Purchased MCG Capital Corp (MCGC)

We purchased MCG Capital Corporation (MCGC) at $11.86 per share yesterday. The company is a conservative Business Development Company (BDC) with a dividend yield of 15.5%. It provides debt financing to small & mid-capitalization companies. Speculation about a possible dividend cut in the future and concerns about the quality of its portfolio companies has brought down the shares more than 50% in the last year thereby making the valuation attractive. Returns on investments in certain competitive local exchange carriers (CLEC) have been mediocre. The investment in Cleartel is in non-accrual status and such accounts are at over 10% of the total as of 3rd quarter 2007.

To accommodate this purchase, we sold Bank Of Ireland (IRE) at $57.40 per share for a short-term loss of 25% during a period of 2 months. The stock experienced a continued decline during the period as Irish housing worries and the banks exposure to mortgages in the area continues to bear down on it.

The list of stock/options sold during the year and the gain/losses are listed below:

Stock	Buy Date	Buy Price	Sell Date	Sell Price	% Gain (Loss)	% Portfolio Return*
Harrah’s (HET)	10/2/2006	75.61	8/7/2007	83.68	10.66	0.62
St. Joe (JOE)	8/7/2007	39.4	8/8/2007	41.8	6.23	0.47
Google (GOOG)	3/14/2007	441	8/10/2007	515.99	16.86	1.14
LOCM (LOCM)	8/10/2007	5.47	9/17/2007	6.094	11.31	0.71
PetroChina (PTR)	9/12/2006	106	10/1/2007	188.5	78.14	2.83
PetroChina (PTR)	9/12/2006	106	10/3/2007	178.05	68.39	2.2
ValueClick (VCLK)	9/12/2007	19.4	10/12/2007	28.28	45.79	3.38
Canetic Resources (CNE)	11/2/2006	13.95	10/26/2007	15.88	13.78	1.06
Harvest Energy (HTE)	11/2/2006	23.46	11/9/2007	26.39	12.5	0.95
Canadian Solar (CSIQ)	10/30/2007	10.60	11/21/2007	14.30	34.9	2.82
Frontier Ltd. (FRO)	10/26/2007	43.51	11/28/2007	46.62	7.15	0.47
Asure Software (ASUR)	10/05/2007	1.31	12/18/2007	0.95	(28.78)	(1.46)
Bank Of Ireland (IRE)	10/01/2007	76.43	12/21/2007	57.40	(24.90)	(1.81)
Suntech March 45 Call	-	-	10/15/2007	5.00	-	-
TSM April 12.5 Call	-	-	10/18/2007	0.35	-	-
Realized Gain/(Loss) YTD	-	-	-	-	-	13.38

• % Gain/Loss Relative to Portfolio Value at Beginning of Year + Deposits
• The table assumes realization of profits associated with selling options only after the option is exercised or expiry.

Here is our updated Stock Portfolio:

Stock	Buy Date	Buy Price	Current Price	Current % Of Portfolio	Unrealized % Return	Current Yield
Philip Morris (MO)	1/4/2005	46.54	77.43	9.16	63.37	4.29
Kraft Foods (KFT)	1/4/2005	21.11	33.26	2.72	57.53	3.15
Plum Creek Timber (PCL)	5/12/2005	35.5	47.10	8.36	32.66	3.74
Pfizer (PFE)	2/6/2006	25.15	23.24	-5.50	(7.61)	4.63
ICICI Bank (IBN)	5/18/2006	27.57	60.04	10.66	117.75	0.92
Taiwan Semi (TSM)	7/27/2006	8.71	9.85	5.83	13.08	3.4
Advantage Energy Fund (AAV)	11/2/2006	11.22	9.14	3.51	(18.61)	15.03
SunTech Power (STP)	3/14/2007	36.73	45	5.33	22.53	0
Central Europe & Russia Fund (CEE)	6/28/2007	51.5	58.20	5.17	12.86	9.6
Patni Computers (PTI)	8/10/2007	20.85	17.38	5.14	(16.71)	0.64
Itron Inc. (ITRI)	11/07/2007	85.01	93.36	5.52	9.69	0
Anthracite (AHR)	11/09/2007	7.97	8.21	4.86	3.01	0
ClickSoftware (CKSW)	11/09/2007	4.61	3.79	2.24	(17.79)	0
LDK Solar (LDK)	11/21/2007	30.30	45.13	13.35	48.94	0
Harvest Energy (HTE)	11/28/2007	21.01	20.55	4.86	(2.21)	17.2
iRobot (IRBT)	12/18/2007	18.65	17.83	3.43	(4.40)	0
MCG Capital (MCGC)	12/21/2007	11.86	11.81	4.19	(0.39)	0
Cash				0.15
Total Portfolio					20.23

• For SunTech Power (STP), we wrote a call option for March 45 (see first table) and so the price is listed as $45 as we won’t participate in the appreciation beyond that plus the premium received.

A detailed analysis of MCG Capital Corporation (MCGC) will follow.