
• Measure and use energy and water efficiently.
• Measure and reduce our total carbon dioxide emissions from our business.
• Measure our total waste and work to reduce, re-use or recycle the materials we use.
• Use our procurement policies to encourage suppliers to minimise their environmental impact.
• Manage our buildings in a way that makes them a comfortable and productive place to work, while minimising their
impact on the environment. 
• Consider the environmental implications of investment decisions. 
This chart shows our progress against targets. 
Data Data T argets T argets
Parameter 2001
1
2002 2002 2003*
Energy use/Utilities
2
Electricity (kWh per person) 5,7 44 5,812 –10% –10%
Gas (kWh per person) 2,860 2,557 –5% –5%
Water (cu mtrs per person) 11.26 9.93 –5% –5%
Business travel
3
Total car miles (miles per person) 1,191 1,029 –5% –5%
Total train miles (miles per person) 103 305 –5% No target
Paper use
3
Office and print (kgs per person) 176 306 –10% No target
Copy paper (kgs per person) 40 43 No target –10% 
(on 2001
levels)
Waste
4
Total solid waste (kgs per person) 160 179 –5% No target
Total landfill (kgs per person) 101 108 –10% –10%
Total recycled (kgs per person) 59 7 1 +10% +10%
(rate of (rate of 
37%) 40%)
1 In 2002 we improved our data collection and our baseline (2001) has been adjusted to reflect this.
2 We did not meet our electricity target because of additional computer systems using more power. We aim to meet the target in 2003. 
3 Rail has a lower environmental impact than cars. We will continue to switch more staff journeys to trains. We will not try to reduce train miles. 
4 Paper use includes print (for marketing) and copy paper used in our offices. In 2003 we will focus on reducing the use of copy paper. 
5 Cleaning before office relocation and our brand refresh in early 2002 contributed to greater amounts of waste. In 2003 we aim to further increase
recycling and meet our 2001 target for reducing the amount of waste sent to landfill. We will not focus on our 2001 target for reducing overall levels
of solid waste. 
*Target reductions for 2003 are on 2002 levels, unless otherwise stated. 
46 Egg plc Annual Report 2002
Directors’ report continued
Corporate social responsibility continued Community
Our people are active in their communities and we encourage our staff to contribute time to good causes. They also
collect money by organising fund-raising events. Those who benefited in 2002 include: Air Training Corps, Cancer
Research UK, Childline, Children in Need, 4th Derby Guides, Lords Taverners, St Albans Lion Club, Centre Stage
Theatre School.
Funds raised for charity by Egg People: £8,400.
In 2002, the Group made charitable donations of £20,781 (2001: £7 ,558). Beneficiaries included: Derby Promoting
Voluntary Action, Childline Northern Ireland, Children in Need and Sports Aid 2002. 
It is Group policy not to make political donations and, as a result, none were made during the year.
Supplier payment policy
In most cases the supplier of goods or services does so under standard terms of contract that lay down terms of
payment. In other cases, specific terms are agreed beforehand. It is the Group’s policy to ensure that the terms of
payment are notified in advance and adhered to. The total outstanding indebtedness of the Group to trade creditors
as at 31 December 2002 amounted to £2.0 million (31 December 2001: £5.1 million), corresponding to seven days
purchases when averaged over the year. 
Auditors 
A resolution for the reappointment of KPMG Audit Plc will be put to the Annual General Meeting. 
Going concern
The Board has satisfied itself that the Group has adequate resources to continue in operation for the foreseeable future.
The Group’s financial statements have accordingly been prepared on a going concern basis. 
By order of the Board 
Marcus Ezekiel Company Secretary 
21 February 2003
47 Egg plc Annual Report 2002 We have audited the financial statements on pages 49
to 85. We have also audited the information in the
directors’ remuneration report that is described as 
having been audited.
This report is made solely to the Company’s members,
as a body, in accordance with Section 235 of the
Companies Act 1985. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed. 
Respective responsibilities of directors and auditors
The directors are responsible for preparing the 
Annual Report and the directors’ remuneration report. 
As described on page 32, this includes responsibility 
for preparing the financial statements in accordance 
with applicable United Kingdom law and accounting
standards. Our responsibilities, as independent auditors,
are established in the United Kingdom by statute, the
Auditing Practices Board, the Listing Rules of the
Financial Services Authority, and by our profession’s
ethical guidance. 
We report to you our opinion as to whether the financial
statements give a true and fair view and whether the
financial statements and the part of the directors’
remuneration report to be audited have been properly
prepared in accordance with the Companies Act 1985.
We also report to you if, in our opinion, the directors’
report is not consistent with the financial statements, if
the Company has not kept proper accounting records, 
if we have not received all the information and
explanations we require for our audit, or if information
specified by law regarding directors’ remuneration and
transactions with the Group is not disclosed. 
We review whether the statement on pages 32 to 35
reflects the Company’s compliance with the seven
provisions of the Combined Code specified for our
review by the Listing Rules, and we report if it does 
not. We are not required to consider whether the 
Board’s statements on internal control cover all risks 
and controls, or form an opinion on the effectiveness 
of the Group’s corporate governance procedures or 
its risk and control procedures.
We read the other information contained in the Annual
Report, including the corporate governance statement
and the unaudited part of the directors’ remuneration
report, and consider whether it is consistent with the
audited financial statements. We consider the
implications for our report if we become aware of any
apparent misstatements or material inconsistencies 
with the financial statements. 
Basis of audit opinion
We conducted our audit in accordance with Auditing
Standards issued by the Auditing Practices Board. 
An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures 
in the financial statements and the part of the directors’
remuneration report to be audited. It also includes an
assessment of the significant estimates and judgements
made by the directors in the preparation of the financial
statements, and of whether the accounting policies are
appropriate to the Group’s circumstances, consistently
applied and adequately disclosed. 
We planned and performed our audit so as to obtain all
the information and explanations which we considered
necessary in order to provide us with sufficient evidence
to give reasonable assurance that the financial
statements and the part of the directors’ remuneration
report to be audited are free from material misstatement,
whether caused by fraud or other irregularity or error. 
In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the
financial statements and the part of the directors’
remuneration report to be audited.
Opinion
In our opinion:
• the financial statements give a true and fair view of 
the state of affairs of the Company and the Group as 
at 31 December 2002 and of the loss of the Group 
for the year then ended; and 
• the financial statements and the part of the directors’
remuneration report to be audited have been properly
prepared in accordance with the Companies Act 1985.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
21 February 2002
48 Egg plc Annual Report 2002
Independent auditors’ report to the 
members of Egg plc 49 Egg plc Annual Report 2002
Existing
operations Acquisitions
2002 2002 2002 2001
Note £m £m £m £m
Interest receivable 2 662.3 2.4 664.7 604.7
Interest payable 3 (439.1) (1.7) (440.8) (459.0)
Net interest income 223.2 0.7 223.9 145.7
Fees and commissions receivable 11 4.9 1.1 116.0 69.5
Fees and commissions payable (25.0) (2.1) (27 .1) (30.1)
Other operating income 4 12.6 1.9 1 4.5 4.3
Operating income 325.7 1.6 327 .3 189.4
Administrative expenses
– operational expenses 5 (136.9) (22.0) (158.9) (132.0)
– brand and marketing costs 5 (34.6) (1 4.0) (48.6) (35.8)
– development costs 5 (17 .4) (8.7) (26.1) (1 6.7)
Total administrative expenses 5 (188.9) (44.7) (233.6) (184.5)
Depreciation and amortisation 6 (18.7) (3.0) (21.7) (20.7)
Amounts written off fixed asset investment 14 (3.1) – (3.1) –
Provisions for bad and doubtful debts 13 (84.1) (1.3) (85.4) (68.0)
Operating profit/(loss) 30.9 (47 .4) (16.5) (83.8)
Share of operating loss of joint ventures 16 (0.1) (0.1)
Share of operating loss of associated undertaking 
and amortisation of goodwill 16 (3.5) (3.9)
Profit on partial disposal of continuing operation 7 3.5 –
Loss on ordinary activities before tax (16.6) (87 .8)
Tax (charge)/credit on loss on ordinary activities 8 (2.2) 25.7
Retained loss for the financial year (18.8) (62.1)
Basic and diluted loss per share (pence per share) 10 (2.3p) (7 .6p)
All of the Group’s losses arose from continuing operations. The notes on pages 53 to 85 are an integral part of these
financial statements.
Consolidated statement of total recognised 
gains and losses
for the year ended 31 December 2002
2002 2001
£m £m
Retained loss for the financial year (18.8) (62.1)
Currency translation differences on foreign currency net investments 
and other adjustments 0.7 –
Total recognised losses related to the year (1 8.1) (62.1)
Consolidated profit and loss account
for the year ended 31 December 2002 50 Egg plc Annual Report 2002
2002 2001
Note £m £m
Assets
Cash and balances at central banks 13.0 9.1
Loans and advances to banks 11 238.6 67 .2
Securities purchased under agreement to resell 26 150.0 –
Loans and advances to customers 12 5,546.3 4,7 12.4
Debt securities 14 4,267 .6 3,060.9
Share of joint venture net assets 16 0.8 0.9
Share of gross assets 3.1 3.3
Share of gross liabilities (2.3) (2.4)
Investment in associated undertakings 16 7.4 9.7
Intangible fixed assets 18 6.7 –
Tangible fixed assets 19 74. 1 54.5
Own shares 20 2.2 2.2
Other assets 21 164. 1 77 .4
Deferred tax 22 18.5 1 4.8
Prepayments and accrued income 23 76.1 7 4.5
Total assets 10,565.4 8,083.6
Liabilities
Deposits by banks 24 501.0 4.8
Securities sold under agreements to repurchase 25 – 384.2
Customer accounts 27 8,016.4 5,944.5
Debt securities issued 28 1,01 4.9 915.0
Other liabilities 29 223.1 108.5
Accruals and deferred income 30 1 46.6 12 7 . 1
Subordinated liabilities
– dated loan capital 31 201.7 123.6
10, 1 03.7 7,60 7.7
Shareholders’ funds
Called up share capital 40 410. 1 409.6
Share premium account 41 10 7 .3 106.2
Capital reserve 41 359.7 359.7
Profit and loss account 41 (416.9) (399.6)
Shareholders’ funds (all attributable to equity interests) 41 460.2 475.9
Minority interests (equity) 1.5 –
Total liabilities 10,565.4 8,083.6
Memorandum items
Commitments
Credit lines and other commitments to lend 5,343.6 4,095.5
These financial statements were approved by the Board of Directors on 21 February 2003 and signed on its behalf by:
Roberto Mendoza Chairman
Stacey Cartwright Chief Financial Officer
The notes on pages 53 to 85 are an integral part of these financial statements. 
Consolidated balance sheet
at 31 December 2002 2002 2001
Note £m £m
Fixed assets
Tangible fixed assets 19 10.6 1.4
Investments:
Shares in subsidiary undertakings 15 890.5 780.3
Shares in joint ventures 16 1.0 1.0
Shares in associated undertakings 16 18. 1 15.9
Investments: own shares 20 2.2 2.2
922.4 800.8
Current assets
Debtors:
Amounts owed by subsidiary undertakings 0.2 31.6
Amounts owed by associated undertakings 0.7 1.2
Prepayments and accrued income 0.3 0.2
Amount owed by parent undertaking (re group relief) – 8.9
Deferred tax 0.3 0.5
Cash at bank and in hand 0.9 1.0
2.4 43.4
Creditors: amounts falling due within one year
Obligations under finance leases 0.2 0.1
Amounts owed to subsidiary undertakings 177 .2 3.2
Accruals and deferred income 5.3 9.7
Corporation taxation 3.2 –
Other liabilities 0.3 1.6
186.2 1 4.6
Net current (liabilities)/assets (183.8) 28.8
T otal assets less current liabilities 738.6 829.6
Creditors: amounts falling due after more than one year
Obligations under finance leases 1.3 1.3
Net assets 737 .3 828.3
Shareholders’ funds (equity)
Called up share capital 40 410. 1 409.6
Share premium account 42 10 7 .3 106.2
Capital reserve 42 359.7 359.7
Profit and loss account 42 (139.8) (47 .2)
737 .3 828.3
These financial statements were approved by the Board of Directors on 21 February 2003.
Roberto Mendoza Chairman
Stacey Cartwright Chief Financial Officer
The notes on pages 53 to 85 are an integral part of these financial statements. 
51 Egg plc Annual Report 2002
Company balance sheet
at 31 December 2002 2002 2001
Note £m £m
Net cash inflow/(outflow) from operating activities 35 1,298. 1 (763.4)
Return on investments and servicing of finance (1 1.2) (4.4)
T axation:
Group relief received 12.5 31.5
Capital expenditure and financial investment:
Purchase of tangible fixed assets 19 (31.6) (1 1.3)
Sale of tangible fixed assets 0.1 –
Restricted share plan purchase of shares (2.7) –
Purchase of investments 14 (6,154.3) (2,411.4)
Sale of investments 14 5,028.6 3,039.5
Net cash (outflow)/inflow from capital expenditure and investment (1,159.9) 616.8
Acquisition and disposals
Purchase of subsidiaries 38 (28.4) –
Investment in associated undertaking 16 (1.2) (1.7)
Investment in joint venture undertaking – (1.0)
Net cash outflow from acquisitions and disposals (29.6) (2.7)
Financing: 
Subsidiary share issue 5.0 –
Issue of dated loan capital 37 78.1 123.6
Issue of share capital 37 1.6 0.2
Net cash inflow from financing 84.7 123.8
Increase in net cash 36 194.6 1.6
The notes on pages 53 to 85 are an integral part of these financial statements.
52 Egg plc Annual Report 2002
Consolidated cash flow statement
for the year ended 31 December 2002 1 Accounting policies
(a) Accounting convention
The Group financial statements have been prepared under the historical cost convention in accordance with the
special provisions of Part VII Chapter 2 of the Companies Act 1985 relating to banking groups. They are prepared in
accordance with applicable accounting standards issued by the Accounting Standards Board and the Statements of
Recommended Accounting Practice issued by the British Bankers’ Association. The consolidated financial statements
of the Group are prepared under Schedule 9 of the Companies Act 1985. The balance sheet of the Company is
prepared under Schedule 4 of the Companies Act 1985. The Group has consistently applied, where appropriate, all
new Financial Reporting Standards issued by the Accounting Standards Board. 
(b) Basis of consolidation
The financial statements of the Group incorporate the assets, liabilities, and results of the Company and its subsidiary
undertakings up to 31 December 2002. The Company has taken advantage of the exemption from presenting its
own profit and loss account under Section 230 of the Companies Act 1985.
(c) Associates and joint ventures
An associate is an undertaking in which the Group has a long-term interest, usually from 20% to 50% of the equity
voting rights, and over which it exercises significant influence. A joint venture is an undertaking in which the Group
has a long-term interest and over which it exercises joint control. The Group’s share of the profits less losses of
associates and of joint ventures is included in the consolidated profit and loss account and its interest in their net
assets is included in investments in the consolidated balance sheet.
(d) Bad and doubtful debts 
Provisions are applied to write off loans and advances, in whole or in part, when they are considered wholly or partly
irrecoverable.
The specific provision is established to cover all identified bad and doubtful debts and is recognised when there is
reasonable doubt over the collectability of principal and interest in accordance with the loan or credit agreement.
Amounts provided for are determined by specific identification on mortgage lending. In the case of loans, in certain
circumstances, it is appropriate to assess the required level of provision when accounts become seriously delinquent
for accounts/relationships individually and manually through experienced underwriters. 
The level of specific provisions required for the majority of impaired debt, however, can be calculated at a portfolio
level from the movement of balances between risk states from month to month, and the extrapolation of these
movements to estimate the level of impairment of currently delinquent debt. The method is standard across the
finance industry for the calculation of provision for bad and doubtful debts on a portfolio basis. Using this method the
key determinants of the bad debt charge are the relative levels of arrears, the rate of change of these arrears and the
level of loss from defaults.
The aggregate provisions that are made during the period (less amounts released and recoveries of bad debts
previously written off) are charged against operating profit. 
General provisions are raised in respect of losses, which although not specifically identified, are known from
experience to be present in any such portfolios. The level of general provision is determined by the application of a
number of basis points to the aspects of the portfolio which are not currently identified as delinquent but which
experience suggests contains lending which is currently impaired and will ultimately lead to losses. The number of
basis points applied to the portfolios are regularly assessed against recent experience and adjusted if appropriate. 
Interest on loans and advances is accrued to income until such time as reasonable doubt exists about its
collectability; thereafter, and until all or part of the loan is written off, interest continues to accrue on customers’
accounts, but is not included in income. Such suspended interest is deducted from loans and advances on the
balance sheet. 
(e) Goodwill
Purchased goodwill is capitalised and amortised to nil, on a straight-line basis, over the investment’s estimated useful
life, assessed on an individual basis. Impairment reviews are carried out on an annual basis. 
53 Egg plc Annual Report 2002
Notes to the financial statements 1 Accounting policies continued
(f) Software 
Costs incurred in acquiring and developing computer software for internal use that are directly attributable to the
functioning of computer hardware are capitalised as tangible fixed assets where the software supports a significant
business system and the expenditure leads to the creation of an identifiable durable asset.
Website design and content development costs have been capitalised where they deliver identifiable benefits
greater than their capitalised costs, otherwise they are expensed to the profit and loss. 
(g) Tangible fixed assets 
Leasehold improvements, computer equipment, computer software, fixtures, furniture and other tangible assets are
stated at cost. These costs are capitalised and depreciated to their estimated residual values in equal annual
instalments over their estimated useful lives, as follows:
Leasehold improvements 10 years
Fixtures and fittings 10 years
Plant and equipment 3 – 10 years
Software costs 3 years
Assets under construction are not depreciated until they are brought into commercial use.
(h) Leased assets
Assets held under finance leases are capitalised at their fair market values and included within fixed assets.
Commitments under these leases are included within other liabilities. Interest cost is amortised over the life of the
underlying asset in proportion to the net cash investment. Operating lease rentals are expensed to the profit and loss
account as incurred.
(i) Foreign currencies
Assets and liabilities are translated at the rates of exchange ruling on the balance sheet date or at the forward
exchange rate, as appropriate. Exchange differences are dealt with in the profit and loss account. 
The balance sheets of overseas subsidiaries are translated into sterling at the rates of exchange ruling at 
31 December and their profit and loss accounts are translated at the average rates of exchange for the year to 
31 December. Exchange differences relating to revenue/expense items are included within the profit and loss
account; those arising from the application of closing rates of exchange to the opening net assets are taken to 
profit and loss account reserves.
(j) Debt securities
Debt securities intended to be held for continuing use are disclosed as investment securities and are included in the
balance sheet at cost less any provision for permanent diminution in value. Where dated investment securities have
been purchased at a discount or premium, these discounts and premiums are amortised through the profit and loss
account over the period from date of purchase to date of maturity. The cost of investment securities is adjusted for
unamortised discounts and premiums. The amortisation of discounts and premiums is performed on a straight-line
basis and is included in “Interest receivable”.
Debt securities which do not meet the Group’s investment policy criteria are held for resale and are stated at their
net realisable value. 
(k) Derivatives and off-balance sheet instruments
Transactions are undertaken in derivative financial instruments, which include currency swaps, interest rate swaps,
interest rate caps, forward rate agreements, options, credit derivatives and similar instruments, for non-trading
purposes.
Derivatives are all classified as non-trading and are entered into for the purpose of matching or eliminating risk from
potential movements in interest rates inherent in the Group’s assets, liabilities and positions or for the purpose of
reducing credit risk inherent in the Group’s balance sheet. All derivative transactions (including foreign exchange and
credit) are for hedging purposes and so therefore it is decided at the outset which position the derivative will be
hedging. Derivatives are reviewed regularly for their effectiveness as hedges. 
Non-trading derivatives are accounted for in a manner consistent with the assets, liabilities, or positions being hedged.
Profits and losses on these instruments are recognised in accordance with the accounting treatment of the underlying
transaction as an adjustment to “Interest receivable” or “Interest payable”. Notional amounts of the contracts are not
recorded on the balance sheet. Where off balance sheet instruments are terminated prior to the underlying 
54 Egg plc Annual Report 2002
Notes to the financial statements continued hedged transaction terminating, any profits or losses realised on early termination are deferred and matched against
the income or expenditure arising from the underlying hedged transaction. If the underlying instrument is sold,
extinguished or terminated, the remaining unamortised gains or losses, fees and commissions on the hedge are
recognised immediately in the profit and loss account.
Fees and commissions payable on derivatives are deferred and amortised over the life of the derivatives contract.
(l) Repos 
As a form of funding, certain investment securities are sold under repurchase agreements. Those securities sold are
retained on the balance sheet and a liability recorded in bank deposits equal to the cash consideration of the sale.
The cost of the repo is calculated as being the difference between the sale and repurchase price of the security and
is accrued as interest payable over the life of the transaction on a yield basis.
(m) Securitisations
The Group has issued debt securities in order to finance the purchase of certain portfolios of loan and investment
assets. These obligations are secured on the assets of the Group. The securitised assets and the related liabilities
are presented gross within the relevant headings in the Group balance sheet, under the “gross presentation” method. 
(n) Pensions
The Group’s main pension scheme, which covers 97% of the Group’s employees who have taken up their right to
contribute to a pension scheme, is a defined contribution scheme. For this scheme the cost is charged to the profit
and loss account as contributions become due. 
Certain employees are members of the Prudential Group defined benefit scheme. In line with paragraph 9b of 
FRS 1 7 , even though this scheme is a defined benefit scheme the contributions have been disclosed as “defined
contributions” on the grounds that this scheme is part of the Prudential plc (“Group Scheme”), and it is not possible
to identify the Egg share of the underlying assets and liabilities. Therefore, in accordance with the treatment
prescribed by FRS 1 7 , the cost of the defined benefit pension scheme (as determined by independent qualified
actuaries performing formal actuarial valuations) is charged to the profit and loss account to spread the cost of the
pension over the service lives of the employees. 
The assets of the scheme are held in a separately administered fund. 
Further details of the Prudential plc Group defined benefit scheme are shown in the Group financial statements of
Prudential plc.
(o) Taxation
Tax is charged on all taxable profits arising in the accounting period. Deferred taxation is recognised on all timing
differences that have originated but not reversed by the balance sheet date. Deferred taxation is not recognised on
certain revaluations nor where there might be some doubt about the recovery of a deferred tax asset. 
(p) Fees and commissions 
Arrangement fees and commissions receivable (in respect of payment protection insurance and other insurance
products), are recognised on the basis of work done and an appropriate provision is calculated to reflect potential
rebates. 
Commission payable in respect of mortgages sold is capitalised and amortised over the early redemption penalty
period.
(q) Profit share from creditor insurance policies 
Written premiums are earned over the life of the policy. These earnings are matched against claims incurred in each
calendar year, recognising any surplus profit above the agreed return on capital for the underwriter.
(r) Mortgage incentives
Cashbacks and discounts, which are recoverable from the customer in the event of an early redemption, are deferred
and amortised to the profit and loss account over the early redemption penalty period of the product.
(s) Brand and development costs 
Brand and development costs are written off as incurred. 
55 Egg plc Annual Report 2002 56 Egg plc Annual Report 2002
10
make friends
It’s been a year of impressive customer growth Egg has demonstrated
strong customer growth throughout the year, particularly in the UK where
we now have over two and a half million customers. We are pleased with
the early results of the launch of our first product in France.  2 Interest receivable
2002 2001
£m £m
Loans and advances to banks 5.9 3.0
Loans and advances to customers 376.2 31 2. 1
Debt securities 188.4 18 7 .4
Hedging 94.2 102.2
664.7 604.7
3 Interest payable
2002 2001
£m £m
Customer accounts 268.3 313.3
Debt securities 43.3 22.2
Securities sold under agreements to repurchase 11 .6 3.6
Subordinated loan capital 11 .2 4.4
Other 106.4 115.5
440.8 459.0
Other interest payable includes interest payable on hedges £101.8 million (2001: £114.1 million).
4 Other operating income
2002 2001
£m £m
Profit on disposal of investment securities 9.1 0.8
Other operating income 5.4 3.5
1 4.5 4.3
5 Administrative expenses
2002 2001
£m £m
Staff costs:
Salaries and accrued incentive payments 64.1 45.5
Social security costs 5.1 4.7
Pension costs:
Defined contribution scheme 3.0 3.4
Other staff costs 10.8 1 4.0
83.0 67 .6
Premises 8.5 7.0
Systems 10.9 7.8
Other operational 56.5 49.6
Operational and administration costs 158.9 132.0
Brand and marketing 48.6 35.8
Development 26.1 16.7
T otal 233.6 184.5
In accordance with FRS 1 7 , the defined benefit pension scheme contributions of £0.2 million (2001: £0.4 million)
have been treated as “defined contribution” scheme costs on the grounds that this scheme is part of a Prudential plc
Group scheme, and it is not possible to identify our share of the underlying assets and liabilities. Details of the deficit
on the Group scheme can be found in the Prudential plc financial statements. 
57 Egg plc Annual Report 2002 5 Administrative expenses continued
The defined benefit pension scheme is non-contributory and provides members with a maximum pension of 38/60
of Final Pensionable Earnings at the normal retirement age of 60. Final Pensionable Earnings are the sum of the
pensionable salary for the 12 months immediately preceding retirement or termination of employment and, for
entrants since 31 May 1989, are restricted to salary up to the Inland Revenue earnings cap, which at the time of
writing is £97 ,200. 
The scheme also provides on death, whether in service, in deferment or following retirement, pensions for spouse
and eligible children. The spouse’s pension on death in service is the higher of 54% of the member’s prospective
pension at age 60 or 25% of salary in the 12 months preceding death subject to the earnings cap. The spouse’s
pension on death in deferment is 50% of the member’s deferred pension at the date of death. On death after
retirement, the spouse’s pension is 50% of the member’s pension in payment ignoring any pension commuted 
for a lump sum at retirement. A lump sum death in service benefit of four times Final Pensionable Earnings is also
provided. Pension increases after retirement are wholly discretionary but in recent years annual increases have been
awarded broadly in line with inflation. Discretionary increases are taken into account in calculating transfer values
payable in lieu of deferred pension benefits.
Other staff costs include temporary staff costs, training, recruitment, medical health insurance, social welfare costs
and other sundry staff costs.
Other operational costs include:
2002 2001
£000 £000
Auditors’ remuneration and expenses:
Statutory audit services 295 165
Further assurance services:
Performed by virtue of being auditor/regulatory reporting account
(1)
13 1 251
Other assurance services
(2)
389 29
Other non-audit services
(3)
688 110
Operating lease costs 5,424 4,045
(1) This principally relates to reviews performed of the interim financial information produced by the Group and reporting accountants’ reports.
(2) Other assurance services relates to work performed of an assurance nature. In the year ended 31 December 2002, this included a review of 
the systems and controls in certain areas of the Group, predominantly a pre-launch review of Egg France.
(3) This principally relates to information security work in connection with Egg France. This assignment was awarded following a competitive 
tender process.
The Company’s audit fee, which is included in the statutory audit fee for the Group, amounted to £30,000 (2001:
£25,000). Auditors’ remuneration includes value added tax.
Average number of employees
The average number of persons employed by the Group during the year, excluding temporary staff, was as follows:
2002 2001
UK       – Operations 1,786 1,598
– Administrative and support 309 278
France – Operations 277 –
– Administrative and support 103 –
2,475 1,8 76
58 Egg plc Annual Report 2002
Notes to the financial statements continued 59 Egg plc Annual Report 2002
6 Depreciation and amortisation
2002 2001
£m £m
Goodwill (note 18) 0.5 1.1
Leasehold improvements 0.5 0.5
Fixtures and fittings 1.2 1.0
Plant and equipment 10.4 11 .3
Software 9.1 6.8
21.7 20.7
7 Profit on partial disposal of continuing operations 
The exceptional gain of £3.5 million relates to the dilution of our shareholding in Investment Funds Direct Holdings
Limited in the latter part of 2002, following the investment by Prudential Group in a 15% minority shareholding in 
the Company. 
8 T axation
The taxation (charge)/credit assumes a UK corporation tax rate of 30% (2001: 30%) and comprises:
2002 2001
£m £m
Current year:
Corporation tax (payable)/Group relief receivable (8.5) 21 .4
Deferred tax 1.9 3.3
(6.6) 24.7
Prior year:
Group relief receivable 2.6 1.0
Deferred tax 1.8 –
4.4 1.0
Tax (charge)/credit on loss on ordinary activities (2.2) 25.7
The Group currently has a tax sharing arrangement with Prudential plc, whereby the Group’s losses are surrendered
to other Prudential group companies, and in return the Group receives relief payments in respect of the surrendered
losses. The ability of the Group to transfer losses to Prudential plc and Prudential group companies is based on
Prudential plc holding at least 75% of the Group’s ordinary shares. 
The tax charge assessed for the year is higher than the standard rate of corporation tax in the UK (30%). 
The differences for the current year are explained below: 
2002 2001
£m £m
Loss on ordinary activities before tax (16.6) (87 .8)
Loss on ordinary activities multiplied by the standard rate of corporation tax in 
the UK of 30% (2001: 30%) 5.0 26.3
Effects of:
Expenses not deductible for tax purposes – (0.3)
Depreciation in excess of capital allowances for the year 0.6 (0.1)
Short-term timing differences (2.5) (2.9)
Revenue expenditure capitalised for tax purposes (0.6) (0.4)
Share of losses on associate undertakings (0.5) (1.2)
Goodwill amortisation (0.7) –
Overseas losses not allowable for tax purposes (10.8) –
Gain on dilution of share in Investment Funds Direct Holdings Limited 1.0 –
Deferred tax credit 1.9 3.3
Current year tax charge/Group relief receivable (6.6) 24.7 9 Loss on ordinary activities after tax for the Company 
£92.8 million (2001: £29.5 million) of the Group loss attributable to ordinary shareholders of the Company has been
dealt with in the accounts of the Company.
10 Loss per ordinary share
The loss per share figure has been calculated in accordance with FRS 14 (Earnings per share) and is based on the
following:
2002 2001
£m £m
Loss attributable to ordinary shareholders (18.8) (62.1)
Number of ordinary shares: m m
Actual weighted average number of ordinary shares in issue during the year 
(used for basic loss per share calculation) 81 4.3 81 3. 1
Adjustment for weighted average number of options which have been 
granted but not yet exercised 1.3 1.1
Potential weighted average number of ordinary shares in issue 
(used for fully diluted loss per share calculation) 815.6 81 4.2
Basic and diluted loss per share (pence per share) (2.3p) (7 .6p)
The weighted average number of ordinary shares in issue has been determined after excluding shares held in trust
for employee share schemes.
11 Loans and advances to banks
Group Group
2002 2001
£m £m
Repayable
On demand 200.5 7.2
In not more than three months 35.0 60.0
Over one year 3.1 –
238.6 67 .2
12 Loans and advances to customers
Group Group
2002 2001
£m £m
Repayable
In not more than three months 2,343.5 1,769.6
In more than three months but not more than one year 22.9 1 4.5
In more than one year but not more than five years 780.4 629.6
In more than five years 2,528.2 2,379.5
Gross loans and advances 5,675.0 4,793.2
Of which
Credit card 2,337 .4 1,768.2
Mortgages 2,360.7 2,428.6
Personal loans 972.5 596.4
Overdrafts 4.4 –
Provision for bad and doubtful debts (note 13) (1 28.7) (80.8)
Net loans and advances 5,546.3 4,7 12.4
60 Egg plc Annual Report 2002
Notes to the financial statements continued 12 Loans and advances to customers continued
During 2002, the Group transferred £1.25 billion of its UK credit card receivables to a trust vehicle created for 
the purpose of asset-backed securitisation. The noteholders in this securitisation have a proportionate interest in
each balance in the portfolio of securitised receivables and at 31 December 2002 the value of this interest was
£500 million. This securitisation does not qualify for linked presentation under FRS 5, Reporting the Substance of
Transactions, and the total portfolio is therefore included within Loans and Advances to Customers. The funding
giving rise to the noteholders interest is included within Deposits by banks (see note 24).
13 Provision for bad and doubtful debts
Group
2002
General Specific T otal
£m £m £m
Balance at the beginning of year 27 .4 53.4 80.8
Amounts written off – (40.2) (40.2)
New and additional provisions 8.5 76.9 85.4
Net charge against profit and loss 8.5 76.9 85.4
Other movements 0.2 2.5 2.7
Balance at the end of year 36.1 92.6 128.7
The other movements amount of £2.7 million relates to the fair value of the opening bad debt provision for our newly
acquired French subsidiary. 
Group
2001
General Specific T otal
£m £m £m
Balance at the beginning of year 17 .8 24.7 42.5
Amounts written off – (29.7) (29.7)
New and additional provisions 9.6 58.4 68.0
Net charge against profit and loss 9.6 58.4 68.0
Balance at the end of year 27 .4 53.4 80.8
Non-performing loans and advances are as follows:
Group Group
2002 2001
£m £m
Loans and advances on which interest is suspended 84.1 50.0
Specific provisions for bad and doubtful debts (7 1.0) (41.6)
Interest in suspense (1.3) (1.7)
11 .8 6.7
Credit card and loan balances become non-performing when the card/loan balance is transferred to our in-house
recoveries department, prior to being moved to an external recovery agency. A mortgage balance becomes 
non-performing following a review by our Credit department and if it is identified that we are in a potential 
loss situation. 
61 Egg plc Annual Report 2002 14 Debt securities
Group Group
For investment b ook value For investment market value
2002 2001 2002 2001
£m £m £m £m
Government debt securities 397 .5 585.5 412.2 590.8
Bank certificates of deposit 1,424.3 1 40.0 1,424.0 140. 1
Building society certificates of deposit 120.0 – 120.0 –
Other debt securities 2,325.8 2,335.4 2,303.6 2,342.8
4,267 .6 3,060.9 4,259.8 3,073.7
Analysed by listing status:
Listed in the UK 1,021.7 1,285.4 1,036.8 1,291.3
Listed outside the UK 1,25 1.6 1,635.5 1,229.0 1,642.3
Unlisted 1,994.3 1 40.0 1,994.0 140. 1
4,267 .6 3,060.9 4,259.8 3,073.7
Analysed by maturity:
Less than one year 1,947 .6 881.9
Greater than one year 2,320.0 2,179.0
4,267 .6 3,060.9
The change in the book amount of debt securities held for investment purposes comprised:
Discounts and 
Historical cost premiums Book value
£m £m £m
Balance at beginning of year 3,043.4 17 .5 3,060.9
Acquisitions 6,042.2 112.1 6,154.3
Disposals and maturities (4,954.7) (73.9) (5,028.6)
Acquisition of subsidiary balances 153.1 – 153.1
Exchange rate movements (61.7) – (61.7)
Realised gains – 9.1 9.1
Amortisation of discounts and premiums – (16.4) (16.4)
Adjustment to carrying value (3.1) – (3.1)
Balance at end of year 4,219.2 48.4 4,267 .6
The turnover in debt securities during the year was principally as a result of the investment of the significant inflow of
deposits by customers and to support the growth in loans and advances to customers.
62 Egg plc Annual Report 2002
Notes to the financial statements continued 15 Shares in Group undertakings
Company
£m
Balance at the beginning of year 780.3
Subscriptions of capital 81.8
Additions (please refer to note 38) 28.4
Balance at the end of year 890.5
All shares in Group undertakings are in subsidiary undertakings, all of which are unlisted. £7 19.5 million of the shares
in Group undertakings is in relation to Egg Banking plc (formerly Prudential Banking plc).
The principal subsidiary undertakings are as follows:
Percentage of 
equity capital 
Class of and voting Country of
capital rights held incorporation Principal activity Year end
Egg Banking plc Ordinary 100% England Banking 31 December 
Egg SA (formerly Zebank SA)
(i)
Ordinary 100% France Banking 31 December
Investment Funds Direct Ordinary 85% England Investments 31 December
Holdings Limited
(ii)
intermediation
Egg Services Limited Ordinary 100% England Printing services 31 December 
Egg Financial Products Limited Ordinary 100% England E-commerce 31 December 
Egg Investments Limited Ordinary 100% England Investments 31 December
intermediation
Egg Financial Intermediation Limited Ordinary 100% England Insurance 31 December
intermediation
(i) On 22 May 2002, Egg plc acquired Zebank SA for a consideration of a36 million (£22.8 million). 
(ii) On 15 March 2002 Egg plc acquired 100% of Investment Funds Direct Holdings Limited for a consideration of £2.9 million. On 25 October 2002,
Prudential Corporation Holdings Limited subscribed £5 million for 15% of the enlarged share capital of Investment Funds Direct Holdings. 
16 Shares in joint ventures and associated undertakings
Group
2002
Equity Share of Intangible Share of 
(i) Joint ventures – Book value adjustments net assets fixed assets net assets
Marlborough Stirling Mortgage Services Limited £m £m £m £m £m
Balance at the beginning of year 1.0 (0.1) 0.9 – 0.9
Share of operating loss for the year – (0.1) (0.1) – (0.1)
Balance at the end of year 1.0 (0.2) 0.8 – 0.8
Company
2002
Cost
£m
Cost
At the beginning and end of year 1.0
63 Egg plc Annual Report 2002 16 Shares in joint ventures and associated undertakings continued
Group
2002
Investment in
Share of Convertible Goodwill associated
net assets loan (note 1 7) undertakings
(ii) Associated undertakings – IfOnline Group Limited £m £m £m £m
Balance at the beginning of year (0.2) 1.0 8.9 9.7
Subscriptions of capital 1.1 – 0.1 1.2
Adjustment to goodwill on dilution of shares – – (0.7) (0.7)
Amortisation of goodwill charged in the year – – (1.1) (1.1)
Conversion of convertible loan to equity capital 0.4 (1.0) 0.6 –
Share of operating loss for the year (1.7) – – (1.7)
Balance at the end of year (0.4) – 7 .8 7 .4
Company
2002
Cost
£m
Balance at the beginning of year 15.9
Subscriptions of capital 2.2
Balance at the end of year 18. 1
The investments are both unlisted.
The principal joint venture and associated undertakings are as follows: 
Total issued 
share and 
loan capital at
31 December Percentage
Class of capital 2002 held Principal activity Year end
Joint venture:
Marlborough Stirling  Ordinary £2,001,000 49.9999% Mortgage processing 31 December
Mortgage Services Convertible £1,000,000 Nil services
Limited preference 
shares
Associate:
IfOnline Group Limited Ordinary £6,400,981 29.8%* Mortgage intermediation 30 November
Convertible £968,437 96.0%*
preference 
shares
Foundershare £1 Nil
A N Share £1 Nil
*Egg plc has a 38.5% share in the total issued share capital of IfOnline Group Limited.
64 Egg plc Annual Report 2002
Notes to the financial statements continued 1 7 Employee benefit trust 
Egg may make awards of shares at no cost to eligible employees selected by the Remuneration Committee under 
a restricted share plan (“the plan”). All Egg’s directors and employees, including employees of its subsidiaries, will 
be eligible to participate, subject to the discretion of the Remuneration Committee. It is, however, intended that
participation will in practice be restricted to selected individuals in key positions. Employees who are within two years
of their anticipated retirement date are not eligible to participate, except in circumstances which the Remuneration
Committee considers to be exceptional.
Egg has made the vesting of awards subject to the satisfaction of performance conditions from January 2002
onwards. Previously the awards have been conditional on service completed. 
Egg has established a discretionary employee benefit trust, the Egg Employee Trust, by a trust deed dated 26 April,
2000 between Egg and Mourant & Co. Trustees Limited. At 31 December 2002 the trust held 5.0 million ordinary
shares (31 December 2001: 4.1 million), with a market value of £7 .2 million (which are intended to be used
principally for delivery of shares under the Company’s employee incentive plans) and a nominal value of £2.5 million. 
The arrangements for the distribution to employees of shares held in trust and for entitlement to dividend depend 
on the particulars of each award under the plan. Shares held in trust are conditionally gifted to employees. 
The costs of share awards under the plan are charged to the profit and loss account evenly over the period of
service to which awards are made. Since these shares were subscribed for by the Egg Employee Trust on flotation,
using the proceeds of a gift from the Company, they are reflected within the consolidated balance sheet of the
Group at nil cost. 
For details of the numbers of shares purchased and held please refer to note 20. 
18 Intangible fixed assets
Less 
associates 
Group (note 16) Subsidiaries 
2002 2002 2002  
£m £m £m
Cost Goodwill Goodwill Goodwill
At the beginning of year 10.5 10.5 –
Acquisitions – (note 38) 7.2 – 7.2
Adjustment to goodwill on further acquisition of shares 
in IfOnline Group Ltd 0.7 0.7 –
Adjustment to goodwill on dilution of share in IfOnline Group Ltd (0.7) (0.7) –
At the end of year 17 .7 10.5 7 .2
Provision for amortisation
At the beginning of year 1.6 1 .6 –
Amortisation charged in the year 1.6 1.1 0.5
At the end of year 3.2 2.7 0.5
Net book value at 31 December 2002 1 4.5 7 .8 6.7
Net book value at 31 December 2001 8.9 8.9 –
Purchased goodwill is capitalised and amortised to nil, on a straight-line basis, over its estimated useful life. 
The amortisation period is 10 years for IfOnline Group Ltd, Investment Funds Direct Holdings Limited and Egg SA
being the period over which the Group expects to derive economic benefit from the assets.
65 Egg plc Annual Report 2002 19 T angible fixed assets
Leasehold Fixtures Plant and Assets under
Software improvements and fittings equipment construction Total
Group £m £m £m £m £m £m
Cost
At the beginning of year 41.4 4.7 10.4 62.7 8.8 128.0
Additions at cost 19.4 – 2.6 8.6 1.0 31.6
Acquisition of subsidiaries 4.4 – 1.7 2.9 – 9.0
Disposals (0.1) –––– (0.1)
Exchange adjustment 0.2 – – 0.1 – 0.3
At the end of year 65.3 4.7 14.7 7 4.3 9.8 168.8
Accumulated depreciation
At the beginning of year 27 .4 1.4 2.5 42.2 – 73.5
Charge for year 9.1 0.5 1.2 10.4 – 21.2
On disposals (0.1) –––– (0.1)
Exchange adjustment 0.1–––– 0.1
At the end of year 36.5 1.9 3.7 52.6 – 94.7
Net book value at 31 December 2002 28.8 2.8 11.0 21.7 9.8 74.1
Net book value at 31 December 2001 14.0 3.3 7 .9 20.5 8.8 54.5
All fixed assets are held at cost less accumulated depreciation. Assets held under finance leases have been
capitalised in accordance with SSAP 21.
Fixtures and Plant and
Software fittings equipment T otal
Company £m £m £m £m
Cost
At the beginning of year 1.5 – 0.2 1.7
Additions at cost 7 .9 0.1 2.5 10.5
At the end of year 9.4 0.1 2.7 12.2
Accumulated depreciation
At the beginning of year 0.2 – 0.1 0.3
Charge for year 1.0 – 0.3 1.3
At the end of year 1.2 – 0.4 1.6
Net book value at 31 December 2002 8.2 0.1 2.3 10.6
Net book value at 31 December 2001 1.3 – 0.1 1.4
The net book value of the Company tangible assets includes £0.9 million (2001: £1.1 million) in respect of software
held under finance leases. Depreciation for the year on leased assets held by the Company was £0.3 million 
(2001: £0.1 million).
Annual commitments in respect of software rentals held under finance leases can be analysed as follows: 
2002 2001
£m £m
Over one year but not more than five years 1.9 –
After five years – 1.9
1.9 1.9
66 Egg plc Annual Report 2002
Notes to the financial statements continued 20 Own shares
Group and 
Company
2002
£m
Cost
At the beginning and end of year 2.2
The Egg Employee Trust (see note 1 7) holds 1.4 million shares that were purchased on the open market at a cost 
of £2.2 million in 2000. These shares are carried at acquisition cost in the Company and Group balance sheet. 
The market value of these shares at 31 December 2002 was £2.0 million (31 December 2001: £2.2 million).
21 Other assets
Group Group
2002 2001
£m £m
Balances arising from off-balance sheet instruments 70.8 29.6
Amounts owed by Prudential Group companies 3.7 4.1
Tax recoverable 3.4 1 4.2
Other 86.2 29.5
164. 1 77 .4
22 Deferred tax asset
Group Group
2002 2001
£m £m
Balance at the beginning of year 1 4.8 11 .5
Credited to the profit and loss account (see note 8) 3.7 3.3
Balance at the end of year 18.5 1 4.8
Analysed as follows: 
Accelerated capital allowances 7. 1 6.2
Short-term timing differences 11 .4 8.6
18.5 1 4.8
Deferred tax assets provided in the financial statements have been computed using the year end tax rate of 30%
(2001: 30%). 
23 Prepayments and accrued income
Group Group
2002 2001
£m £m
Prepayments 16.5 1 4.3
Accrued interest and commission 59.6 60.2
76.1 7 4.5
Included in prepayments is £3.6 million (2001: £4.8 million) relating to the deferred element of the expenditure
incurred under mortgage cashback schemes and £2.3 million (2001: £4.5 million) in respect of discount 
mortgage schemes.
The amount that would have been credited to the profit and loss account for the year ended 31 December 2002 if
mortgage incentives had not been deferred was £1.2 million (2001: charge of £0.8 million). A credit has arisen in
2002 as a result of a net credit on clawbacks due to redemptions.
67 Egg plc Annual Report 2002 24 Deposits by banks
Group Group
2002 2001
£m £m
Repayable
On demand – 0.6
In not more than three months 0.4 3.4
Over one year but not more than five years 500.6 0.8
501.0 4.8
During 2002, £500 million medium note funding was raised from the securitisation of credit card receivables (see
note 12). This amount has been included within the “over one year but not more than five years” category within the
above table. 
25 Securities sold under agreements to repurchase 
Group Group
2002 2001
£m £m
Repayable
In not more than three months – 259.9
Over three months but not more than one year – 124.3
– 384.2
The market value of the underlying securities is £nil (2001: £388.6 million).
26 Securities purchased under agreements to resell 
Group Group
2002 2001 
£m £m
Repayable
In not more than three months 150.0 –
150.0 –
The market value of the underlying securities is £150.3 million (2001: £nil).
27 Customer accounts
Group Group
2002 2001
£m £m
Repayable
On demand 7 ,669.3 5,768.5
In not more than three months 14 1 .6 176.0
Over three months but not more than one year 190.6 –
Over five years 1 4.9 –
8,016.4 5,944.5
68 Egg plc Annual Report 2002
Notes to the financial statements continued 69 Egg plc Annual Report 2002 69 Egg plc Annual Report 2002
11
onwards and
upwards
Y our company is an ambitious company. We continue to invest 
in Egg’s development with the intention of building on our existing
successful market position. In the UK, we now have over 5% of 
credit card balances, but we continue to be vigilant and prudent 
in our lending position.  28 Debt securities issued
Group Group
2002 2001
Bonds and Floating Rate Notes £m £m
Repayable
Under one year 446.3 284.0
Over one year 568.6 631.0
1,01 4.9 915.0
29 Other liabilities
Group Group
2002 2001
£m £m
Balances arising from off-balance sheet instruments 76.8 19.8
Amounts owed to Prudential Group companies 0.3 3.5
Taxation and social security 20.1 15.8
Settlement balances 64.4 35.4
Other creditors 61.5 34.0
223.1 108.5
30 Accruals and deferred income
Group Group
2002 2001
£m £m
Accrued interest and commission 112.9 100.5
Other accruals and deferred income 33.7 26.6
1 46.6 12 7 . 1
31 Subordinated liabilities 
Group Group
2002 2001 
£m £m
Balance at the beginning of year 123.6 –
Issue of dated loan capital 78.1 123.6
Balance at the end of year 201.7 123.6
The dated loan capital increase relates to an issue of £75 million at a premium of £3.1 million and was issued on the
same terms as the 2001 issue. This was at a rate of 6.875% and will mature in 2021. There is an early repayment
option in 2016. Early redemption requires prior approval from the Financial Services Authority. 
70 Egg plc Annual Report 2002
Notes to the financial statements continued 32 Commitments and contingencies
Guarantees at 31 December 2002 amounted to £1.8 million (2001: £nil). There was no capital expenditure
contracted but not yet provided for at 31 December 2002 (2001: £1.5 million).
Operating lease commitments
Annual commitments in respect of property rentals held under operating leases, analysed according to the period in
which the lease expires, are as follows:
2002 2001
£m £m
Over one year but not more than five years 2.1 –
After five years 1.5 3.5
3.6 3.5
Included within the commitment figures above are rates and service charges that comprise part of the lease
commitments.
33 Financial instruments including derivatives
The Group uses financial instruments including derivatives for the purpose of supporting the strategic and operational
business activities of the Group and reducing and eliminating the risk of loss arising from changes in interest rates.
Interest rate risk arises in the Group’s core balance sheet as a result of fixed rate, variable rate and non-interest
bearing assets and liabilities. Exposure to interest rate movements arises when there is a mismatch between interest
rate sensitive assets and liabilities. 
For the purpose of reducing interest rate risk, the Group uses a number of derivative instruments, comprised of
interest rate swaps, interest rate options, caps, futures and forward rate agreements.
The Asset and Liability Management Committee regularly review the Group’s policies relating to the use of financial
instruments, including derivatives and the controls and procedures in place to manage risk exposure.
All the Group’s financial instrument activity is contracted with authorised financial institutions.
The numerical disclosures shown in this note outline how hedging instruments are used to reduce exposure to
interest rate risk arising from net differences between assets and liabilities maturing in different time periods.
Short-term debtors and creditors have been included in all of the following disclosures, where applicable.
Further information on the Group’s management of risk is contained in the Financial Review on page 30.
(a) Interest rate sensitivity gap analysis
Part of the Group’s return on financial instruments is obtained from managing the mismatch of the dates on which
the instruments mature or, if earlier, the dates on which interest receivable on assets and interest payable on liabilities
are next reset to market rates. The table below summarises these repricing mismatches on the Group’s non-trading
book as at 31 December 2002. Items are allocated to time bands by reference to the earlier of the next contractual
interest rate repricing date and maturity date.
71 Egg plc Annual Report 2002 33 Financial instruments including derivatives continued
Group
More than More than More than
three months six months one year
Not  but not  but not but not 
more than more than more than more than More than Non-interest
three months six months one year five years five years bearing T otal
2002 2002 2002 2002 2002 2002 2002
£m £m £m £m £m £m £m
Assets:
Loans and advances 
to banks 238.6 –––– 13.0 251.6
Loans and advances 
to customers 4,491.9 107 .6 204.5 7 12.3 30.0 – 5,546.3
Securities purchased 
under agreements 
to resell 150.0 ––––– 150.0
Debt securities 2,978.0 533.6 48.4 473.7 233.9 – 4,267 .6
Other assets ––––– 349.9 349.9
Total assets 7 ,858.5 641.2 252.9 1,186.0 263.9 362.9 10,565.4
Liabilities:
Deposits by banks 500.6 – – 0.4 – – 501.0
Customer accounts 7 ,808.5 193.0 – – 1 4.9 – 8,016.4
Debt securities in issue/
subordinated liabilities 987 .9 – – 27 .0 201.7 – 1,216.6
Other liabilities ––––– 369.7 369.7
Shareholders’ funds ––––– 461.7 461.7
Total liabilities 9,297 .0 193.0 – 27 .4 216.6 831.4 10,565.4
Off balance sheet items 2,685.2 (58.9) (625.2) (2,016.0) 1 4.9 – –
Interest rate sensitivity gap 1,246.7 389.3 (372.3) (857 .4) 62.2 (468.5) –
Cumulative gap 1,246.7 1,636.0 1,263.7 406.3 468.5 – –
72 Egg plc Annual Report 2002
Notes to the financial statements continued 33 Financial instruments including derivatives continued
Group
More than More than More than
three months six months one year
Not  but not  but not but not 
more than more than more than more than More than Non-interest
three months six months one year five years five years bearing Total
2001 2001 2001 2001 2001 2001 2001
£m £m £m £m £m £m £m
Assets:
Loans and advances 
to banks 76.3 ––––– 76.3
Loans and advances 
to customers 3,883.3 47 .2 125.8 655.9 0.2 – 4,7 12.4
Debt securities 1,442.4 663.3 352.3 602.9 – – 3,060.9
Other assets ––––– 234.2 234.2
Total assets 5,402.0 7 10.5 478.1 1,258.8 0.2 234.2 8,083.8
Liabilities:
Deposits by banks 4.0 – – 0.8 – – 4.8
Customer accounts 5,944.5 –––––5,944.5
Debt securities in issue 910.0 5.0 – – 125.0 – 1,040.0
Securities sold under 
agreements to repurchase 259.9 124.3 –––– 384.2
Other liabilities ––––– 234.4 234.4
Shareholders’ funds ––––– 475.9 475.9
Total liabilities 7 ,118.4 129.3 – 0.8 125.0 7 10.3 8,083.8
Off balance sheet items 240.0 (102.5) (17 .5) (245.0) 125.0 – –
Interest rate sensitivity gap (1,476.4) 478.7 460.6 1,013.0 0.2 (476.1) –
Cumulative gap (1,476.4) (997 .7) (537 .1) 475.9 476.1 – –
A negative interest rate sensitivity gap exists when more liabilities than assets reprice during a given period. Although
a negative gap position tends to benefit net interest income in a declining interest rate environment, the actual effect
will depend on a number of factors, including the extent to which repayments are made earlier or later than the
contracted date and variations in interest rate sensitivity within repricing periods and among currencies.
(b) Trading book disclosures
No trading book disclosures have been made as the Group does not hold positions either on the Group’s 
own account or on behalf of customers in order to take advantage of short-term price movements in the debt
securities market.
(c) Currency risk disclosures
The Group does not maintain material non-trading open currency positions other than the structural currency
exposures that arise from the Group’s investment in its overseas subsidiary and its related funding, as noted in the
table below.
2002 2001
£m £m
Euro 102.2 –
73 Egg plc Annual Report 2002 33 Financial instruments including derivatives continued
(d) Hedging
The Group’s policy is to hedge the following exposures:
• Interest rate risk – using interest swaps, caps, collars, currency swaps and forward foreign currency contracts.
• Foreign exchange exposures – using currency swaps and forward foreign currency contracts.
The gains and losses on these instruments (arising from change in fair value) are not recognised in the profit and
loss account immediately they arise. Instead the gain or loss is recognised in the profit and loss account at the 
same time as the hedged transaction. Where off balance sheet instruments are terminated prior to the underlying
hedged transaction terminating, any profits or losses realised on early termination are deferred and matched against
the income or expenditure arising from the underlying hedged transaction. If the underlying instrument is sold,
extinguished or terminated, the remaining unamortised gains or losses on the hedge are recognised immediately in
the profit and loss account.
The table below summarises the unrecognised gains and losses on hedges at 31 December 2002 and movements
therein during the year.
Group
T otal net
Gains Losses gains/(losses)
2002 2002 2002
£m £m £m
Unrecognised gains/(losses) on hedges at beginning of year 13.0 (15.5) (2.5)
Of which recognised in the year to 31 December 2002 (10.8) 12.3 1.5
Gains/(losses) arising before 1 January 2002 that were not 
recognised in the year to 31 December 2002 2.2 (3.2) (1.0)
Gains/(losses) arising in the year to 31 December 2002 that were 
not recognised in that year 60.0 (54.9) 5.1
Unrecognised gains/(losses) on hedges at the end of year 62.2 (58.1) 4.1
Of which:
Gains/(losses) expected to be recognised in the year to 31 December 2003 61.4 (44.9) 16.5
Gains/(losses) expected to be recognised after 31 December 2003 0.8 (13.2) (12.4)
Group
Total net
Gains Losses gains/(losses)
2001 2001 2001
£m £m £m
Unrecognised gains/(losses) on hedges at beginning of year 1.7 (14.0) (12.3)
Of which recognised in the year to 31 December 2001 (1.7) 5.4 3.7
Gains/(losses) arising before 1 January 2001 that were not 
recognised in the year to 31 December 2001 – (8.6) (8.6)
Gains/(losses) arising in the year to 31 December 2001 that were 
not recognised in that year 13.0 (6.9) 6.1
Unrecognised gains/(losses) on hedges at the end of year 13.0 (15.5) (2.5)
Of which:
Gains/(losses) expected to be recognised in the year to 31 December 2002 10.8 (12.3) (1.5)
Gains/(losses) expected to be recognised after 31 December 2002 2.2 (3.2) (1.0)
74 Egg plc Annual Report 2002
Notes to the financial statements continued 33 Financial instruments including derivatives continued
(e) Fair values of financial assets and financial liabilities or derivatives used for hedging or 
funding purposes
Set out below is a comparison by category of book values and fair values of the Group’s non-trading financial assets
and financial liabilities and derivatives used for hedging and funding purposes as at 31 December 2002.
Group Group
Non-trading Non-trading Non-trading Non-trading
fair value book value fair value book value
2002 2002 2001 2001
£m £m £m £m
Assets:
Debt securities 4,259.8 4,267 .6 3,073.7 3,060.9
Derivatives 39.3 70.8 20.3 29.6
Liabilities:
Debt securities in issue 1,01 4.9 1,01 4.9 915.0 915.0
Subordinated debt 201.7 201.7 125.0 125.0
Derivatives 41.2 76.8 13.0 19.8
Liquid and active markets exist for financial assets and liabilities or derivatives held by the Group. Market values 
have been used to determine the fair value of all listed debt issued and held. Management determine the fair value
of derivatives based on quoted market prices of financial instruments or by using valuation techniques such as
discounted cash flow (DCF).
(f) Derivatives held for non-trading purposes
At 31 December 2002 the notional principal amounts, fair values and book values of non-trading instruments
entered into with third parties were as follows:
Group
Notional Year end Year end Year end Year end
principal positive positive negative negative
amount fair value book value fair value book value
2002 2002 2002 2002 2002
£m £m £m £m £m
Foreign exchange derivatives:
Foreign exchange forward 1,194.6 26.8 63.0 6.3 62.7
Cross currency swaps 163.5 1.3 – 15.3 –
Interest rate derivatives:
Swaps 4,101.0 9.7 5.2 18.5 13.0
Swaptions 160.0 –1.1 1.11.1
Credit derivative 2,025.4 1.5 1.5 – –
Total non-trading derivatives 7 ,644.5 39.3 70.8 41.2 76.8
75 Egg plc Annual Report 2002 33 Financial instruments including derivatives continued 
(f) Derivatives held for non-trading purposes continued
Group
Notional Year end Year end Year end Year end 
principal positive positive negative negative 
amount fair value book value fair value book value
2001 2001 2001 2001 2001
£m £m £m £m £m
Foreign exchange derivatives:
Foreign exchange forward 975.5 13.9 9.0 1.2 –
Cross currency swaps 25.0 – 0.1 0.2 0.1
Interest rate derivatives:
Swaps 1,277.54.016.811.418.6
Swaptions 160.0 0.3 1.3 0.2 1.1
OTC caps 25.0 – 0.3 – –
Credit derivative 1,977 .1 2.1 2.1 – –
Total non-trading derivatives 4,440.1 20.3 29.6 13.0 19.8
(g) Maturity of notional principal amounts and net replacement cost
At 31 December 2002 the notional principal amounts and net replacement cost, by residual maturity, of the Group’s
non-trading derivatives were as follows:
Group
Over one  
year but not    
One year more than  Over 
or less five years five years T otal
2002 2002 2002 2002
£m £m £m £m
Foreign exchange derivatives:
Foreign exchange forwards (purchases) 1,194.6 – – 1,194.6
Cross currency swaps 57 .7 105.8 – 163.5
Interest rate derivatives:
Swaps 3,439.0 647 .1 1 4.9 4,101.0
Swaptions – 160.0 – 160.0
Credit derivative – – 2,025.4 2,025.4
Total notional principal amounts 4,691.3 912.9 2,040.3 7 ,644.5
Total net replacement cost 37 .7 0.1 – 37 .8
76 Egg plc Annual Report 2002
Notes to the financial statements continued 33 Financial instruments including derivatives continued
(g) Maturity of notional principal amounts and net replacement cost continued
Group
Over one year 
One year but not more Over 
or less than five years five years Total
2001 2001 2001 2001
£m £m £m £m
Foreign exchange derivatives:
Foreign exchange forwards (purchases) 975.5 – – 975.5
Cross currency swaps – 25.0 – 25.0
Interest rate derivatives:
Swaps 867.5285.0125.01,277.5
OTC caps 25.0 – – 25.0
Swaptions – 160.0 – 160.0
Credit derivative – – 1,977 .1 1,977 .1
Total notional principal amounts 1,868.0 470.0 2,102.1 4,440.1
Total net replacement cost 17 .3 0.3 0.6 18.2
The full amount of the net replacement cost relates to off balance sheet instruments held with banks and other
financial institutions.
The fair value of a derivative contract represents the amount at which that contract could be exchanged in an arm’s
length transaction, calculated at market rates current at the balance sheet date. Positive fair values arise where gross
positive fair values exceed gross negative fair values on a contract-by-contract basis. This equates to replacement
cost. The totals of positive and negative fair values arising on non-trading derivatives at the balance sheet date have
been netted where the Group has a legal right of offset with the relevant counterparty. Total positive fair values after
netting equates to net replacement cost.
All exchange-traded instruments are subject to cash requirements under the standard margin arrangements applied
by the individual exchanges. Such instruments are not subject to significant credit risk. Other derivative contracts are
not subject to these cash requirements. 
34 Directors’ emoluments
Details of directors’ pay and benefits and interests in shares are disclosed in the report on directors’ remuneration on
pages 35 to 45.
77 Egg plc Annual Report 2002 35 Reconciliation of Group loss before tax to net operating cash flows 
2002 2001
£m £m
Operating loss (16.5) (83.8)
Decrease in accrued income and prepayments 0.5 45.2
Increase/(decrease) in accruals and deferred income 18.0 (45.0)
Provision for bad and doubtful debts 45.2 38.3
Profit on sale of financial investments (9.1) (0.9)
Interest on subordinated liabilities 11 .2 4.4
Depreciation and amortisation, including premium/discount on debt securities 41 .6 31.3
Net increase in loans and advances to banks and customers (836.9) (844.7)
Net increase in securities purchased under agreements to resell (150.0) –
Net increase/(decrease) in deposits by banks and customer accounts 2,411.3 (1,1 84.1)
Net (decrease)/increase in securities sold under agreements to repurchase (384.2) 384.2
Net increase in debt securities in issue 99.9 915.0
Net increase in other assets (36.9) (27 .5)
Net increase in other liabilities 7 4.4 0.9
Net increase in settlement balances 28.9 3.3
Other non cash movements 0.7 –
Net cash inflow/(outflow) from operating activities 1,298. 1 (763.4)
36 Analysis of the balances of cash as shown in the balance sheet
Group Group
At Acquisition At At At
1 January of 31 December 1 January 31 December
2002 subsidiaries Cash flow 2002 2001 Cash flow 2001
£m £m £m £m £m £m £m
Cash 9.1 – 3.9 13.0 7 .1 2.0 9.1
Loans and advances to other 
banks repayable on demand 7 .2 2.6 190.7 200.5 7 .6 (0.4) 7 .2
16.3 2.6 194.6 213.5 1 4.7 1.6 16.3
The cash balance at 31 December 2002 and 1 January 2002 relates solely to a cash ratio deposit, held with the
Bank of England.
37 Analysis of changes in financing
Group Group
Share Share Loan Share Share Loan
capital premium capital T otal capital premium capital T otal
2002 2002 2002 2002 2001 2001 2001 2001
£m £m £m £m £m £m £m £m
At the beginning of year 409.6 106.2 123.6 639.4 409.5 106.1 – 515.6
Net proceeds of issue of shares 0.5 – – 0.5 0.1 – – 0.1
Premium arising on the issue of shares –1.1 –1.1 –0.1 –0.1
Issue of dated loan stock – – 78.1 78.1 – – 123.6 123.6
Balance at end of year 410. 1 10 7 .3 201 .7 7 1 9. 1 409.6 106.2 123.6 639.4
78 Egg plc Annual Report 2002
Notes to the financial statements continued 38 Purchase of interests in subsidiary undertakings
Group Group
2002 2001
£m £m
Net assets acquired 21.2 –
Goodwill 7.2 –
28.4 –
Satisfied by:
Cash 25.7 –
Related costs of acquisition 2.7 –
28.4 –
39 Summary of the cash flow effects of acquisition of subsidiary undertakings 
The agreement to purchase Zebank SA (subsequently renamed Egg SA) was signed on 28 January 2002. 
A purchase price of a36 million (£22.8 million) was paid. This represented a5.5 million for 99.86% of the shares and
a30.5 million to reimburse a share capital injection between signature of the deal and completion. The transaction
was completed on 22 May 2002. We have adopted the acquisition method of accounting for the purchase of 
this subsidiary. 
For the year ended 31 December 2001, Zebank SA reported an audited post-tax loss of a84.3 million. For the 
period from January 1 to 23 May 2002, the unaudited operating loss before exceptional items was a23.2 million 
and the unaudited post-tax loss after exceptional items was a24.8 million based on its then accounting policies.
The balance sheet of Zebank SA on acquisition was as follows:
Fair value
adjustment 
for consistent 
accounting Fair value at
Book value policies acquisition
£m £m £m
Loans and advances to banks 22.9 – 22.9
Loans and advances to customers 2.3 (0.5) 1.8
Debt securities and other fixed income securities 64.6 – 64.6
Equity shares and other variable-yield securities 88.5 – 88.5
Intangible fixed assets 5.7 (5.7) –
Tangible assets 4.3 4.5 8.8
Trade debtors 0.4 – 0.4
Other assets 4.1 – 4.1
Deposits by banks (0.9) – (0.9)
Customer account balances (155.8) – (155.8)
Other liabilities (14.6) 0.5 (14.1)
Net assets acquired 21.5 (1.2) 20.3
Goodwill 5.2
25.5
Consideration satisfied by:
Cash 22.8
Related costs of acquisition 2.7
25.5
79 Egg plc Annual Report 2002 80 Egg plc Annual Report 2002
Forming better relationships with our customers has been 
a focus for us during the year.  We want to revolutionise the 
way in which people think and feel about money and their 
bank – as well as revolutionise products to the ultimate 
benefit of our customers. 
12
keep in touch 81 Egg plc Annual Report 2002 39 Summary of the cash flow effects of acquisition of subsidiary undertakings continued
The agreement to purchase all the issued share capital of Investment Funds Direct Holdings Limited was signed on
31 January 2002 for a cash consideration of £2.9 million. The transaction was completed on 15 March 2002. We
have adopted the acquisition method of accounting for the purchase of this subsidiary. 
Fair value
adjustment 
for consistent 
accounting Fair value at
Book value policies acquisition
£m £m £m
Fixed Assets
Intangible assets 1.5 (1.5) –
Tangible fixed assets 0.3 – 0.3
Current assets
Cash at bank and in hand 0.6 – 0.6
Prepayments and accrued income 0.1 – 0.1
Creditors: amounts falling due within one year 
Other creditors including taxation and social security (0.1) – (0.1)
Accruals and deferred income – – –
Net assets acquired 2.4 (1.5) 0.9
Goodwill 2.0
2.9
Consideration satisfied by:
Cash 2.9
2.9
40 Share capital
Company Company
2002 2002
V alue Number 
£m m
Ordinary shares of 50p each:
Authorised 1,1 40.3 2,280.5
Issued, allotted, called-up and fully paid 410. 1 820.2
Company Company
2001 2001
Value Number 
£m m
Ordinary shares of 50p each:
Authorised 1,1 40.3 2,280.5
Issued, allotted, called-up and fully paid 409.6 819.1
Each ordinary equity share entitles the holder to equal voting rights and an equal share of any dividend paid. 
Shares are non-redeemable. The increase in share capital in 2002 and 2001 is due to the take-up of share options
by employees. 
82 Egg plc Annual Report 2002
Notes to the financial statements continued 41 Analysis of changes in reserves – Group 
2002
Profit T otal  
Share Share Capital and lossshareholders’
capital premium reserve account funds
£m £m £m £m £m
At the beginning of year 409.6 106.2 359.7 (399.6) 475.9
Exchange and other adjustments ––– 0.7 0.7
Net proceeds of issue of shares 0.5 – – – 0.5
Premium arising on the issue of shares – 1.1–– 1.1
Deficit for the financial year – – – (18.8) (18.8)
Awards under incentive schemes – – – 0.8 0.8
Balance at end of year 410. 1 10 7 .3 359.7 (416.9) 460.2
42 Analysis of changes in reserves – Company
2002
Profit T otal
Share Share Capital and lossshareholders’
capital premium reserve account funds
£m £m £m £m £m
At the beginning of year 409.6 106.2 359.7 (47 .2) 828.3
Exchange and other adjustments – – – (0.6) (0.6)
Net proceeds of issue of shares 0.5 – – – 0.5
Premium arising on the issue of shares – 1.1–– 1.1
Deficit for the financial year – – – (92.8) (92.8)
Awards under incentive schemes – – – 0.8 0.8
Balance at end of year 410. 1 10 7 .3 359.7 (1 39.8) 7 3 7 .3
83 Egg plc Annual Report 2002 43 Segmental analysis
The table below analyses the Group results and assets by the geographical area in which business is generated.
The geographical analysis is prepared in accordance with the location of the relevant company with certain costs
incurred in the UK on behalf of France included in the results of France.
2002
UK France Group
£m £m £m
Interest receivable 662.4 2.3 664.7
Fees and commission receivable 11 4.9 1.1 116.0
Dealing profits 9.1 – 9.1
Other operating income 3.5 1.9 5.4
Gross income 789.9 5.3 795.2
Operating loss before exceptional items 30.2 (46.7) (16.5)
Share of operating loss of joint venture (0.1) – (0.1)
Share of operating loss of associates and amortisation of goodwill (3.5) – (3.5)
Exceptional (gain on sale of investment) 3.5 – 3.5
Group profit/(loss) before taxation 30.1 (46.7) (16.6)
Total assets
Joint ventures 0.8 – 0.8
Associate undertakings 7.4 – 7.4
Group total assets 10,399.5 165.9 10,565.4
Net assets (excluding minority interests) 409.0 51.2 460.2
44 Related party transactions
At 31 December 2002, transactions, arrangements and agreements entered into by the Group with directors and
connected persons and with officers included:
2002 2001
Number of T otal Number of Total
persons £000 persons £000
Directors and connected persons
Loans 2 888 31,369
Credit card accounts 13 41 13 42
Officers
Loans 81,843 13 2,229
Credit card accounts 39 109 36 129
Officers are defined as the members of Executive Committee (who are not Egg plc directors) and their direct reports.
84 Egg plc Annual Report 2002
Notes to the financial statements continued 44 Related party transactions (continued)
During the year the Group carried out a number of transactions with related parties in the normal course of business
and on an arm’s length basis. The names of these related parties, the nature of those transactions and their total
value is shown below.
Value of transactions Amounts outstanding
2002 2001 2002 2001
£m £m £m £m
Transactions with Direct Valuations Limited and Direct Valuations 
(PB) Limited. Paul Gratton (Director) is a director and shareholder 
of Direct Valuations Limited which receives a management fee 
from Direct Valuations (PB) Limited.
– Valuations fees paid to Direct Valuations (PB) Limited. (0.3) (1.1) – (0.1)
– Valuations fees paid to Direct Valuations Limited. (0.7) – – –
Transactions with Lost Wax Media Limited in which 
Mike Harris (Director), Tom Ilube (Chief Information Officer) 
and Prudential plc each have a minority shareholding. 
Mike was formerly chairman of Lost Wax and Tom is currently 
Chief Executive Officer of Lost Wax.
– Consultancy fees paid for information technology and internet 
services provided. (0.5) – (0.1) –
Transactions with Prudential Services Limited, a wholly owned 
subsidiary of Prudential plc.
– Provision of administrative services. (0.6) (1.1) – –
Transactions with M&G Investment Management Limited 
(formerly Prudential Portfolio Managers Limited), a wholly 
owned subsidiary of Prudential plc.
– Provision of premises. – (0.1) – –
Transactions with Prudential Financial Services Limited, 
a wholly owned subsidiary of Prudential plc.
– Commissions paid for the sale of mortgages and personal loans on 
behalf of the Group and provision of administrative services. (1.9) (2.4) – (0.7)
Transactions with Prudential Assurance Company Limited, 
a wholly owned subsidiary of Prudential plc.
– Commission received on sale of life and critical illness policies. 0.8 1.3 0.5 0.6
– General commission income. – 6.0 – –
– Profit share on payment protection insurance premiums. 3.2 3.5 2.7 3.5
– Commission income on payment protection insurance policies sold. 3.3 23.9 (2.3) 3.2
Transactions with Prudential Staff Pensions Limited, a wholly 
owned subsidiary of Prudential plc.
– Provision of Company pension scheme n/a n/a (0.2) (0.2)
The Group has a tax sharing arrangement with Prudential Group, whereby tax losses incurred by the Group can be
surrendered to the Prudential Group at a price at least equal to the UK statutory rate of taxation. 
45 Ultimate parent company
The ultimate and immediate parent undertaking is Prudential plc. Copies of the consolidated financial statements can
be obtained from the company secretary of Prudential plc. The address is Governors House, Laurence Pountney Hill,
London EC4R 0HH.  
85 Egg plc Annual Report 2002 2002 2001 2000 1999 1998
£m £m £m £m £m
Net interest income 223.9 1 45.7 80.0 24.2 10.5
Other operating income/(expense) 103.4 43.7 1 3.2 (4.5) (1.1)
Operating income 327 .3 189.4 93.2 19.7 9.4
Administrative expenses
– operational and administrative expenses (158.9) (132.0) (108.4) (101.0) (50.8)
– brand and marketing costs (48.6) (35.8) (50.7) (21.7) (15.5)
– development costs (26.1) (16.7) (33.6) (27 .6) (27 .7)
Depreciation (21.7) (20.7) (16.9) (10.2) (7 .5)
Amounts written off fixed asset investment (3.1) ––––
Provisions for bad and doubtful debts (85.4) (68.0) (37 .2) (8.9) (1.6)
Operating loss (16.5) (83.8) (153.6) (1 49.7) (93.7)
Share of operating (loss) of joint venture (0.1) (0.1) –––
Share of operating (loss) of associated undertaking (3.5) (3.9) (1.7) – –
Profit on partial disposal of continuing operations 3.5 ––––
Loss on ordinary activities before tax (16.6) (87 .8) (155.3) (1 49.7) (93.7)
Tax (charge)/credit on loss on ordinary activities (2.2) 25.7 45.7 43.0 24.8
Retained loss for the financial period (18.8) (62.1) (109.6) (106.7) (68.9)
Basic and diluted loss per share (pence per share) (2.3p) (7 .6p) (1 4.3p) (17 .6p) (25.6p)
Interest spread 2.12% 1.70% 0.64% 0.01% 0.33%
Interest margin 2.36% 1.90% 0.97% 0.36% 0.90%
Share price at 31 December £1.44 £1.56 £1.21 n/a n/a
Shareholders’ funds 460.2 475.9 535.5 472.4 279.2
Customer accounts 8,016.4 5,944.5 7 ,127 .6 8,156.6 2,199.9
Loans and advances to customers 5,546.3 4,7 12.4 3,736.1 2,046.3 672.9
Total assets 10,565.4 8,083.6 7 ,945.2 8,936.0 2,552.8
Capital adequacy ratio – tier 1 9.8% 10.1% 12.4% 1 4.3% 19.7%
Capital adequacy ratio – total 13. 1% 13.6% 12.9% 1 4.7% 20.1%
Total Egg customers 2,561,167 1,950,624 1,351,339 792,348 155,353
Note:
The figures for 1998 and 1999 are based on the results reflected in the Group’s prospectus (dated 25 May 2000) where a merger accounting basis
has been adopted as if the businesses of Egg Banking plc and its subsidiary undertakings had been combined with Egg plc throughout the periods
stated. In addition these figures have been restated for the prior year adjustment in respect of the implementation of FRS 19 “Deferred Taxation” which
was adopted in 2001.
86 Egg plc Annual Report 2002
Five-year summary of results 
under current accounting policies
2003
24 February 2003 Final results for the year ended 31 December 2002 
24 April 2003 First quarter results announcement 
29 April 2003 Annual General Meeting
23 July 2003 Announcement of 2003 interim results
22 October 2003 Third quarter results announcement
Financial calendar  2002 2001 
Average balance Average balance
Average Average Average Average
balance rate balance rate
£m % £m %
Assets
Wholesale assets 4,202 4.58 3,225 5.90
Mortgages 2,392 5.00 2,448 6.26
Personal loans 724 9.59 538 9.73
Credit card 2,081 8.99 1,443 7 .38
Total average interest-earning assets 9,399 6.05 7 ,654 6.56
Fixed assets 59 58
Other assets 50 159
T otal assets 9,508 7,8 7 1
Liabilities
Customer accounts 7, 1 33 3. 7 7 6,413 4.89
Wholesale liabilities 1,703 4.60 629 5.03
Total average interest-bearing liabilities 8,836 3.93 7 ,042 4.86
Other liabilities 19 7 37 1
9,033 7,4 1 3
Shareholders’ funds 475 458
T otal liabilities 9,508 7,8 7 1
Average yields
2002 2001 
Average balance Average balance
Average rate Average rate
% %
Interest income as a percentage of average interest-earning assets 6.05 6.56
Interest expense as a percentage of average interest-bearing liabilities 3.93 4.86
Interest spread 2.12 1.70
Net interest margin 2.36 1.90
87 Egg plc Annual Report 2002
Average balance sheet That’s it for this ye 
more information
us a visit at www.
88 Egg plc Annual Report 2002 89 Egg plc Annual Report 2002
ar, but if you want
on Egg please pay
egg.com.
Shareholder enquiries:
Lloyds TSB Registrars
The Causeway
Worthing
West Sussex BN99 6DA
Tel: 0845 6060252
Company Secretary:
Marcus Ezekiel
1 Waterhouse Square
138-142 Holborn 
London EC1N 2NA
Registered Office:
1 Waterhouse Square 
138-142 Holborn 
London EC1N 2NA
Group Investor Relations: 
Kieran Coleman 
Director of Finance and 
Investor Relations
1 Waterhouse Square
138-142 Holborn 
London EC1N 2NA
Tel: 020 7526 2648
Media enquires:
Tel: 020 7526 2600
Website address:
www.egg.com
Designed and produced 
by Radley Yeldar (London)
How to contact us We’ve had a
nice year
Let’s have a look
Thanks for popping in
Egg plc Annual Report 2002