EAFE® Index - The MSCI EAFE Index is an unmanaged index of over 1,000 foreign common stock prices and includes the reinvestment of dividends. It tracks 20 developed stock markets outside of North America.

Early Stage: A state of a company that typically has completed its seed stage and has a founding or core senior management team, has proven its concept or completed its beta test, has minimal revenues, and no positive earnings or cash flows.

EBITDA: "Earnings Before Interest, Taxes, Depreciation and Amortization": A measure of cash flow calculated as: Revenue - Expenses (excluding tax, interest, depreciation and amortization). EBITDA looks at the cash flow of a company. By not including interest, taxes, depreciation and amortization, we can clearly see the amount of money a company brings in. This is especially useful when one company is considering a takeover of another because the EBITDA would cover any loan payments needed to finance the takeover.

Economies of Scale: Economic principle that as the volume of production increases, the cost of producing each unit decreases.

Emerging Markets - Investment in the securities of companies located in developing countries, e.g., Russia, India, etc. The definition of an "emerging market" is the market in any country with per capita GNP of less than US$ 7620 in l990 (World Bank). This is primarily a long strategy, as many countries do not permit shorting. The holding period is usually short to medium term. Because these markets are less mature with high, volatile growth and inflation, expected volatility can be very high.

Employee Stock Option Plan (ESOP): A plan established by a company whereby a certain number of shares is reserved for purchase and issuance to key employees. Such shares usually vest over a certain period of time to serve as an incentive for employees to build long term value for the company.

Employee Stock Ownership Plan: A trust fund established by a company to purchase stock on behalf of employees.

Equity Kicker: Option for private equity investors to purchase shares at a discount. Typically associated with mezzanine financings where a small number of shares or warrants are added to what is primarily a debt financing.

Equity Market Neutral: An investment strategy where an equal dollar amount of securities are held both long and short. The portfolio thereby theoretically maintains a neutral exposure to the market. If longs selected are undervalued and shorts overvalued, there should be net benefit. There are many variations on this basic structure: dollar neutral or equal dollars long and short; sector neutral with balanced sector weightings on both sides, and beta neutral.

ERISA Significant Participation Test: A test that is satisfied if the General Partner determines in its reasonable discretion that Persons that are "benefit plan investors" within the meaning of Section (f)(2) of the Final Regulation constitute or are expected to constitute at least 25 percent in interest of the Limited Partners. Note that the test is 25% of the interests of all the limited partners, which means 20% (+/-) in the partnership as a whole, taking into account the general partner's interest.

ERISA: ERISA shall mean the United States Employee Retirement Income Security Act of 1974, as amended, including the regulations promulgated thereunder.

Event-Driven/Opportunistic: An investment strategy that seeks to profit from special situations or opportunities to capitalize on price fluctuations or imbalances. Various styles or strategies may be simultaneously employed or the strategy may be changed as deemed appropriate, e.g., there is no commitment to any particular style or asset class.

Exercise price: The price at which an option or warrant can be exercised.

Exit Strategy: A fund's intended method for liquidating its holdings while achieving the maximum possible return. These strategies depend on the exit climates including market conditions and industry trends. Exit strategies can include selling or distributing the portfolio company's shares after an initial public offering (IPO), a sale of the portfolio company or a recapitalization.

Exiting climates: The conditions that influence the viability and attractiveness of various exit strategies.

Exits (AKA divestments or realizations): The means by which a private equity firm realizes a return on its investment. Private equity investors generally receive their principal returns via a capital gain on the sale or flotation of investments. Exit methods include a trade sale (most common), flotation on a stock exchange (common), a share repurchase by the company or its management or a refinancing of the business (least common). A Secondary purchase of the LP interest by another private equity firm are becoming an increasingly common phenomenon.