N-Q 1 convertiblesec_final.htm convertiblesec_final.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: February 28, 2014

Item 1: Schedule of Investments

 

Vanguard Convertible Securities Fund

Schedule of Investments
As of February 28, 2014

          Market
          Value
        Shares ($000)
Common Stocks (0.0%)          
Energy (0.0%)          
Halcon Resources Corp.       67,270 256
 
Total Common Stocks (Cost $252)         256
        Face Market
    Maturity   Amount Value•
  Coupon Date Currency  (000) ($000)
Convertible Bonds (90.8%)          
Consumer Discretionary (12.1%)          
ABC-Mart Inc. Cvt. 0.000% 2/5/18 JPY 560,000 6,146
Asics Corp. 0.000% 3/1/19 JPY 150,000 1,632
Cineplex Inc. Cvt. 4.500% 12/31/18 CAD 4,253 3,948
1 Ctrip.com International Ltd. Cvt. 1.250% 10/15/18 USD 17,672 18,081
Enterprise Funding Ltd. Cvt. 3.500% 9/10/20 GBP 1,200 2,259
Iconix Brand Group Inc. Cvt. 2.500% 6/1/16 USD 2,880 3,994
1 Iconix Brand Group Inc. Cvt. 1.500% 3/15/18 USD 11,465 15,908
Jarden Corp. Cvt. 1.875% 9/15/18 USD 16,259 23,179
1 Jarden Corp. Cvt. 1.500% 6/15/19 USD 17,115 21,126
1 Liberty Interactive LLC Cvt. 0.750% 3/30/43 USD 15,900 20,114
1 Liberty Media Corp. Cvt. 1.375% 10/15/23 USD 33,140 32,229
Lotte Shopping Co. Ltd. Cvt. 0.000% 1/24/18 KRW 4,200,000 4,147
Meritage Homes Corp. Cvt. 1.875% 9/15/32 USD 5,705 6,422
Misarte Cvt. 3.250% 1/1/16 EUR 2,842 4,914
Newford Capital Ltd. Cvt. 0.000% 5/12/16 USD 2,600 2,709
NH Hoteles SA Cvt. 4.000% 11/8/18 EUR 1,500 2,485
1 priceline.com Inc. Cvt. 0.350% 6/15/20 USD 29,550 37,547
ResortTrust Inc. Cvt. 0.000% 7/27/18 JPY 310,000 3,415
Sekisui House Ltd. Cvt. 0.000% 7/5/16 JPY 450,000 5,850
Takashimaya Co. Ltd. Cvt. 0.000% 12/11/20 JPY 420,000 4,304
Tesla Motors Inc. Cvt. 1.250% 3/1/21 USD 33,750 33,143
TUI AG Cvt. 0.000% 3/24/16 EUR 36 3,646
TUI Travel plc Cvt. 4.900% 4/27/17 GBP 1,900 4,066
          261,264
Consumer Staples (2.9%)          
Asahi Group Holdings Ltd. Cvt. 0.000% 5/26/28 JPY 257,000 3,550
Biostime International Holdings Ltd. Cvt. 0.000% 2/20/19 HKD 34,000 4,616
Hengan International Group Co. Ltd. Cvt. 0.000% 6/27/18 HKD 28,000 3,766
1 Herbalife Ltd. Cvt. 2.000% 8/15/19 USD 23,685 22,812
Marine Harvest ASA Cvt. 2.375% 5/8/18 EUR 5,000 7,456
Olam International Ltd. Cvt. 6.000% 10/15/16 USD 5,500 5,534
Rallye SA Cvt. 1.000% 10/2/20 EUR 3,380 5,172
Vector Group Ltd. Cvt. 2.500% 1/15/19 USD 7,030 8,990
          61,896
Energy (9.5%)          
Alpha Natural Resources Inc. Cvt. 3.750% 12/15/17 USD 9,545 8,817
BPZ Resources Inc. Cvt. 8.500% 10/1/17 USD 10,290 9,898
Cam 2012 SPA Cvt. 5.625% 10/26/17 EUR 3,300 5,878
CEZ MH BV Cvt. 0.000% 8/4/17 EUR 800 1,144
Cobalt International Energy Inc. Cvt. 2.625% 12/1/19 USD 25,975 25,066

 

 

1 Energy XXI Bermuda Ltd. Cvt. 3.000% 12/15/18 USD 20,235 19,476
Golar LNG Ltd. Cvt. 3.750% 3/7/17 USD 3,600 3,641
Goodrich Petroleum Corp. Cvt. 5.000% 10/1/32 USD 560 569
Helix Energy Solutions Group Inc. Cvt. 3.250% 3/15/32 USD 13,470 16,661
Hornbeck Offshore Services Inc. Cvt. 1.500% 9/1/19 USD 25,725 29,053
Lukoil International Finance BV Cvt. 2.625% 6/16/15 USD 5,300 5,539
Pembina Pipeline Corp. Cvt. 5.750% 12/31/18 CAD 2,845 3,494
Pembina Pipeline Corp. Cvt. 5.750% 11/30/20 CAD 665 838
SEACOR Holdings Inc. Cvt. 2.500% 12/15/27 USD 20,165 24,185
1 SEACOR Holdings Inc. Cvt. 3.000% 11/15/28 USD 8,680 8,566
Siem Industries Inc. Cvt. 1.000% 9/12/19 USD 7,200 7,178
Stone Energy Corp. Cvt. 1.750% 3/1/17 USD 28,460 32,942
Subsea 7 SA Cvt. 1.000% 10/5/17 USD 1,000 999
Technip SA Cvt. 0.500% 1/1/16 EUR 1,271 1,934
          205,878
Financials (10.3%)          
Alstria Office REIT-AG Cvt. 2.750% 6/14/18 EUR 2,600 3,959
American Realty Capital Properties Inc. Cvt. 3.000% 8/1/18 USD 5,715 6,219
American Realty Capital Properties Inc. Cvt. 3.750% 12/15/20 USD 21,295 23,757
Azimut Holding SPA Cvt. 2.125% 11/25/20 EUR 5,200 8,173
Beni Stabili SPA Cvt. 3.375% 1/17/18 EUR 1,600 2,596
BES Finance Ltd. Cvt. 3.500% 12/6/15 USD 6,100 6,448
BNP Paribas SA Cvt. 0.250% 9/21/15 EUR 430,000 5,841
BNP Paribas SA Cvt. 0.250% 9/27/16 EUR 90,000 1,239
British Land Co. Jersey Ltd. Cvt. 1.500% 9/10/17 GBP 2,200 4,280
Caja de Ahorros y Pensiones de Barcelona          
Cvt. 1.000% 11/25/17 EUR 4,700 7,315
CapitaCommercial Trust Cvt. 2.500% 9/12/17 SGD 4,000 3,373
CapitaLand Ltd. Cvt. 2.875% 9/3/16 SGD 1,750 1,405
CapitaLand Ltd. Cvt. 1.850% 6/19/20 SGD 1,750 1,261
1 CapitaLand Ltd. Cvt. 1.850% 6/19/20 SGD 4,500 3,242
CapitaLand Ltd. Cvt. 1.950% 10/17/23 SGD 1,500 1,164
China Overseas Grand Oceans Finance          
Cayman Ltd. Cvt. 2.000% 3/21/17 HKD 44,000 5,897
Colony Financial Inc. Cvt. 5.000% 4/15/23 USD 10,800 11,468
Deutsche Euroshop AG Cvt. 1.750% 11/20/17 EUR 2,500 3,778
Deutsche Wohnen AG Cvt. 0.500% 11/22/20 EUR 4,100 5,765
Fonciere Des Regions Cvt. 3.340% 1/1/17 EUR 1,482 2,197
Forest City Enterprises Inc. Cvt. 4.250% 8/15/18 USD 19,257 21,724
Gabriel Finance Ltd. Partnership Cvt. 2.000% 11/26/16 EUR 4,100 5,733
Gecina SA Cvt. 2.130% 1/1/16 EUR 1,973 3,260
Grand City Properties SA Cvt. 1.500% 2/24/19 EUR 2,700 3,833
Graubuendner Kantonalbank Cvt. 2.000% 5/8/14 CHF 4,870 5,552
Hansteen Jersey Securities Ltd. Cvt. 4.000% 7/15/18 EUR 2,100 3,605
Industrivarden AB Cvt. 2.500% 2/27/15 EUR 1,950 3,461
INTU Jersey Ltd. Cvt. 2.500% 10/4/18 GBP 1,900 3,417
1 Portfolio Recovery Associates Inc. Cvt. 3.000% 8/1/20 USD 21,223 23,995
SBI Holdings Inc. Cvt. 0.000% 11/2/17 JPY 330,000 3,498
Shizuoka Bank Ltd. Cvt. 0.000% 4/25/18 USD 2,800 2,944
St. Modwen Properties Securities Jersey Ltd.          
Cvt. 2.875% 3/6/19 GBP 1,400 2,391
Starwood Property Trust Inc. Cvt. 4.550% 3/1/18 USD 6,895 7,903
Starwood Property Trust Inc. Cvt. 4.000% 1/15/19 USD 8,660 9,948
Steinhoff Finance Holding GmbH Cvt. 4.000% 1/30/21 EUR 4,000 5,993
TAG Immobilien AG Cvt. 5.500% 6/28/19 EUR 700 1,274

 

 

Unite Jersey Issuer Ltd. Cvt. 2.500% 10/10/18 GBP 3,300 5,905
          223,813
Health Care (16.4%)          
1 Albany Molecular Research Inc. Cvt. 2.250% 11/15/18 USD 1,790 2,140
Alere Inc. Cvt. 3.000% 5/15/16 USD 9,223 10,387
1 Allscripts Healthcare Solutions Inc. Cvt. 1.250% 7/1/20 USD 24,785 31,276
BioMarin Pharmaceutical Inc. Cvt. 0.750% 10/15/18 USD 7,535 8,792
BioMarin Pharmaceutical Inc. Cvt. 1.500% 10/15/20 USD 22,760 27,312
Brookdale Senior Living Inc. Cvt. 2.750% 6/15/18 USD 23,485 31,631
1 Cepheid Inc. Cvt. 1.250% 2/1/21 USD 13,075 14,039
1 Cubist Pharmaceuticals Inc. Cvt. 1.125% 9/1/18 USD 14,055 17,244
1 Cubist Pharmaceuticals Inc. Cvt. 1.875% 9/1/20 USD 3,455 4,332
Fluidigm Corp. Cvt. 2.750% 2/1/34 USD 9,550 11,108
HealthSouth Corp. Cvt. 2.000% 12/1/43 USD 29,790 31,038
HeartWare International Inc. Cvt. 3.500% 12/15/17 USD 9,250 11,308
Hologic Inc. Cvt. 2.000% 12/15/37 USD 3,170 3,638
Hologic Inc. Cvt. 2.000% 3/1/42 USD 4,390 4,505
1 Medidata Solutions Inc. Cvt. 1.000% 8/1/18 USD 14,365 19,240
1 Molina Healthcare Inc. Cvt. 1.125% 1/15/20 USD 24,735 27,611
Nikkiso Co. Ltd. Cvt. 0.000% 8/2/18 JPY 200,000 2,162
NuVasive Inc. Cvt. 2.750% 7/1/17 USD 27,580 31,941
Omnicare Inc. Cvt. 3.500% 2/15/44 USD 29,860 30,009
Orpea Cvt. 3.880% 1/1/16 EUR 3,276 5,471
Orpea Cvt. 1.750% 1/1/20 EUR 1,412 2,266
Wright Medical Group Inc. Cvt. 2.000% 8/15/17 USD 19,724 27,416
          354,866
Industrials (7.9%)          
Aecon Group Inc. Cvt. 5.500% 12/31/18 CAD 4,198 4,058
Air France-KLM Cvt. 2.030% 2/15/23 EUR 3,537 6,097
Air Lease Corp. Cvt. 3.875% 12/1/18 USD 15,900 23,900
Asahi Glass Co. Ltd. Cvt. 0.000% 11/14/14 JPY 50,000 491
Astaldi SPA Cvt. 4.500% 1/31/19 EUR 1,400 2,271
Balfour Beatty Finance No.2 Ltd. Cvt. 1.875% 12/3/18 GBP 4,000 7,160
China Merchants Holdings Pacific Ltd. Cvt. 1.250% 11/6/17 HKD 16,000 2,205
Daifuku Co. Ltd. Cvt. 0.000% 10/2/17 JPY 100,000 1,190
Deutsche Post AG Cvt. 0.600% 12/6/19 EUR 2,400 4,526
Ebara Corp. Cvt. 0.000% 3/19/18 JPY 190,000 2,786
Greenbrier Cos. Inc. Cvt. 3.500% 4/1/18 USD 6,660 9,012
GS Yuasa Corp. Cvt. 0.000% 3/13/19 JPY 220,000 2,348
GVM Debentures Lux 1 SA Cvt. 5.750% 2/14/18 EUR 2,300 4,064
Kawasaki Kisen Kaisha Ltd. Cvt. 0.000% 9/26/18 JPY 190,000 1,993
Kawasaki Kisen Kaisha Ltd. Cvt. 0.000% 9/26/18 JPY 280,000 2,939
KUKA AG Cvt. 2.000% 2/12/18 EUR 2,800 4,685
1 Lufthansa Malta Blues LP Cvt. 0.750% 4/5/17 EUR 2,610 5,044
MISUMI Group Inc. Cvt. 0.000% 10/22/18 USD 4,000 4,345
Nagoya Railroad Co. Ltd. Cvt. 0.500% 3/31/15 JPY 35,000 434
Nagoya Railroad Co. Ltd. Cvt. 0.000% 10/3/23 JPY 510,000 5,500
OCI Cvt. 3.875% 9/25/18 EUR 2,300 3,909
OSG Corp. Cvt. 0.000% 4/4/22 JPY 200,000 2,559
PB Issuer No 3 Ltd. Cvt. 1.875% 10/22/18 USD 4,586 5,477
Prysmian SPA Cvt. 1.250% 3/8/18 EUR 3,300 5,162
Russel Metals Inc. Cvt. 7.750% 9/30/16 CAD 4,900 5,402
Schindler Holding AG Cvt. 0.375% 6/5/17 CHF 3,300 3,859
SGL Carbon SE Cvt. 2.750% 1/25/18 EUR 3,500 5,073
Siemens Financieringsmaatschappij NV Cvt. 1.050% 8/16/17 USD 2,000 2,311
Siemens Financieringsmaatschappij NV Cvt. 1.650% 8/16/19 USD 6,750 8,032

 

 

Societa Iniziative Autostradali e Servizi SPA          
Cvt. 2.625% 6/30/17 EUR 1,195 1,705
Tem SAS Cvt. 4.250% 1/1/15 EUR 1,463 2,271
Tong Jie Ltd. Cvt. 0.000% 2/18/18 HKD 27,000 3,597
1 UTi Worldwide Inc. Cvt. 4.500% 3/1/19 USD 15,750 16,006
Wabash National Corp. Cvt. 3.375% 5/1/18 USD 6,510 9,037
Yamato Holdings Co. Ltd. Cvt. 0.000% 3/7/16 JPY 170,000 2,044
          171,492
Information Technology (27.8%)          
Advanced Semiconductor Engineering Inc.          
Cvt. 0.000% 9/5/18 USD 3,800 4,229
AU Optronics Corp. Cvt. 0.000% 10/13/15 USD 3,200 3,376
Bottomline Technologies de Inc. Cvt. 1.500% 12/1/17 USD 6,340 8,397
Cap Gemini SA Cvt. 0.000% 1/1/19 EUR 25 2,651
1 Cardtronics Inc. Cvt. 1.000% 12/1/20 USD 13,005 12,867
Ciena Corp. Cvt. 0.875% 6/15/17 USD 25,490 26,350
1 Ciena Corp. Cvt. 3.750% 10/15/18 USD 5,640 8,312
1 Concur Technologies Inc. Cvt. 0.500% 6/15/18 USD 14,100 18,647
1 Cornerstone OnDemand Inc. Cvt. 1.500% 7/1/18 USD 7,655 9,889
1 CSG Systems International Inc. Cvt. 3.000% 3/1/17 USD 8,135 10,525
Davis & Henderson Corp. Cvt. 6.000% 9/30/18 CAD 4,653 4,917
Dealertrack Technologies Inc. Cvt. 1.500% 3/15/17 USD 1,775 2,731
Econocom Group Cvt. 4.000% 6/1/16 EUR 702 1,580
Econocom Group Cvt. 1.500% 1/15/19 EUR 3,105 4,725
1 Emulex Corp. Cvt. 1.750% 11/15/18 USD 9,955 10,073
Epistar Corp. Cvt. 0.000% 8/7/18 USD 3,900 4,690
1 Finisar Corp. Cvt. 0.500% 12/15/33 USD 18,190 19,611
Hanwha SolarOne Co. Ltd. Cvt. 3.500% 1/15/18 USD 2,563 2,273
Indra Sistemas SA Cvt. 1.750% 10/17/18 EUR 3,000 4,654
Intel Corp. Cvt. 2.950% 12/15/35 USD 13,765 15,701
Intel Corp. Cvt. 3.250% 8/1/39 USD 9,855 13,310
1 JDS Uniphase Corp. Cvt. 0.625% 8/15/33 USD 29,840 31,220
Lam Research Corp. Cvt. 0.500% 5/15/16 USD 21,719 24,393
Lam Research Corp. Cvt. 1.250% 5/15/18 USD 1,975 2,356
Mentor Graphics Corp. Cvt. 4.000% 4/1/31 USD 12,515 15,550
Micron Technology Inc. Cvt. 3.000% 11/15/43 USD 34,155 37,912
Nihon Unisys Ltd. Cvt. 0.000% 6/20/16 JPY 350,000 4,162
1 NQ Mobile Inc. Cvt. 4.000% 10/15/18 USD 10,055 9,150
1 NVIDIA Corp. Cvt. 1.000% 12/1/18 USD 35,060 38,982
ON Semiconductor Corp. Cvt. 2.625% 12/15/26 USD 24,577 29,938
Photronics Inc. Cvt. 3.250% 4/1/16 USD 7,947 8,781
1 Proofpoint Inc. Cvt. 1.250% 12/15/18 USD 8,825 11,092
1 Salesforce.com Inc. Cvt. 0.250% 4/1/18 USD 28,305 33,453
1 SanDisk Corp. Cvt. 0.500% 10/15/20 USD 37,525 39,472
Semiconductor Manufacturing International          
Corp. Cvt. 0.000% 11/7/18 USD 3,300 3,534
1 SINA Corp. Cvt. 1.000% 12/1/18 USD 3,055 2,969
1 SunEdison Inc. Cvt. 2.000% 10/1/18 USD 8,145 11,714
1 SunEdison Inc. Cvt. 2.750% 1/1/21 USD 14,230 20,714
Take-Two Interactive Software Inc. Cvt. 1.750% 12/1/16 USD 9,294 11,478
Take-Two Interactive Software Inc. Cvt. 1.000% 7/1/18 USD 11,240 12,961
TTM Technologies Inc. Cvt. 1.750% 12/15/20 USD 13,180 14,457
1 Vishay Intertechnology Inc. Cvt. 2.250% 11/15/40 USD 4,145 4,681
1 Vishay Intertechnology Inc. Cvt. 2.250% 5/15/41 USD 10,735 9,715
Web.com Group Inc. Cvt. 1.000% 8/15/18 USD 12,270 15,161
WebMD Health Corp. Cvt. 2.500% 1/31/18 USD 6,690 6,841
1 WebMD Health Corp. Cvt. 1.500% 12/1/20 USD 9,335 9,872

 

 

1 Yandex NV Cvt. 1.125% 12/15/18 USD 2,980 3,079
            603,145
Materials (2.8%)          
  African Minerals Ltd. Cvt. 8.500% 2/10/17 USD 2,000 1,935
  APERAM Cvt. 2.625% 9/30/20 USD 3,800 4,758
  Buzzi Unicem SPA Cvt. 1.375% 7/17/19 EUR 3,600 5,814
  Cemex SAB de CV Cvt. 4.875% 3/15/15 USD 3,570 4,427
  Cemex SAB de CV Cvt. 3.250% 3/15/16 USD 4,494 6,336
  Glencore Finance Europe SA Cvt. 5.000% 12/31/14 USD 3,000 3,390
  Logo Star Ltd. Cvt. 1.500% 11/22/18 HKD 26,000 3,735
  RTI International Metals Inc. Cvt. 3.000% 12/1/15 USD 11,420 11,727
  RTI International Metals Inc. Cvt. 1.625% 10/15/19 USD 14,955 14,684
  Salzgitter Finance BV Cvt. 2.000% 11/8/17 EUR 2,650 4,093
1,2 ShengdaTech Inc. Cvt. 6.500% 12/15/15 USD 305 3
            60,902
Telecommunication Services (0.3%)          
  Billion Express Investments Ltd. Cvt. 0.750% 10/18/15 USD 4,800 4,834
  Inmarsat plc Cvt. 1.750% 11/16/17 USD 2,000 2,697
            7,531
Utilities (0.8%)          
  ENN Energy Holdings Ltd. Cvt. 0.000% 2/26/18 USD 4,000 5,020
  Northland Power Inc. Cvt. 5.000% 6/30/19 CAD 915 831
  Parpublica - Participacoes Publicas SGPS SA 5.250% 9/28/17 EUR 2,850 4,374
  Suez Environnement Co. 0.000% 2/27/20 EUR 127 3,493
  YTL Corp. Finance Labuan Ltd. Cvt. 1.875% 3/18/15 USD 4,200 4,389
            18,107
Total Convertible Bonds (Cost $1,779,455)         1,968,894
    Coupon     Shares  
Convertible Preferred Stocks (7.6%)          
Consumer Staples (0.3%)          
  Bunge Ltd. Pfd. 4.875%     52,700 5,540
 
Energy (3.1%)          
1 Chesapeake Energy Corp. Pfd. 5.750%     16,490 18,417
  Energy XXI Bermuda Ltd. Pfd. 5.625%     41,450 11,036
  Goodrich Petroleum Corp. Pfd. 5.375%     352,300 13,420
  Halcon Resources Corp. Pfd. 5.750%     16,650 12,383
1 Sanchez Energy Corp. Pfd. 4.875%     42,200 3,156
  SandRidge Energy Inc. Pfd. 8.500%     93,310 9,798
            68,210
Financials (1.4%)          
  Crown Castle International Corp. Pfd. 4.500%     179,900 18,328
  Health Care REIT Inc. Pfd. 6.500%     62,405 3,510
  Wintrust Financial Corp. Pfd. 5.000%     7,530 9,323
            31,161
Health Care (1.0%)          
  Alere Inc. Pfd. 3.000%     72,840 21,324
 
Industrials (1.3%)          
  Continental Airlines Finance Trust II Pfd. 6.000%     244,410 12,121
  Genesee & Wyoming Inc. Pfd. 5.000%     121,740 15,979
            28,100

 

 

Materials (0.1%)      
ArcelorMittal Pfd. 6.000% 98,100 2,325
 
Telecommunication Services (0.4%)      
1 Iridium Communications Inc. Pfd. 7.000% 94,600 8,999
 
Total Convertible Preferred Stocks (Cost $157,152)     165,659
Temporary Cash Investment (1.6%)      
Money Market Fund (1.6%)      
3,4 Vanguard Market Liquidity Fund (Cost      
$33,830) 0.130% 33,829,827 33,830
 
Total Investments (100.0%) (Cost $1,970,689)     2,168,639
Other Assets and Liabilities-Net (0.0%)     (249)
Net Assets (100%)     2,168,390

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, 2014, the
aggregate value of these securities was $706,640,000, representing 32.6% 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 $3,108,000 has been segregated as initial margin for open forwards contracts.
REIT—Real Estate Investment Trust.
AUD—Australian dollars.
CAD—Canadian dollars.
CHF—Swiss francs.
CNY—Chinese Yuan.
EUR—Euro.
GBP—British pounds.
HKD—Hong Kong dollars.
JPY—Japanese Yen.
KRW—Korean won.
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 affected by events occurring before the fund's pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund's pricing time. When fair-value

 

Convertible Securities Fund

pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities.

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).

The following table summarizes the market value of the fund's investments as of February 28, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Common Stocks 256 — —
Convertible Bonds — 1,968,894 —
Convertible Preferred Stocks — 165,659 —
Temporary Cash Investments 33,830 — —
Forward Currency Contracts—Assets — 191 —
Forward Currency Contracts—Liabilities — (5,570) —
Total 34,086 2,129,174 —

 

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. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. 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 pledged. Any assets pledged

 

Convertible Securities Fund

as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

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 notional 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).

    Contract Amount (000)  
            Unrealized
  Contract         Appreciation
  Settlement         (Depreciation)
Counterparty Date   Receive   Deliver ($000)
UBS AG 4/24/14 USD 185,838 EUR 137,125 (3,434)
UBS AG 4/24/14 USD 54,576 JPY 5,675,425 (1,208)
UBS AG 4/24/14 USD 26,751 GBP 16,256 (459)
UBS AG 4/24/14 USD 23,359 CAD 25,700 180
UBS AG 4/24/14 USD 22,256 HKD 172,620 11
UBS AG 4/24/14 USD 10,315 SGD 13,185 (87)
UBS AG 4/24/14 USD 9,419 CHF 8,585 (346)
UBS AG 4/24/14 USD 4,080 KRW 4,393,445 (22)
UBS AG 4/24/14 USD 1,374 HKD 10,673 (1)
UBS AG 4/24/14 USD 647 AUD 740 (10)
UBS AG 4/24/14 USD 420 CAD 469 (3)
            (5,379)
AUD—Australian dollar.
CAD—Canadian dollar.
CHF—Swiss franc.
EUR—Euro.
GBP—British pound.
HKD—Hong Kong dollar.
JPY—Japanese yen.
KRW—Korean won.
SGD—Singapore dollar.
USD—U.S. dollar.

 

E. At February 28, 2014, the cost of investment securities for tax purposes was $1,970,508,000. Net unrealized appreciation of investment securities for tax purposes was $198,131,000, consisting of unrealized gains of $217,640,000 on securities that had risen in value since their purchase and $19,509,000 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: April 16, 2014  

 

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 16, 2014  

 

  VANGUARD CONVERTIBLE SECURITIES FUND
 
By: /s/ THOMAS J. HIGGINS*
  THOMAS J. HIGGINS
  CHIEF FINANCIAL OFFICER
 
Date: April 16, 2014  

 

* By:/s/ Heidi Stam

Heidi Stam, pursuant to a Power of Attorney filed on April 22, 2014 see file Number 2-17620, Incorporated by Reference.