N-Q 1 convertiblesecuritiesfinal.htm VANGUARD CONVERTIBLE SECURITIES FUND convertiblesecuritiesfinal.htm - Generated by SEC Publisher for SEC Filing

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: 811-04627

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

Date of fiscal year end: November 30

Date of reporting period: August 31, 2012

Item 1: Schedule of Investments

 

Vanguard Convertible Securities Fund

Schedule of Investments
As of August 31, 2012

        Face Market
    Maturity   Amount Value
  Coupon Date Currency ($000) ($000)
Convertible Bonds (86.6%)          
Consumer Discretionary (8.9%)          
1 Goldman Sachs Group Inc. Cvt. (Convertible          
into Ford Motor Co.) 0.250% 2/28/17 USD 4,640 4,071
Group 1 Automotive Inc. Cvt. 2.250% 6/15/36 USD 6,650 7,382
Hengdeli Holdings Ltd. Cvt. 2.500% 10/20/15 HKD 22,000 2,780
1 Iconix Brand Group Inc. Cvt. 2.500% 6/1/16 USD 3,365 3,340
Interpublic Group of Cos. Inc. Cvt. 4.750% 3/15/23 USD 2,585 2,814
Intime Department Store Group Co. Ltd. Cvt. 1.750% 10/27/13 HKD 19,000 2,526
1 Lennar Corp. Cvt. 2.000% 12/1/20 USD 6,115 7,888
Liberty Interactive LLC Cvt. 3.125% 3/30/23 USD 3,355 4,378
MGM Resorts International Cvt. 4.250% 4/15/15 USD 27,425 27,699
Newford Capital Ltd. Cvt. 0.000% 5/12/16 USD 5,700 5,579
Nokian Renkaat OYJ Cvt. 0.000% 6/27/14 EUR 3,100 4,691
Power Regal Group Ltd. Cvt. 2.250% 6/2/14 HKD 19,180 3,066
1 priceline.com Inc. Cvt. 1.000% 3/15/18 USD 28,925 30,263
Ryland Group Inc. Cvt. 1.625% 5/15/18 USD 11,100 12,543
Sekisui House Ltd. Cvt. 0.000% 7/5/16 JPY 150,000 1,948
Standard Pacific Corp. Cvt. 1.250% 8/1/32 USD 15,025 16,302
Steinhoff Finance Holding GmbH Cvt. 5.000% 5/22/16 EUR 5,550 7,536
Steinhoff Finance Holding GmbH Cvt. 4.500% 3/31/18 EUR 200 246
TUI Travel PLC Cvt. 6.000% 10/5/14 GBP 200 316
TUI Travel PLC Cvt. 4.900% 4/27/17 GBP 1,900 2,875
          148,243
Consumer Staples (1.6%)          
Aeon Co. Ltd. Cvt. 0.300% 11/22/13 JPY 107,000 1,452
Glory River Holdings Ltd. Cvt. 1.000% 7/29/15 HKD 24,100 3,140
Marine Harvest ASA Cvt. 4.500% 2/23/15 EUR 700 984
Olam International Ltd. Cvt. 6.000% 10/15/16 USD 4,500 4,916
Pescanova SA Cvt. 6.750% 3/5/15 EUR 2,050 2,579
Pescanova SA Cvt. 5.125% 4/20/17 EUR 1,850 2,094
Tyson Foods Inc. Cvt. 3.250% 10/15/13 USD 4,670 5,119
Unicharm Corp. Cvt. 0.000% 9/24/15 JPY 310,000 4,746
Wilmar International Ltd. Cvt. 0.000% 12/18/12 USD 2,000 2,335
          27,365
Energy (7.5%)          
BPZ Resources Inc. Cvt. 6.500% 3/1/15 USD 9,035 6,257
Cie Generale de Geophysique - Veritas Cvt. 1.750% 1/1/16 EUR 2,060 2,995
Endeavour International Corp. Cvt. 5.500% 7/15/16 USD 7,960 7,184
Exterran Holdings Inc. Cvt. 4.250% 6/15/14 USD 5,055 5,491
Goodrich Petroleum Corp. Cvt. 5.000% 10/1/29 USD 340 320
Helix Energy Solutions Group Inc. Cvt. 3.250% 3/15/32 USD 17,385 18,645
1 Hornbeck Offshore Services Inc. Cvt. 1.500% 9/1/19 USD 19,210 19,546
Hornbeck Offshore Services Inc. Cvt. 1.625% 11/15/26 USD 2,430 2,540
Lukoil International Finance BV Cvt. 2.625% 6/16/15 USD 5,300 5,674
Paladin Energy Ltd. Cvt. 3.625% 11/4/15 USD 3,866 3,416
Paladin Energy Ltd. Cvt. 6.000% 4/30/17 USD 1,272 1,260
1 PDC Energy Inc. Cvt. 3.250% 5/15/16 USD 7,010 6,782
Pembina Pipeline Corp. Cvt. 5.750% 12/31/18 CAD 3,360 3,698
Pembina Pipeline Corp. Cvt. 5.750% 11/30/20 CAD 185 204

 

 

Petrominerales Ltd. Cvt. 2.625% 8/25/16 USD 1,900 1,827
Progress Energy Resources Corp. Cvt. 5.250% 10/31/14 CAD 3,132 4,020
Seadrill Ltd. Cvt. 3.375% 10/27/17 USD 2,100 2,909
1 Stone Energy Corp. Cvt. 1.750% 3/1/17 USD 23,900 21,988
Subsea 7 SA Cvt. 2.250% 10/11/13 USD 3,500 4,081
Technip SA Cvt. 0.500% 1/1/16 EUR 831 1,254
TMK Bonds SA Cvt. 5.250% 2/11/15 USD 4,100 4,092
          124,183
Financials (11.9%)          
1 American Equity Investment Life Holding Co.          
Cvt. 3.500% 9/15/15 USD 15,465 17,611
1 American Equity Investment Life Holding Co.          
Cvt. 5.250% 12/6/29 USD 2,582 3,424
1 Amtrust Financial Services Inc. Cvt. 5.500% 12/15/21 USD 9,645 11,104
Annaly Capital Management Inc. Cvt. 4.000% 2/15/15 USD 1,375 1,743
Annaly Capital Management Inc. Cvt. 5.000% 5/15/15 USD 8,590 8,654
BES Finance Ltd. Cvt. 1.625% 4/15/13 USD 5,600 5,359
1 BioMed Realty LP Cvt. 3.750% 1/15/30 USD 5,915 6,876
CapitaCommercial Trust Cvt. 2.500% 9/12/17 SGD 2,500 2,047
CapitaLand Ltd. Cvt. 2.875% 9/3/16 SGD 4,750 3,780
China Overseas Grand Oceans Finance          
Cayman Ltd. Cvt. 2.000% 3/21/17 HKD 27,000 3,633
1 DFC Global Corp. Cvt. 3.250% 4/15/17 USD 14,490 15,993
DFC Global Corp. Cvt. 3.000% 4/1/28 USD 8,726 10,133
Fidelity National Financial Inc. Cvt. 4.250% 8/15/18 USD 9,600 10,896
Fonciere Des Regions Cvt. 3.340% 1/1/17 EUR 3,453 4,288
Forest City Enterprises Inc. Cvt. 4.250% 8/15/18 USD 22,052 22,272
Graubuendner Kantonalbank Cvt. 2.000% 5/8/14 CHF 4,390 4,762
1 Host Hotels & Resorts LP Cvt. 2.500% 10/15/29 USD 14,370 18,447
Industrivarden AB Cvt. 2.500% 2/27/15 EUR 1,950 2,851
Industrivarden AB Cvt. 1.875% 2/27/17 EUR 1,350 1,733
KFW Cvt. 1.500% 7/30/14 EUR 1,200 1,825
1 NorthStar Realty Finance LP Cvt. 7.500% 3/15/31 USD 12,075 12,815
Old Republic International Corp. Cvt. 3.750% 3/15/18 USD 8,515 8,302
ORIX Corp. Cvt. 1.000% 3/31/14 JPY 300,000 4,369
QBE Funding Trust Cvt. 0.000% 5/12/30 USD 2,955 1,899
Sherson Ltd. Cvt. 0.000% 6/4/14 HKD 36,070 5,569
Shui On Land Ltd. Cvt. 4.500% 9/29/15 CNY 4,000 615
Siemens Financieringsmaatschappij NV Cvt. 1.050% 8/16/17 USD 2,000 1,980
Siemens Financieringsmaatschappij NV Cvt. 1.650% 8/16/19 USD 1,000 992
1 SL Green Operating Partnership LP Cvt. 3.000% 10/15/17 USD 655 756
Wereldhave NV Cvt. 2.875% 11/18/15 EUR 2,750 3,355
          198,083
Health Care (19.9%)          
Accuray Inc. Cvt. 3.750% 8/1/16 USD 2,150 2,120
Brookdale Senior Living Inc. Cvt. 2.750% 6/15/18 USD 26,990 28,677
Chemed Corp. Cvt. 1.875% 5/15/14 USD 6,955 7,190
Gilead Sciences Inc. Cvt. 1.625% 5/1/16 USD 24,450 34,505
Hologic Inc. Cvt. 2.000% 12/15/37 USD 15,900 17,569
Hologic Inc. Cvt. 2.000% 3/1/42 USD 13,885 13,468
Insulet Corp. Cvt. 3.750% 6/15/16 USD 4,839 5,335
Integra LifeSciences Holdings Corp. Cvt. 1.625% 12/15/16 USD 16,108 15,967
1 Isis Pharmaceuticals Inc. Cvt. 2.750% 10/1/19 USD 12,703 14,323
LifePoint Hospitals Inc. Cvt. 3.500% 5/15/14 USD 13,324 14,207
1 Medicines Co. Cvt. 1.375% 6/1/17 USD 7,600 8,541
Medicis Pharmaceutical Corp. Cvt. 1.375% 6/1/17 USD 14,255 14,041

 

 

Medivation Inc. Cvt. 2.625% 4/1/17 USD 3,115 4,061
Molina Healthcare Inc. Cvt. 3.750% 10/1/14 USD 10,835 11,919
NuVasive Inc. Cvt. 2.750% 7/1/17 USD 5,550 5,203
Omnicare Inc. Cvt. 3.750% 4/1/42 USD 33,729 32,000
Orpea Cvt. 3.880% 1/1/16 EUR 2,563 3,357
1 PSS World Medical Inc. Cvt. 3.125% 8/1/14 USD 10,690 12,734
Qiagen Euro Finance SA Cvt. 3.250% 5/16/26 USD 3,500 4,178
Salix Pharmaceuticals Ltd. Cvt. 2.750% 5/15/15 USD 361 436
1 Salix Pharmaceuticals Ltd. Cvt. 1.500% 3/15/19 USD 25,810 25,649
Sawai Pharmaceutical Co. Ltd. Cvt. 0.000% 9/17/15 JPY 188,000 2,662
Teleflex Inc. Cvt. 3.875% 8/1/17 USD 8,990 10,968
1 United Therapeutics Corp. Cvt. 1.000% 9/15/16 USD 15,665 20,032
Volcano Corp. Cvt. 2.875% 9/1/15 USD 7,920 9,514
1 Wright Medical Group Inc. Cvt. 2.000% 8/15/17 USD 10,650 11,302
          329,958
Industrials (9.7%)          
Abengoa SA Cvt. 4.500% 2/3/17 EUR 2,150 2,282
1 Air Lease Corp. Cvt. 3.875% 12/1/18 USD 20,615 21,233
Asahi Glass Co. Ltd. Cvt. 0.000% 11/14/14 JPY 185,000 2,324
Avis Budget Group Inc. Cvt. 3.500% 10/1/14 USD 11,180 13,989
1 Barnes Group Inc. Cvt. 3.375% 3/15/27 USD 1,885 2,001
2 Barnes Group Inc. Cvt. 3.375% 3/15/27 USD 7,740 8,214
1 CBIZ Inc. Cvt. 4.875% 10/1/15 USD 2,435 2,411
Chart Industries Inc. Cvt. 2.000% 8/1/18 USD 9,560 12,093
Covanta Holding Corp. Cvt. 3.250% 6/1/14 USD 15,745 18,500
GenCorp Inc. Cvt. 4.063% 12/31/39 USD 3,650 4,476
Greenbrier Cos. Inc. Cvt. 3.500% 4/1/18 USD 13,795 11,898
1 Kaman Corp. Cvt. 3.250% 11/15/17 USD 5,380 6,335
Kloeckner & Co. Financial Services SA Cvt. 2.500% 12/22/17 EUR 3,300 3,730
Larsen & Toubro Ltd. Cvt. 3.500% 10/22/14 USD 2,600 2,617
1 Lufthansa Malta Blues LP Cvt. 0.750% 4/5/17 EUR 1,388 1,832
Misarte Cvt. 3.250% 1/1/16 EUR 2,842 4,075
Nexans SA Cvt. 4.000% 1/1/16 EUR 2,485 3,327
Nidec Corp. Cvt. 0.000% 9/18/15 JPY 100,000 1,275
PB Issuer No 2 Ltd. Cvt. 1.750% 4/12/16 USD 2,810 2,625
Russel Metals Inc. Cvt. 7.750% 9/30/16 CAD 3,325 3,907
San Miguel Corp. Cvt. 2.000% 5/5/14 USD 5,400 5,578
SGL Carbon SE Cvt. 0.750% 5/16/13 EUR 450 566
SGL Carbon SE Cvt. 2.750% 1/25/18 EUR 2,900 3,693
SM Investments Corp. Cvt. 1.625% 2/15/17 USD 3,600 3,744
Societa Iniziative Autostradali e Servizi SPA          
Cvt. 2.625% 6/30/17 EUR 1,682 1,940
Tem SAS Cvt. 4.250% 1/1/15 EUR 1,758 2,330
1 Titan Machinery Inc. Cvt. 3.750% 5/1/19 USD 8,005 7,345
Wabash National Corp. Cvt. 3.375% 5/1/18 USD 7,255 7,083
          161,423
Information Technology (17.5%)          
Atos Cvt. 2.500% 1/1/16 EUR 2,466 3,765
AU Optronics Corp. Cvt. 0.000% 10/13/15 USD 3,200 2,536
BroadSoft Inc. Cvt. 1.500% 7/1/18 USD 7,695 8,609
BroadSoft Inc. Cvt. 1.500% 7/1/18 USD 565 632
Cap Gemini SA Cvt. 3.500% 1/1/14 EUR 1,402 1,965
1 Ciena Corp. Cvt. 3.750% 10/15/18 USD 15,705 16,529
Comtech Telecommunications Corp. Cvt. 3.000% 5/1/29 USD 8,880 9,457
1 CSG Systems International Inc. Cvt. 3.000% 3/1/17 USD 9,590 10,705
1 DealerTrack Holdings Inc. Cvt. 1.500% 3/15/17 USD 7,120 7,440

 

 

  Econocom Group Cvt. 4.000% 6/1/16 EUR 1,946 2,506
  Electronic Arts Inc. Cvt. 0.750% 7/15/16 USD 885 819
  Hanwha SolarOne Co. Ltd. Cvt. 3.500% 1/15/18 USD 1,953 1,406
  Hon Hai Precision Industry Co. Ltd. Cvt. 0.000% 10/12/13 USD 100 101
  Ingenico Cvt. 2.750% 1/1/17 EUR 407 683
  Intel Corp. Cvt. 2.950% 12/15/35 USD 5,745 6,413
  Intel Corp. Cvt. 3.250% 8/1/39 USD 5,259 6,817
  Ixia Cvt. 3.000% 12/15/15 USD 9,726 10,966
  Lam Research Corp. Cvt. 0.500% 5/15/16 USD 6,515 6,271
  Lam Research Corp. Cvt. 1.250% 5/15/18 USD 10,760 10,545
  Linear Technology Corp. Cvt. 3.000% 5/1/27 USD 6,850 7,175
  Mentor Graphics Corp. Cvt. 4.000% 4/1/31 USD 14,845 17,035
  Micron Technology Inc. Cvt. 1.875% 6/1/27 USD 9,684 8,716
1 Micron Technology Inc. Cvt. 1.500% 8/1/31 USD 17,725 16,130
1 Micron Technology Inc. Cvt. 1.875% 8/1/31 USD 3,660 3,312
1 Micron Technology Inc. Cvt. 3.125% 5/1/32 USD 13,990 13,168
  Neopost SA Cvt. 3.750% 2/1/15 EUR 2,845 3,676
1 Nuance Communications Inc. Cvt. 2.750% 11/1/31 USD 25,460 28,961
  ON Semiconductor Corp. Cvt. 2.625% 12/15/26 USD 17,487 18,099
  SanDisk Corp. Cvt. 1.500% 8/15/17 USD 27,735 30,716
1 Take-Two Interactive Software Inc. Cvt. 1.750% 12/1/16 USD 3,915 3,548
1 TIBCO Software Inc. Cvt. 2.250% 5/1/32 USD 19,760 19,809
1 Vishay Intertechnology Inc. Cvt. 2.250% 11/15/40 USD 2,875 2,444
1 Vishay Intertechnology Inc. Cvt. 2.250% 5/15/41 USD 10,745 7,857
1 Vishay Intertechnology Inc. Cvt. 2.250% 6/1/42 USD 2,215 2,099
            290,910
Materials (8.3%)          
  African Minerals Ltd. Cvt. 8.500% 2/10/17 USD 2,800 2,708
  AngloGold Ashanti Holdings Finance plc Cvt. 3.500% 5/22/14 USD 2,300 2,444
  Aquarius Platinum Ltd. Cvt. 4.000% 12/18/15 USD 2,400 1,368
  ArcelorMittal Cvt. 5.000% 5/15/14 USD 1,295 1,318
  Cemex SAB de CV Cvt. 4.875% 3/15/15 USD 24,859 23,181
  Cemex SAB de CV Cvt. 3.250% 3/15/16 USD 15,972 14,874
  Glencore Finance Europe SA Cvt. 5.000% 12/31/14 USD 1,400 1,715
  Goldcorp Inc. Cvt. 2.000% 8/1/14 USD 1,085 1,250
  Kaiser Aluminum Corp. Cvt. 4.500% 4/1/15 USD 7,855 10,305
  Petropavlovsk 2010 Ltd. Cvt. 4.000% 2/18/15 USD 3,100 2,775
  Royal Gold Inc. Cvt. 2.875% 6/15/19 USD 9,320 10,473
  RTI International Metals Inc. Cvt. 3.000% 12/1/15 USD 11,885 12,034
  Salzgitter Finance BV Cvt. 1.125% 10/6/16 EUR 200 242
  Salzgitter Finance BV Cvt. 2.000% 11/8/17 EUR 2,650 3,704
1,2 ShengdaTech Inc. Cvt. 6.500% 12/15/15 USD 305 15
  Steel Dynamics Inc. Cvt. 5.125% 6/15/14 USD 10,627 11,331
  Tata Steel Ltd. Cvt. 4.500% 11/21/14 USD 3,531 3,487
  United States Steel Corp. Cvt. 4.000% 5/15/14 USD 29,775 30,184
  Welspun Corp. Ltd. Cvt. 4.500% 10/17/14 USD 2,700 2,403
  Western Areas NL Cvt. 6.375% 7/2/14 AUD 1,185 1,200
  Western Areas NL Cvt. 6.400% 7/2/15 AUD 500 511
            137,522
Telecommunication Services (0.7%)          
  Billion Express Investments Ltd. Cvt. 0.750% 10/18/15 USD 4,800 5,052
  Inmarsat PLC Cvt. 1.750% 11/16/17 USD 1,300 1,638
  Portugal Telecom International Finance BV          
  Cvt. 4.125% 8/28/14 EUR 750 927
  SK Telecom Co. Ltd. Cvt. 1.750% 4/7/14 USD 2,961 3,165
            10,782

 

 

Utilities (0.6%)          
Tata Power Co. Ltd. Cvt. 1.750% 11/21/14 USD 2,700 2,700
YTL Corp. Finance Labuan Ltd. Cvt. 1.875% 3/18/15 USD 5,800 6,482
          9,182
Total Convertible Bonds (Cost $1,408,341)         1,437,651
  Coupon     Shares  
Convertible Preferred Stocks (11.0%)          
Consumer Discretionary (2.0%)          
General Motors Co. Pfd. 4.750%     464,100 16,534
Interpublic Group of Cos. Inc. Pfd. 5.250%     15,740 16,153
          32,687
Energy (3.7%)          
Apache Corp. Pfd. 6.000%     147,900 7,238
1 Chesapeake Energy Corp. Pfd. 5.750%     13,950 12,764
Energy XXI Bermuda Ltd. Pfd. 5.625%     50,420 17,805
Goodrich Petroleum Corp. Pfd. 5.375%     358,000 12,194
SandRidge Energy Inc. Pfd. 8.500%     116,380 12,387
          62,388
Financials (2.2%)          
Entertainment Properties Trust Pfd. 5.750%     237,600 4,919
Fifth Third Bancorp Pfd. 8.500%     60,550 8,621
Health Care REIT Inc. Pfd. 6.500%     190,133 10,528
MetLife Inc. Pfd. 5.000%     83,200 5,611
Wintrust Financial Corp. Pfd. 5.000%     7,530 7,822
          37,501
Health Care (1.8%)          
HealthSouth Corp. Pfd. 6.500%     16,430 17,601
Omnicare Capital Trust II Pfd. 4.000%     253,600 11,618
          29,219
Industrials (1.3%)          
Continental Airlines Finance Trust II Pfd. 6.000%     112,030 3,746
Stanley Black & Decker Inc. Pfd. 4.750%     33,480 3,953
United Technologies Corp. Pfd. 7.500%     253,200 14,133
          21,832
Total Convertible Preferred Stocks (Cost $173,635)         183,627
Temporary Cash Investment (1.8%)          
Money Market Fund (1.8%)          
3 Vanguard Market Liquidity Fund (Cost          
$29,453) 0.158%     29,452,738 29,453
 
Total Investments (99.4%) (Cost $1,611,429)         1,650,731
Other Assets and Liabilities-Net (0.6%)4         10,005
Net Assets (100%)         1,660,736

 

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, 2012, the aggregate value of these securities was $459,423,000, representing 27.7% of net assets.
2 Non-income-producing security--interest payments in default.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
4 Cash of $2,500,000 has been segregated as collateral for open forward currency contracts.
REIT—Real Estate Investment Trust.
AUD—Australian dollars.

 

Convertible Securities Fund

CAD—Canadian dollars.
CHF—Swiss francs.
CNY—Chinese Yuan.
EUR—Euro.
GBP—British pounds.
HKD—Hong Kong dollars.
JPY—Japanese Yen.
SGD—Singapore dollars.
USD—United States dollars.

A. 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.

B. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund's pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

C. Various inputs may be used to determine the value of the fund's investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value 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).

 

Convertible Securities Fund

The following table summarizes the market value of the fund's investments as of August 31, 2012, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Convertible Bonds — 1,437,651 —
Convertible Preferred Stocks 183,627 — —
Temporary Cash Investments 29,453 — —
Forward Currency Contracts—Assets — 1 —
Forward Currency Contracts—Liabilities — (2,875) —
Total 213,080 1,434,777 —

 

D. Forward Currency Contracts: The fund enters into forward currency contracts to protect the value of securities and related receivables and payables against changes in future foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. Counterparty risk is mitigated by entering into forward currency contracts only with highly rated counterparties, by a master netting arrangement between the fund and the counterparty, and by the posting of collateral by the counterparty. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has posted. Any securities posted as collateral for open contracts are noted in the Schedule of Investments.

Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The aggregate principal amounts of the contracts are not recorded in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Schedule of Investments as an asset (liability).

 

Convertible Securities Fund

At August 31, 2012, the fund had open forward currency contracts to receive and deliver currencies as follows. Unrealized appreciation (depreciation) on open forward currency contracts is treated as realized gain (loss) for tax purposes.

      Contract Amount (000)  
            Unrealized
            Appreciation
  Contract         (Depreciation)
Counterparty Settlement Date   Receive   Deliver ($000)
UBS AG 10/18/12 USD 83,439 EUR 66,160 (2,174)
UBS AG 10/18/12 USD 20,423 HKD 158,385 1
UBS AG 10/18/12 USD 18,680 JPY 1,462,050 (177)
UBS AG 10/18/12 USD 11,559 CAD 11,419 (301)
UBS AG 10/18/12 USD 4,880 CHF 4,645 (124)
UBS AG 10/18/12 USD 3,828 SGD 4,775 (41)
UBS AG 10/18/12 USD 2,909 GBP 1,832 (46)
UBS AG 10/18/12 USD 1,790 AUD 1,740 (12)
            (2,874)
AUD—Australian dollar.
CAD—Canadian dollar.
CHF—Swiss Franc.
EUR—Euro.
GBP—British pound.
HKD—Hong Kong dollar.
JPY—Japanese yen.
SGD—Singapore dollar.
USD—U.S. dollar.

 

E. At August 31, 2012, the cost of investment securities for tax purposes was $1,611,093,000. Net unrealized appreciation of investment securities for tax purposes was $39,638,000, consisting of unrealized gains of $98,640,000 on securities that had risen in value since their purchase and $59,002,000 in unrealized losses on securities that had fallen in value since their purchase.

 

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

  VANGUARD CONVERTIBLE SECURITIES FUND
 
By: /s/ F. WILLIAM MCNABB III*
  F. WILLIAM MCNABB III
  CHIEF EXECUTIVE OFFICER
 
Date: October 17, 2012

 

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 17, 2012

 

  VANGUARD CONVERTIBLE SECURITIES FUND
 
By: /s/ THOMAS J. HIGGINS*
  THOMAS J. HIGGINS
  CHIEF FINANCIAL OFFICER
 
Date: October 17, 2012

 

* By:/s/ Heidi Stam

Heidi Stam, pursuant to a Power of Attorney filed on March 27, 2012 see file Number 2-11444, Incorporated by Reference.