N-Q 1 convertible_final.htm NQ REPORT FOR CONVERT SEC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT COMPANY


Investment Company Act file number: 811-4672

Name of Registrant: Vanguard Convertible Securities Fund

Address of Registrant: P.O. Box 2600
Valley Forge, PA 19482

Name and address of agent for service: Heidi Stam, Esquire
P.O. Box 876
Valley Forge, PA 19482

Registrant’s telephone number, including area code: (610) 669-1000


Date of fiscal year end: November 30

Date of reporting period: August 31, 2008

Item 1: Schedule of Investments



Vanguard Convertible Securities Fund

Schedule of Investments

As of August 31, 2008

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value

 

 

Coupon

Date

($000)

($000)

Convertible Bonds (84.4%)

 

 

 

 

Consumer Discretionary (5.2%)

 

 

 

 

1

American Real Estate

4.000%

8/15/13

4,995

3,596

 

Ford Motor Co.

4.250%

12/15/36

17,880

11,778

 

General Motors Corp.

6.250%

7/15/33

629

7,154

1

Iconix Brand Group

1.875%

6/30/12

8,640

6,588

 

Interpublic

4.250%

3/15/23

15,000

15,619

 

Liberty Media LLC

3.500%

1/15/31

4,570

2,314

1

Stewart Enterprises

3.125%

7/15/14

4,245

4,484

 

51,533

Consumer Staples (3.5%)

1

Archer-Daniels-Midland Co.

0.875%

2/15/14

9,615

8,762

 

Archer-Daniels-Midland Co.

0.875%

2/15/14

4,775

4,351

 

Chattem Inc.

1.625%

5/1/14

6,960

7,682

 

Molson Coors Brewing Co.

2.500%

7/30/13

7,835

8,824

 

Smithfield Foods Inc.

4.000%

6/30/13

3,940

4,487

 

34,106

Energy (20.0%)

 

Bill Barrett Corp.

5.000%

3/15/28

8,715

8,595

 

Bristow Group

3.000%

6/15/15

6,385

6,066

 

Carrizo Oil & Gas

4.375%

6/1/28

13,960

12,355

 

Chesapeake Energy Corp.

2.250%

12/15/38

30,485

28,580

 

Goodrrich Petroleum Corp.

3.250%

12/1/26

9,325

10,327

 

Hercules Offshore LLC

3.375%

6/1/38

6,160

5,067

 

Hornbeck Offshore Services

1.625%

11/15/26

12,120

13,353

 

Massey Energy Co.

3.250%

8/1/15

6,625

6,964

 

Nabors Industries Ltd.

0.940%

5/15/11

7,725

8,015

 

Parker Drilling

2.125%

7/15/12

3,785

3,657

1

Patriot Coal

3.250%

5/31/13

8,460

9,697

 

Peabody Energy Corp.

4.750%

12/15/41

370

473

 

Pennsylvania Virginia Co.

4.500%

11/15/12

7,170

9,814

 

Pioneer Natural

2.875%

1/15/38

3,035

3,896

 

St. Mary Land & Exploration

3.500%

4/1/27

14,900

15,757

 

Superior Energy Services, Inc.

1.500%

12/15/26

7,170

8,496

1

Superior Energy Services, Inc.

1.500%

12/15/26

3,440

4,076

 

Transocean Inc.

1.500%

12/15/37

15,300

15,740

 

Transocean Inc.

1.500%

12/15/37

3,290

3,376

 

Transocean Inc.

1.625%

12/15/37

12,740

13,202

 

Trico Marine

3.000%

1/15/27

7,415

5,858

1

Trico Marine

6.500%

5/15/28

3,830

3,577

 

196,941

Financials (1.8%)

 

CapitalSource Inc.

7.250%

7/15/37

6,005

4,774

1

Prologis Inc.

2.250%

4/1/37

8,695

7,358

 

 

 

 

 

1

Rayonier TRS Holdings Inc.

3.750%

10/15/12

5,160

5,160

 

17,292

Health Care (24.6%)

1

Allergan, Inc.

1.500%

4/1/26

10,095

10,928

 

Allergan, Inc.

1.500%

4/1/26

5,955

6,446

 

Alpharma Inc.

2.125%

3/15/27

8,815

10,931

 

American Medical Systems Holdings, Inc.

3.250%

7/1/36

3,790

4,051

 

Amgen Inc.

0.125%

2/1/11

4,800

4,698

 

Amgen Inc.

0.375%

2/1/13

8,370

8,140

 

China Medical Technologies

4.000%

8/15/13

9,235

8,993

 

Cubist Pharmaceuticals Inc.

2.250%

6/15/13

17,555

16,941

1

Cyberomnics Inc.

3.000%

9/27/12

5,265

4,429

 

Five Star Quality Care Inc.

3.750%

10/15/26

4,645

2,781

 

Genzyme Corp.

1.250%

12/1/08

4,345

4,942

1

Gilead Sciences Inc.

0.500%

5/1/11

18,180

25,884

 

Gilead Sciences Inc.

0.500%

5/1/11

1,745

2,484

1

Health Management Assn.

3.750%

5/1/28

2,065

1,791

 

Hologic Inc.

2.000%

12/15/37

17,250

14,080

1

Integra Lifesciences

2.375%

6/1/12

7,790

7,284

1

Inverness Medical Innovations Inc.

3.000%

5/15/16

8,400

8,410

 

Invitrogen Corp.

1.500%

2/15/24

11,520

11,390

 

Invitrogen Corp.

3.250%

6/15/25

4,705

5,023

 

Kendle International Inc.

3.375%

7/15/12

3,515

4,315

 

Lifepoint Hospital, Inc.

3.500%

5/15/14

5,270

4,743

 

Medtronic Inc.

1.500%

4/15/11

7,400

8,020

1

Medtronic Inc.

1.500%

4/15/11

960

1,040

1

Nuvasive Inc.

2.250%

3/15/13

8,125

10,126

1

PSS World Medical Inc.

3.125%

8/1/14

6,200

6,510

 

SFBC International, Inc.

2.250%

8/15/24

9,190

8,707

 

Sonosite Inc.

3.750%

7/15/14

3,425

3,750

 

Teva Pharmaceutical Financial

1.750%

2/1/26

21,510

24,414

 

Thoratec Corp.

1.379%

5/16/34

3,075

2,583

 

Valeant Pharmaceuticals International

3.000%

8/16/10

2,015

1,899

 

Valeant Pharmaceuticals International

4.000%

11/15/13

1,170

1,072

1

Wilson Greatbatch

2.250%

6/15/13

6,010

5,274

 

242,079

Industrials (13.0%)

1

AAR Corp.

1.625%

3/1/14

5,110

3,756

 

AAR Corp.

1.750%

2/1/26

800

664

 

Albany International Corp.

2.250%

3/15/26

2,355

2,146

1

Alliant Techsystems Inc.

2.750%

9/15/11

6,830

8,324

 

AMR Corp.

4.500%

2/15/24

14,810

13,940

1

Barnes Group Inc.

3.375%

3/15/27

6,080

6,483

 

Barnes Group Inc.

3.375%

3/15/27

2,490

2,655

 

Covanta Holding

1.000%

2/1/27

10,915

11,925

 

Energy Conversion Device

3.000%

6/15/13

5,055

5,238

1

General Cable Corp.

1.000%

10/15/12

13,680

11,970

 

JA Solar Holdings Co. Ltd.

4.500%

5/15/13

5,990

5,271

 

L-3 Communications Corp.

3.000%

8/1/35

13,772

16,234

 

SunPower Corp.

0.750%

8/1/27

5,840

7,687

 

Suntech Power Holdings

0.250%

2/15/12

3,171

3,647

1

Suntech Power Holdings

3.000%

3/15/13

11,380

15,078

 

 

 

 

 

 

Triumph Group

2.625%

10/1/26

1,390

1,640

 

UAL Corp.

4.500%

6/30/21

7,235

4,106

1

Waste Connections, Inc.

3.750%

4/1/26

4,200

5,008

 

Waste Connections, Inc.

3.750%

4/1/26

2,280

2,719

 

 

 

 

 

128,491

Information Technology (14.4%)

1

Alliance Data System Co.

1.750%

8/1/13

6,290

6,203

 

Arris Group, Inc.t.

2.000%

11/15/26

6,805

5,901

 

CACI International Inc.

2.125%

5/1/14

5,175

5,628

1

CACI International Inc.

2.125%

5/1/14

1,600

1,740

 

Ciena Corp.

0.250%

5/1/13

20,720

15,203

 

CSG Systems International Inc.

2.500%

6/15/24

1,245

1,156

 

Equinix Inc.

2.500%

4/15/12

17,910

17,283

 

Equinix Inc.

3.000%

10/15/14

2,555

2,488

 

FEI Co.

2.875%

6/1/13

5,620

6,330

 

Flextronics International Ltd.

1.000%

8/1/10

12,040

11,197

 

Informatica Corp.

3.000%

3/15/26

4,775

5,157

1

Lawson Software Inc.

2.500%

4/15/12

9,355

9,016

 

Lawson Software Inc.

2.500%

4/15/12

3,705

3,571

1

Magma Design Automation Inc.

2.000%

5/15/10

2,926

2,359

 

Magma Design Automation Inc.

2.000%

5/15/10

235

189

1

Netapp Inc.

1.750%

6/1/13

12,170

12,429

 

ON Semiconductor

2.625%

12/15/26

19,850

22,356

 

Symantec Corp.

0.750%

6/15/11

8,760

11,016

1

Synnex Corp.

4.000%

5/15/18

2,440

2,504

 

141,726

Materials (0.4%)

1

Kinross Gold

1.750%

3/15/28

4,970

4,473

Telecommunication Services (1.5%)

 

Globalstar

5.750%

4/1/28

2,040

1,609

 

Nii Holdings

3.125%

6/15/12

300

257

1

SBA Communications Corp.

1.875%

5/1/13

13,315

13,332

 

15,198

Total Convertible Bonds (Cost $858,094)

831,839

 

 

 

 

 

Market

 

 

 

 

 

Value

 

 

 

 

Shares

($000

Convertible Preferred Stocks (11.7%)

 

 

 

 

Financials (8.4%)

 

 

 

 

 

American International Group, Inc.

8.500%

 

167,000

8,325

 

Aspen Insurance Holdings, Ltd.

5.625%

 

165,460

8,438

 

Bank of America Corp

7.250%

 

31,850

28,904

 

CIT Group Inc.

8.750%

 

335,200

17,766

 

Citigroup Inc.

6.500%

 

272,600

11,620

 

KeyCorp

7.750%

 

57,300

5,728

 

Lehman Brothers Holdings

7.250%

 

3,590

2,333

 

 

 

 

 

83,114

Health Care (2.0%)

3

Inverness Medical Innovations Inc.

3.000%

 

56,532

13,794

 

 

Schering-Plough Corp.

6.000%

 

29,800

5,513

 

19,307

Industrials (0.3%)

 

Continental Airlines Financial Trust

6.000%

 

115,000

2,724

Telecommunication Services (1.0%)

 

Crown Castle International Corp.

6.250%

 

187,700

10,277

Total Convertible Preferred Stocks (Cost $129,418)

115,422

Temporary Cash Investment (3.6%)

4

Vanguard Market Liquidity Fund (Cost $34,869)

2.389%

 

34,868,787

34,869

Total Investments (99.7%) (Cost $1,022,381)

982,130

Other Assets and Liabilities-Net (0.3%)

3,139

Net Assets (100%)

985,269

 

1 Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At August 31, 2008, the aggregate value of these securities was $237,649,000, representing 24.1% of net assets.

 

2 Represents shares in thousands.

 

3 New issue that has not paid a dividend as of August 31, 2008.

 

4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value. Other temporary cash investments are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund's pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

 

At August 31, 2008, the cost of investment securities for tax purposes was $1,022,381,000. Net unrealized depreciation of investment securities for tax purposes was $40,251,000, consisting of unrealized gains of $34,988,000 on securities that had risen in value since their purchase and $75,239,000 in unrealized losses on securities that had fallen in value since their purchase.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157 (“FAS 157”), “Fair Value Measurements.” FAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements in financial statements, effective for the fund's current fiscal period.

 

The various inputs that may be used to determine the value of the fund's investments are summarized in three broad levels. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

 

The following table summarizes the fund's investments as of August 31, 2008, based on the inputs used to value them:

 

 

 

Investments

 

in Securities

Valuation Inputs

($000)

Level 1- Quoted prices

157,444 

Level 2- Other significant observable inputs

824,686

Level 3- Significant unobservable inputs

— 

Total

982,130

 

 

 

 

Item 2: Controls and Procedures.

(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

(b) Internal Control Over Financial Reporting. During the last fiscal quarter, there was no significant change in the Registrant’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3:

 Exhibits.
(a) Certifications.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VANGUARD CONVERTIBLE SECURITIES FUND

BY: /s/ F. WILLIAM MCNABB III*
F. WILLIAM MCNABB III
CHIEF EXECUTIVE OFFICER

Date: October 14, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

VANGUARD CONVERTIBLE SECURITIES FUND

BY: /s/ F. WILLIAM MCNABB III*
F. WILLIAM MCNABB III
CHIEF EXECUTIVE OFFICER

Date: October 14, 2008

VANGUARD CONVERTIBLE SECURITIES FUND

BY: /s/ THOMAS J. HIGGINS*
THOMAS J. HIGGINS
TREASURER

Date: October 14, 2008

*By: /s/ Heidi Stam
Heidi Stam, pursuant to a Power of Attorney filed on January 18, 2008, see file Number 2-29601, Incorporated by Reference; and pursuant to a Power of Attorney filed on September 26, 2008, see File Number 2-47371, Incorporated by Reference.