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To: Paul Senior who wrote (25978)	2/12/2007 4:13:08 PM
From: Grommit	Respond to of 78814

PSEC. This company looks appealing. But I don't really like their structure. Let me know if I have it right... They are managed like a hedge fund, in that they have advisory fees. They pay themselves 2% of assets plus incentive fees which can get pretty steep. Check the last 10K. I did not see any salaries in the proxy, so maybe the "employees" are all paid as advisors???. The outside directors get $70,000 per year. I'll take that job. DO I have to attend 4 meeting per year? Anyway, just a quick look on my part. I like the business but I do not like a structure that can give exceptional paychecks to the officers. I have to dig too deep to see if I am being ripped off.

To: Paul Senior who wrote (25978)	2/12/2007 4:42:29 PM
From: Madharry	Respond to of 78814

re PSEC I too spent quite a bit of time reviewing the 10K. reminded me a little bit of edv. 2% mgmt fee, but then they have some weird formula and they glom 100% of some of the fee beyond a certain hurdle rate and then it drops back to 20% of everything beyond that upper limit hurdle rate. Looking at the history of share prices vis a vis net asset values. Im interested in the company but would like to buy it at discount to NAV. Especially because the they are making riskier investments than treasury bills but get the incentives while the investors bear the risk. To elaborate- their incentive fee is broken down into a yield segment and a capital gains segment. the incentive on the capital gains is reduced by the capital losses. Thus they could have a whole slew of investments going back yet still earn a nice incentive fee on the yield portion. Oh did I mention that they also incur debt to finance some of their investments? There is also a husband and wife team in here which is a red flag for me . Having said that the wifes credentials indicate that she is pretty sharp, so that may be a plus in this case. Let me know if the discount ever goes to 15%.

To: Paul Senior who wrote (25978)	2/12/2007 5:29:22 PM
From: jhelmers	Read Replies (3) \| Respond to of 78814

For some PSEC background, you may want to peruse two write-ups on ValueInvestorsClub.com via guest access: valueinvestorsclub.com The CEO, John Barry, is binary - people either love him or hate him, with the latter group being more popular. Last fall, PSEC raised a ruckus when they sent out a proxy that would allow them to sell shares below NAV. Many investors were upset that management would let them be diluted. They could not get the vote and dropped the issue, and then subsequently did a follow-on equity offering. General rules about investing in BDC's: 1. Never buy the IPO. 2. Buy immature BDC's when they trade below NAV. 3. On mature BDC's, buy when the yield is over 10% (although make sure they are earning the dividend; MCGC used to do a return of capital). 4. On a mature BDC, sell when the yield is under 8%. However, there is such a chase for yield that it is distorting things and some are trading in the 7's. On difference between mature vs. immature, most BDC's take time to invest the capital and use leverage. BDC's are limited to assets to equity ratio of 200%, meaning that debt to equity can't exceed 1-1. Most operate BDC's will operate between 65% and 95% of leverage.