UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Dynex Capital, Inc.
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
26817Q506
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(CUSIP Number)
Arthur D. Lipson
Western Investment LLC
2855 East Cottonwood Parkway, Ste. 110
Salt Lake City, UT 84121
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 26, 2006
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(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 Rule 13d-1(e), (f) or (g), check the
following box [ ].
CUSIP No. - 26817Q506
1 NAMES OF REPORTING PERSONS.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY).
WESTERN INVESTMENT LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS* (See Item 3)
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) [ ]
OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER (See Item 5)
SHARES 1,145,193 shares
BENEFICIALLY 8 SHARED VOTING POWER (See Item 5)
OWNED BY 0 shares
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,145,193 shares
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0 shares
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5) 1,145,193 shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.3%
14 TYPE OF REPORTING PERSON*
OO
1 NAMES OF REPORTING PERSONS.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY).
ARTHUR D. LIPSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS* (See Item 3)
OO,PF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) [ ]
OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
NUMBER OF 7 SOLE VOTING POWER (See Item 5)
SHARES 1,170,193 shares
BENEFICIALLY 8 SHARED VOTING POWER (See Item 5)
OWNED BY 0 shares
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,170,193 shares
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0 shares
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5) 1,170,193 shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.5%
14 TYPE OF REPORTING PERSON*
IN
1 NAMES OF REPORTING PERSONS.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY).
WESTERN INVESTMENT HEDGED PARTNERS LP
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS* (See Item 3)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) [ ]
OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER (See Item 5)
SHARES 142,470 shares
BENEFICIALLY 8 SHARED VOTING POWER (See Item 5)
OWNED BY 0 shares
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 142,470 shares
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0 shares
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5) 142,470 shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.2%
14 TYPE OF REPORTING PERSON*
PN
1 NAMES OF REPORTING PERSONS.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY).
WESTERN INVESTMENT INSTITUTIONAL PARTNERS LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS* (See Item 3)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) [ ]
OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER (See Item 5)
SHARES 952,478 shares
BENEFICIALLY 8 SHARED VOTING POWER (See Item 5)
OWNED BY 0 shares
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 952,478 shares
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0 shares
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5) 952,478 shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.7%
14 TYPE OF REPORTING PERSON*
OO
1 NAMES OF REPORTING PERSONS.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY).
WESTERN INVESTMENT TOTAL RETURN MASTER FUND LTD
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS* (See Item 3)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) [ ]
OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
NUMBER OF 7 SOLE VOTING POWER (See Item 5)
SHARES 50,245 shares
BENEFICIALLY 8 SHARED VOTING POWER (See Item 5)
OWNED BY 0 shares
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 50,245 shares
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0 shares
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5) 50,245 shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.4%
14 TYPE OF REPORTING PERSON*
CO
ITEM 1. SECURITY AND ISSUER
This statement relates to shares of the Common Stock, par value $.01 (the
"Common Shares"), of Dynex Capital, Inc. (the "Issuer"). The Common Shares
reported in this statement include Common Shares issuable upon conversion of
the Issuer's Series D 9.50% Cumulative Convertible Preferred Stock, par value
$.01 (the "Preferred Shares"). Based on the Issuer's public filings, each
outstanding Preferred Share is currently convertible into one Common Share at
the option of the holder. The address of the principal executive offices of the
Issuer is 4551 Cox Rd., Suite 300, Glen Allen, VA 23060.
ITEM 2. IDENTITY AND BACKGROUND
(a) This statement is filed by Western Investment LLC, a Delaware limited
liability company ("WILLC"), Arthur D. Lipson, Western Investment Hedged
Partners LP, a Delaware limited partnership ("WIHP"), Western Investment
Institutional Partners LLC ("WIIP"), a Delaware limited liability company,
and Western Investment Total Return Master Fund, Ltd. ("WITR"), a Cayman
Islands corporation. Each of the foregoing is referred to as a "Reporting
Person" and collectively as the "Reporting Persons."
WILLC has sole voting and investment power over WIHP's, WIIP's and WITR's
security holdings and Mr. Lipson, in his role as the managing member of
WILLC, controls WILLC's voting and investment decisions.
(b) The principal business address of each Reporting Person is 2855 East
Cottonwood Parkway, Suite 110, Salt Lake City, UT 84121
(c) The principal business of WILLC is acting as the general partner,
managing member and investment manager of WIHP, WIIP and WITR, respectively.
The principal occupation of Arthur D. Lipson is acting as managing member of
WILLC. The principal business of WIHP, WIIP and WITR is acquiring, holding and
disposing of investments in various companies.
(d) No Reporting Person has, during the last five years, been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) No Reporting Person has, during the last five years, been 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) Mr. Lipson is a citizen of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The aggregate purchase price of the 939,771 Common Shares beneficially owned
by WILLC (not including shares issuable upon conversion of Preferred Shares
beneficially owned by WILLC) is $6,200,193.49. The aggregate purchase price of
the 205,422 Preferred Shares beneficially owned by WILLC is $2,111,452.83. The
Common Shares and Preferred Shares beneficially owned by WILLC were acquired
with the investment funds of each of WIHP, WIIP and WITR. The aggregate
purchase price of the 25,000 Common Shares owned directly by Mr. Lipson is
$141,500. The Common Shares owned directly by Mr. Lipson were acquired with
his personal funds.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Persons purchased the Common Shares and Preferred Shares based
on the Reporting Persons' belief that such securities, when purchased, were
undervalued and represented an attractive investment opportunity. Depending
upon overall market conditions, other investment opportunities available to
the Reporting Persons, and the availability of Common Shares and Preferred
Shares at prices that would make the purchase of additional shares desirable,
the Reporting Persons may endeavor to increase their position in the Issuer
through, among other things, the purchase of Common Shares and/or Preferred
Shares on the open market or in private transactions or otherwise, on such
terms and at such times as the Reporting Persons may deem advisable.
No Reporting Person has any present plan or proposal which would relate to or
result in any of the matters set forth in subparagraphs (a) - (j) of Item 4 of
Schedule 13D except as set forth herein or such as would occur upon completion
of any of the actions discussed above. The Reporting Persons strongly support
current management and their goal to increase shareholder value. The Reporting
Persons intend to review their investment in the Issuer on a continuing basis
and may engage in discussions with management and the Board of Directors of the
Issuer concerning the business, operations and future plans of the Issuer.
Depending on various factors including, without limitation, the Issuer's
financial position and investment strategy, the price levels of the Common
Shares and Preferred Shares, conditions in the securities markets and general
economic and industry conditions, the Reporting Persons may in the future take
such actions with respect to their investment in the Issuer as they deem
appropriate including, without limitation, making proposals to the Issuer
concerning changes to the capitalization, ownership structure or operations of
the Issuer, communicating with other shareholders regarding the Issuer,
purchasing additional securities of the Issuer, selling some or all of their
Common Shares and/or Preferred Shares, engaging in short selling of or any
hedging or similar transaction with respect to the Common Shares and/or
Preferred Shares or changing their intention with respect to any and all
matters referred to in Item 4.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The aggregate percentage of Common Shares reported owned by each person
named herein is based upon 12,163,391 Common Shares outstanding as of April
28, 2006, as reported in the Issuer's definitive proxy statement filed with
the Securities and Exchange Commission on May 5, 2006.
As of the close of business on August 4, 2006, WIHP, WIIP and WITR
beneficially owned 142,470, 952,478 and 50,245 Common Shares, respectively,
representing approximately 1.2%, 7.7% and 0.4%, respectively, of the Common
Shares outstanding. The Common Shares beneficially owned by WIIP include
205,422 Common Shares that are issuable upon the conversion of Preferred
Shares owned by WIIP. WILLC beneficially owned 1,145,193 Common Shares,
constituting approximately 9.3% of the Common Shares outstanding. Mr. Lipson
beneficially owned 1,170,193 Common Shares, constituting approximately 9.5%
of the Common Shares outstanding. The Common Shares beneficially owned by Mr.
Lipson consist of the 1,145,193 Common Shares beneficially owned by WILLC and
25,000 Common Shares owned directly by him.
As the general partner, managing member and investment manager of WIHP, WIIP
and WITR, respectively, WILLC may be deemed to beneficially own the 1,145,193
Common Shares beneficially owned in the aggregate by WIHP, WIIP and WITR. As
the managing member of WILLC, Mr. Lipson may be deemed to beneficially own
the 1,145,193 Common Shares beneficially owned by WILLC.
(b) Each of WILLC and Mr. Lipson is deemed to have sole voting and dispositive
power over the securities reported herein as beneficially owned by WIHP, WIIP
and WITR by virtue of their respective positions as described in paragraph
(a). Mr. Lipson has sole voting and dispositive power over the securities
reported herein as owned directly by him.
(c) Schedule A annexed hereto lists all transactions in the Common Shares and
Preferred Shares during the past sixty days by the Reporting Persons. All of
such transactions were effected in the open market.
(d) No person other than the Reporting Persons is known to have the right to
receive, or the power to direct the receipt of dividends from, or proceeds from
the sale of, the securities reported herein.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
On August 7, 2006, the Reporting Persons entered into a Joint Filing Agreement
in which the parties agreed to the joint filing on behalf of each of them of
statements on Schedule 13D with respect to the securities of the Issuer. Other
than as described herein, there are no contracts, arrangements, understandings
or relationships among the Reporting Persons, or between the Reporting Persons
and any other person, with respect to the securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Joint Filing Agreement by and among Western Investment LLC, Arthur D.
Lipson, Western Investment Hedged Partners LP, Western Investment
Institutional Partners LLC and Western Investment Total Return Master
Fund Ltd., dated August 7, 2006.
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
August 7, 2006 WESTERN INVESTMENT LLC
By: /s/ Arthur D. Lipson, Sole Member
WESTERN INVESTMENT HEDGED PARTNERS LP
By: Western Investment LLC,
its General Partner
By: /s/ Arthur D. Lipson, Managing Member
WESTERN INVESTMENT INSTITUTIONAL PARTNERS LLC
By: Western Investment LLC,
its Managing Member
By: /s/ Arthur D. Lipson, Managing Member
WESTERN INVESTMENT TOTAL RETURN MASTER FUND LTD
By: Western Investment LLC,
its Investment Manager
By: /s/ Arthur D. Lipson, Managing Member
/s/ Arthur D. Lipson
___________________________
ARTHUR D. LIPSON
EXHIBIT A
1. Joint Filing Agreement by and among Western Investment LLC,
Arthur D. Lipson, Western Investment Hedged Partners LP, Western
Investment Institutional Partners LLC and Western Investment Total
Return Master Fund Ltd, dated August 7, 2006. See attached.
SCHEDULE A
COMMON STOCK
Transaction Code Quantity Trade Date Price
WIIP Buy 2,300 6/16/2006 $6.7300
Buy 2,200 6/19/2006 $6.7000
Buy 400 6/20/2006 $6.7200
Buy 2,000 6/21/2006 $6.7285
Buy 400 6/22/2006 $6.7310
Buy 1,710 6/23/2006 $6.7285
Buy 900 6/23/2006 $6.7306
Buy 600 6/26/2006 $6.7552
Buy 400 7/03/2006 $6.7585
Buy 600 7/05/2006 $6.7335
Buy 13,000 7/13/2006 $6.7303
Buy 5,500 7/13/2006 $6.7310
Buy 3,400 7/17/2006 $6.7279
Buy 2,400 7/18/2006 $6.7296
Buy 800 7/19/2006 $6.7450
Buy 600 7/20/2006 $6.7667
Buy 5,800 7/21/2006 $6.7580
Buy 1,800 7/24/2006 $6.7452
Buy 2,000 7/25/2006 $6.7585
Buy 299,200 7/26/2006 $6.7250
Buy 4,000 7/26/2006 $6.7285
Buy 12,100 7/27/2006 $6.7300
Buy 225,400 7/27/2006 $6.7350
Buy 6,400 7/28/2006 $6.7200
Buy 600 7/31/2006 $6.7200
Buy 300 8/01/2006 $6.7285
Buy 100 8/02/2006 $6.7285
Buy 400 8/04/2006 $6.7285
WITR Buy 12,750 7/14/2006 $6.7258
SERIES D PREFERRED STOCK
Transaction Code Quantity Trade Date Price
WIIP Buy 500 7/31/2006 $10.1600
EXHIBIT A
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k)(1)(iii) under the Securities Exchange
Act of 1934, as amended, the persons named below agree to the joint filing
on behalf of each of them of a Statement on Schedule 13D dated August 7, 2006
(including amendments thereto) with respect to the Common Stock of Dynex
Capital, Inc. This Joint Filing Agreement shall be filed as an Exhibit to
such Statement.
Dated: August 7, 2006
WESTERN INVESTMENT LLC
By: /s/ Arthur D. Lipson, Sole Member
WESTERN INVESTMENT HEDGED PARTNERS LP
By: Western Investment LLC,
its General Partner
By: /s/ Arthur D. Lipson, Managing Member
WESTERN INVESTMENT INSTITUTIONAL PARTNERS LLC
By: Western Investment LLC,
its Managing Member
By: /s/ Arthur D. Lipson, Managing Member
WESTERN INVESTMENT TOTAL RETURN MASTER FUND LTD
By: Western Investment LLC,
its Investment Manager
By: /s/ Arthur D. Lipson, Managing Member
/s/ Arthur D. Lipson
ARTHUR D. LIPSON