1 Egg plc Annual Report 2002
Hello
Hi
He knows where I am
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Egg plc Annual Report and Accounts 2003
building relationships with money Financial highlights
31 December 31 December 
2003 2002
£m £m
Egg UK operating profit 
(before restructuring costs) 72.8 34.8
Egg France operating loss (89.1) (46.7)
Group loss before tax (34.4) (1 6.6)
Basic and diluted loss per share 
(pence per share) (4.0p) (2.3p)
Total Assets 11 ,694.7 10,565.4
Tier 1 Capital Ratio 9.7% 9.9%
Total Capital Ratio 17 .5% 13.2%
Business highlights
2003 2002
UK Customer Numbers 3.2 million 2.6 million
Net New Customers Acquired 635,000 610,000
Credit Card Balances £3.0 billion £2.3 billion
Personal Loan Drawdowns £1.7 billion £0.8 billion
Contents
IFCFinancial highlights
IFC Business highlights
06 Chairman’s statement
08 Chief Executive’s review
10 Business review
20 Y our Board
26 Financial review
32 Directors’ report
52 Independent auditors’ report to the 
members of Egg plc
53 Consolidated profit and loss account
53 Consolidated statement of total 
recognised gains and losses
54 Consolidated balance sheet
55 Company balance sheet
56 Consolidated cash flow statement
57 Notes to the financial statements
90 Five year summary 
90 Financial calendar
91 Average balance sheet
91 Average yields
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 is a
number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these for-
ward-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.
XX Egg plc Annual Report 2003
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
Investor Relations: 
Kieran Coleman 
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 01 Egg plc Annual Report 2003
Our financial performance
reflects a year of two extremes.
Where we have been 
absolutely consistent is in our
commitment to our customers
and continuing to build a 
happy relationship between
them and their money.  
Looking at this relationship 
from money’s point of view; if 
it could talk, what would money
say about Egg customers? 02 Egg plc Annual Report 2003
My money and I are 
really happy together 03 Egg plc Annual Report 2003
It’ s all 
about 
res pec t 04 Egg plc Annual Report 2003
She hasherownw 05 Egg plc Annual Report 2003
ay of doingthings
I’m treated as 
an individual with 
my money 06 Egg plc Annual Report 2003
2003 has been a challenging yet successful year for Egg.
The performance underlying the Group pre-tax loss of 
£34 million reflects a year of two extremes. 
The UK business has performed exceptionally well, with
profit more than doubling to £73 million. Egg has continued
to leverage its distinctive voice in the marketplace, 
giving Egg customers a better relationship with, and
understanding of, their money, and campaigning on behalf
of the consumer to change unfair practice in the industry. 
In France, however, the underlying business performance
has been very disappointing. We do believe a significant
market opportunity exists for a consumer-sided financial
services business such as Egg, but we are not prepared 
at this stage to make the required additional investment 
on a stand-alone basis. We believed it to be in
shareholders’ best interests for Egg to form an alliance
with a strategic partner with regard to our French business.
However, these negotiations have been put on hold
following our majority shareholder, Prudential plc,
announcing in January 2004 that it is considering
proposals relating to the possible disposal of its
shareholding in us.
On behalf of the Board, I would like to thank all Egg
people for their hard work, energy and commitment 
during the year. We celebrated our fifth anniversary this
year which allowed us a moment’s recollection of the
tremendous amount that has been achieved and this 
is due principally to the spirit and drive of Egg people. 
Chairman’s statement
Roberto Mendoza
It’s been a challe 
successful year 07 Egg plc Annual Report 2003
There were a number of changes to your Board this year.
Chief Financial Officer, Stacey Cartwright, resigned after four
years of excellent service to continue her career in the retail
sector. Richard Delbridge, Chairman of the Audit Committee
and Non Executive Director, tendered his resignation in
December. Richard chaired the Audit Committee with
distinction and made an invaluable contribution to the 
Board. Both Stacey and Richard leave with our warmest
thanks and good wishes for their future endeavours.
We were delighted to welcome Pascal Cagni, David Doyle,
Mark Nancarrow, and Ronnie Baird to the Board. Pascal
joins Egg as a Non Executive Director and is also Vice
President and General Manager Europe, Middle East and
Africa at Apple. He brings a wealth of relevant experience
to the Board, particularly in supporting Egg’s drive to 
help consumers use digital technology to improve their
understanding and management of money. David joins 
as Chief Financial Officer from Prudential plc, where he
was Head of Corporate Finance. Mark, our Chief Operating
Officer, has been with Egg since its launch and has been
instrumental to the success of Egg in the UK. Ronnie 
joins Egg as a Non Executive Director and has had a
distinguished career at Lloyds Bank, the Bank of England
and The Financial Services Authority. I am sure all of 
them will make an important and valuable contribution 
to the Board.
Y ou will be aware from company announcements 
made this year by Egg and by our majority shareholder,
Prudential plc, that 2004 is likely to hold significant change
for Egg. At the time of writing this report, Prudential has
announced that it has begun a process which will allow
interested parties to make an offer for its shareholding in
Egg. Any such offer would also have to be made to all other
shareholders under the Listing Rules. The outcome of these
discussions is by no means certain, but what I can tell you is
that the management team and people at Egg have built a
truly unique business which continues to go from strength to
strength. Egg remains an ambitious company with exciting
growth prospects. Naturally, we will keep shareholders
advised of progress as much as it is possible to do so. 
We remain intent on leveraging Egg’s unique brand
proposition to create substantial long-term value. 
Roberto Mendoza
nging yet 08 Egg plc Annual Report 2003
I am pleased to report that Egg has achieved substantial
growth once again, during a challenging year. The UK
business delivered exceptionally good results in an
increasingly competitive marketplace, but our one year old
French business has had a difficult and disappointing year.
Consequently, this is reflected in a group pre-tax loss of
£34 million.
The UK business has performed impressively with Egg 
UK operating profit more than doubling and customer
acquisition volumes reaching record levels. Both these
results were delivered against the backdrop of increasing
competition and demonstrate the ability of our brand 
and marketing effort to differentiate the Egg offering and
target the right people to whom our proposition appeals.
This was achieved at an extremely low marketing
acquisition cost of £33 per credit card, including brand
spend, some 40% of the acquisition cost of our direct
competitors and 7 4% of the industry average. We now
have a proven track record of delivering both sustained
profitability and rapid growth.
Within unsecured lending in the UK we have continued to
grow our market share of credit card balances to almost
6% while at the same time successfully cross selling
record volumes of personal loans. Net lending growth 
was an impressive £1.5 billion, an increase of 60% on
2002 levels, taking total balances to almost £5 billion. 
At £1.8 billion, personal loan balances are an increasingly
significant part of our business.
Chief Executive’s review
Paul Gratton
The Egg UK operating profit of £73 million demonstrates
the benefits of Egg’s business model continuing to
emerge. Revenues grew almost 30% on the back of
record sales volumes and increases in lending balances
while expenses were held relatively flat. This led to our
cost-income ratio improving to 51%, well on track to
exceed our stated target of 40% by end 2005. Credit
quality remains strong with the card portfolio continuing 
to have significantly lower arrears rates than the industry
average. We are particularly pleased that this strong profit
performance has been achieved in a year where we
continued to invest heavily in growing the customer base
and developing our business.
In France progress in the first quarter was slow and the
business initially suffered from high acquisition costs 
and low customer conversion rates. We responded by
appointing a new Chief Executive and senior executive
team, who together have introduced a range of
improvements that saw a turnaround in the key operating
metrics through the second and third quarters. The new
management team also developed a new long-term
financial plan to create a self-sustaining, scale business 
in France. As we announced in October, execution of 
this plan will take longer and requires a greater level of
investment than Egg is prepared to undertake on a
standalone basis. The search for a strategic partner 
Strong UK profit 09 Egg plc Annual Report 2003
has since been superseded by Prudential considering
proposals for its shareholding in Egg. In the meantime 
we are managing discretionary expenditure tightly in 
Egg France as we await the conclusion of this process.
With the exception of France it is very much business 
as usual at Egg as we build on our impressive UK results 
in 2003.
We are pleased at the ongoing improvements we 
have made in customer service. We monitor customer
satisfaction regularly throughout the year, and are 
delighted to report that during 2003 our level of
complaints decreased by over 50%. Equally pleasing is
the fact that customer satisfaction levels have increased 
by 10% across all products measured. This will remain a
key priority for us.
I would like to thank all Egg People for their diligence,
dedication and good humour during what has been a
challenging and productive year. Through their continued
efforts, various teams and individuals, as well as Egg 
as a whole, have been recognised for their outstanding
achievements by winning prestigious awards, particularly 
in technology, product innovation, communications 
and marketing. 
Paul Gratton
and growth 10 Egg plc Annual Report 2003
Business review
Egg UK
31 December 31 December 
2003 2002
Total Egg UK Customers
(1) (2) (3)
3,1 96,435 2,56 1,1 67
Egg UK Customers by product
(1 )
– Credit Card
(4)
2,61 6,505 1,91 2,526
– Savings
(3)
738,565 740,506
– Mortgages
(3)
28,929 29,947
– Personal Loans
(3)
227 ,195 14 7 ,453
– Egg Invest
(3)
57 ,942 55,909
– Egg Insure
(3)
11 8,242 85,468
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 delivered a record year of growth with 635,000
net new customers acquired during 2003, leading to a
year-end total of 3.2 million. Since launch in 1998 Egg 
has achieved a compound annual growth rate in net 
new customers of 50%. It is pleasing to note that our 
card offer remains attractive to customers more than two
years after we introduced the 0% interest rate offer on
balance transfers, given the number of imitation offers 
now available. We believe the brand still benefits from 
first-mover advantage and research shows Egg to be one
of the most trusted financial services brands in the UK. 
We have constantly outperformed our internal target of
500,000 net new customers per annum and believe this
level of acquisition is therefore highly achievable moving
forward as our target market continues to grow in line with
internet penetration and usage and the widening appeal
of the brand. Added to this is our proven track record 
in brand, marketing and product development. 
UK Product balances: 
31 December 31 December 
2003 2002
£m £m
– Egg Card 3,01 5 2,330
– Egg Personal Loans 1,773 967
– Egg Savings 6,1 64 7, 7 08
– Egg Mortgages 1,1 9 7 1,233
– Prudential Savings 185 236
– Prudential Mortgages 798 1,1 2 7
– Prudential Personal Loans 2 5
Unsecured Lending
The UK credit card business attracted over 700,000 net
new customers during the year, taking the total to over 
2.6 million, with card balances standing at £3.0 billion at
period end. Egg Card balances have consistently grown
faster than the card market as a whole. Egg has taken
approximately 12% of the net growth in UK card balances
in 2003, thus increasing our market share to almost 6%.
This is particularly pleasing given we are also successfully
cross selling record volumes of unsecured loans to card
customers, with the consequent shift in card balances 
into structured lending. 
Personal loan customers increased by a record 80,000 
in 2003 with full year total for disbursements of £1.7 billion,
more than double the levels achieved in the previous year.
The loan book has now reached £1.8 billion in balances.
The performance noted above demonstrates how Egg 
is now reaping the benefit of its investment in a new
Customer Relationship Management platform which
enables us to capture fully the value inherent in our
customer base through targeted, personalised campaigns
and offers. This has been at the heart of Egg’s success
both in cross-selling loans to the card base and in 
growing lending balances in total. Egg now runs over 
80 campaigns a month into its customer base, focused 
on selling new products, encouraging value positive
customer behaviours and maximising retention. 11 Egg plc Annual Report 2003
My money 
is easy to 
understand
She thinks 
I’m str aight 
fo rw ar d 12 Egg plc Annual Report 2003
I have very f ew
constraints with 
my money 13 Egg plc Annual Report 2003
We are so free 14 Egg plc Annual Report 2003
He knows exactly
wher e I am
My money 
is easy to 
get hold of
Business review 15 Egg plc Annual Report 2003
Savings
In 2002 Egg had returned to the savings market with 
a strategy executed between March and August that 
year 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 continued to grow in the 
UK and developed our French business. This was highly
successful with £3.0 billion inflows to the bonus account.
As expected in 2003 we saw attrition of balances as
customers moved off the bonus rate onto our standard
internet savings rate, which is base rate guaranteed until
200 7. This attrition also reflected some highly competitive
pricing by some new entrants to the market in 2003. 
Egg intends to acquire more funding in the retail savings
market in Q1 2004 with another bonus account offering.
The net effect of these movements for the full year 
2003 was net outflows totalling £1.5 billion 
(2002: £2.1 billion inflow).
Mortgages
Egg Mortgage completions totalled £278 million last year
compared to £485 million in 2002. The product remains
competitive in the standard variable rate market and
continues to win awards for value and flexibility, however
we still take a low key approach to the mortgage market,
choosing not to compete with the wide variety of
introductory offers available to consumers.
Prudential branded mortgage balances have continued 
to decline during the year as these are no longer 
actively marketed.
Egg France
In France progress in the first quarter was slow and the
business initially suffered from high acquisition costs, 
low customer conversion rates and poor press locally. 
We responded by appointing a new Chief Executive and
senior executive team, who together have introduced a
range of improvements that saw a turnaround in many 
of the key operating metrics through the second and third
quarters. Acquisition costs fell markedly, conversion rates
improved, brand awareness reached new highs and
customer satisfaction levels climbed to 95%. 
However by Q4 2003 a combination of seasonal factors,
reduced marketing spend and negative market rumours
following Egg’s announcement that it was seeking a
strategic partner in France has resulted in Egg issuing
8,000 new cards in Q4, compared to 16,000 in Q3, taking
the total to 66,000. Card balances continue to increase,
reaching 1 17 1 million by year end, up 36% on the Q3
position, reflecting the strategy of offering balance transfers
into the base. 80% of these balances are now interest-
bearing and this percentage has been increasing
consistently since launch. 
Whilst research continues to confirm there is a significant
market opportunity for a consumer-sided financial services
business in France, we clearly underestimated the level 
of investment required to deliver a scale business. 
As we explained last October, we do not believe that 
it is appropriate for Egg to pursue this opportunity on 
a standalone basis. The search for a strategic partner 
has since been superseded by Prudential considering
proposals for its shareholding in Egg. In the meantime
we are managing discretionary expenditure tightly in 
Egg France as we await the conclusion of this process. 16 Egg plc Annual Report 2003
It’ s  
I have a great time 
with my money 17 Egg plc Annual Report 2003
 never dull 18 Egg plc Annual Report 2003 19 Egg plc Annual Report 2003
I can do what I want 
with my money
She is just so
decisive 20 Egg plc Annual Report 2003
Y our Board
9
6
3 2
5
8
11 10
7
4
1 21 Egg plc Annual Report 2003
1. Roberto Mendoza
Chairman, non-executive director (Age 58)
Chairman of the Remuneration and 
Nominations Committees
Roberto has been a director and the Chairman 
since 1 0 May 2000. He is a non-executive director of
Prudential plc, Reuters Group plc and The BOC Group plc. 
He is also Chairman of Integrated Finance Limited and 
a member of the World Bank-IFC Bank Advisory Group. 
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 54)
Mike has been a director since 29 October 1 999. 
Mike joined Prudential plc as Chief Executive Officer 
of Egg Banking plc in July 1 995. On 1 January 200 1 he
stepped down as Chief Executive Officer 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 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 44) 
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 Egg, he
worked at First Direct, where he served in a variety of
positions, including Financial Services Director, from 1 989.
4. David Doyle
Chief Financial Officer, director (Age 37) 
David was appointed a director on 1 0 October 2003. 
Prior to Egg, David worked for Prudential plc where, for the
past three years, he has served as Head of Corporate
Finance with responsibility for the group’s mergers and
acquisitions activity. During his time with Prudential, 
David led numerous merger, acquisition and disposal
transactions, directed the project to list Prudential’s shares
on the New Y ork Stock Exchange and was responsible 
for managing a small private equity portfolio. David joined
Prudential plc in 1 996 from Arthur Andersen. 
He is a chartered accountant.
5. Mark Nancarrow
Chief Operating Officer, director (Age 43) 
Mark was appointed a director on 26 September 2003.
Mark joined Egg Banking plc in October 1 998 as Chief
Operating Officer, becoming accountable for the UK
business in 2000. Before joining Egg, Mark spent 1 0 years
with Midland Bank in a variety of positions, including
responsibility for its consumer card business. Mark’s career
has also included finance roles at Unilever and Shell. 
He is a certified accountant.
6. Ronnie Baird
Non-executive director (Age 64)
Chairman of the Audit Committee and member of the
Remuneration and Nominations Committees
Ronnie was appointed a director on 2 1 October 2003. 
He has held a range of prominent senior appointments
throughout his career including heading up the finance
functions of International Banking and UK Retail Banking 
at Lloyds Bank. He held the position of Head of Quality
Assurance at the Bank of England. He is a former founding
member of the Financial Services Authority. As Director,
Quality Assurance & Internal Audit and working with 
Sir Howard Davies, he helped build the new operating
model for the FSA. His independent review of the regulation
of the Equitable Life Assurance Society by the FSA was
published by HM Government in October 200 1. 
He is a chartered accountant.
7. Jonathan Bloomer
Non-executive director (Age 49) 
Member of the Remuneration and 
Nominations Committees
Jonathan has been a director since 31 March 1 999 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 1 995 to May 1 999, when he
became Deputy Group Chief Executive. He is 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. 22 Egg plc Annual Report 2003
8. Pascal Cagni
Non-executive director (Age 42) 
Member of the Remuneration and 
Nominations Committees
Pascal was appointed as a director on 29 April 2003. 
He is Vice President and General Manager Europe, Middle
East and Africa at Apple where he has been instrumental 
in developing Apple’s increasing presence across these
geographies. During his career, Pascal has held senior
positions at leading international technology companies
including NEC Computer International, Packard Bell,
Compaq and Booz Allen Hamilton.
9. Sir Derek Higgs
Non-executive director (Age 59) 
Member of the Audit, Remuneration and 
Nominations Committees
Sir Derek has been a director since 1 7 May 2000 and he
was a director of Prudential plc between February 1 996 and
December 2000. Prior to joining Prudential plc, Sir Derek
spent 24 years with the S.G. Warburg Group, from 1 98 7 
as a member of the parent company board. 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 and Jones Lang LaSalle Inc. He is also
a member of the Financial Reporting Council and a Senior
Adviser in the UK to UBS Investment Bank. During 2002,
Sir 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 which resulted in the publication, in July 2003, 
of a revised Combined Code on Corporate Governance. 
Sir Derek was awarded a knighthood in the 2004 New
Y ear’s Honours List. He is a chartered accountant.
10. Leslie Priestley
Non-executive director (Age 70) 
Member of the Audit, Remuneration and 
Nominations Committees
Leslie has been a director since 1 0 May 2000 and 
non-executive director of Egg Banking plc since 
13 August 1 996. He was Chief Executive of TSB England 
and Wales plc and a director of TSB Group plc from 1 986
to 1 989, following thirty five years at Barclays Bank where
he held senior appointments relating to Banking, Insurance
and Credit Cards. He has also been Secretary General of
the Committee of the London Clearing Bankers, a member 
of the Monopolies and Mergers Commission, a director 
of London Electricity plc and the Civil Aviation Authority. 
He was, until recently, Chairman of the Civil Aviation
Authority Pension Scheme. He is currently Vice Chairman 
of the Guernsey Financial Services Commission. He is 
a fellow of the Chartered Institute of Bankers.
11. Juan Rada
Non-executive director (Age 51) 
Member of the Audit, Remuneration and 
Nominations Committees
Juan has been a director since 1 9 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 T echnology 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 a board
member of Earth Energy Utility, LEAD International, and 
of the Council of the World Conservation Union (IUCN).
Y our Board 23 Egg plc Annual Report 2003
It’ s a very
tr anspar ent
r elationship
I know everything
about my money 24 Egg plc Annual Report 2003
He makes 
sense of it all 25 Egg plc Annual Report 2003
I really understand
my money  Overview
Profit and Loss account by Business Unit
2003 2002
£m £m
UK
Net interest income 263.0 223.3
Other operating income 156.6 102.7
Egg UK operating income 419.6 326.0
Operational and 
administrative expenses (1 43.7) (1 33.5)
Brand and marketing costs (33.9) (34.6)
Development costs (1 9.9) (17.4)
Depreciation and amortisation (1 8.3) (1 8.5)
Amounts written off fixed 
asset investment (4.3) (3.1)
Provisions for bad and 
doubtful debts (1 26.7) (84.1)
Egg UK operating profit 
(before restructuring costs) 72.8 34.8
France
Net interest income 5.7 0.6
Other operating income (1.3) 0.6
Egg France operating income 4.4 1.2
Operational and administrative 
expenses (45.3) (20.5)
Brand and marketing costs (26.0) (1 4.0)
Development costs (3.4) (8.7)
Depreciation and amortisation (8.5) (3.4)
Provisions for bad and 
doubtful debts (1 0.3) (1.3)
Egg France operating loss (89.1) (46.7)
Other international (4.2) (3.4)
Subsidiaries/associates/JVs (3.6) (1.3)
Restructuring costs (10.3) –
Group loss before tax (34.4) (1 6.6)
26 Egg plc Annual Report 2003
Financial review
David Doyle 27 Egg plc Annual Report 2003
Egg UK
Revenues
Net interest income increased by 18% to £263.0 million
for the period (31 December 2002: £223.3 million)
resulting from the growth in gross UK lending balances
(31 December 2003: £6.8 billion, 31 December 2002:
£5.7 billion). Margins have remained relatively stable with
improved card yields offset by more competitive pricing
on loans and the additional cost of debt capital.
Moving forward we expect net interest margins to be
stable over the next few years with a prudent assumption
that Egg absorbs the base rate rises implied in current
yield curves but this is offset by the ongoing reduction 
in margin strain of new business which becomes a
decreasing proportion of total balances. Retail assets
continuing to grow in line with recent trends should lead
to a 15%-20% growth in net interest income each year. 
Year on year other operating income grew very strongly
from £102.7 million in 2002 to £156.6 million in 2003 
on the back of the record sales in personal loans and
another strong year for card acquisition. Looking ahead
we expect further strong growth in this area as we
continue to successfully cross-sell payment protection
insurance at point of sale on cards and loans and the
growing card book generates increasing fee income to
offset the expected reduction in interchange revenues.
Costs
For the full year 2003 operational costs at £143.7 million
were up 8% on the previous year in a period where
customer numbers grew 25%. We expect further
economies of scale to emerge over the next few years
as the business reaches maturity and Egg’s ongoing
investment in the development of systems and
processes delivers additional benefits.
Unit marketing acquisition costs have been consistently
low throughout 2003 and according to a MORI survey
Egg is acquiring credit card customers at 40% of the
cost of its direct competitors and 7 4% of the industry
average. In 2003 as a whole Egg spent £33.9 million on
brand and marketing compared to £34.6 million in 2002.
We expect to continue to invest at similar levels going
forward using our enhanced CRM techniques and the
power of our brand to maximise acquisition volumes and
manage the existing portfolios to deliver our expected
strong growth in lending balances.
The full year investment in development spend was
£19.9 million (2002: £1 7 .4 million). The higher level 
of investment reflects some new propositions we 
have been working on in 2003, the CRM capability
enhancements now finished and the initial phases 
of the Basel 2 preparation project being completed.
Therefore we expect the annual investment in the next
few years to be at similar levels to 2002 and 2003.
Depreciation at £18.3 million in 2003 was in line 
with 2002 levels (£18.5 million). The majority of the
investment needed to deliver the core systems and
product infrastructure in the UK was incurred in 1999 
and 2000 and as a consequence as this expenditure
becomes fully depreciated we expect the depreciation
charge to reduce slightly over the next few years. 
Amounts written off fixed asset investments
The £4.3 million cost reflects a specific provision booked
in respect of an investment within Egg’s Asset Backed
Securities (“ABS”) portfolio. Added to the £3.1 million
booked in 2002 against a second asset this takes total
provisions up to the £7 .4 million first loss amount on 
the credit default swap that covers the majority of the
ABS portfolio. 
Bad debt provisions
Credit quality remains good and provision levels reflect
the continuing strong growth in the unsecured lending
portfolio, the stage in life cycle of the card book and 
the increasing proportion of personal loans in the book. 
The full year charge for bad debts was £126.7 million
(2002: £84.1 million). This equates to 2.0% of average
receivables in 2003 up from 1.6% in 2002 reflecting the
change in mix in the book with a higher proportion of
unsecured lending. We expect a similar 40 basis point
increase in the charge as a percentage of average
assets in 2004 followed by a modest reduction in this
metric in 2005 and 2006 as the unsecured portfolio
matures and benefits emerge from continually 
enhancing our scorecards and further automation in
credit operations.
Egg France
Egg France’s operating loss almost doubled in 
2003 to £89.1 million, as this was the first full year 
of investment in the French business after its launch 
in November 2002. 
Business volumes and customer acquisition were 
very disappointing which has flowed through to 
revenues which were significantly below expectations 
at £4.4 million. 
Operational and administrative expenses are
predominantly fixed in nature in the short term as the 
call centre, people resources and IT infrastructure had
been sized for a larger business and no significant
restructuring has been effected while uncertainty exists
over Egg France’s future.  Brand and marketing expenditure in the second half 
of 2003 reflected the minimum investment required to
maintain a presence and protect the brand asset built to
date and as a result costs increased by only 85% for the
full year 2003 compared to two months in 2002. 
Development costs reduced from £8.7 million in 2002 
to £3.4 million in 2003 as the peak expenditure was 
in the prior year to launch the business. 
Bad debt provisions increased in line with the growing
book and the £10.3 million charge for the full year is
consistent with expectations given the early stage of
development of the French business where, unlike in 
the UK, no credit bureau data exists.
Other international
The costs incurred relate to the strategy and business
development team that was looking at new territories
that have potential for the Egg brand to be successful
and the Q1 2003 research conducted in the USA which
demonstrated that there are Egg propositions that are
suited to that market. However no investment is planned
in the USA in the near term. This team has been
downsized as part of the restructuring noted below and
currently there are no costs expected in this category
going forward.
Subsidiaries/associates/JVs
Of the £3.6 million net loss in 2003, £1.7 million was 
in respect of Egg’s 85% subsidiary Investment Funds
Direct  Holdings Limited (Funds Direct) which relates 
to its development costs for the integrated business 
to business platform currently being built. Funds Direct
signed a deal with Marlborough Stirling Group in January
2004 allowing it exclusive access to the Exchange
platform, thus securing a significant distribution channel.
The Marlborough Stirling Mortgage Services Limited 
joint venture achieved a small profit in 2003 while we
recognised a £0.9 million loss from the 38.6% stake 
in IfOnline Group Limited. In addition amortisation of
goodwill on IfOnline Group Limited was £1.1 million.
Restructuring
There were two rounds of restructuring completed in
2003 at a total cost of £10.3 million. In the first quarter
there were approximately 140 employees affected by 
a relocation and redundancy programme, mainly in the 
IT department, as certain activities were centralised in 
our Derby operations centre. In the final quarter a further
reduction in headcount of approximately 60 people took
place following a business wide review of overhead
functions. These have resulted in annualised payroll
savings of approximately £12 million.
T axation
The tax credit was £1.4 million (2002: tax charge of 
£2.2 million). This can largely be attributed to the fact that
tax relief on the French losses has only been recognised
since the amalgamation of the France subsidiary to a
branch in April 2003. Therefore no relief was recognised
in 2002 leading to a tax charge on the UK profits.
Shareholders’ funds
Shareholders’ funds at 31 December 2003 were 
£434.7 million (2002: £460.2 million). The principal
elements in the movement on shareholders’ funds
during the year were the retained losses of £32.8 million.
The loss per share was 4.0p (2002: 2.3p). No dividend 
is proposed.
Accounting policies
The accounting policies are presented on pages 57 to
59. 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:
2003 2002
£m £m
Capital base
Tier 1 capital 47 4.2 512.3
Tier 2 capital 47 4.2 200.0
Total capital 948.4 71 2.3
Less: investments in certain 
subsidiaries, associated undertakings 
and other supervisory deductions (88.9) (60.0)
859.5 652.3
Risk-weighted assets
On balance sheet 4,895.4 4,932.0
Off balance sheet 14.4 12.2
4,909.8 4,944.2
Risk asset ratio
% %
Tier 1 9.7 9.9
T otal 17 .5 13.2
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
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.
28 Egg plc Annual Report 2003
Financial review continued 29 Egg plc Annual Report 2003
Egg Banking has now securitised £1,500 million of 
credit card receivables to a special purpose vehicle 
Arch (Term) Limited. These transactions were 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 default swap on 
$1.6 billion of asset-backed securities within our treasury
investment portfolio and a credit derivative covering 
£1.75 billion of mortgages receivables.
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 diagram 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: Retail Credit
Committee is responsible for retail credit risk, Wholesale 
Credit Committee is responsible for Wholesale credit 
risk, Operational Risk 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 Retail and
Wholesale Credit Committees define the policies,
procedures and set 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 both new and 
top-up lending applications. Collections activity is
centralised and systems are used to prioritise actions. 
The Wholesale Credit function performs regular
appraisals of counterparty credit quality through the
analysis of qualitative and quantitative information. 
The Wholesale 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 the Treasury function.
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 Operational Risk
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 the Group
Internal Audit function according to the priorities implied.
Unrated and <A-2%
A 15%
AAA 41%
AA 42%
Wholesale asset exposure by credit rating as at
31 December 2003 30 Egg plc Annual Report 2003
Financial review continued
Liquidity risk
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. The Group’s liquidity is managed by the
Treasury function and monitored by ALCO. The Group
keeps its liquidity within limits agreed with the Financial
Services Authority.
The Treasury function use various methods including
predictions of daily cash positions to monitor and
manage 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 to which the Group is exposed 
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 the Treasury
function 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 France. 
The management of funding such investments in
overseas entities 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 of the Group’s derivatives activity is contracted with
authorised financial institutions.
Basel 2 Accord and IFRS
There are significant legal and regulatory changes
underway in the banking industry at present that have an
impact across our entire business. We have had projects
underway for many months now to prepare for these
changes in the most appropriate way and these will
continue throughout 2004. 
The Basel 2 Accord, although only coming in to force in
200 7, requires substantial investment up front in terms of
new systems, data analysis and credit modelling. It will
change substantially the way in which the bank reports
to the Financial Services Authority and third parties. 
In addition, as a listed EU entity the bank also needs 
to account and report under International Financial
Reporting Standards from 2005 and detailed work has
been undertaken during the year to prepare the bank 
for these reporting changes. These changes should
better enable users to compare and analyse corporate
performance across industry and geographical sectors.
These projects have resulted in a cost of £2.1 million 
in the accounts for the year ended 2003. 31 Egg plc Annual Report 2003
The f eeling 
is mutual
I’m content with 
my money 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 2003.
Results for the year
The Group made a loss after tax and minority interests 
of £32.8 million for the year ended 31 December 2003
(2002: £18.8 million loss).
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 54 shows 
the state of affairs of the Group at 31 December 2003. 
The Company’s balance sheet appears on page 55 and
the consolidated profit and loss account on page 53. 
There is a five-year review of the Group on page 90.
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 activities 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 10 and 26 respectively. 
Share capital
During the year, the ordinary share capital was increased
by the issue of 318,597 ordinary shares allotted as a
result of the exercise of options under the Company’s
share schemes. 
Substantial shareholdings 
As at 19 February 2004 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 650,955,847 79.1%
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 53 to 89.
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 the Group and to prevent and detect
fraud and other irregularities.
Directors
The present directors of the Company are listed 
on page 20. 
Details of the interests in the share capital of the
Company of the directors in office as at 31 December
2003 are set out in the remuneration section of this
report on pages 38 to 49.
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.
Egg's 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 revised Combined Code on
Corporate Governance (published in July 2003) and Egg
is committed to high standards of corporate governance.
This revised Code comes into effect for the Company for
the year ending 31 December 2004. A programme of
work is now in progress to address all the requirements
of the revised Code. 
In terms of the Code in place during 2003 which is
annexed to the Listing Rules issued by the Financial
Services Authority (the “Code”), the Company has
complied throughout the year ended 31 December 2003
with the provisions set out in Section 1, except in relation
to the requirement for the Remuneration Committee to
comprise solely of independent non-executive directors.
32 Egg plc Annual Report 2003
Directors’ report
For the year ended 31 December 2003 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.
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 eleven directors, consisting 
of four executive directors and seven non-executive
directors. A number of changes has been made 
in Board membership during the year, as follows: 
Pascal Cagni was appointed as a non-executive director
at the Annual General Meeting held on 29 April 2003;
Stacey Cartwright resigned from the Board as 
Chief Financial Officer on 26 September 2003 and 
David Doyle was appointed to replace her on 10 October
2003; Mark Nancarrow, Chief Operating Officer, was
appointed to the Board on 26 September 2003; 
Richard Delbridge, non-executive director, resigned from
the Board on 31 December 2003 and Ronnie Baird 
was appointed as a non-executive director on 
21 October 2003.
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 Prudential plc 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. The roles of
Chairman and Chief Executive Officer are distinct and 
are held by different people.
The Board is of the view that all the remaining 
non-executive directors are independent although, under
the definition of “independence” contained in the revised
Combined Code, Sir Derek Higgs does not fully meet the
requirements of independence, having been employed
by Prudential plc within the last five years. However, the
Board is of the view that Sir Derek Higgs is sufficiently
independent in character and judgement notwithstanding
his previous relationship with Prudential plc. The senior
independent non-executive director during 2003 was
Richard Delbridge.
The Board met twelve times during the year. Attendance 
was 100% for all directors who were members at 
the time with the exception of Sir Derek Higgs, 
Jonathan Bloomer, Pascal Cagni, Leslie Priestley and
Juan Rada who each missed one meeting. The Board
has a clearly documented schedule of matters reserved
to it, including the agreement of strategy and budgets,
the approval of quarterly and annual financial statements,
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.
In terms of training, opportunities to attend externally-run
courses have been highlighted to Board members
during the year. Work is currently in place to address the
ongoing need for training and development which will
recognise the knowledge and skill requirements of each
of the directors.
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 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 committees
The Board has established a number of committees,
each with specific terms of reference (which are available
on request), 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 Executive
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, which met seven times during 
the year has a membership of four independent 
non-executive directors, currently Ronnie Baird, 
Sir Derek Higgs, Leslie Priestley and Juan Rada (see the
Board’s view on the independence of Sir Derek Higgs as
above). Audit Committee members attended all meetings
with the exception of Sir Derek Higgs, Leslie Priestley and
Juan Rada who each missed one meeting. The Audit
Committee was chaired by Richard Delbridge throughout
33 Egg plc Annual Report 2003 2003. Ronnie Baird joined the Audit Committee in
December 2003, taking over as Chairman of the Audit
Committee on 1 January 2004. The Audit Committee
issues a standing invitation for senior executives, including
those from finance, internal audit, compliance and risk
management, as well as the external auditor to attend
each meeting. On a periodic basis, and at least anually,
the Audit Committee meets in private with the internal and
external auditors.
The Audit Committee has terms of reference, which are
reviewed annually, and an agreed schedule of matters
for each of its meetings. 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 departments. 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 Audit Committee reviews the plans and
results of the external audit and its cost effectiveness, 
the independence and objectivity of the external auditors
and reviews and approves any related party transactions
involving the directors and officers of the Company. 
The Audit Committee also considers ad hoc issues such
as consideration of actions arising from the FSA Risk
Assessment Review which took place during the year
and discussion of the proposed plans for the Company
to meet the requirements of the new International
Accounting Standards to be implemented in 2005. 
As part of the requirement for ongoing training, the 
Audit Committee will be briefed at each meeting on 
any new accounting or regulatory developments.
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 approve expenditure on non-audit work 
to enable the Committee to satisfy itself that auditor
independence is not being compromised.
After each meeting, the Chairman of the Audit
Committee reports to the Board. During the year, the
Committee reviewed its terms of reference in the light 
of the Smith Guidance contained within the revised
Combined Code on Corporate Governance and
recommended a number of changes to the Board which
were approved. The Audit Committee also reviewed its
effectiveness and a number of procedural changes were
recommended and implemented as a part of this review. 
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 has
been nominated by Prudential plc as Chairman of the
Board. It includes as members both the independent
non-executive directors and the non-executive director
nominated by Prudential plc. Whilst the Board
acknowledges the Combined Code requirement for 
all members of the Remuneration Committee to be
independent, the Board believes that the Chairman of
the Remuneration Committee and the non-executive
director nominated by Prudential plc are sufficiently
independent from the day-to-day activities of the
business to assess objectively the remuneration of 
the Group’s senior executives.
The Remuneration Committee met four times during
2003 and attendance was 100% for each meeting
except for Jonathan Bloomer, Roberto Mendoza and
Leslie Priestley who each missed one meeting.
The terms of reference and membership of this
Committee are currently under review in the light 
of the new Combined Code.
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. The Nominations Committee 
is chaired by Roberto Mendoza and includes as
members all of the non-executive directors. 
A majority of the members are therefore independent
non-executive directors.
During the year, the Nominations Committee met on 
two occasions, firstly as part of a Board Meeting, to
consider the appointment of a new non-executive
director to replace Richard Delbridge who had signified
that he wished to leave the Board at the end of the year
to pursue other interests. Outside consultants were used
to identify suitable candidates with a financial services
background, resulting in the recommendation to appoint
Ronnie Baird to the Board. The Committee also met to
consider the appointment of a replacement Chief
Financial Officer following Stacey Cartwright's resignation
and to consider a recommendation to appoint Mark
Nancarrow, Chief Operating Officer, to the Board.
Attendance was 100% with the exception of Pascal
Cagni and Leslie Priestley who both missed one of the
two meetings.
The terms of reference and membership of this
Committee are currently under review in the light of the
new Combined Code.
34 Egg plc Annual Report 2003
Directors’ report continued 
Corporate governance report continued 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 20 February 2004, 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 Egg's constituent businesses 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, treasury 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 was monitored during the year 
by each of the Operational Risk Committee, the Asset
and Liability Committee (“ALCO”), the Retail Credit
Committee and the 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.
• Egg’s risk management processes are consolidated
under the Chief Risk Officer who has responsibility for
ensuring that all risks are effectively managed and
emerging risk issues are escalated to the Executive
Committee and Board as appropriate. The Chief Risk
Officer reports to the Chief Financial Officer and is a
member of the Executive Committee and provides
quarterly reports to 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 focused on the areas of
greatest risk. The Chief Internal Auditor reports to the
Chief Executive Officer and the Audit Committee.
These internal control 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”). 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 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 Chief Risk Officer, 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
35 Egg plc Annual Report 2003 36 Egg plc Annual Report 2003
It’ s up to him 37 Egg plc Annual Report 2003
My money allows
me to choose 38 Egg plc Annual Report 2003
Directors’ report continued
Corporate governance continued
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, Sir Derek
Higgs, Leslie Priestley, Juan Rada, Pascal Cagni and
Ronnie Baird. 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 Nick Wilson (HR Director) 
on matters concerning the overall pay structure and the
balance of the different elements of total remuneration
and benefits. 
The Committee meets at least three times a year 
and the Chief Executive Officer is 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.
In 2003 the Committee met on four occasions 
(in February, July, September and October). All who 
were members, at the date of each meeting, attended
each of the meetings, with the exception of Roberto
Mendoza, Jonathan Bloomer and Leslie Priestley who
were unable to attend one meeting.
(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 successful financial services internet 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. 
The different comparator groups include over 
forty companies in total and the Group used varies 
by role. 
Base pay and total cash use a comparator group of
companies suitably comparable to Egg, which provides
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.
The comparator group of retail banks in the FTSE 350 
is listed below:
• Abbey National
• Alliance & Leicester
• Barclays
• Bradford & Bingley
• HBOS
• HSBC Holdings 
• Lloyds TSB Group
• Northern Rock
• Royal Bank of Scotland
• Standard Chartered T able 1: Directors’ emoluments
(2)
Other 
Other payments to T otal T otal
Salary Bonus benefits former director 2003 2002
Director £’000 £’000 £’000 £’000 £’000 £’000
Executive
Mike Harris 293 205 18 – 516 527
Paul Gratton 390 273 12 – 675 700
Stacey Cartwright 203 155 9 204 57 1 483
Mark Nancarrow 69 58 2 – 129 N/A
David Doyle 50 38 2 – 90 N/A
T otal 2003 1,005 729 43 204 1,981 N/A
Total 2002 899 763 48 – N/A 1,7 1 0
(2) Tables 1 to 11 in the Remuneration Report are those items described in the auditors’ report on page 52 as having been audited.
The highest paid director for 2003 was Paul Gratton whose emoluments for 2003 were £675,31 7 . Additionally 
in 2003 the Group made pension contributions of £32,568 on his behalf to a defined benefit pension scheme. 
(The highest paid director in 2002 was Paul Gratton whose emoluments for 2002 were £700,035, in addition 
to a pension contribution of £32,568 to a defined benefit pension scheme).
Stacey Cartwright resigned from the Egg plc Board on 26 September 2003. Under the terms of an agreement 
with the Company concluded at that time, which reflected the principle of mitigation, Stacey left the Group and 
was entitled to receive her monthly salary, bonus and other benefits until the expiry of her contract, which is due 
to take effect on 29 February 2004. The salary, bonus and other benefits figures in the above table relate to the
period of her service between 1 January and 26 September 2003. The additional sum shown as “other payments 
to former director” represents the total value of salary, bonus and other benefits payable under the above agreement
following her resignation as a director. Additionally, Stacey was also entitled to retain certain share options under 
the Egg Employee Share Option Plan and share awards under the Egg Restricted Share Plan as shown in tables 5
and 6.
Mark Nancarrow was appointed to the Board on 26 September 2003 and David Doyle on 10 October 2003. 
The figures shown above are pro-rated and relate to the period in which they served as executive directors.
Pensions
All of the executive directors have pension arrangements to which the Group makes contributions. Paul Gratton
participates in an individual defined benefit scheme whilst Mike Harris, Stacey Cartwright and Mark Nancarrow have
individual defined contribution schemes. David Doyle is a member of the Prudential Staff Pension Scheme, a defined
benefit scheme.
39 Egg plc Annual Report 2003
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 the 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. These include profit, sales and revenue 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. Of the overall
bonus, 40% is based on individual targets. On target
achievement against stretching objectives would lead 
to a bonus of 75% of base salary 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
(or cash alternative), medical and life assurance, none of
which is pensionable. 40 Egg plc Annual Report 2003
Directors’ report continued
Remuneration continued
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
Tr ansf er
v alue of 
accrued
Change Transferentitlement at 
in accrued v alue of 1 January Change Tr ansf er
Y ears of entitlement Accrued accrued 2003 or in tr ansf er v alue of Pre-tax
pensionable in period to entitlement at entitlement  at date of v alue at the increase contribution
Age at service at 3 1 December 3 1 December 3 1 December appointment 3 1 December in accrued to salary
31 December 31 December 2003 2003 2003 if later 2003 entitlement supplement
(2)
Director 2003 2003£££££££
Paul Gratton 44 7 23,602 99,652
(1)
364,994 276,263 88,731 76,387 –
David Doyle 37 7 1,666 12,100 73,029 53,831 19,198 9,845 5,000
(1) The accrued entitlement for Paul Gratton combines both approved and unapproved benefits. The unfunded element of the defined benefit pension
scheme at 31 December 2003 amounted to £355,000 (2002: £282,000) which has been fully provided.
(2) The pre-tax contributions to salary supplement shown for David Doyle relate only to the period from his appointment to the Board to the end of
December 2003. The remaining figures reflect entitlement for the whole of 2003.
T able 3: Pre tax contribution or salary supplements
Y ear to Year to
31 December 31 December 
2003 2002
Director £’000 £’000
Executive
Mike Harris 88 83
Stacey Cartwright
(1)
39 49
Mark Nancarrow
(1)
14 –
Total 14 1 132
(1) 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. These relate to part of the year, from date of appointment or to date of resignation as appropriate.
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
plc. 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 plc for the period. The fees shown are for services as director of Egg plc and
its subsidiaries from 1 January 2003. 
Pascal Cagni joined the Board on 29 April 2003, and Ronnie Baird joined the Board on 21 October 2003. Their fees
for 2003 are therefore pro-rated. T able 4: Non-executive directors’ fees
T otal T otal 
2003 2002
Director £’000 £’000
Non-executive
Roberto Mendoza (Chairman) 75 75
Jonathan Bloomer – –
Richard Delbridge 35 35
Sir Derek Higgs 33 33
Leslie Priestley 33 33
Juan Rada 33 4
Pascal Cagni 20 –
Ronnie Baird 5 –
Total 234 180
Directors’ service contracts
It is the policy of the Group not to allow service contracts with more than twelve months’ written notice. The service
contracts for Mike Harris and Paul Gratton are dated 22 May 2000. The service contract for Mark Nancarrow is dated
26 September 2003 and the service contract for David Doyle is dated 10 October 2003. Each of the executive
directors’ contracts is terminable by either side giving twelve 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 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 eighteen 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 
either or both the Restricted Share Plan and the Share Option Plan. In the event that awards are made in 2004, 
it is intended that the level of awards will be maintained, with UK awards being delivered in restricted shares.
Performance conditions apply to the grant of awards under both plans. Performance conditions on grant 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; 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; David Doyle – ensuring business strategies are value creative
and deliver the financial targets incorporated in the Group’s operating plan, ensuring the integrity of financial results
and implementing sound risk management; Mike Harris – devising Egg’s future strategic plans; Mark Nancarrow –
delivery of the customer proposition, customer service and long-term customer value. 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. 
41 Egg plc Annual Report 2003 42 Egg plc Annual Report 2003
I’m right in
his pocket
My money knows
who’ s boss With effect from awards made in 2002, performance conditions apply to restricted shares on vesting. Total
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.
In 2003 awards were made to executive directors under the Restricted Share Plan, with an expected maximum value
calculated using a PEV (see below) of 1 75% of salary. 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. 
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 was 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 Restricted Share Plan are shown below. 
These shares represent the conditional awards out of which allocations will be made. David Doyle joined Egg 
on 29 September 2003 and will be eligible for an award at the next allocation date. 
43 Egg plc Annual Report 2003
Directors’ report continued
Remuneration continued
120
100
80
60
40
20
012 June
2000
31 Dec
2000
31 Dec
2001
31 Dec 
2003
31 Dec 
2002
Figure 2: Illustration of TSR Performance
Illustrative Performance Graph from Egg's IPO at 12 June 2000 to
31 December 2003. Egg Total 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
3.5
3.0
2.5
2.0
1.5
1.0
0.5
010 2030405060 708090 100
Figure 1: Illustration of the proportion of Restricted 
Shares vesting in relation to performance
Award units (multiples) T able 5: Egg Restricted Share Plan
Conditional
share awards Award price
outstanding at of shares Market price Conditional
1 January 2003, conditionally Number of Number of of shares share awards
or date of Conditionally awarded in shares shares vesting in outstanding at
appointment, awarded in 2003 lapsed in vested in 2003 31 December Release 
Director if later 2003
(5)
£
(2)
2003 2003
(4)
£
(3)
2003 year
Executive
Mike Harris 200,139–––200,139 1.25 – 2003
218,606––––– 21 8,606 2004
161,972––––– 1 61,972 2004
81,775––––– 81,775 2005
– 260,198 0.8867––– 260,198 2006
662,492 722,55 1
Paul Gratton
(1)
159,404–––159,404 1.25 – 2003
173,224––––– 17 3,224 2004
255,962––––– 255,962 2004
126,534––––– 126,534 2005
– 409,106 0.8867––– 409,106 2006
71 5, 1 24 964,826
Stacey Cartwright 149,644–––149,644 1.25 – 2003
163,495––––– 163,495
(6)
2004
150,235––––– 150,235
(6)
2004
75,596––10,499
(6)
–– 65,097 2005
–241,535 0.8867 1 20,76 7
(6)
–– 120,7 68 2006
538,970 499,595
Mark Nancarrow 102,296–––102,296 1.25 – 2003
111,638––––– 111 ,638 2004
150,235––––– 150,235 2004
75,596––––– 75,596 2005
–247 ,218–––– 247 ,218 2006
439,765 584,687
(1) The figures shown for Paul Gratton include awards made to his wife, who is a senior manager at Egg.
(2) The award price of shares conditionally awarded in 2003 is based on the market price of the shares on the day of the award.
(3) The market price of shares vested in 2003 is based on the market price of the shares on the day of vesting.
(4) There were no performance conditions attaching to the awards vested in 2003. As a result rights were granted over 100% of the shares
conditionally awarded.
(5) The shares conditionally awarded in 2003 are subject to the performance conditions outlined in the previous section.
(6) The terms agreed for Stacey Cartwright on her resignation from the Board provided for the retention of the restricted shares that were granted at
the time of the Initial Public Offering. Of the remaining restricted shares, it was agreed that Stacey would retain a proportion of those previously
awarded, based on her service to the end of her contract. These shares will vest according to the original vesting schedule and performance
conditions will continue to apply. The remaining shares lapsed on 26 September 2003.
44 Egg plc Annual Report 2003
Directors’ report continued
Remuneration continued 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
1 January 2003, Market
or date of Granted Lapsed Excercised price of Exercise Earliest Later
appointment, during the during the during the shares at 31December price exercise exercise
Director if later period period period
(4)
exercise 2003 £ date date
Executive
Mike Harris 500,000–––– 500,000 1.60 2003 2010
563
(1)
–––– 563
(1)
1.65 2003 2010
24 7,206–––– 247 ,206 1.278 2004 2011
22,7 47
(1)
–––– 22,747
(1)
1.278 2004 2011
384,825–––– 384,825 1.461 7 2005 2012
1,1 55,34 1 1,1 55,34 1
Paul Gratton
(2)
475,000–––– 475,000 1.60 2003 2010
1,1 26
(1)
–––– 1,1 26
(1)
1.65 2003 2010
399,443–––– 399,443 1.278 2004 2011
45,494
(1)
–––– 45,494
(1)
1.278 2004 2011
583, 101–––– 583,101 1.461 7 2005 2012
1,504, 1 64 1,504, 1 64
Stacey Cartwright
363,281–––– 363,281 1.60 2003 2004
282
(1)
–––– 282
(1)
1.65 2003 2004
281
(1)
–––– 281
(1)
1.65 2004 2004
22 7,644–––– 227 ,644 1.278 2004 2004
22,7 47
(1)
–––– 22,747
(1)
1.278 2004 2004
355,750 – 355,750 – – – 1.46 1 7 N/A N/A
969,985 61 4,235
(3)
Mark Nancarrow
312,500–––– 31 2,500 1.60 2003 2010
563
(1)
–––– 563
(1)
1.65 2003 2010
22 7,644–––– 227 ,644 1.278 2004 2011
22,7 47
(1)
–––– 22,747
(1)
1.278 2004 2011
355,750–––– 355,750 1.461 7 2005 2012
91 9,204 91 9,204
(1) Egg Employee Share Option Plan (Approved Part).
(2) Figures shown for Paul Gratton include options held by his wife, who is a senior manager at Egg.
(3) The terms agreed for Stacey Cartwright on her resignation from the Board provided for all vested options to be exercisable up to the date of her
contract (29 February 2004). At that date, all unapproved options will lapse and all unvested approved options will lapse. All vested approved
options will be exercisable for a period of six months from 29 February 2004 and will lapse thereafter.
(4) No share options were exercised during 2002.
The market price of Egg plc shares at 31 December 2003 was £1.25. The highest price during the year was
£1.55 and the lowest price during the year was £0.84.
45 Egg plc Annual Report 2003 Egg Savings-Related Share Option Scheme 
An invitation was issued under the Egg Savings-Related Share Option Scheme (“Sharesave”) in October 2003. 
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.
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 2003 period period period 2003 £ date date
Executive
Paul Gratton 4,457––– 4,457 1.304 2004 2005
3,298––– 3,298 1.1 46 2005 2006
7,7 55 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 
At the end of each three-year performance period executive directors and certain other senior managers of
Prudential plc may be granted a right to receive shares at no cost to the individual, dependent on the Company’s
performance. For RSP awards prior to 2004, no rights are granted if the Company’s TSR performance as ranked
against the comparator group is at the 60th percentile or below. The maximum grant will be made only if the TSR
ranking of the Company is 20th percentile or above. Between these points, the size of the grant made is calculated
on a straight-line sliding scale. In normal circumstances, directors may take up their right to receive shares at any
time during the following seven years.
In respect of awards made in 2000 under the Restricted Share Plan, the Company’s TSR was ranked 62nd out 
of the 88 relevant comparator companies remaining in the FTSE 100 (ie, the 70th percentile) for the three year
performance period ended on 31 December 2002. As Prudential’s position was lower than 60th percentile, the 
2000 awards lapsed and rights were not granted over any of the shares conditionally awarded to executive directors. 
In respect of awards made in 2001 under the Restricted Share Plan, the Company’s TSR was ranked 66th out 
of the 95 relevant comparator companies remaining in the FTSE 100 (ie, the 69th percentile) for the three year
performance period ended on 31 December 2003. As Prudential’s position was lower than 60th percentile, the 2001
awards lapsed and rights will not be granted over any of the shares conditionally awarded to executive directors.
The awards made in respect of 2002 and 2003 under the Restricted Share Plan run to 31 December 2004 and
31 December 2005 respectively and any grants under these plans will be based on the TSR ranking determined at
the end of each of those performance periods. Performance under these plans was ranked respectively at percentile
positions 81 and 66 on the basis of TSR performance at 31 December 2003.
In determining the conditional awards to be made for 2003 the shares were valued at their average share price
during the preceding calendar year, and the price used to determine the number of shares conditionally awarded 
in 2003 was £5.703 (2002: £8.187).
46 Egg plc Annual Report 2003
Directors’ report continued
Remuneration continued 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 2003 31 December Release
Director 2003 2003 2003 2003 £
(1)
2003 year
Executive
David Doyle
(2)
5, 125–––– 5,125 2004
6,596–––– 6,596 2005
–1 4,601––– 14,60 1 2006
11 ,721 26,322
Non-executive
Jonathan Bloomer 63,470 – – 63,470 – – 2003
135,301–––– 135,301 2004
177,110–––– 177,110 2005
– 266,527––– 266,527 2006
375,88 1 578,938
(1) The market price of rights vested in 2003 is based on the market price of the shares on the day of the vesting. 
(2) Prior to his appointment as a director David Doyle was employed by Prudential and received his awards as a senior executive. 
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 Prudential
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.
T able 9: Prudential Executive and Savings-Related Share Option Schemes
1 January
2003 Market
or date of Granted Lapsed Exercised price on Exercise Earliest Latest
appointment, during the during the during the date of 31 December price exercise exercise
Director if later period period period exercise
(3)
2003 £ date date
Executive
Paul Gratton
(2)
1,32 7
(1)
–1,327–– – 7.30 2002 2003
1,32 7 –
Mark Nancarrow
(4)
2,51 7
(1)
–––– 2,51 7
(1)
7.30 2007 2008
2,51 7 2,51 7
David Doyle
(4)
2,025
(1)
–––– 2,025
(1)
2.80 2006 2006
2,346
(1)
–––– 2,346
(1)
2.80 2008 2008
4,37 1 4,37 1
Non-executive
Jonathan Bloomer 196,750–––– 196,7 50 3. 15 1998 2005
226,750–––– 226,750 3. 15 2000 2005
2,247
(1)
–––– 2,247
(1)
7.51 2005 2005
425,7 47 425,7 47
(1) Savings-Related Share Option Scheme.
(2) Figures shown for Paul Gratton include options held by his wife, who is a senior manager at Egg.
(3) The market price on the date of exercise is the market price of the shares on the day of exercise.
(4) Prior to appointment as director.
The market price of Prudential plc shares at 31 December 2003 was £4.72. The highest price during the year was
£4.87 and the lowest price during the year was £2.81.
47 Egg plc Annual Report 2003 48 Egg plc Annual Report 2003
She definitely
wears the
trousers
What can I do with 
my money today? 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 2003 to the date of the approval of the financial statements.
T able 10: Directors’ shareholdings in Egg plc
1 January 2003, 31 December
Director or date of appointment, if later 2003
Executive
Mike Harris 124,535 244,618
Paul Gratton
(1)
190,21 7 349,621
Stacey Cartwright 92,478 N/A
Mark Nancarrow 188,777 188,777
David Doyle 940 940
Non-executive
Roberto Mendoza 225,000 250,000
Jonathan Bloomer 9,092 9,092
Richard Delbridge 20,000 20,000
Sir Derek Higgs 5,470 5,470
Leslie Priestley 940 940
Juan Rada – –
Pascal Cagni 3,700 3,700
Ronnie Baird – –
(1) Figures shown for Paul Gratton include shares held by his wife, who is a senior manager at Egg.
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 2003 to
the date of the approval of the financial statements. 
T able 11: Directors’ shareholdings in Prudential plc
1 January 2003, 31 December
Director or date of appointment, if later 2003
Executive
Mike Harris 32,041 32,041
Stacey Cartwright – N/A
Paul Gratton 20,411 20,650
Mark Nancarrow – –
David Doyle 8,040 8,132
Non-executive
Roberto Mendoza 46,882
(1)
105,516
Jonathan Bloomer 1 76,493 37 1,1 93
Richard Delbridge – –
Sir Derek Higgs 41 ,344 41 ,344
Leslie Priestley 138 138
Juan Rada – –
Pascal Cagni – –
Ronnie Baird – –
(1) The closing balance of 45,933 shares for 31 December 2002 did not include a number of shares received as a result of a scrip dividend.
49 Egg plc Annual Report 2003
Directors’ report continued
Remuneration continued Corporate social responsibility 
Community
During the year, we initiated our first community policy with a dedicated budget of £250,000 which will be matched
with a further equivalent £250,000 in voluntary time by our employees. Our policy is to encourage all Egg people to
be active in our communities and our policy has been devised in response to asking all our people how they would
wish these monies to be used. Our programme is focused on arts, education, sports and regeneration.
In 2003, we joined Business in the Community (BITC), the UK charity that encourages business to improve its
positive impact on society. With BITC’s assistance and support, we have devised and launched the Developing 
Local Talent Fund, our first community project, in Derby. Egg is Derby’s second largest employer, with around 
1,700 people working at our premises in Pride Park.
Projects we have begun include: Derby County Football Club, where we have launched a football skills challenge 
into a number of local schools; Derby Playhouse, with whom we have created the Egg Theatre Academy; and 
Derby Rugby Football Club, with whom we have launched a rugby development programme. We plan to use our
experience in Derby to contribute to communities at our other locations.
Environment
Our commitment to good environmental performance adds value to Egg, reduces business risk and gives Egg
people a pride in their work. 
We have a corporate environmental policy and a main Board member with specific responsibility for the environment.
We are working to bring our environmental management system (EMS) in line with the recognised ISO14001
standard. Egg is listed in the FTSE4Good Index Series, a stock market index designed to measure the 
performance of companies that meet globally recognised corporate responsibility standards. We have reported on
our environmental performance for two years and have data since 2001. Our performance against targets is shown
in the table opposite.
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.
This is a summary of our environmental performance. Please see www.egg.com for more detail.
Highlights of 2003
• Set seven management targets (see www.egg.com/environment for details) covering issues such as stakeholder
dialogue and supply chain environmental rating. 
• From November 2003 electricity from renewable sources has been used at our Derby operations centre. We will
consider using more renewable energy in our buildings where possible. 
• Environmental sustainability was an integral part of the design and fit-out of the new building on our Derby campus.
Issues considered included: maximising the use of daylight and reducing the need for electric lights; automatic
controls on lighting, air conditioning, taps, pumps and fans, to reduce wastage. Incoming fresh air is heated by
outgoing stale air, reducing heating demand.
50 Egg plc Annual Report 2003
Directors’ report continued Progress against targets 
Target T arget
2002 for 
Impact (data per person) 2001 2002 2003 baseline Target met
(3)
2004/05
Energy (kWh) 8,604 8,369 8,952
Electricity (all) (kWh) 5,7 44 5,812 6,651 –10% No
(3)
See
emissions
Electricity (renewable
(1)
) (kWh) – – 545
Gas (kWh) 2,860 2,557 2,301 –5% Yes
Water (cu mtrs) 11.26 9.93 12.42 –5% No
(4)
–5%
Business travel (all) (miles) 1,679 2,250 1,737
Car (miles) 1,191 1,029 983 –5% No
(5)
–5%
Rail (miles) 103 305 220
Air (miles) 385 916 534
Paper (print) (Kg) 176 306 402
Paper (office) (Kg) 40 43 28 –10% Yes –5%
(on 2001)
Waste (landfill) (Kg) 101 108 79 –10% Yes –10%
Waste (recycled) (Kg) 59 7 1 72 +10% No
(6)
+10%
Waste recycle rate 37% 40% 48%
Emissions
(2)
(KgCO
2
)3,5663,633 3,501
Emissions from energy (KgCO
2
)3,070 3,043 3,026 –10% 
(New)
(1) Renewable energy is electricity qualifying for the issue of LEC (Levy Exempt Certificate) and rated at zero CO
2
emissions.
(2) We report emissions for the first time, using UK government conversion factors. By 2005 we intend to reduce CO
2
emissions from energy by 10%,
based on 2002/03 baseline. 
(3) We prefer to set stretching targets for the main parameters (the table shows additional data) rather than easily achievable targets. Although we risk
falling short of our goals, this demanding attitude drives us to make sustainable improvements. Increased demands for power from a new building
in Derby – primarily a data centre with fewer people per m
2
– has increased the electricity used per person. Modifications to lighting systems in our
other buildings in Dudley and Derby took longer to implement than planned. Savings will be shown in 2004 data.
(4) The targets proved too stretching. We are reviewing our water minimisation strategy. Renewed efforts will be made to cut water use.
(5) The target was missed by 0.53%. We are working to further reduce car miles.
(6) The underlying trend has improved year on year. We are looking at ways to further improve our performance to meet the stretching target.
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 2003 amounted to £7 .6 million (31 December 2002: £2.0 million), corresponding to 29 days’
purchases when averaged over the year.
Auditors 
A resolution for the re-appointment 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 
20 February 2004
51 Egg plc Annual Report 2003 We have audited the financial statements on pages 53 to 89. 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 38 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 2003 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
London
20 February 2004
52 Egg plc Annual Report 2003
Independent auditors’ report 
to the members of Egg plc 53 Egg plc Annual Report 2003
Consolidated profit and loss account
for the year ended 31 December 2003
2003 2002
Note £m £m
Interest receivable 2 830.8 664.7
Interest payable 3 (562.0) (440.8)
Net interest income 268.8 223.9
Fees and commissions receivable 180.3 116.0
Fees and commissions payable (35.6) (27 .1)
Other operating income 4 10.5 1 4.5
Operating income 424.0 327 .3
Administrative expenses
– operational expenses 5 (202.6) (1 58.9)
– brand and marketing costs 5 (60.0) (48.6)
– development costs 5 (25.7) (26.1)
Total administrative expenses 5 (288.3) (233.6)
Depreciation and amortisation 6 (26.9) (21.7)
Amounts written off fixed asset investment 14 (4.3) (3.1)
Provisions for bad and doubtful debts 13 (1 37 .0) (85.4)
Operating loss (32.5) (16.5)
Share of operating profit/(loss) of joint ventures 16 0.1 (0.1)
Share of operating loss of associated undertaking and amortisation of goodwill 16 (2.0) (3.5)
Profit on partial disposal of continuing operation 7 – 3.5
Loss on ordinary activities before tax (34.4) (16.6)
Tax credit/(charge) on loss on ordinary activities 8 1.4 (2.2)
Loss on ordinary activities after tax (33.0) (18.8)
Minority interests (equity) 0.2 –
Retained loss for the financial year (32.8) (18.8)
Basic and diluted loss per share (pence per share) 10 (4.0p) (2.3p)
All of the Group’s losses arose from continuing operations. The notes on pages 57 to 89 are an integral part of these
financial statements.
Consolidated statement of total
recognised gains and losses
for the year ended 31 December 2003
2003 2002
£m £m
Retained loss for the financial year (32.8) (18.8)
Currency translation differences on foreign currency net investments and other adjustments 4.5 0.7
Total recognised losses related to the year (28.3) (1 8.1) 2003 2002
Note £m £m
Assets
Cash and balances at central banks 13.3 13.0
Loans and advances to banks 11 329.6 238.6
Securities purchased under agreement to resell 26 – 150.0
Loans and advances to customers 12 6,7 18.0 5,546.3
Debt securities 14 4,156.5 4,267 .6
Share of joint venture net assets 16 0.9 0.8
Share of gross assets 2.8 3.1
Share of gross liabilities (1.9) (2.3)
Interests in associated undertakings 16 5.4 7.4
Intangible fixed assets 18 6.1 6.7
Tangible fixed assets 19 95.3 74. 1
Own shares 20 2.2 2.2
Other assets 21 268.6 164. 1
Deferred tax 22 23.3 18.5
Prepayments and accrued income 23 75.5 76.1
Total assets 11 ,694.7 10,565.4
Liabilities
Deposits by banks 24 1,61 0.4 501.0
Securities sold under agreements to repurchase 25 829.2 –
Customer accounts 27 6,451.7 8,016.4
Debt securities issued 28 1,422.9 1,0 1 4.9
Other liabilities 29 340.1 223.1
Accruals and deferred income 30 153.7 146.6
Subordinated liabilities – dated loan capital 31 450.8 201.7
11 ,258.8 10, 1 03.7
Shareholders’ funds
Called up share capital 40 410.3 410. 1
Share premium account 40 10 7 .5 10 7 .3
Capital reserve 40 359.7 359.7
Profit and loss account 40 (442.8) (416.9)
Shareholders’ funds (all attributable to equity interests) 40 434.7 460.2
Minority interests (equity) 1.2 1.5
Total liabilities 11 ,694.7 10,565.4
Memorandum items
Commitments
Credit lines and other commitments to lend 7, 7 92.5 5,343.6
These financial statements were approved by the Board of Directors on 20 February 2004 and signed on its behalf by:
Roberto Mendoza Chairman
David Doyle Chief Financial Officer
The notes on pages 57 to 89 are an integral part of these financial statements.
54 Egg plc Annual Report 2003
Consolidated balance sheet
at 31 December 2003 2003 2002
Note £m £m
Fixed assets
Tangible fixed assets 19 2.2 10.6
Investments:
Shares in subsidiary undertakings 15 798.3 890.5
Shares in joint ventures 16 1.0 1.0
Shares in associated undertakings 16 18. 1 18. 1
Own shares 20 2.2 2.2
821.8 922.4
Current assets 
Debtors:
Amounts owed by subsidiary undertakings 0.5 0.2
Amounts owed by associated undertakings 1.3 0.7
Prepayments and accrued income 0.2 0.3
Amount owed by parent undertaking (re group relief) 8.4 –
Deferred tax 1.3 0.3
Cash at bank and in hand – 0.9
11 .7 2.4
Creditors: amounts falling due within one year
Obligations under finance leases 0.4 0.2
Amounts owed to subsidiary undertakings 111 . 1 17 7 .2
Accruals and deferred income 4.0 5.3
Corporation taxation 1.9 3.2
Other liabilities 0.1 0.3
11 7 .5 186.2
Net current liabilities (105.8) (1 83.8)
T otal assets less current liabilities 716.0 738.6
Creditors: amounts falling due after more than one year
Obligations under finance leases 1.3 1.3
Net assets 714.7 73 7 .3
Shareholders’ funds (equity)
Called up share capital 41 410.3 410. 1
Share premium account 41 10 7 .5 10 7 .3
Capital reserve 41 359.7 359.7
Profit and loss account 41 (1 62.8) (1 39.8)
714.7 73 7 .3
These financial statements were approved by the Board of Directors on 20 February 2004 and signed on its behalf by:
Roberto Mendoza Chairman
David Doyle Chief Financial Officer
The notes on pages 57 to 89 are an integral part of these financial statements.
55 Egg plc Annual Report 2003
Company balance sheet
at 31 December 2003 2003 2002
Note £m £m
Net cash (outflow)/inflow from operating activities 35 (259.9) 1,298. 1
Return on investments and servicing of finance (25.9) (1 1.2)
T axation:
Tax (paid)/Group relief received (3.8) 12.5
Capital expenditure and financial investment:
Purchase of tangible fixed assets 19 (46.7) (31.6)
Sale of tangible fixed assets – 0.1
Restricted share plan purchase of shares (3.0) (2.7)
Purchase of investments 14 (5,960.7) (6,154.3)
Sale of investments 14 5,996.9 5,028.6
Net cash outflow from capital expenditure and investment (1 3.5) (1,1 59.9)
Acquisition and disposals:
Purchase of subsidiaries 38 – (28.4)
Investment in associated undertaking – (1.2)
Net cash outflow from acquisitions and disposals – (29.6)
Financing:
Subsidiary share issue – 5.0
Issue of dated loan capital 37 249.1 78.1
Issue of share capital 37 0.4 1.6
Net cash inflow from financing 249.5 84.7
(Decrease)/increase in net cash 36 (53.6) 194.6
The notes on pages 57 to 89 are an integral part of these financial statements.
56 Egg plc Annual Report 2003
Consolidated cash flow statement
for the year ended 31 December 2003 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 2003. 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) Associated undertakings 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 reduce the carrying value of loans and advances to their realisable amount, 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 management also assess the required level of provision on a case-by-case basis when accounts
become seriously delinquent.
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 as approprate.
57 Egg plc Annual Report 2003
Notes to the financial statements (f) 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 (see below) 3 years
Land and buildings are stated at cost and are not depreciated. Assets under construction are not depreciated until
they are brought into commercial use.
(g) 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. 
(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 and corrective action taken, if appropriate. 
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 hedged transaction terminating, any profits or losses realised on early termination are deferred and
58 Egg plc Annual Report 2003
Notes to the financial statements continued 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 derivative contract.
(l) Debt securities sold and repurchased
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 (“repos”) 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) Securitisation of assets
The Group has issued debt securities in order to finance 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 81% 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. The assets of the Scheme are held in a separately administered fund. 
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. It should be noted that the Egg share of the
underlying assets and liabilities and deficit within the Group Scheme is not material. Therefore, in accordance with
the treatment prescribed by FRS 1 7 , the cost of the defined benefit pension scheme is charged to the profit and loss
account as determined by independent qualified actuaries performing formal actuarial valuations to spread the cost
of the pension over the service lives of the employees on the basis of contributions payable to the Group Scheme. 
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
where there might be some doubt about the recovery of a deferred tax asset. 
(p) Income recognition
Interest income is recognised in the profit and loss account as it accrues except where interest is suspended 
as set out in policy note (d) above. 
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 to customers. 
(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 and commissions
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.
Commission payable in respect of mortgages sold is capitalised and amortised over the early redemption penalty
period.
(s) Brand development costs
Brand development costs are written off as incurred. 
59 Egg plc Annual Report 2003 60 Egg plc Annual Report 2003
60 Egg plc Annual Report 2003
I get the best out
of my money
She knows how 
to manage me 2 Interest receivable
2003 2002
£m £m
Loans and advances to banks 10.2 5.9
Loans and advances to customers 469.5 376.2
Debt securities 17 7 .0 188.4
Hedging 17 4. 1 94.2
830.8 664.7
The amounts included within “hedging” represent interest receivable on interest rate and currency swaps used to
hedge exposures to interest rate and currency movements on the Group’s assets and liabilities. See note 33.
3 Interest payable
2003 2002
£m £m
Customer accounts 239.2 268.3
Deposits by banks 40.8 4.6
Debt securities 44.7 43.3
Securities sold under agreements to repurchase 9.8 11 .6
Subordinated loan capital 25.9 11 .2
Hedging 201.6 101 .8
562.0 440.8
The amounts included within “hedging” represent interest payable on interest rate and currency swaps used to
hedge exposures to interest rate and currency movements on the Group’s assets and liabilities. See note 33.
4 Other operating income
2003 2002
£m £m
Profit on disposal of investment securities 5.3 9.1
Other operating income 5.2 5.4
10.5 1 4.5
61 Egg plc Annual Report 2003 5 Administrative expenses
2003 2002
£m £m
Staff costs:
Salaries and accrued incentive payments 73.1 64.1
Social security costs 10. 1 5.1
Pension costs:
Defined contribution scheme 3.6 3.0
Other staff costs 21.1 10.8
10 7 .9 83.0
Premises 10.9 8.5
Systems 14.8 10.9
Restructuring 10.3 –
Other operational 58.7 56.5
Operational and administration costs 202.6 158.9
Brand and marketing costs 60.0 48.6
Development costs 25.7 26.1
T otal 288.3 233.6
In accordance with FRS 1 7 , the defined benefit pension scheme contributions of £0.3 million (2002: £0.2 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.
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 £99,000.
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.
62 Egg plc Annual Report 2003
Notes to the financial statements continued 63 Egg plc Annual Report 2003
5 Administrative expenses continued
Other operational costs include:
2003 2002
£000 £000
Auditors’ remuneration and expenses:
Audit services:
Statutory audit services 384 295
Performed by virtue of being auditor/regulatory reporting account
(1)
134 13 1
Further assurance services
(2)
– 389
Tax services:
Advisory services 41 –
Other services
(3)
59 688
Operating lease costs 5,726 5,424
(1) This principally relates to reviews performed of the interim financial information produced by the Group and reporting accountants’ reports.
(2) Further assurance services principally related to reviews of systems and controls in specific areas.
(3) In the year ended 31 December 2003 this related to a review of scorecard controls and work on debt issues.
The Company’s audit fee, which is included in the statutory audit fee for the Group, amounted to £32,000 
(2002: £30,000). 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:
2003 2002
UK – Operations 1,849 1,786
– Administrative and support 365 309
France – Operations 31 0 27 7
– Administrative and support 156 103
2,680 2,475
6 Depreciation and amortisation
2003 2002
£m £m
Goodwill (note 18) 0.6 0.5
Leasehold improvements 0.5 0.5
Fixtures and fittings 2.0 1.2
Plant and equipment 8.8 10.4
Software 15.0 9.1
26.9 21 .7
7 Profit on partial disposal of continuing operations 
The exceptional gain of £3.5 million in 2002 relates to the dilution of our shareholding in Investment Funds Direct
Holdings Limited in the latter part of that year, following the investment by Prudential Group in a 15% minority
shareholding in the Company. 64 Egg plc Annual Report 2003
My money is easy to look after 65 Egg plc Annual Report 2003
He r eally car es 8 T axation
The tax credit/(charge) assumes a UK corporation tax rate of 30% (2002: 30%) and comprises:
2003 2002
£m £m
Corporation tax:
Current year (3.7) (8.5)
Prior years: Group relief receivable 0.3 2.6
(3.4) (5.9)
Deferred tax:
Current year 3.0 1.9
Prior years 1.8 1.8
4.8 3.7
Tax credit/(charge) on loss on ordinary activities 1.4 (2.2)
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:
2003 2002
£m £m
Loss on ordinary activities before tax (34.4) (1 6.6)
Loss on ordinary activities multiplied by the standard rate of corporation tax in 
the UK of 30% (2002: 30%) 10.3 5.0
Effects of:
Capital allowances in excess of depreciation for the year 1.6 0.6
Short-term timing differences (4.6) (2.5)
Expenses not deductible for tax purposes (0.3) (0.6)
Share of losses on associate undertakings (0.2) (0.5)
Inter-company gains on transfer of assets (0.9) –
Goodwill amortisation (0.5) (0.7)
Overseas tax at less than UK standard rate (5.8) –
Overseas losses not allowable for tax purposes (3.3) (1 0.8)
Gain on dilution of share in Investment Funds Direct Holdings Limited – 1.0
Adjustments for prior years 0.3 2.6
Current tax charge (3.4) (5.9)
9 Loss on ordinary activities after tax for the Company
£25.4 million (2002: £92.8 million) of the Group loss attributable to ordinary shareholders of the Company has been
dealt with in the accounts of the Company.
66 Egg plc Annual Report 2003
Notes to the financial statements continued 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:
Group Group
2003 2002
£m £m
Loss attributable to ordinary shareholders (32.8) (18.8)
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 4.8 81 4.3
Adjustment for weighted average number of options which have been granted
but not yet exercised 0.2 1.3
Potential weighted average number of ordinary shares in issue 
(used for fully diluted loss per share calculation) 81 5.0 815.6
Basic and diluted loss per share (pence per share) (4.0p) (2.3p)
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
2003 2002
£m £m
Repayable
On demand 146.6 200.5
In not more than three months 163.0 35.0
In more than three months but not more than one year 9.3 –
In more than one year but not more than five years 9.9 3.1
Over five years 0.8 –
329.6 238.6
67 Egg plc Annual Report 2003 12 Loans and advances to customers
Group Group
2003 2002
£m £m
Repayable
In not more than three months 3,135.6 2,343.5
In more than three months but not more than one year 40.1 22.9
In more than one year but not more than five years 1,124.7 780.4
In more than five years 2,611.0 2,528.2
Loans and advances (net of interest in suspense) 6,911.4 5,675.0
Of which
Credit card 3,1 31.2 2,337 .4
Mortgages 1,995.5 2,360.7
Personal loans 1,781.8 972.5
Overdrafts 2.9 4.4
Provision for bad and doubtful debts (note 13) (1 93.4) (1 28.7)
Net loans and advances 6,7 18.0 5,546.3
During 2003, the Group transferred additional UK card receivables to its trust vehicle, created in 2002 for the
purpose of asset-backed securitisation, bringing the outstanding balance of assets in this vehicle to £2.26 billion
(2002: £1.25 billion). The noteholders in securitisations from this vehicle have a proportionate interest in each
account balance in the trust. As at 31 December 2003 the value of this interest was £1.5 billion (2002: £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
2003
General Specific T otal
£m £m £m
Balance at the beginning of year 36.1 92.6 128.7
Amounts written off –(72.7) (72.7)
New and additional provisions 15. 1 12 1 .9 1 3 7 .0
Net charge against profit and loss 15. 1 12 1 .9 1 3 7 .0
Exchange adjustments –0.4 0.4
Balance at the end of year 51 .2 1 42.2 193.4
68 Egg plc Annual Report 2003
Notes to the financial statements continued 13 Provision for bad and doubtful debts continued
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 for 2002 relates to the fair value of the opening bad debt provision for
our newly acquired French subsidiary. 
Non-performing loans and advances are as follows:
Group Group
2003 2002
£m £m
Loans and advances on which interest is suspended 139.0 84.1
Specific provisions for bad and doubtful debts (1 02.2) (7 1.0)
Interest in suspense (5.7) (1.3)
31.1 11 .8
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.
14 Debt securities
Group Group
For investment book value For investment market value
2003 2002 2003 2002
£m £m £m £m
Government debt securities 1,1 64.2 397 .5 1,1 66.0 412.2
Bank certificates of deposit 7 44.0 1,424.3 743.6 1,424.0
Building society certificates of deposit 205.0 120.0 205.0 120.0
Other debt securities 2,043.3 2,325.8 2,020.6 2,303.6
4,156.5 4,267 .6 4,135.2 4,259.8
Analysed by listing status:
Listed in the UK 1,687 .0 1,02 1.7 1,684.0 1,036.8
Listed outside the UK 1,070.6 1,25 1.6 1,052.7 1,229.0
Unlisted 1,398.9 1,994.3 1,398.5 1,994.0
4,156.5 4,267 .6 4,135.2 4,259.8
Analysed by maturity:
Less than one year 1,398.3 1,94 7 .6
Greater than one year 2,758.2 2,320.0
4,156.5 4,267 .6
69 Egg plc Annual Report 2003 14 Debt securities continued
The change in the book amount of debt securities held for investment purposes comprised:
Group
2003
Discounts
Historical and 
cost premiums Book value
£m £m £m
Balance at beginning of year 4,219.2 48.4 4,267 .6
Acquisitions 5,866.9 93.8 5,960.7
Disposals and maturities (5,930.7) (66.2) (5,996.9)
Exchange rate movements (59.9) – (59.9)
Realised gains – 5.3 5.3
Amortisation of discounts and premiums – (16.0) (16.0)
Write down of carrying value (4.3) – (4.3)
Balance at end of year 4,091.2 65.3 4,156.5
The turnover in debt securities during the year was principally to support the growth in loans and advances to
customers. Realised gains on disposals were £5.3 million (2002: £9.1 million).
15 Shares in Group undertakings
Company 
£m
Balance at the beginning of year 890.5
Amalgamation of Egg SA into Egg Banking plc (102.2)
Subscriptions of capital 10.0
Balance at the end of year 798.3
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. Egg France was amalgamated from a subsidiary 
to a branch of Egg Banking plc with effect from 1 April 2003.
The principal subsidiary undertakings are as follows:
Percentage of 
equity capital 
Class of and voting Country of Principal
capital rights held incorporation activity Year end
Egg Banking plc Ordinary 100% England Banking 31 December 
Investment Funds Direct Holdings Limited Ordinary 85% England Investments 31 December
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
70 Egg plc Annual Report 2003
Notes to the financial statements continued 16 Shares in joint ventures and associated undertakings
Group
2003
Equity Share of net
Book value adjustments assets
(i) Joint ventures – Marlborough Stirling Mortgage Services Limited £m £m £m
Balance at the beginning of year 1.0 (0.2) 0.8
Share of operating profit for the year – 0.1 0.1
Balance at the end of year 1.0 (0. 1) 0.9
Company 
2003
Cost
£m
Cost
At the beginning and end of the year 1.0
Group 
2003
Investment in
Share of Goodwill associated
net assets (note 18) undertakings
(ii) Associated undertakings – IfOnline Group Limited £m £m £m
Balance at the beginning of year (0.4) 7 .8 7 .4
Amortisation of goodwill charged in the year – (1.1) (1.1)
Share of operating loss for the year (0.9) – (0.9)
Balance at the end of year (1.3) 6.7 5.4
Company 
2003
Cost
£m
Cost
At the beginning and end of the 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 2003 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 £6,393,191 29.9%* Mortgage intermediation 30 November
Preference £968,437 96.0%*
shares
Foundershare £1 Nil
A N Share £1 Nil
*Egg plc has a 38.6% share in the total issued share capital of IfOnline Group Limited.
71 Egg plc Annual Report 2003 17 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 2003
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 2003 the trust held 5.8 million ordinary
shares (31 December 2002: 5.0 million), with a market value of £7 .3 million (which are intended to be used
principally for delivery of shares under the Company’s employee incentive plans) and a nominal value of £2.9 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 
2003 2003 2003  
£m £m £m
Cost Goodwill Goodwill Goodwill
At the beginning and end of year 17 .7 1 0.5 7 .2
Provision for amortisation
At the beginning of year 3.2 2.7 0.5
Amortisation charged in the year 1.7 1 .1 0.6
At the end of year 4.9 3.8 1.1
Net book value at 31 December 2003 12.8 6.7 6.1
Net book value at 31 December 2002 14.5 7 .8 6.7
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 for 
Egg Banking plc French branch being the period over which the Group expects to derive economic benefit from 
the assets.
72 Egg plc Annual Report 2003
Notes to the financial statements continued 19 T angible fixed assets
Leasehold Fixtures Plant and Land and
Software improvements and fittings equipment buildings Total
Group £m £m £m £m £m £m
Cost
At the beginning of year 65.3 4.7 14.7 7 4.3 9.8 168.8
Additions at cost 22.2 – 16.1 7 .6 0.8 46.7
Reclassification ––1.4–(1.4)–
Write-off of software costs (0.2) –––– (0.2)
Other (1.6) – (0.1) – – (1.7)
Disposals – – (0.1) – – (0.1)
Exchange movements 0.5 – 0.3 0.4 – 1.2
At the end of year 86.2 4.7 32.3 82.3 9.2 214.7
Accumulated depreciation
At the beginning of year 36.5 1.9 3.7 52.6 – 94.7
Charge for year 15.0 0.5 2.0 8.8 – 26.3
Other (1.6) – (0.1) (0.2) – (1.9)
On disposals ––––––
Exchange movements 0.2 – – 0.1 – 0.3
At the end of year 50.1 2.4 5.6 61.3 – 119.4
Net book value at 31 December 2003 36.1 2.3 26.7 21.0 9.2 95.3
Net book value at 31 December 2002 28.8 2.8 11.0 21.7 9.8 7 4.1
All fixed assets are held at cost less accumulated depreciation. Assets held under finance leases have been
capitalised in accordance with SSAP 21. 
All of the Land and Buildings within tangible fixed assets are occupied by the Group for its own activities.
Fixtures Plant and
Software and fittings equipment Total
Company £m £m £m £m
Cost
At the beginning of year 9.4 0.1 2.7 12.2
Additions at cost ––––
Transfers to other Group companies (7 .5) – (0.7) (8.2)
At the end of year 1.9 0.1 2.0 4.0
Accumulated depreciation
At the beginning of year 1.2 – 0.4 1.6
Charge for year 0.1 – 0.1 0.2
At the end of year 1.3 – 0.5 1.8
Net book value at 31 December 2003 0.6 0.1 1.5 2.2
Net book value at 31 December 2002 8.2 0.1 2.3 10.6
The net book value of the Company tangible assets includes £0.6 million (2002: £0.9 million) in respect of software
held under finance leases. Depreciation for the year on leased assets held by the Company was £0.3 million 
(2002: £0.3 million).
Annual commitments in respect of software rentals held under finance leases can be analysed as follows:
2003 2002
£m £m
Within one year 0.5 –
Over one year but not more than five years 1.4 1.9
1.9 1.9
73 Egg plc Annual Report 2003 20 Own shares
Group and 
Company
2003 
£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 2003 was £1.7 million (31 December 2002: £2.0 million).
21 Other assets
Group Group
2003 2002
£m £m
Balances arising from off-balance sheet instruments 53.3 70.8
Amounts owed by Prudential Group companies 5.3 3.7
Tax recoverable 2.6 3.4
Other 207 .4 86.2
268.6 164. 1
22 Deferred tax asset
Group Group
2003 2002
£m £m
Balance at the beginning of year 18.5 14.8
Credited to the profit and loss account (see note 8) 4.8 3.7
Balance at the end of year 23.3 18.5
Analysed as follows: 
Accelerated capital allowances 6.9 7. 1
Short-term timing differences 16.4 11 .4
23.3 18.5
Deferred tax assets provided in the financial statements have been computed using the year-end tax rate of 30%
(2002: 30%).
23 Prepayments and accrued income
Group Group
2003 2002
£m £m
Prepayments 14.4 16.5
Accrued interest and commission 61.1 59.6
75.5 76.1
Included in prepayments is £2.7 million (2002: £3.6 million) relating to the deferred element of the expenditure
incurred under mortgage cashback schemes and £0.7 million (2002: £2.3 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 2003 
if mortgage incentives had not been deferred was £3.1 million (2002: £1.2 million). A credit has arisen in 2003 as 
a result of a net credit on clawbacks due to redemptions.
74 Egg plc Annual Report 2003
Notes to the financial statements continued 75 Egg plc Annual Report 2003
75 Egg plc Annual Report 2003
She gets the 
best deal
It always seems to
work out well with
my money 24 Deposits by banks
Group Group
2003 2002
£m £m
Repayable
On demand 31.9 –
In not more than three months 80.1 0.4
Over three months but not more than one year 500.0 –
Over one year but not more than five years 998.4 500.6
1,61 0.4 501.0
As at 31 December 2003, £1.5 billion of medium note funding was outstanding from the securitisation of credit card
receivables (see note 12).
25 Securities sold under agreements to repurchase
Group Group
2003 2002
£m £m
Repayable
In not more than three months 807 .1 –
Over three months but not more than one year 22.1 –
829.2 –
The market value of the underlying securities is £815.6 million (2002: £nil).
26 Securities purchased under agreements to resell
Group Group
2003 2002
£m £m
Repayable
In not more than three months – 150.0
– 150.0
The market value of the underlying securities is £nil (2002: £150.3 million).
27 Customer accounts
Group Group
2003 2002
£m £m
Repayable
On demand 6,177 .4 7,669.3
In not more than three months 138. 1 14 1 .6
Over three months but not more than one year 10.0 190.6
Over one year but not more than five years 97 .3 –
Over five years 28.9 14.9
6,451.7 8,016.4
76 Egg plc Annual Report 2003
Notes to the financial statements continued 28 Debt securities issued
Group Group
2003 2002
Bonds and Floating Rate Notes £m £m
Repayable
Under one year 940.1 446.3
Over one year 482.8 568.6
1,422.9 1,0 1 4.9
29 Other liabilities
Group Group
2003 2002
£m £m
Balances arising from off-balance sheet instruments 63.3 76.8
Amounts owed to Prudential Group companies 2.6 0.3
Taxation and social security 18.0 20.1
Settlement balances 19.4 64.4
Other creditors 236.8 61 .5
340.1 223.1
30 Accruals and deferred income
Group Group
2003 2002
£m £m
Accrued interest and commission 94.1 112.9
Other accruals and deferred income 59.6 33.7
153.7 146.6
31 Subordinated liabilities
Group Group
2003 2002
£m £m
Balance at the beginning of year 201.7 123.6
Issue of dated loan capital 249.1 78.1
Balance at the end of year 450.8 201.7
The dated loan capital increase relates to an issue of £250 million at a discount of £0.9 million. This was issued at a
rate of 7 .5% and is perpetual with a callable date of 2013. Early redemption requires prior approval from the Financial
Services Authority.
77 Egg plc Annual Report 2003 32 Commitments and contingencies
Guarantees at 31 December 2003 amounted to £1.9 million (2002: £1.8 million) in respect of a lease for a call
centre building in France. Capital expenditure contracted but not yet provided for amounted to £1.4 million at
31 December 2003 (2002: £nil).
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:
2003 2002
£m £m
Over one year but not more than five years 5.2 2.1
After five years 0.5 1.5
5.7 3.6
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
and foreign exchange 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. Foreign exchange risk arises as a result of foreign
currency denominated 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. For the purpose of reducing
foreign exchange risk the Group uses forward foreign currency contracts and currency swaps.
The Asset and Liability Management Committee regularly reviews 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 of 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 26.
(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 2003. Items are allocated to time bands by reference to the earlier of the next contractual
interest rate repricing date and maturity date.
78 Egg plc Annual Report 2003
Notes to the financial statements continued 79 Egg plc Annual Report 2003
My money and I look
after each other
We ar e equals 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
2003 2003 2003 2003 2003 2003 2003
£m £m £m £m £m £m £m
Assets:
Loans and advances 
to banks 329.6 –––– 13.3 342.9
Loans and advances to
customers 3,476.0 1,657 .9 215.5 1,367 .2 1.4 – 6,7 18.0
Debt securities 2,672.2 392.5 89.0 541.0 461.8 – 4,156.5
Other assets ––––– 477.3 477.3
Total assets 6,477 .8 2,050.4 304.5 1,908.2 463.2 490.6 11,694.7
Liabilities:
Deposits by banks 1,604.55.9 ––––1,610.4
Securities sold under
agreements to resell 80 7.122.1–––– 829.2
Customer accounts 6,441.7 – 10.0 – – – 6,451.7
Debt securities in issue/
sub-ordinated liabilities 1,372.6 5.6 10.0 35.5 450.0 – 1,873.7
Other liabilities ––––– 493.8 493.8
Shareholders’ funds 
(including MI) ––––– 435.9 435.9
Total liabilities 10,225.9 33.6 20.0 35.5 450.0 929.7 11,694.7
Off-balance sheet items 2,960.8 (224.1) (1,91 7 .8) (798.9) (20.0) – –
Interest rate sensitivity gap (787 .3)1,792.7 (1,633.3) 1,073.8 (6.8) (439.1) –
Cumulative gap (787 .3) 1,005.4 (627 .9) 445.9 439.1 – –
80 Egg plc Annual Report 2003
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
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 – – 14.9 – 8,016.4
Debt securities in issue/
sub-ordinated liabilities 987 .9 – – 27 .0 201.7 – 1,216.6
Other liabilities ––––– 369.7 369.7
Shareholders’ funds 
(including MI) ––––– 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) 14.9 – –
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 – –
(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 French operation and its related funding, as noted in 
the table below.
2003 2002
£m £m
Euro 102.2 102.2
81 Egg plc Annual Report 2003 33 Financial instruments including derivatives continued
(d) Hedging
The Group’s policy is to hedge the following exposures:
• Interest rate risk – using interest rate 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 2003 and movements
therein during the year.
Group
T otal net
Gains Losses gains/(losses)
2003 2003 2003
£m £m £m
Unrecognised Gains/(losses) on hedges at beginning of year 62.2 (58.1) 4.1
Of which recognised in the year to 31 December 2003 (61.4) 44.9 (16.5)
Gains/(losses) arising before 1 January 2003 that were  
not recognised in the year to 31 December 2003 0.8 (13.2)(12.4)
Gains/(losses) arising in the year to 31 December 2003 that were 
not recognised in that year 11 .8 (7 .2) 4.6
Unrecognised Gains/(losses) on hedges at the end of year 12.6 (20.4) (7 .8)
Of which:
Gains/(losses) expected to be recognised in the year to 31 December 2004 1.0 (1 7 .9)(16.9)
Gains/(losses) expected to be recognised after 31 December 2004 11 .6 (2.5) 9.1
Group
Total 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)
82 Egg plc Annual Report 2003
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 2003.
Group Group
Non-trading Non-trading Non-trading Non-trading
fair value book value fair value book value
2003 2003 2002 2002
£m £m £m £m
Assets:
Debt securities 4,135.2 4,156.5 4,259.8 4,267 .6
Derivatives 52.8 53.3 39.3 70.8
Liabilities:
Debt securities in issue 1,422.9 1,422.9 1,0 1 4.9 1,01 4.9
Subordinated debt 450.8 450.8 201.7 201.7
Derivatives 70.6 63.3 41 .2 76.8
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 2003 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
2003 2003 2003 2003 2003
£m £m £m £m £m
Foreign exchange derivatives:
Foreign exchange forward 1,448.3 38.6 41.2 28.2 28.9
Cross currency swaps 21 0.3 1 .3 –19.5 1.7
Interest rate derivatives:
Swaps 4,016.8 10.0 9.5 22.9 32.7
Forward rate agreements 500.0 0.3 – – –
Credit derivatives: 2,665.7 2.6 2.6 – –
Total non-trading derivatives 8,841.1 52.8 53.3 70.6 63.3
83 Egg plc Annual Report 2003 84 Egg plc Annual Report 2003
33 Financial instruments including derivatives 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
2002 2002 2002 2002 2002
£m £m £m £m £m
Foreign exchange derivatives:
Foreign exchange forwards 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 9.75.2 18.5 13.0
Swaptions 160.0 – 1.1 1.1 1.1
Credit derivatives: 2,025.4 1.5 1.5 – –
Total non-trading derivatives 7 ,644.5 39.3 70.8 41.2 76.8
(g) Maturity of notional principal amounts and net replacement cost
At 31 December 2003 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
2003 2003 2003 2003
£m £m £m £m
Foreign exchange derivatives:
Foreign exchange forwards 1,448.3 – – 1,448.3
Cross currency swaps 14 7 .6 62.7 – 2 1 0.3
Interest rate derivatives:
Swaps 1,780.7 2,182.8 53.3 4,016.8
Forward rate agreement 500.0 – – 500.0
Credit derivatives: –1,750.0 915.7 2,665.7
Total notional principal amounts 3,876.6 3,995.5 969.0 8,841.1
Total net replacement cost 39.0 8.2 3.1 50.3 33 Financial instruments including derivatives continued
Group
Over one 
year but not 
One year more than Over 
or less five years five years Total
2002 2002 2002 2002
£m £m £m £m
Foreign exchange derivatives:
Foreign exchange forwards 1,194.6 – – 1,194.6
Cross currency swaps 57 .7 105.8 – 163.5
Interest rate derivatives:
Swaps 3,439.0647.114.94,101.0
Swaptions – 160.0 – 160.0
Credit derivatives: – – 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
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 38 to 49.
35 Reconciliation of Group loss before tax to net operating cash flows 
2003 2002
£m £m
Operating loss (32.5) (16.5)
Decrease in accrued income and prepayments 0.6 0.5
Increase in accruals and deferred income 8.1 18.0
Provision for bad and doubtful debts 64.2 45.2
Profit on sale of financial investments (5.3) (9.1)
Interest on subordinated liabilities 25.9 11 .2
Depreciation and amortisation, including premium/discount on debt securities 47 .6 41 .6
Net increase in loans and advances to banks and customers (1,379.0) (836.9)
Net decrease/(increase) in securities purchased under agreements to resell 150.0 (1 50.0)
Net (decrease)/increase in deposits by banks and customer accounts (455.2) 2,411.3
Net increase/(decrease) in securities sold under agreements to repurchase 829.2 (384.2)
Net increase in debt securities in issue 408.0 99.9
Net increase in other assets (47 .1) (36.9)
Net increase in other liabilities 165.8 7 4.4
Net (decrease)/increase in settlement balances (44.9) 28.9
Other non cash movements 4.7 0.7
Net cash (outflow)/inflow from operating activities (259.9) 1,298. 1
85 Egg plc Annual Report 2003 36 Analysis of the balances of cash as shown in the balance sheet
Group Group
At At At At
1 January 31 December 1 January Acquisition of 31 December
2003 Cash flow 2003 2002 subsidiaries Cash flow 2002
£m £m £m £m £m £m £m
Cash 13.0 0.313.3 9.1 – 3.9 13.0
Loans and advances to other 
banks repayable on demand 200.5 (53.9) 1 46.6 7.2 2.6 1 90.7 200.5
21 3.5 (53.6) 159.9 16.3 2.6 194.6 213.5
The cash balance at 31 December 2003 and 1 January 2003 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
2003 2003 2003 2003 2002 2002 2002 2002
£m £m £m £m £m £m £m £m
At the beginning of year 410. 1 10 7 .3 201 .7 7 1 9. 1 409.6 106.2 123.6 639.4
Net proceeds of issue of shares 0.2 – – 0.2 0.5 – – 0.5
Premium arising on the issue of shares –0.2 –0.2 – 1.1 – 1.1
Issue of dated loan capital ––249.1249.1 –– 78.1 78.1
Balance at end of year 410.3 10 7 .5 450.8 968.6 410. 1 10 7 .3 201 .7 7 1 9. 1
38 Purchase of interests in subsidiary undertakings 
Group Group
2003 2002
£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
86 Egg plc Annual Report 2003
Notes to the financial statements continued 39 Share capital
Company Company
2003 2003
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 410.3 820.6
Company Company
2002 2002
Value 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
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 2003 and 2002 is due to the issue of share capital 
to satisfy the vesting of share options by employees. 
40 Analysis of changes in reserves – Group 
2003 2002
Profit T otal T otal
Share Share Capital and lossshareholders’ shareholders’
capital premium reserve account funds funds
£m £m £m £m £m £m
At the beginning of year 410. 1 10 7 .3 359.7 (416.9) 460.2 475.9
Exchange and other adjustments ––– 4.5 4.5 0.7
Net proceeds of issue of shares 0.2 – – – 0.2 0.5
Premium arising on the issue of shares –0.2 – – 0.2 1.1
Loss for the financial year ––– (32.8) (32.8) (18.8)
Awards under incentive schemes ––– 2.4 2.4 0.8
Balance at end of year 410.3 107 .5 359.7 (442.8) 434.7 460.2
41 Analysis of changes in reserves – Company
2003 2002
Profit T otal T otal
Share Share Capital and lossshareholders’ shareholders’
capital premium reserve account funds funds
£m £m £m £m £m £m
At the beginning of year 410. 1 10 7 .3 359.7 (1 39.8) 7 3 7 .3 828.3
Exchange and other adjustments ––––– (0.6)
Net proceeds of issue of shares 0.2 – – – 0.2 0.5
Premium arising on the issue of shares –0.2 – – 0.2 1.1
Loss for the financial year ––– (25.4) (25.4) (92.8)
Awards under incentive schemes ––– 2.4 2.4 0.8
Balance at end of year 410.3 10 7 .5 359.7 (1 62.8) 7 1 4.7 73 7 .3
87 Egg plc Annual Report 2003 42 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.
2003
UK France Group
£m £m £m
Interest receivable 823.8 7 .0 830.8
Fees and commissions receivable 176.3 4.0 180.3
Dealing profits 5.3 – 5.3
Other operating income 4.4 0.8 5.2
Gross income 1,009.8 11.8 1,021.6
Operating profit/(loss) 56.6 (89.1) (32.5)
Share of operating profit of joint venture 0.1 – 0.1
Share of operating loss of associates and amortisation of goodwill (2.0) – (2.0)
Profit/(loss) before taxation 54.7 (89.1) (34.4)
Total assets
Joint ventures 0.9 – 0.9
Associate undertakings 5.4 – 5.4
Group total assets 11 ,49 7 .4 197 .3 11,694.7
Net assets (excluding minority interests) 403.7 31.0 434.7
2002
UK France Group
£m £m £m
Interest receivable 662.4 2.3 664.7
Fees and commissions receivable 114.9 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
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
88 Egg plc Annual Report 2003
Notes to the financial statements continued 43 Related party transactions
At 31 December 2003, transactions, arrangements and agreements entered into by the Group with directors and
connected persons and with officers included:
2003 2002
Number of T otal Number of Total
persons £’000 persons £’000
Directors and connected persons
Loans 1 293 2 888
Credit card accounts 13 52 13 41
Officers
Loans 5 963 81,843
Credit card accounts 17 80 39 109
Officers are defined as the members of Executive Committee (who are not Egg plc directors).
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
2003 2002 2003 2002
£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 received a management fee 
from Direct Valuations (PB) Limited.
– Valuations fees paid to Direct Valuations (PB) Limited – (0.3) – –
– Valuations fees paid to Direct Valuations Limited (0.3) (0.7) – –
Transactions with Lost Wax Media Limited in which Mike Harris 
(Director) and Prudential plc each have a minority shareholding. 
Tom Ilube (Chief Information Officer) had a minority shareholding 
during 2003 which was disposed of pre 31 December 2003. 
Mike was formerly chairman of Lost Wax and Tom was 
Chief Executive Officer of Lost Wax during part of 2003.
– Consultancy fees paid for information technology and internet 
services provided. (2.3) (0.5) – (0.1)
Transactions with Prudential UK Services Limited, 
a wholly owned subsidiary of Prudential plc.
– Provision of administrative services (2.8) (2.5) (0.5) –
– Profit share on payment protection insurance premiums – 3.2 – 2.7
– Commission income on payment protection insurance policies sold (0.1) 3.3 0.6 (2.3)
– Profit share on Prudential branded products (2.1) – (2.1) –
Transactions with Prudential Assurance Company Limited, a wholly 
owned subsidiary of Prudential plc.
– Commission received on sale of life and critical illness policies 0.3 0.8 0.1 0.5
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. 
44 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 Laurence Pountney Hill, London, EC4R 0HH. 
89 Egg plc Annual Report 2003 90 Egg plc Annual Report 2003
Five-year summary of results 
under current accounting policies
2003 2002 2001 2000 1999
£m £m £m £m £m
Net interest income 268.8 223.9 1 45.7 80.0 24.2
Other operating income/(expense) 155.2 103.4 43.7 13.2 (4.5)
Operating income 424.0 327 .3 189.4 93.2 19.7
Administrative expenses
– operational and administrative expenses (202.6) (1 58.9) (1 32.0) (1 08.4) (101 .0)
– brand and marketing costs (60.0) (48.6) (35.8) (50.7) (21.7)
– development costs (25.7) (26.1) (16.7) (33.6) (27 .6)
Depreciation (26.9) (21.7) (20.7) (1 6.9) (1 0.2)
Amounts written off fixed asset investment (4.3) (3.1) –––
Provisions for bad and doubtful debts (1 37 .0) (85.4) (68.0) (37 .2) (8.9)
Operating loss (32.5) (1 6.5) (83.8) (153.6) (1 49.7)
Share of operating profit/(loss) of joint venture 0.1 (0.1) (0.1) – –
Share of operating loss of associated undertaking (2.0) (3.5) (3.9) (1.7) –
Profit on partial disposal of continuing operations – 3.5 –––
Loss on ordinary activities before tax (34.4) (1 6.6) (8 7 .8) (155.3) (1 49.7)
Tax credit/(charge) on loss on ordinary activities 1.4 (2.2) 25.7 45.7 43.0
Minority interest 0.2 ––––
Retained loss for the financial period (32.8) (1 8.8) (62.1) (1 09.6) (1 06.7)
Basic and diluted loss per share (pence per share) (4.0p) (2.3p) (7 .6p) (1 4.3p) (1 7 .6p)
Interest spread 2.32% 2.12% 1.70% 0.64% 0.01%
Interest margin 2.50% 2.36% 1.90% 0.97% 0.36%
Share price at 31 December £1.25 £1.44 £1.56 £1.21 N/A
Shareholders’ funds 434.7 460.2 475.9 535.5 472.4
Customer accounts (6,451.7) (8,016.4) (5,944.5) (7 ,127 .6) (8,156.6)
Loans and advances to customers 6,7 18.0 5,546.3 4,7 12.4 3,736.1 2,046.3
Total assets 11 ,694.7 10,565.4 8,083.6 7 ,945.2 8,936.0
Capital adequacy ratio – tier 1 9.7% 9.9% 10.1% 12.4% 1 4.3%
Capital adequacy ratio – total 17 .5% 13.2% 1 3.6% 12.9% 1 4.7%
Total Egg customers 3,196,435 2,56 1,1 6 7 1,950,624 1 ,351 ,339 792,348
Note:
The figures for 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. 
2004
23 February 2004 Final results for the year ended 31 December 2003 
21 April 2004 First quarter results announcement 
22 July 2004 Announcement of 30 June 2004 interim results
26 July 2004 Annual General Meeting
20 October 2004 Third quarter results announcement 
Financial calendar  2003 2002 
Average balance Average balance
Average Average Average Average
balance rate balance rate
(UK business only) £m % £m %
Assets
Wholesale assets 4,345 4.11 4,202 4.58
Mortgages 2,210 4.7 4 2,392 5.00
Personal loans 1,326 8.03 724 9.59
Credit card 2,650 9.59 2,081 8.99
Total average interest-earning assets 10,53 1 6.12 9,399 6.05
Fixed and other assets 159 109
T otal assets 10,690 9,508
Liabilities
Customer accounts 7, 1 49 3.32 7, 1 33 3.7 7
Wholesale liabilities and subordinated debt 2,875 5.00 1,703 4.60
Total average interest-bearing liabilities 10,024 3.80 8,836 3.93
Other liabilities 234 19 7
10,258 9,033
Shareholders’ funds 432 475
T otal liabilities 10,690 9,508
Average yields
2003 2002 
Average rate Average rate
% %
Interest income as a percentage of average interest-earning assets 6.12 6.05
Interest expense as a percentage of average interest-bearing liabilities 3.80 3.93
Interest spread 2.32 2.12
Net interest margin 2.50 2.36
91 Egg plc Annual Report 2003
Average balance sheet 92 Egg plc Annual Report 2003
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www.egg.com Financial highlights
31 December 31 December 
2003 2002
£m £m
Egg UK operating profit 
(before restructuring costs) 72.8 34.8
Egg France operating loss (89.1) (46.7)
Group loss before tax (34.4) (1 6.6)
Basic and diluted loss per share 
(pence per share) (4.0p) (2.3p)
Total Assets 11 ,694.7 10,565.4
Tier 1 Capital Ratio 9.7% 9.9%
Total Capital Ratio 17 .5% 13.2%
Business highlights
2003 2002
UK Customer Numbers 3.2 million 2.6 million
Net New Customers Acquired 635,000 610,000
Credit Card Balances £3.0 billion £2.3 billion
Personal Loan Drawdowns £1.7 billion £0.8 billion
Contents
IFCFinancial highlights
IFC Business highlights
06 Chairman’s statement
08 Chief Executive’s review
10 Business review
20 Y our Board
26 Financial review
32 Directors’ report
52 Independent auditors’ report to the 
members of Egg plc
53 Consolidated profit and loss account
53 Consolidated statement of total 
recognised gains and losses
54 Consolidated balance sheet
55 Company balance sheet
56 Consolidated cash flow statement
57 Notes to the financial statements
90 Five year summary 
90 Financial calendar
91 Average balance sheet
91 Average yields
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 is a
number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these for-
ward-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.
XX Egg plc Annual Report 2003
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
Investor Relations: 
Kieran Coleman 
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)
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