Financial Glossary: E

Early-redemption penalty

A financial penalty that is levied by mortgage lenders for switching to another lender. This is payable on certain types of loans, such as, discount and fixed-interest rate loans upon early redemption or part redemption during the specified early redemption period.

Earnings per share (EPS)

The EPS is calculated by dividing the earnings (pre-tax profits) by the number of shares in issue.This is one of the key ratios that is used in the valuation of shares as it expresses the amount of profit a company manages to make per share.

Emerging markets

The Stock Markets based in developing countries that have a low income per head compared with the developed world. These are attractive markets for speculative investors in the western countries because there is potential for rapid economic growth but at a higher economic and political risk.

Endowment policy

A policy which combines investment with insurance and runs for a specific period. It builds up a cash value, generally on either a with-profit or with unit-linked basis and is paid out at the end of the policy term or when you die (whichever is the earliest).

Enhanced Scrip Dividend

A dividend that is in the form of shares rather than cash. To encourage shareholders to take the scrip dividend the value of the shares is usually greater than the cash dividend.

Equity capital

Another term for ordinary share capital - the owners of the equity capital are collectively the owners of the company. They are the risk bearing shareholders as they benefit from capital growth if the share price rises but bear the highest risk if the company is wound up, as they will be last to receive payment.

Ethical investments

Investments that are made in companies that make a postive contribution to the world and are kind to the environment. Most ethical investments are made through a managed investment fund such as a unit trust or pension fund, as it is difficult for an individual investor to judge whether a particular company is ethical or not.

Euro

The Euro is Europe's new unit of currency that was officially launched in January 1999 in eleven countries in the European Union. All of the national notes and coins in the relevant countries will ceased to be legal tender by the end of February 2002, however, banks will contine to accept them until 2004. Britain has not yet signed up to the referendum to adopt the Euro and therefore still keeps the pound.

Eurosterling bond

A corporate bond issued by a UK company that wants to raise money in the international markets instead of its home market.

Exceptional items

Items listed in a company's profit and loss account that are associated with the normal activity of the company but are exceptional in their size.

Ex-dividend

A share sold without the right to the next declared dividend payment.

Execution only

A type of sharedealing service where the customer make his or her own investment decision and the stockbroker just carries out the transaction.

Exercise price

The specific price paid for shares if an investor exercises a warrant or option to buy.

Exit charge

Payment that has to be made by an investor selling an investment.

Exposure

The vulnerability that is attached with an investment. There are different types of exposures that an investment may have, such as, currency exposure or economic exposure. For example, currency exposure is the proportion of your share portfolio that is at risk to exchange rate fluctuations.

Extraordinary general meeting (EGM)

A meeting called either by the Board of Directors or shareholders of a company to discuss special business. This would include matters, such as, a proposed takeover or merger, or a substantial change in the way the business is to be run. (If the meeting is called by shareholders then they must hold at least 10% of the voting rights of the company's shares).

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