UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
TCW Convertible Securities Fund, Inc.
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
872340104
(CUSIP Number)
Jerald A. Trannel
290 South County Farm Road, Third Floor
Wheaton, Illinois 60187-4526
Telephone: (630) 588-7200
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
November 9, 2005
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject
of this Schedule 13D, and is filing this schedule because
of Section 240.13d-l(e), 240.13d-l(f) or 240.13d-l(g),
check the following box. [ ]
NOTE: Schedules filed in paper format shall include a
signed original and five copies of the schedule, including
all exhibits. See Section 240.13d-7(b) for other parties
to whom copies are to be sent.
The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect
to the subject class of securities, and for any subsequent
amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover
page shall not be deemed to be "filed" for the purpose of
Section 18 of the Securities Exchange Act of 1934 ("Act")
or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
2
Schedule 13D
CUSIP No. 630079101 Page 2 of 13 Pages
1. Names of Reporting Person
S.S. OR I.R.S. Identification No. of Above Persons
Grace Brothers, Ltd.
2. Check the Appropriate Box if a Member of a Group (See
instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See instructions)
OO
5. Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6. Citizenship or Place of Organization
Illinois Limited Partnership
7 Sole Voting Power
Number of 0
Shares 8 Shared Voting Power
Beneficially 1,141,200 shares
Owned by
Each
Reporting 9 Sole Dispositive Power
Person 0
With 10 Shared Dispositive Power
1,141,200 shares
11. Aggregate Amount Beneficially Owned by Each Reporting
Person
1,141,200 shares
12. Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See instructions) [ ]
13. Percent of Class Represented by Amount in Row (11)
2.4%
14. Type of Reporting Person (See instructions)
PN
3
Schedule 13D
CUSIP No. 630079101 Page 3 of 13 Pages
1. Names of Reporting Person
S.S. OR I.R.S. Identification No. of Above Persons
Bradford T. Whitmore
2. Check the Appropriate Box if a Member of a Group (See
instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See instructions)
OO
5. Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6. Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0 shares
Shares
Beneficially 8 Shared Voting Power
Owned by 1,141,200 shares
Each
Reporting 9 Sole Dispositive Power
Person 0 shares
With
10 Shared Dispositive Power
1,141,200 shares
11. Aggregate Amount Beneficially Owned by Each Reporting
Person
1,141,200
12. Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See instructions) [ ]
13. Percent of Class Represented by Amount in Row (11)
2.4%
14. Type of Reporting Person (See instructions)
IN
4
Schedule 13D
CUSIP No. 630079101 Page 4 of 13 Pages
1. Names of Reporting Person
S.S. OR I.R.S. Identification No. of Above Persons
Spurgeon Corporation
2. Check the Appropriate Box if a Member of a Group (See
instructions)
(a) [ ]
(b) [ ]
3. SEC Use Only
4. Source of Funds (See instructions)
OO
5. Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6. Citizenship or Place of Organization
Illinois Corporation
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned by 1,141,200 shares
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
1,141,200 shares
11. Aggregate Amount Beneficially Owned by Each Reporting
Person
1,141,200
12. Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See instructions) [ ]
13. Percent of Class Represented by Amount in Row (11)
2.4%
14. Type of Reporting Person (See instructions)
CO
5
Page 5 of 13 Pages
Item 1. Security and Issuer
This Schedule 13D relates to the Common Stock (the "Common
Stock") issued by TCW Convertible Securities Fund, Ltd., an
Investment Advisor (the "Company"), whose principal
executive offices are located at 865 South Figueroa Street,
Los Angeles, CA 90017.
Item 2. Identity and Background
(a) The statement is filed by Grace Brothers, Ltd., an
Illinois limited partnership ("Grace"), Bradford T.
Whitmore ("Whitmore") and Spurgeon Corporation ("Spurgeon")
(the "Filers"). Whitmore and Spurgeon are the general
partners of Grace.
(b) The business address of Grace and Whitmore is 1560
Sherman Avenue, Suite 900, Evanston, Illinois 60201.
The business address of Spurgeon is 290 South County Farm
Road, Third Floor, Wheaton, Illinois 60187.
(c) The principal business of Grace is to purchase, sell,
invest, and trade in securities. Whitmore's principal
occupation is that of being a general partner of Grace.
The principal business of Spurgeon is that of being a
general partner of Grace. The names, business addresses,
and present principal occupation or employment of each
director and executive officer of Spurgeon are set forth
in Exhibit A hereto.
(d) None of the persons referred to in this Item 2 has,
during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors).
(e) None of the persons referred to in this Item 2 has,
during the last five years, been a party to a civil
proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to , federal or state securities laws or
finding any violation with respect to such laws.
(f) Grace is an Illinois limited partnership and Spurgeon
is an Illinois corporation. Whitmore is a citizen of the
United States.
7
Page 7 of 13 Pages
Item 3. Source and Amount of Funds
The Common Stock beneficially owned by the Filers was
purchased with working capital and partnership funds.
Item 4. Purpose of Transaction.
On November 9, 2005, Grace sent a letter to the Board of
Directors of the Company regarding the Company's annual
proxy statement filed for the annual meeting scheduled for
September 29, 2005. See Exhibit B.
At the September 29 meeting, it was adjourned until
November 1, due to the fact that the Company did not
receive sufficient votes to amend various of the Fund's
investment restrictions, objectives and policies, as well
as to amend the Fund's investment management agreement. On
November 2, the Company issued a press release stating that
at the November 1 meeting, shareholders had approved those
amendments relating to the Fund's investment restrictions,
objectives and policies. However, the final proposal for
shareholder vote, that of amending the Fund's investment
management agreement with TCW Investment Management Company
("TCW") (the current investment advisor to the Fund), was
not approved by the shareholders. As a result, the
Company, yet again, adjourned the annual meeting until
November 18 in order to allow the continued solicitation of
shareholders to gain approval of this final proposal.
This proposal being pushed by the Company, which continued
solicitation expenses are being paid by us, the
shareholders, would result in the granting of additional
fees to TCW at the expense of the shareholders. The logic
provided by the Company's Board, of which each member has
recommended that we, the shareholders approve, is as
follows:
The Fund has decided that it can produce better results if
it is able to lever up the Fund, by issuing securities
senior to our common stock, or by borrowing money.
However, as a result of this fundraising, it now has more
money to invest, and therefore should be paid more fees.
Therefore, they want us to approve an amendment to the
investment management agreement to base fees on total
assets managed, and not just the equity in the Fund.
First of all, levering up the Fund will not necessarily
produce better results for the common shareholders. It
will amplify the results; if basic performance is good, it
will make it better, and if basic performance is bad, it
will make it worse. If the investment advisor decides that
it wants to lever the fund, that's a choice it can make (as
a result of the approval of amendments at the November 1
meeting). But, again, it's their choice. To pay them more
in fees just because they decide to borrow money, at their
sole discretion, is wrong. They should always be working
to provide good results for us, and if they determine that
that involves borrowing, so be it. To pay them more of our
money as a results of this voluntary levering on their part
is something we would never support, and therefore we are
voting against this proposal.
8
Page 8 of 13 Pages
The purpose of the acquisition of shares of Common Stock is
for investment; the acquisition was made in the ordinary
course of Grace's business and was not made for the purpose
of acquiring control of the Company.
Except as set forth herein, the Filers have no plans or
proposals which relate to, or would result in, any of the
matters referred to in Paragraphs (a) through (j),
inclusive, of Item 4 of the Schedule 13D. The Filers may,
at any time and from time to time, review or reconsider
their investment in the Company and formulate plans or
proposals with respect thereto, but have no present
intention of doing so.
Item 5. Interest in Securities of the Issuer
(a) Grace beneficially owns 1,141,200 shares of
Common Stock, representing approximately 2.4% of the
outstanding shares of Common Stock. As general partner of
Grace, Spurgeon may be deemed the beneficial owner of
1,141,200 shares of Common Stock, or 2.4% of the
outstanding shares of Common Stock, although they otherwise
disclaim beneficial ownership. As general partner of Grace,
Whitmore may be deemed the beneficial owner of 1,141,200
shares of Common Stock, or 2.4% of the outstanding shares
of Common Stock.
(b) Grace: shared voting power (with Whitmore and
Spurgeon)
1,141,200 Shares of Common Stock;
Whitmore: shared voting power (with Grace and Spurgeon)
1,141,200 Shares of Common Stock;
and
Spurgeon: shared voting power (with Grace and Whitmore)
1,141,200 Shares of Common Stock;
and
9
Page 9 of 13 Pages
(c) Transactions in the Company's Common Stock effected by
the Filer during the past 60 days are set forth in
Schedule A.
(d) No person other than the Filers is known to have the
right to receive, or the power to direct the receipt of,
dividends from or the proceeds from the sale of the Shares.
(e) N/A
Item 6. Contracts, Arrangements, Understandings or
Relationships with respect to Securities of the Issuer
There are no contracts, arrangements, understandings or
other relationships with respect to any securities of the
Company.
Item 7. Items to be Filed as Exhibits
Exhibit A - Directors and Executive Officers of Spurgeon
Corporation
Exhibit B - Letter to the Directors of TCW Convertible
Securities Fund, Inc.
SIGNATURE
After reasonable inquiry and to the best of its knowledge
and belief, the undersigned certifies that the information
set forth in this Statement with respect to it is true,
complete and correct.
Dated: November 9, 2005
Grace Brothers, Ltd.
By: /s/ Bradford T. Whitmore
Name: Bradford T. Whitmore
Its: General Partner
Bradford T. Whitmore
By: /s/ Bradford T. Whitmore
Name: Bradford T. Whitmore
Spurgeon Corporation
By: /s/ Jerald A. Trannel
Name: Jerald A. Trannel
Its: Vice President
10
Page 10 of 13 Pages
SCHEDULE A
TRADE ACTIVITY FOR TCW CONVERTIBLE SECURITIES FUND, INC.
EFFECTED BY GRACE BROTHERS, LTD. FOR THE PREVIOUS 60 DAYS.
Amount of Price per
Date Security Shares Purchased Share
10/25/2005 Common Stock 200 $4.84
10/26/2005 Common Stock 2,000 $4.82
10/31/2005 Common Stock 600 $4.85
10/31/2005 Common Stock 2,000 $4.86
10/31/2005 Common Stock 4,000 $4.87
10/31/2005 Common Stock 100 $4.90
10/31/2005 Common Stock 1,000 $4.91
10/31/2005 Common Stock 8,000 $4.93
10/31/2005 Common Stock 2,100 $4.89
11/02/2005 Common Stock 2,000 $4.80
11/02/2005 Common Stock 3,600 $4.83
11/02/2005 Common Stock 1,400 $4.84
11/02/2005 Common Stock 4,600 $4.85
11/03/2005 Common Stock 400 $4.90
11/03/2005 Common Stock 1,900 $4.93
11/03/2005 Common Stock 2,900 $4.94
11/03/2005 Common Stock 6,700 $4.95
11/03/2005 Common Stock 5,000 $4.92
11/04/2005 Common Stock 200 $4.90
11/04/2005 Common Stock 2,400 $4.91
11/04/2005 Common Stock 4,800 $4.92
11/07/2005 Common Stock 1,600 $4.90
11/07/2005 Common Stock 3,900 $4.92
11/08/2005 Common Stock 2,700 $4.93
Exhibit A
Directors and Officers of Spurgeon Corporation
Judith M. Van Kampen
290 South County Farm Road
3rd Floor
Wheaton, IL 60187
Director of Spurgeon. Trustee of Judith M. Van Kampen
Trust which is Manager of Van Kampen Asset Management
Company, LLC.
11
Page 11 of 13 Pages
Karla M. Van Kampen-Pierre
290 South County Farm Road
3rd Floor
Wheaton, IL 60187
Director of Spurgeon. Trustee of Judith M. Van Kampen
Trust which is Manager of Van Kampen Asset Management
Company, LLC.
David Wisen
120 Washington St.
Grand Haven, MI 49417-0070
Director and President of Spurgeon. President of Van
Kampen Asset Management Company, LLC.
Jerald A. Trannel
290 South County Farm Road
Third Floor
Wheaton, IL 60187
Vice President and Treasurer of Spurgeon. Controller
of Grace Brothers, Ltd. and Senior Vice President and
Treasurer of Van Kampen Asset Management Company, LLC.
Gregory M. White
290 South County Farm Road
Third Floor
Wheaton, IL 60187
Secretary of Spurgeon. Secretary of Van Kampen Asset
Management Company, LLC.
All are United States Citizens.
The Business address of Van Kampen Asset Management
Company, LLC is 290 South County Farm Road, Third Floor,
Wheaton, IL 60187. The principal business of Van Kampen
Asset Management Company, LLC is investment and asset
management.
Exhibit B
Letter to the Board of Directors of TCW Convertible
Securities Fund, Inc.
12
Page 12 of 13 Pages
November 8, 2005
The Directors of TCW Convertible Securities Fund, Inc.
Samuel P. Bell, Richard W. Call, Matthew K. Fong, John
Gavin, Patrick C. Haden, Charles A. Parker, Ernest
O. Ellison, Robert G. Sims
865 South Figueroa Street
Los Angeles, CA 90017
Gentlemen:
We are holders of in excess of 1.1 million shares of the
TCW Convertible Securities Fund, Inc. ("CVT"). We may be
your largest shareholder. As such, we were very
interested in your annual proxy statement filed for the
annual meeting scheduled for September 29, 2005. As
holders, we have experienced the dismal return which CVT
has provided to its shareholders, both on a net asset value
as well as a market value basis. As we're sure you are
well aware, the trading discount to net asset value is a
true indication of how shareholders feel about the
prospects your investment advisor has provided and will
provide if left to continue with the management of the
fund. The current market discount to net asset value
conveys a STRONG dislike for the performance your chosen
investment advisor has provided. To put it in perspective,
the market discount to NAV implies that your advisor
provides a NEGATIVE value of 9 percent of the funds net
asset value, or approximately $23 million. As you are of
course aware, that negative value would immediately go
away, and inure to the benefit of the CVT shareholders, if
you would either open-end the fund, or liquidate the fund.
Obviously, you will never recommend either of those, as
doing so would significantly reduce the fees you get from
us upon an open-ending, with its corresponding reduction of
assets under management (due to redemptions), or would
cause the fees to totally disappear in the case of a
liquidation of the fund.
The proxy dealt with a number of issues, such as borrowing
by the Fund, issuing senior securities, expanding the type
of securities in which the Fund may invest, allowing for the
purchase or sale of call options, and PROVIDING THAT FEES
PAID UNDER THE MANAGEMENT AGREEMENT WILL BE BASED ON ALL
MANAGED ASSETS. This last request, which you've ALL
recommended that we vote for, is truly remarkable.
13
Page 13 of 13 Pages
First of all, you want shareholders to allow you to issue
securities senior to our common stock, and/or borrow money
to support leveraging up our equity. Leveraging, of
course, is a double-edged sword. If the return provided by
the incremental investment made as a result of additional
borrowing is lower than the cost of the borrowing, then
this activity actually lowers the return to the common
shareholders. Of course, it could go the other way: an
incremental return in excess of the cost of borrowing would
enhance the return to the common shareholders. In this
way, one could argue that leveraging can be either a good
thing or a bad thing, depending on the incremental return
on investment vs. the incremental cost of funds.
However, an unambiguously negative proposition for
shareholders is your proposal that FEES BE PAID BASED ON
ALL MANAGED ASSETS, BOTH UNLEVERED AND LEVERED. THIS IS
AKIN TO GIVING THE MANAGEMENT COMPANY A CHECK MADE OUT TO
THEM, AND LETTING THEM JUST FILL IN HOW MUCH OF OUR
PROPERTY THEY WANT TO TAKE FROM US. IT IS WRONG, AND YOU,
AS OUR FIDUCIARIES, KNOW BETTER. IF YOU ARE TRULY LOOKING
OUT FOR OUR INTEREST, HOW CAN YOU PROPOSE THAT THE FUND BE
ABLE TO LEVERAGE UP ITS BALANCE SHEET, AND THEN USE THAT TO
ARRIVE AT THE CONCLUSION THAT "IT WOULD NOT BE APPROPRIATE
TO TAKE ACTIONS THAT INCREASE ASSETS WHICH THE ADVISOR IS
OBLIGED BY THE AGREEMENT TO MANAGE WITHOUT PROVIDING
PROPORTIONAL ADDITIONAL COMPENSATION" (proxy: page 16). It
is absurd to modify the Fund's investment restrictions to
ALLOW the management company to lever up the balance sheet
(an action with uncertain results for shareholders), and
then conclude that now that they have more work to do, they
should get paid more (unambiguously negative for
shareholders). No one is making them lever up the balance
sheet. It's their choice. But I can tell you with
certainty that if they get more money by levering it up,
lever they will. YOU ARE PROVIDING YET ANOTHER WAY FOR
THE ADVISORS TO TAKE MONEY OUT OF OUR ASSET BASE. WORSE,
THESE ARE THE SAME ADVISORS WHO HAVE BEEN MIS-MANAGING THE
FUND'S ASSETS FOR QUITE SOME TIME, RESULTING IN
UNDER-PERFORMANCE BOTH ON A NET ASSET BASIS AS WELL AS A
MARKET VALUE BASIS.
Obviously, I'm not the only shareholder who shares this
view. Clearly, your decision to adjourn the annual meeting
YET AGAIN until November 18th to "provide additional time
to solicit the necessary votes to approve a fourth
proposal...to provide that fees paid under the Agreement be
based on all managed assets" indicates that you aren't
getting your desired support for this change. It is such a
waste of money to continue to have Georgeson Shareholder
Communications, Inc.("Georgeson") attempt to convince
shareholders to support this proposal JUST SO THE MANAGER
CAN TAKE MORE OF OUR MONEY. (As the proxy states,
Georgeson has been retained by the Fund.) YOU ARE TAKING
MONEY OUT OF OUR FUND TO PAY GEORGESON TO SPEND TIME
TRYING TO CONVINCE SHAREHOLDERS TO ALLOW THE MANAGER TO
TAKE MORE OF OUR MONEY. IS THAT WHAT YOUR FIDUCIARY DUTY
IS ALL ABOUT? ONE TRULY HAS TO WONDER WHERE YOUR LOYALTIES
LIE.
SHAME ON YOU.
Sincerely,
Bradford T. Whitmore
General Partner