Guide to Analysing Companies

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EMERGING MARKET
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Employee Retirement Income Security Act
Introduced in the United States in 1974 to govern the operation
of most private pension and benefit plans. Among other
things, the Employee Retirement Income Security Act (erisa) es-
tablished a Pension Benefits Guarantee Corporation and set up
guidelines for managing pension plans. Those flouting the rules
may be subjected to strict audits by the Department of Labour.
Since most qualifying plans pay no tax and over the years have
grown to dominate investment markets, erisa funds are
courted for their business and treated with a respect that
matches their influence.
Employee stock ownership plan
A US scheme designed to encourage employees to buy stock
in the companies that they work for. There are tax advantages
to employee stock ownership plans (esops); companies can
deduct for tax purposes any dividends paid to employees
under them. Most developed countries have similar schemes.
EMS
See european monetary system.
EMU
See economic and monetary union.
Endorsement
The signature on the back of a cheque (or similar financial
instrument) which transfers ownership of the instrument
from the signatory to the bearer. A bearer instrument, such as
an open cheque, does not need endorsement.
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Endowment mortgage
A mortgage linked to an endowment policy. During the
life of the mortgage, the mortgagee pays only interest on it.
However, he or she also pays premiums on a policy which
matures at the same time as the end of the loan. The capital
sum assured by the policy should cover the principal that has
to be repaid on the mortgage. This is fine in theory, but it does
not always work in practice if the return on the premiums in-
vested fails to match the value of the principal outstanding.
During the gung-ho days of the 1980s and 1990s, when stock-
markets were on average rising strongly, some home buyers
were tempted into taking out endowment mortgages which
assumed investment returns of 8–10% a year. When markets fell
in 2000 and subsequent years, some homeowners were left
with a shortfall.