N-Q 1 convertiblesecurities_final.htm convertiblesecurities_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: August 31, 2014

 

Item 1: Schedule of Investments

 


Vanguard Convertible Securities Fund

Schedule of Investments
As of August 31, 2014

          Market
          Value
        Shares ($000)
Common Stocks (0.0%)          
Energy (0.0%)          
Halcon Resources Corp.       44,950 247
Total Common Stocks (Cost $238)         247
        Face  
    Maturity   Amount  
  Coupon Date   Currency (000)  
Convertible Bonds (88.7%)          
Consumer Discretionary (11.0%)          
ABC-Mart Inc. Cvt. 0.000% 2/5/18 JPY 560,000 6,580
Asics Corp. Cvt. 0.000% 3/1/19 JPY 150,000 1,557
Cineplex Inc. Cvt. 4.500% 12/31/18 CAD 4,253 4,107
1 Ctrip.com International Ltd. Cvt. 1.250% 10/15/18 USD 10,637 11,787
Enterprise Funding Ltd. Cvt. 3.500% 9/10/20 GBP 1,600 2,703
FF Group Finance Luxembourg Cvt. 1.750% 7/3/19 EUR 4,600 6,084
Iconix Brand Group Inc. Cvt. 1.500% 3/15/18 USD 6,100 8,628
Jarden Corp. Cvt. 1.500% 6/15/19 USD 19,345 23,262
1 Jarden Corp. Cvt. 1.125% 3/15/34 USD 18,200 18,757
Liberty Interactive LLC Cvt. 0.750% 3/30/43 USD 7,710 10,452
1 Liberty Media Corp. Cvt. 1.375% 10/15/23 USD 32,795 33,676
Lotte Shopping Co. Ltd. Cvt. 0.000% 1/24/18 KRW 4,200,000 4,215
Misarte Cvt. 3.250% 1/1/16 EUR 20 4,667
NH Hoteles SA Cvt. 4.000% 11/8/18 EUR 1,500 2,228
1 Priceline Group Inc. Cvt. 0.900% 9/15/21 USD 18,835 18,423
priceline.com Inc. 0.350% 6/15/20 USD 24,535 28,829
ResortTrust Inc. Cvt. 0.000% 7/27/18 JPY 310,000 3,512
Sekisui House Ltd. Cvt. 0.000% 7/5/16 JPY 450,000 5,723
Sogefi SPA Cvt. 2.000% 5/21/21 EUR 2,800 3,670
Steinhoff Finance Holding GmbH Cvt. 4.000% 1/30/21 EUR 4,000 6,220
Takashimaya Co. Ltd. Cvt. 0.000% 12/11/20 JPY 420,000 4,110
Tesla Motors Inc. Cvt. 1.250% 3/1/21 USD 27,675 28,107
TUI AG Cvt. 2.750% 3/24/16 EUR 36 3,217
          240,514
Consumer Staples (2.3%)          
Biostime International Holdings Ltd. Cvt. 0.000% 2/20/19 HKD 34,000 4,102
Hengan International Group Co. Ltd. Cvt. 0.000% 6/27/18 HKD 28,000 3,726
1 Herbalife Ltd. Cvt. 2.000% 8/15/19 USD 22,470 17,555
Marine Harvest ASA Cvt. 2.375% 5/8/18 EUR 5,000 8,253
Olam International Ltd. Cvt. 6.000% 10/15/16 USD 6,600 7,400
Rallye SA Cvt. 1.000% 10/2/20 EUR 34 5,043
Sonae Investments BV Cvt. 1.625% 6/11/19 EUR 2,900 3,647
          49,726
Energy (9.9%)          
BPZ Resources Inc. Cvt. 8.500% 10/1/17 USD 9,890 10,465
Cam 2012 SPA Cvt. 5.625% 10/26/17 EUR 3,300 5,240
Cobalt International Energy Inc. Cvt. 3.125% 5/15/24 USD 36,670 35,570
1 Emerald Oil Inc. Cvt. 2.000% 4/1/19 USD 10,860 12,061
1 Energy XXI Bermuda Ltd. Cvt. 3.000% 12/15/18 USD 9,390 8,428
Etablissements Maurel et Prom Cvt. 1.625% 7/1/19 EUR 164 3,731
Golar LNG Ltd. Cvt. 3.750% 3/7/17 USD 2,700 3,753

 

 

Goodrich Petroleum Corp. Cvt. 5.000% 10/1/32 USD 6,133 7,087
Helix Energy Solutions Group Inc. Cvt. 3.250% 3/15/32 USD 4,405 5,963
Hornbeck Offshore Services Inc. Cvt. 1.500% 9/1/19 USD 19,800 22,622
Lukoil International Finance BV Cvt. 2.625% 6/16/15 USD 5,100 5,068
1 Scorpio Tankers Inc. Cvt. 2.375% 7/1/19 USD 27,220 28,071
SEACOR Holdings Inc. Cvt. 2.500% 12/15/27 USD 19,895 22,394
1 SEACOR Holdings Inc. Cvt. 3.000% 11/15/28 USD 8,680 8,284
Siem Industries Inc. Cvt. 1.000% 9/12/19 USD 7,200 7,027
Stone Energy Corp. Cvt. 1.750% 3/1/17 USD 24,335 27,210
Subsea 7 SA Cvt. 1.000% 10/5/17 USD 400 387
Technip SA Cvt. 0.500% 1/1/16 EUR 15 1,770
          215,131
Financials (9.2%)          
Alstria Office REIT-AG Cvt. 2.750% 6/14/18 EUR 2,600 3,846
American Realty Capital Properties Inc. Cvt. 3.750% 12/15/20 USD 22,735 23,573
Azimut Holding SPA Cvt. 2.125% 11/25/20 EUR 5,200 7,695
Beni Stabili SPA Cvt. 3.375% 1/17/18 EUR 1,600 2,446
BES Finance Ltd. Cvt. 3.500% 12/6/15 USD 6,100 6,786
BNP Paribas SA Cvt. 0.250% 9/21/15 EUR 4,300 6,166
BNP Paribas SA Cvt. 0.250% 9/27/16 EUR 1,600 2,312
British Land Jersey Ltd. Cvt. 1.500% 9/10/17 GBP 2,200 4,191
Caja de Ahorros y Pensiones de Barcelona          
Cvt. 1.000% 11/25/17 EUR 4,700 6,960
CapitaCommercial Trust Cvt. 2.500% 9/12/17 SGD 4,000 3,632
1 CapitaLand Ltd. Cvt. 1.850% 6/19/20 SGD 4,500 3,475
CapitaLand Ltd. Cvt. 1.850% 6/19/20 SGD 1,750 1,351
CapitaLand Ltd. Cvt. 1.950% 10/17/23 SGD 1,500 1,256
China Overseas Grand Oceans Finance          
Cayman Ltd. Cvt. 2.000% 3/21/17 HKD 27,000 3,500
Colony Financial Inc. Cvt. 5.000% 4/15/23 USD 10,800 11,313
Deutsche Euroshop AG Cvt. 1.750% 11/20/17 EUR 2,700 4,199
Deutsche Wohnen AG Cvt. 0.500% 11/22/20 EUR 4,100 5,717
1 Element Financial Corp. Cvt. 5.125% 6/30/19 CAD 7,929 8,058
Fonciere Des Regions Cvt. 3.340% 1/1/17 EUR 17 2,142
Forest City Enterprises Inc. Cvt. 4.250% 8/15/18 USD 17,167 19,570
Gabriel Finance LP Cvt. 2.000% 11/26/16 EUR 4,100 5,191
GAGFAH SA Cvt. 1.500% 5/20/19 EUR 4,700 6,920
Gecina SA Cvt. 2.130% 1/1/16 EUR 11 2,052
Grand City Properties SA Cvt. 1.500% 2/24/19 EUR 2,700 3,993
Industrivarden AB Cvt. 0.000% 5/15/19 SEK 13,000 1,861
INTU Jersey Ltd. Cvt. 2.500% 10/4/18 GBP 1,900 3,443
National Bank of Abu Dhabi PJSC Cvt. 1.000% 3/12/18 USD 1,000 1,090
Nexity SA Cvt. 0.625% 1/1/20 EUR 44 2,516
1 Portfolio Recovery Associates Inc. Cvt. 3.000% 8/1/20 USD 21,223 24,353
SBI Holdings Inc. Cvt. 0.000% 11/2/17 JPY 330,000 3,338
Shizuoka Bank Ltd. Cvt. 0.000% 4/25/18 USD 2,800 2,824
St. Modwen Properties Securities Jersey Ltd.          
Cvt. 2.875% 3/6/19 GBP 2,100 3,460
Starwood Property Trust Inc. Cvt. 4.550% 3/1/18 USD 2,605 2,911
Starwood Property Trust Inc. Cvt. 4.000% 1/15/19 USD 2,040 2,317
Swiss Life Holding AG Cvt. 0.000% 12/2/20 CHF 140 178
Unite Jersey Issuer Ltd. Cvt. 2.500% 10/10/18 GBP 3,700 6,381
          201,016
Health Care (21.1%)          
Alere Inc. Cvt. 3.000% 5/15/16 USD 9,223 9,684
Allscripts Healthcare Solutions Inc. Cvt. 1.250% 7/1/20 USD 24,920 26,727

 

 

BioMarin Pharmaceutical Inc. Cvt. 0.750% 10/15/18 USD 10,670 11,470
BioMarin Pharmaceutical Inc. Cvt. 1.500% 10/15/20 USD 23,385 25,972
Brookdale Senior Living Inc. Cvt. 2.750% 6/15/18 USD 21,015 28,712
1 Cepheid Inc. Cvt. 1.250% 2/1/21 USD 13,075 12,454
1 Cubist Pharmaceuticals Inc. Cvt. 1.125% 9/1/18 USD 14,055 15,610
1 Cubist Pharmaceuticals Inc. Cvt. 1.875% 9/1/20 USD 5,115 5,812
HealthSouth Corp. Cvt. 2.000% 12/1/43 USD 29,790 33,774
HeartWare International Inc. Cvt. 3.500% 12/15/17 USD 7,025 7,811
Hologic Inc. Cvt. 2.000% 12/15/37 USD 8,175 9,912
Hologic Inc. Cvt. 2.000% 3/1/42 USD 25,336 27,205
1 Illumina Inc. Cvt. 0.500% 6/15/21 USD 23,230 25,524
1 Incyte Corp. Ltd. Cvt. 0.375% 11/15/18 USD 4,515 5,827
1 Jazz Investments I Ltd. Cvt. 1.875% 8/15/21 USD 31,424 35,411
1 Ligand Pharmaceuticals Inc. Cvt. 0.750% 8/15/19 USD 8,845 8,751
Medicines Co. Cvt. 1.375% 6/1/17 USD 2,915 3,354
Medidata Solutions Inc. Cvt. 1.000% 8/1/18 USD 18,705 20,786
Molina Healthcare Inc. Cvt. 1.125% 1/15/20 USD 20,450 26,419
Nikkiso Co. Ltd. Cvt. 0.000% 8/2/18 JPY 245,000 2,446
NuVasive Inc. Cvt. 2.750% 7/1/17 USD 28,565 32,189
Omnicare Inc. Cvt. 3.500% 2/15/44 USD 27,905 31,393
Orpea Cvt. 1.750% 1/1/20 EUR 58 4,551
Qiagen NV Cvt 0.375% 3/19/19 USD 2,600 2,736
Qiagen NV Cvt 0.875% 3/19/21 USD 3,600 3,901
Spectranetics Corp. Cvt. 2.625% 6/1/34 USD 14,455 16,939
Wright Medical Group Inc. Cvt. 2.000% 8/15/17 USD 18,104 24,033
          459,403
Industrials (7.3%)          
1 51job Inc. Cvt. 3.250% 4/15/19 USD 3,125 3,213
Aecon Group Inc. Cvt. 5.500% 12/31/18 CAD 4,503 4,597
Air France-KLM Cvt. 2.030% 2/15/23 EUR 283 4,253
Air Lease Corp. Cvt. 3.875% 12/1/18 USD 5,589 8,352
Astaldi SPA Cvt. 4.500% 1/31/19 EUR 2,100 3,251
Balfour Beatty Finance No.2 Ltd. Cvt. 1.875% 12/3/18 GBP 4,800 7,841
China Merchants Holdings Pacific Ltd. Cvt. 1.250% 11/6/17 HKD 16,000 2,256
Daifuku Co. Ltd. Cvt. 0.000% 10/2/17 JPY 100,000 1,070
Deutsche Post AG Cvt. 0.600% 12/6/19 EUR 600 1,036
DP World Ltd. Cvt. 1.750% 6/19/24 USD 400 425
Ebara Corp. Cvt. 0.000% 3/19/18 JPY 84,000 1,042
GS Yuasa Corp. Cvt. 0.000% 3/13/19 JPY 220,000 2,211
GVM Debentures Lux 1 SA Cvt. 5.750% 2/14/18 EUR 2,900 4,515
Johnson Electric Holdings Ltd. Cvt. 1.000% 4/2/21 USD 2,000 2,170
Kawasaki Kisen Kaisha Ltd. Cvt. 0.000% 9/26/18 JPY 470,000 4,743
KEYW Holding Corp. Cvt. 2.500% 7/15/19 USD 9,445 9,439
KUKA AG Cvt. 2.000% 2/12/18 EUR 2,800 5,030
Macquarie Infrastructure Co. LLC Cvt. 2.875% 7/15/19 USD 12,080 13,741
MISUMI Group Inc. Cvt. 0.000% 10/22/18 USD 4,000 4,225
Nagoya Railroad Co. Ltd. Cvt. 0.000% 10/3/23 JPY 510,000 5,944
OCI Cvt. 3.875% 9/25/18 EUR 5,200 7,217
OSG Corp. Cvt. 0.000% 4/4/22 JPY 200,000 2,360
PB Issuer No 3 Ltd. Cvt. 1.875% 10/22/18 USD 4,586 5,425
Prysmian SPA Cvt. 1.250% 3/8/18 EUR 3,300 4,487
Russel Metals Inc. Cvt. 7.750% 9/30/16 CAD 1,162 1,517
Sacyr SA Cvt. 4.000% 5/8/19 EUR 3,900 5,124
Schindler Holding AG Cvt. 0.375% 6/5/17 CHF 3,300 3,713
Siemens Financieringsmaatschappij NV Cvt. 1.050% 8/16/17 USD 2,000 2,238
Siemens Financieringsmaatschappij NV Cvt. 1.650% 8/16/19 USD 6,750 7,844

 

 

Societa Iniziative Autostradali e Servizi SPA          
Cvt. 2.625% 6/30/17 EUR 1,195 1,677
SolarCity Corp. Cvt. 2.750% 11/1/18 USD 3,510 4,675
Tem SAS Cvt. 4.250% 1/1/15 EUR 25 1,716
Tong Jie Ltd. Cvt. 0.000% 2/18/18 HKD 30,000 3,954
1 UTi Worldwide Inc. Cvt. 4.500% 3/1/19 USD 15,630 15,904
Wabash National Corp. Cvt. 3.375% 5/1/18 USD 580 805
Yamato Holdings Co. Ltd. Cvt. 0.000% 3/7/16 JPY 170,000 1,963
          159,973
Information Technology (24.2%)          
Advanced Semiconductor Engineering Inc.          
Cvt. 0.000% 9/5/18 USD 3,800 4,747
Alps Electric Co. Ltd. Cvt. 0.000% 3/25/19 JPY 240,000 2,638
1 AOL Inc. Cvt. 0.750% 9/1/19 USD 15,950 16,518
ASM Pacific Technology Ltd. Cvt. 2.000% 3/28/19 HKD 18,000 2,452
1 Canadian Solar Inc. Cvt. 4.250% 2/15/19 USD 2,615 2,896
Cap Gemini SA Cvt. 0.000% 1/1/19 EUR 25 2,481
1 Cardtronics Inc. Cvt. 1.000% 12/1/20 USD 13,605 13,027
1 Ciena Corp. Cvt. 3.750% 10/15/18 USD 14,400 18,702
1 Citrix Systems Inc. Cvt. 0.500% 4/15/19 USD 23,325 25,818
Concur Technologies Inc. 0.500% 6/15/18 USD 20,950 24,132
Cornerstone OnDemand Inc. Cvt. 1.500% 7/1/18 USD 11,499 11,952
Davis and Henderson Corp Cvt 6.000% 9/30/18 CAD 4,653 5,306
Econocom Group Cvt. 1.500% 1/15/19 EUR 293 4,292
Epistar Corp. Cvt. 0.000% 8/7/18 USD 3,900 4,648
Hanwha SolarOne Co. Ltd. Cvt. 3.500% 1/15/18 USD 2,563 2,454
Indra Sistemas SA Cvt. 1.750% 10/17/18 EUR 3,600 5,031
Intel Corp. Cvt. 2.950% 12/15/35 USD 13,765 17,843
j2 Global Inc. Cvt. 3.250% 6/15/29 USD 10,415 10,767
Lam Research Corp. Cvt. 0.500% 5/15/16 USD 26,374 33,808
Mentor Graphics Corp. Cvt. 4.000% 4/1/31 USD 12,515 15,393
Micron Technology Inc. Cvt. 3.000% 11/15/43 USD 29,875 38,147
NetSuite Inc. Cvt. 0.250% 6/1/18 USD 7,027 7,286
Nihon Unisys Ltd. Cvt. 0.000% 6/20/16 JPY 350,000 3,578
1 NVIDIA Corp. Cvt. 1.000% 12/1/18 USD 34,835 39,668
ON Semiconductor Corp. Cvt. 2.625% 12/15/26 USD 25,817 30,513
Photronics Inc. Cvt. 3.250% 4/1/16 USD 7,947 8,652
1 Proofpoint Inc. Cvt. 1.250% 12/15/18 USD 9,280 11,455
Salesforce.com Inc. Cvt. 0.250% 4/1/18 USD 28,305 32,692
1 SanDisk Corp. Cvt. 0.500% 10/15/20 USD 19,355 23,516
Semiconductor Manufacturing International          
Corp. Cvt. 0.000% 11/7/18 USD 4,200 4,641
1 SunEdison Inc. Cvt. 0.250% 1/15/20 USD 16,675 17,717
1 SunPower Corp. Cvt. 0.875% 6/1/21 USD 4,165 4,850
Take-Two Interactive Software Inc. Cvt. 1.000% 7/1/18 USD 3,795 4,772
1 Trina Solar Ltd. Cvt. 3.500% 6/15/19 USD 1,790 1,952
TTM Technologies Inc. Cvt. 1.750% 12/15/20 USD 13,180 13,650
Verint Systems Inc. Cvt. 1.500% 6/1/21 USD 19,650 20,436
1 Vishay Intertechnology Inc. Cvt. 2.250% 11/15/40 USD 3,849 4,768
1 Vishay Intertechnology Inc. Cvt. 2.250% 5/15/41 USD 10,735 10,708
Web.com Group Inc. Cvt. 1.000% 8/15/18 USD 4,335 3,912
WebMD Health Corp. Cvt. 2.500% 1/31/18 USD 6,690 7,087
1 WebMD Health Corp. Cvt. 1.500% 12/1/20 USD 10,320 11,423
1 Yandex NV Cvt. 1.125% 12/15/18 USD 2,980 2,594
          528,922

 

 

Materials (2.6%)          
  APERAM Cvt. 0.625% 7/8/21 USD 5,000 5,090
  Buzzi Unicem SPA Cvt. 1.375% 7/17/19 EUR 3,700 5,304
  Cemex SAB de CV Cvt. 4.875% 3/15/15 USD 3,302 4,027
1 Chemtrade Logistics Income Fund Cvt. 5.250% 6/30/21 CAD 4,553 4,342
  Glencore Finance Europe SA Cvt. 5.000% 12/31/14 USD 2,200 2,518
  Logo Star Ltd. Cvt. 1.500% 11/22/18 HKD 26,000 3,678
  NV Bekaert SA Cvt. 0.750% 6/18/18 EUR 3,400 4,465
  RTI International Metals Inc. Cvt. 1.625% 10/15/19 USD 14,955 15,310
  Salzgitter Finance BV Cvt. 2.000% 11/8/17 EUR 4,650 6,525
1,2 ShengdaTech Inc. Cvt. 6.500% 12/15/15 USD 305 3
  Toray Industries Inc. Cvt. 0.000% 8/31/21 JPY 560,000 5,824
            57,086
Telecommunication Services (0.1%)          
  Inmarsat PLC Cvt. 1.750% 11/16/17 USD 2,000 2,724
Utilities (1.0%)          
  ENN Energy Holdings Ltd. Cvt. 0.000% 2/26/18 USD 4,000 4,882
  Northland Power Inc. Cvt. 5.000% 6/30/19 CAD 3,666 3,547
  Parpublica - Participacoes Publicas SGPS SA          
  Cvt. 5.250% 9/28/17 EUR 2,850 4,278
  Shine Power International Ltd. Cvt. 0.000% 7/28/19 HKD 4,000 510
  Suez Environnement Co. Cvt. 0.000% 2/27/20 EUR 127 3,285
  Superior Plus Corp. Cvt. 6.000% 6/30/19 CAD 194 194
  YTL Corp. Finance Labuan Ltd. Cvt. 1.875% 3/18/15 USD 4,200 4,484
            21,180
Total Convertible Bonds (Cost $1,810,946)         1,935,675
          Shares  
Convertible Preferred Stocks (8.5%)          
Energy (4.0%)          
1 Chesapeake Energy Corp. Pfd. 5.750%     16,490 19,829
  Energy XXI Bermuda Ltd. Pfd. 5.625%     41,450 9,624
  Goodrich Petroleum Corp. Pfd. 5.375%     352,300 17,912
  Halcon Resources Corp. Pfd. 5.750%     16,120 15,576
1 Penn Virginia Corp. Pfd. 6.000%     132,578 14,502
  Rex Energy Corp. Pfd. 6.000%     81,900 8,897
            86,340
Financials (1.6%)          
  Crown Castle International Corp. Pfd. 4.500%     250,600 26,235
  Wintrust Financial Corp. Pfd. 5.000%     7,530 9,464
            35,699
Health Care (1.2%)          
  Alere Inc. Pfd. 3.000%     45,676 14,445
  Amsurg Corp. Pfd. 5.250%     99,700 11,322
            25,767
Industrials (0.6%)          
  Genesee & Wyoming Inc. Pfd. 5.000%     106,540 13,642
 
Materials (0.1%)          
  ArcelorMittal Pfd. 6.000%     98,100 2,200
 
Telecommunication Services (1.0%)          
  Iridium Communications Inc. Pfd. 6.750%     27,290 9,705

 

 

   
1 Iridium Communications Inc. Pfd. 7.000%   101,800 11,924
          21,629
Total Convertible Preferred Stocks (Cost $162,632)         185,277
Temporary Cash Investment (1.6%)          
Money Market Fund (1.6%)        
3 Vanguard Market Liquidity Fund      
(Cost $35,539) 0.113%     35,538,886 35,539
Total Investments (98.8%) (Cost $2,009,355)         2,156,738
Other Assets and Liabilities-Net (1.2%)         26,877
Net Assets (100%)         2,183,615

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, 2014, the aggregate value of these securities was $577,646,000, representing 26.5% 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.
REIT—Real Estate Investment Trust.
CAD—Canadian dollars.
CHF—Swiss francs.
EUR—Euro.
GBP—British pounds.
HKD—Hong Kong dollars.
JPY—Japanese Yen.
KRW—Korean won.
SEK—Swedish krona.
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 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 August 31, 2014, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Common Stocks 247 — —
Convertible Bonds — 1,935,672 3
Convertible Preferred Stocks — 185,277 —
Temporary Cash Investments 35,539 — —
Forward Currency Contracts—Assets — 8,546 —
Forward Currency Contracts—Liabilities — (9) —
Total 35,786 2,129,486 3

 

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 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 settlement values of the contracts are not recorded in the Schedule of Investments. Fluctuations in the value of the contracts are recorded as an asset (liability).

 
Contract Amount (000)
          Unrealized
  Contract         Appreciation
  Settlement         (Depreciation)
Counterparty Date   Receive   Deliver ($000)
UBS AG 10/23/14 USD 207,282 EUR 153,410 5,639
UBS AG 10/23/14 USD 60,458 JPY 6,126,460 1,551
UBS AG 10/23/13 USD 32,587 CAD 35,047 395
UBS AG 10/23/14 USD 28,407 GBP 16,655 769
UBS AG 10/23/14 USD 24,427 HKD 189,349 (6)
UBS AG 10/23/14 USD 9,665 SGD 11,985 70
UBS AG 10/23/14 USD 4,012 CHF 3,603 85
UBS AG 10/23/14 USD 1,867 SEK 12,795 37
UBS AG 10/23/14 USD 571 CAD 624 (3)
            8,537

 

CAD—Canadian dollar.
CHF—Swiss franc.
EUR—Euro.
GBP—British pound.
HKD—Hong Kong dollar.
JPY—Japanese yen.
SEK—Swedish krona.
SGD—Singapore dollar.
USD—U.S. dollar.

At August 31, 2014, the counterparty had deposited in segregated accounts securities with a value of $8,527,000 in connection with amounts due to the fund for open forward currency contracts.

E. At August 31, 2014, the cost of investment securities for tax purposes was $2,009,471,000. Net unrealized appreciation of investment securities for tax purposes was $147,267,000, consisting of unrealized gains of $173,544,000 on securities that had risen in value since their purchase and $26,277,000 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 22, 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: October 22, 2014

 

  
 

VANGUARD CONVERTIBLE SECURITIES FUND

 

  /s/ THOMAS J. HIGGINS*
  THOMAS J. HIGGINS
  CHIEF FINANCIAL OFFICER
Date: October 22, 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.