N-Q 1 convertiblesecfinal.htm VANGUARD CONVERTIBLE SECURITIES FUND

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: 811-4627

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: August 31

Date of reporting period: February 28, 2009

Item 1: Schedule of Investments

Vanguard Convertible Securities Fund

Schedule of Investments

As of February 28, 2009

 

 

 

Coupon

Maturity
Date

Face
Amount ($000)

Market

Value
($000)

Convertible Bonds (88.2%)

Consumer Discretionary (2.3%)

1

American Real Estate

4.000%

8/15/13

2,580

1,522

1

Iconix Brand Group

1.875%

6/30/12

8,455

5,443

 

Interpublic

4.250%

3/15/23

19,500

13,333

1

Stewart Enterprises

3.125%

7/15/14

4,245

2,176

 

22,474

Consumer Staples (3.9%)

1

Archer-Daniels-Midland Co.

0.875%

2/15/14

4,820

4,416

 

Archer-Daniels-Midland Co.

0.875%

2/15/14

8,735

8,004

 

Chattem Inc.

1.625%

5/1/14

9,955

8,673

 

Molson Coors Brewing Co.

2.500%

7/30/13

11,555

11,815

 

Smithfield Foods Inc.

4.000%

6/30/13

4,405

2,753

 

Tyson Foods Inc.

3.250%

10/15/13

3,390

2,797

 

38,458

Energy (16.0%)

 

Bill Barrett Corp.

5.000%

3/15/28

9,370

7,133

 

Bristow Group

3.000%

6/15/38

9,705

5,617

 

Carrizo Oil & Gas

4.375%

6/1/28

14,550

7,675

 

Chesapeake Energy Corp.

2.750%

11/15/35

1,880

1,302

 

Chesapeake Energy Corp.

2.250%

12/15/38

29,650

15,752

 

Core Laboratories LP

0.250%

10/31/11

16,970

16,885

 

GMX Resources

5.000%

2/1/13

7,680

5,760

 

Goodrich Petroleum Corp.

3.250%

12/1/26

15,205

11,525

 

Hornbeck Offshore Services

1.625%

11/15/26

14,805

8,957

 

Massey Energy Co.

3.250%

8/1/15

2,925

1,857

 

Parker Drilling

2.125%

7/15/12

2,700

1,772

1

Patriot Coal

3.250%

5/31/13

5,050

2,260

 

Pennsylvania Virginia Co.

4.500%

11/15/12

13,745

9,244

 

Pioneer Natural

2.875%

1/15/38

2,945

2,190

 

SEACOR Holdings Inc.

2.875%

12/15/24

9,320

8,866

 

St. Mary Land & Exploration

3.500%

4/1/27

16,675

12,152

1

Superior Energy Services, Inc.

1.500%

12/15/26

3,440

2,511

 

Superior Energy Services, Inc.

1.500%

12/15/26

11,730

8,563

 

Transocean Inc.

1.500%

12/15/37

15,300

12,871

 

Transocean Inc.

1.500%

12/15/37

3,290

2,636

 

Transocean Inc.

1.625%

12/15/37

12,740

11,355

 

Trico Marine

3.000%

1/15/27

7,415

1,603

1

Trico Marine

6.500%

5/15/28

3,460

1,159

 

159,645

Financials (2.3%)

 

Prudential Financial Inc.

0.366%

12/15/37

18,860

18,153

1

Rayonier TRS Holdings Inc.

3.750%

10/15/12

4,940

4,310

 

Rayonier TRS Holdings Inc.

3.750%

10/15/12

130

113

 

22,576

 

 

 

Health Care (26.4%)

1

Allergan, Inc.

1.500%

4/1/26

10,005

9,555

 

Allergan, Inc.

1.500%

4/1/26

8,570

8,184

 

American Medical Systems Holdings, Inc.

3.250%

7/1/36

11,155

8,575

 

Amerigroup Corp.

2.000%

5/15/12

21,840

18,782

 

Amgen Inc.

0.125%

2/1/11

15,800

14,516

 

Amgen Inc.

0.375%

2/1/13

13,695

12,120

 

Chemed Corp.

1.875%

5/15/14

3,550

2,618

 

China Medical Technologies

4.000%

8/15/13

9,235

4,548

 

Cubist Pharmaceuticals Inc.

2.250%

6/15/13

20,165

14,664

1

Cyberomnics Inc.

3.000%

9/27/12

5,265

3,337

1

Gilead Sciences Inc.

0.500%

5/1/11

15,735

19,216

 

Gilead Sciences Inc.

0.500%

5/1/11

1,745

2,131

 

Hologic Inc.

2.000%

12/15/37

17,910

11,642

1

Integra Lifesciences

2.375%

6/1/12

7,790

5,628

 

Inverness Medical Innovations Inc.

3.000%

5/15/16

3,505

2,655

1

Inverness Medical Innovations Inc.

3.000%

5/15/16

8,400

6,363

 

Invitrogen Corp.

2.000%

8/1/23

6,720

7,014

 

Invitrogen Corp.

1.500%

2/15/24

11,500

9,976

 

Invitrogen Corp.

3.250%

6/15/25

6,455

6,019

 

Kendle International Inc.

3.375%

7/15/12

3,515

2,500

 

Medtronic Inc.

1.500%

4/15/11

13,280

12,251

 

Mylan Labratories Inc.

1.250%

3/15/12

8,440

7,100

1

Nuvasive Inc.

2.250%

3/15/13

15,245

13,206

1

PSS World Medical Inc.

3.125%

8/1/14

6,055

5,170

 

SFBC International, Inc.

2.250%

8/15/24

8,325

8,096

 

Teva Pharmaceutical Financial

0.250%

2/1/26

8,745

8,975

 

Teva Pharmaceutical Financial

1.750%

2/1/26

20,778

22,025

 

Valeant Pharmaceuticals International

3.000%

8/16/10

5,675

5,505

 

Valeant Pharmaceuticals International

4.000%

11/15/13

5,680

4,920

 

Wilson Greatbatch

2.250%

6/15/13

1,540

1,138

1

Wilson Greatbatch

2.250%

6/15/13

6,010

4,440

 

262,869

Industrials (12.0%)

1

AAR Corp.

1.625%

3/1/14

5,110

3,175

 

Albany International Corp.

2.250%

3/15/26

2,355

1,275

1

Alliant Techsystems Inc.

2.750%

9/15/11

6,675

6,491

 

Alliant Techsystems Inc.

2.750%

9/15/11

1,990

1,935

 

Barnes Group Inc.

3.750%

8/1/25

5,830

4,810

1

Barnes Group Inc.

3.375%

3/15/27

6,080

3,557

 

Barnes Group Inc.

3.375%

3/15/27

2,490

1,457

 

Continental Airlines, Inc.

5.000%

6/15/23

16,695

14,003

 

Covanta Holding

1.000%

2/1/27

16,755

13,634

 

Energy Conversion Device

3.000%

6/15/13

355

214

 

 

 

1

General Cable Corp.

1.000%

10/15/12

12,580

8,507

 

General Cable Corp.

1.000%

10/15/12

395

267

 

L-3 Communications Corp.

3.000%

8/1/35

21,916

21,313

 

SunPower Corp.

0.750%

8/1/27

11,760

9,673

 

Suntech Power Holdings

0.250%

2/15/12

5,076

4,131

1

Suntech Power Holdings

3.000%

3/15/13

11,380

3,613

 

Triumph Group

2.625%

10/1/26

6,025

5,468

 

UAL Corp.

4.500%

6/30/21

15,140

6,283

 

Waste Connections, Inc.

3.750%

4/1/26

6,240

6,084

1

Waste Connections, Inc.

3.750%

4/1/26

4,185

4,080

 

119,970

Information Technology (17.6%)

1

Alliance Data System Co.

1.750%

8/1/13

10,375

6,925

 

Arris Group, Inc.

2.000%

11/15/26

6,805

4,628

1

CACI International Inc.

2.125%

5/1/14

1,575

1,492

 

CACI International Inc.

2.125%

5/1/14

5,175

4,903

 

Ciena Corp.

0.250%

5/1/13

18,620

10,404

 

Commscope Inc.

1.000%

3/15/24

7,555

7,479

 

CSG Systems Intl. Inc.

2.500%

6/15/24

9,685

8,438

 

Earthlink Inc.

3.250%

11/15/26

10,425

9,591

 

EMC Corp.

1.750%

12/1/11

13,995

13,488

 

EMC Corp.

1.750%

12/1/13

5,445

5,132

 

Equinix Inc.

2.500%

4/15/12

18,790

14,680

 

Equinix Inc.

3.000%

10/15/14

2,520

1,644

 

FEI Co.

2.875%

6/1/13

3,830

3,236

 

Informatica Corp.

3.000%

3/15/26

11,545

10,780

 

Itron Inc.

2.500%

8/1/26

7,510

7,200

 

Lawson Software Inc.

2.500%

4/15/12

5,820

4,540

1

Lawson Software Inc.

2.500%

4/15/12

9,355

7,297

 

Linear Technology Corp.

3.000%

5/1/27

2,055

1,606

 

Magma Design Automation Inc.

2.000%

5/15/10

235

134

1

Magma Design Automation Inc.

2.000%

5/15/10

1,264

721

1

Netapp Inc.

1.750%

6/1/13

13,840

10,813

 

ON Semiconductor

2.625%

12/15/26

22,550

14,770

 

Sybase Inc.

1.750%

2/22/25

1,760

2,059

 

Symantec Corp.

0.750%

6/15/11

13,080

12,246

1

Synnex Corp.

4.000%

5/15/18

5,670

3,962

 

WebMD Corp.

1.750%

6/15/23

7,395

6,868

 

175,036

Materials (3.0%)

1

Kinross Gold

1.750%

3/15/28

14,170

12,452

 

Newport Mining Corp

3.000%

2/15/12

15,100

17,667

 

30,119

 

 

 

Telecommunication Services (3.5%)

 

Nii Holdings

3.125%

6/15/12

300

199

 

Nii Holdings

2.750%

8/15/25

9,635

8,455

 

Qwest Communications International, Inc.

3.500%

11/15/25

12,908

11,537

1

SBA Communications Corp.

1.875%

5/1/13

20,075

14,805

 

34,996

Utilities (1.2%)

 

CMS Energy Corp.

2.875%

12/1/24

7,565

7,414

 

Unisource Energy Corp

4.500%

3/1/35

5,120

4,070

 

11,484

Total Convertible Bonds (Cost $1,074,008)

877,627

 

 

Coupon

 

Shares

Market

Value
($000)

Convertible Preferred Stock (7.7%)

Consumer Staples (0.2%)

 

Archer-Daniels-Midland Co.

6.250%

 

55,400

1,951

 

Energy (0.1%)

 

Bristow Group

5.500%

 

20,800

591

 

Financials (2.9%)

 

Aspen Insurance Holdings, Ltd.

5.625%

 

165,460

6,474

 

Bank of America Corp

7.250%

 

31,940

11,658

 

Fifth Third Bank

8.500%

 

110,800

3,379

 

KeyCorp

7.750%

 

133,300

7,665

 

29,176

 

Health Care (1.1%)

 

Inverness Medical Innovations Inc.

3.000%

 

59,424

8,528

 

Schering-Plough Corp.

6.000%

 

16,000

2,710

 

11,238

Industrials (0.3%)

 

Continental Airlines Financial Trust

6.000%

 

163,300

2,511

 

Materials (1.6%)

 

Freeport-McMoRan Copper & Gold, Inc.

5.500%

 

20,950

16,131

 

Telecommunication Services (0.7%)

 

Crown Castle International Corp.

6.250%

 

157,800

6,845

 

Utilities (0.8%)

 

CMS Energy Corp

4.500%

 

138,900

8,091

 

Total Convertible Preferred Stocks (Cost $114,545)

76,534

Temporary Cash Investment (4.0%)

2

Vanguard Market Liquidity Fund (Cost $40,578)

0.663%

 

40,577,634

40,578

Total Investments (99.9%) (Cost $1,229,131)

994,739

Other Assets and Liabilities-Net (0.1%)

546

Net Assets (100%)

995,285

 

 

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 February 28, 2009, the aggregate value of these securities was $178,602,000, representing 17.9% of net assets.

2

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 February 28, 2009, the cost of investment securities for tax purposes was $1,229,131,000. Net unrealized depreciation of investment securities for tax purposes was $234,392,000, consisting of unrealized gains of $17,563,000 on securities that had risen in value since their purchase and $251,955,000 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.

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 February 28, 2009, based on the inputs used to value them:

Valuation Inputs

Investments in Securities ($000)

Level 1- Quoted prices

117,112

 

Level 2- Other significant observable inputs

877,627

 

Level 3- Significant unobservable inputs

-

 

Total

994,739

 

 

 

 

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: April 20, 2009

 

 

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: April 20, 2009

 

 

 

 

VANGUARD CONVERTIBLE SECURITIES FUND

 

 

By:

/s/ THOMAS J. HIGGINS*

 

THOMAS J. HIGGINS

 

CHIEF FINANCIAL OFFICER

 

 

Date: April 20, 2009

 

 

* 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.