Guide to Analysing Companies

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EUROPEAN MONETARY SYSTEM
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and their own currency. Many countries maintained strict ex-
change controls after the second world war. The UK abolished
them in 1979, and France even later.
Exchange Rate Mechanism
A central part of the european monetary system. The Ex-
change Rate Mechanism (erm) was an agreement to maintain
within limits the exchange rates of member states of the Euro-
pean Community. This guaranteed a degree of monetary stabil-
ity within the boundaries of what later became the European
Union. However, it also created strains, as the UK found to its
cost when the pound was forced out of the erm by speculators
in 1992.
Exchange traded fund
A mutual fund (unit trust) which tracks a particular
stockmarket index and can be bought and sold like a
share. One of the most widely held exchange traded funds
(etfs) is Standard & Poor’s Depositary Receipt (spdr, or spider)
which tracks the shares of companies that make up the s&p 500
index. One spdr is worth a fraction of the value of the s&p 500.
Investors receive dividends quarterly, based on the accumu-
lated amounts held in trust, less any expenses charged by the
fund.
Ex-div
An indication given next to a quoted share price showing that
the price excludes payment of a dividend that has been de-
clared by the company but not yet paid. Ex-div means that the
dividend is to be paid to the previous owner of the share. (See
also cum div.)
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Exercise
Making use of a right that is available under the terms of a con-
tract; for example, exercising an option to purchase a
share at a certain price within a certain time. The right in ques-
tion may also be the conversion of a convertible security
into a share.