N-Q 1 convertiblesecurities_final.htm VANGUARD CONVERTIBLE SECURITIES FUND 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 30th

Date of reporting period: February 28, 2015

Item 1: Schedule of Investments


Vanguard Convertible Securities Fund          
 
 
 
Schedule of Investments          
As of February 28, 2015          
 
          Market
          Value
        Shares ($000)
Common Stocks (0.0%)          
Energy (0.0%)          
Halcon Resources Corp.       119,533 229
Total Common Stocks (Cost $240)         229
        Face  
    Maturity   Amount  
  Coupon Date Currency (000)  
Convertible Bonds (90.6%)          
Consumer Discretionary (8.9%)          
ABC-Mart Inc. Cvt. 0.000% 2/5/18 JPY 540,000 6,636
Asics Corp. Cvt. 0.000% 3/1/19 JPY 150,000 1,596
Cineplex Inc. Cvt. 4.500% 12/31/18 CAD 4,453 3,918
Ctrip.com International Ltd. Cvt. 1.250% 10/15/18 USD 137 132
Enterprise Funding Ltd. Cvt. 3.500% 9/10/20 GBP 1,600 2,137
FF Group Finance Luxembourg Cvt. 1.750% 7/3/19 EUR 6,300 6,076
Iconix Brand Group Inc. Cvt. 1.500% 3/15/18 USD 7,355 8,849
Jarden Corp. Cvt. 1.500% 6/15/19 USD 12,490 17,915
1 Jarden Corp. Cvt. 1.125% 3/15/34 USD 19,709 23,835
K's Holdings Corp. Cvt. 0.000% 12/20/19 JPY 590,000 5,579
Liberty Media Corp. Cvt. 1.375% 10/15/23 USD 25,130 25,099
Lotte Shopping Co. Ltd. Cvt. 0.000% 1/24/18 KRW 4,200,000 3,702
Misarte Cvt. 3.250% 1/1/16 EUR 2,550 3,795
NH Hoteles SA Cvt. 4.000% 11/8/18 EUR 5,700 7,598
priceline.com Inc. Cvt. 0.350% 6/15/20 USD 24,970 29,340
ResortTrust Inc. Cvt. 0.000% 12/1/21 JPY 560,000 5,282
SAF-Holland SA Cvt. 1.000% 9/12/20 EUR 3,200 4,461
Steinhoff Finance Holding GmbH Cvt. 4.000% 1/30/21 EUR 4,000 6,319
Takashimaya Co. Ltd. Cvt. 0.000% 12/11/20 JPY 420,000 3,801
Tesla Motors Inc. Cvt. 1.250% 3/1/21 USD 6,505 5,517
          171,587
Consumer Staples (2.1%)          
Hengan International Group Co. Ltd. Cvt. 0.000% 6/27/18 HKD 28,000 3,777
Herbalife Ltd. Cvt. 2.000% 8/15/19 USD 13,940 10,490
J Sainsbury PLC Cvt. 1.250% 11/21/19 GBP 3,200 5,303
Marine Harvest ASA Cvt. 2.375% 5/8/18 EUR 3,400 5,215
Olam International Ltd. Cvt. 6.000% 10/15/16 USD 6,600 6,864
Rallye SA Cvt. 1.000% 10/2/20 EUR 3,380 4,277
Sonae Investments BV Cvt. 1.625% 6/11/19 EUR 4,600 5,163
          41,089
Energy (5.2%)          
BPZ Resources Inc. Cvt. 8.500% 10/1/17 USD 7,060 1,200
BW Group Ltd. Cvt. 1.750% 9/10/19 USD 5,000 4,343
Cam 2012 SPA Cvt. 5.625% 10/26/17 EUR 3,700 5,282
Cobalt International Energy Inc. Cvt. 3.125% 5/15/24 USD 25,530 19,706
Helix Energy Solutions Group Inc. Cvt. 3.250% 3/15/32 USD 6,451 6,536
Lukoil International Finance BV Cvt. 2.625% 6/16/15 USD 7,000 6,878
RAG-Stiftung Cvt. 0.000% 2/18/21 EUR 100 116
1 Scorpio Tankers Inc. Cvt. 2.375% 7/1/19 USD 27,680 26,953
SEACOR Holdings Inc. Cvt. 2.500% 12/15/27 USD 18,625 19,498
SEACOR Holdings Inc. Cvt. 3.000% 11/15/28 USD 8,680 7,720

 

 

Subsea 7 SA Cvt. 1.000% 10/5/17 USD 400 354
Technip SA Cvt. 0.500% 1/1/16 EUR 1,206 1,349
          99,935
Financials (8.9%)          
Alstria Office REIT-AG Cvt. 2.750% 6/14/18 EUR 2,600 3,701
American Realty Capital Properties Inc. Cvt. 3.750% 12/15/20 USD 3,510 3,304
AmTrust Financial Services Inc. Cvt. 2.750% 12/15/44 USD 13,070 11,363
AYC Finance Ltd. Cvt. 0.500% 5/2/19 USD 2,886 3,261
Azimut Holding SPA Cvt. 2.125% 11/25/20 EUR 8,300 11,476
Beni Stabili SPA Cvt. 3.375% 1/17/18 EUR 1,600 2,268
BES Finance Ltd. Cvt. 3.500% 12/6/15 USD 5,000 4,960
BNP Paribas SA Cvt. 0.250% 9/21/15 EUR 4,300 5,362
BNP Paribas SA Cvt. 0.250% 9/27/16 EUR 1,600 2,057
British Land Jersey Ltd. Cvt. 1.500% 9/10/17 GBP 2,200 4,184
Caja de Ahorros y Pensiones de Barcelona          
Cvt. 1.000% 11/25/17 EUR 9,500 12,120
CapitaCommercial Trust Cvt. 2.500% 9/12/17 SGD 4,000 3,427
1 CapitaLand Ltd. Cvt. 1.850% 6/19/20 SGD 2,750 1,995
CapitaLand Ltd. Cvt. 1.950% 10/17/23 SGD 2,500 1,958
Carillion Finance Jersey Ltd. Cvt. 2.500% 12/19/19 GBP 500 835
China Overseas Grand Oceans Finance          
Cayman Ltd. Cvt. 2.000% 3/21/17 HKD 27,000 3,471
Colony Financial Inc. Cvt. 5.000% 4/15/23 USD 9,164 10,086
Deutsche Euroshop AG Cvt. 1.750% 11/20/17 EUR 2,700 4,297
Deutsche Wohnen AG Cvt. 0.500% 11/22/20 EUR 3,000 4,707
1 Element Financial Corp. Cvt. 5.125% 6/30/19 CAD 13,469 12,579
Fonciere Des Regions Cvt. 3.340% 1/1/17 EUR 1,482 1,991
Grand City Properties SA Cvt. 1.500% 2/24/19 EUR 1,400 2,488
Industrivarden AB Cvt. 0.000% 5/15/19 SEK 13,000 1,736
INTU Jersey Ltd. Cvt. 2.500% 10/4/18 GBP 1,900 3,330
National Bank of Abu Dhabi PJSC Cvt. 1.000% 3/12/18 USD 1,000 1,055
Nexity SA Cvt. 0.630% 1/1/20 EUR 2,248 2,808
Portfolio Recovery Associates Inc. Cvt. 3.000% 8/1/20 USD 20,868 21,990
SBI Holdings Inc. Cvt. 0.000% 11/2/17 JPY 330,000 3,069
Siem Industries Inc. Cvt. 1.000% 9/12/19 USD 9,800 9,188
St. Modwen Properties Securities Jersey Ltd.          
Cvt. 2.875% 3/6/19 GBP 4,700 7,950
Swiss Life Holding AG Cvt. 0.000% 12/2/20 CHF 140 171
Unite Jersey Issuer Ltd. Cvt. 2.500% 10/10/18 GBP 4,100 7,392
          170,579
Health Care (24.9%)          
1 Aegerion Pharmaceuticals Inc. Cvt. 2.000% 8/15/19 USD 5,520 5,227
Alere Inc. Cvt. 3.000% 5/15/16 USD 7,723 8,823
Allscripts Healthcare Solutions Inc. Cvt. 1.250% 7/1/20 USD 16,935 16,617
BioMarin Pharmaceutical Inc. Cvt. 0.750% 10/15/18 USD 10,670 14,178
BioMarin Pharmaceutical Inc. Cvt. 1.500% 10/15/20 USD 23,385 32,067
Brookdale Senior Living Inc. Cvt. 2.750% 6/15/18 USD 19,465 26,922
Cepheid Inc. Cvt. 1.250% 2/1/21 USD 13,075 14,530
Depomed Inc. Cvt. 2.500% 9/1/21 USD 9,335 12,229
Elekta AB Cvt. 2.750% 4/25/17 SEK 26,207 3,460
Emergent Biosolutions Inc. Cvt. 2.875% 1/15/21 USD 5,666 6,711
Fluidigm Corp. Cvt. 2.750% 2/1/34 USD 6,580 7,271
Fresenius Medical Care AG & Co. KGaA Cvt. 1.125% 1/31/20 EUR 800 1,086
HealthSouth Corp. Cvt. 2.000% 12/1/43 USD 20,460 24,769
HeartWare International Inc. Cvt. 3.500% 12/15/17 USD 7,025 7,894
Hologic Inc. Cvt. 2.000% 12/15/37 USD 4,020 5,842
Hologic Inc. Cvt. 2.000% 3/1/42 USD 28,611 35,299

 

 

1 Illumina Inc. Cvt. 0.500% 6/15/21 USD 21,230 25,051
Insulet Corp. Cvt. 2.000% 6/15/19 USD 10,879 10,811
1 Jazz Investments I Ltd. Cvt. 1.875% 8/15/21 USD 32,052 37,180
1 Ligand Pharmaceuticals Inc. Cvt. 0.750% 8/15/19 USD 8,845 8,922
Medidata Solutions Inc. Cvt. 1.000% 8/1/18 USD 14,805 16,591
Molina Healthcare Inc. Cvt. 1.625% 8/15/44 USD 5,305 6,648
1 Molina Healthcare Inc. Cvt. 1.625% 8/15/44 USD 13,255 16,610
Nikkiso Co. Ltd. Cvt. 0.000% 8/2/18 JPY 245,000 2,030
NuVasive Inc. Cvt. 2.750% 7/1/17 USD 24,995 31,416
Omnicare Inc. Cvt. 3.250% 12/15/35 USD 7,993 9,367
Omnicare Inc. Cvt. 3.500% 2/15/44 USD 26,860 32,769
Orpea Cvt. 1.750% 1/1/20 EUR 2,687 4,333
Qiagen NV Cvt 0.375% 3/19/19 USD 3,200 3,516
Qiagen NV Cvt 0.875% 3/19/21 USD 3,600 4,023
Shionogi & Co. Ltd. Cvt. 0.000% 12/17/19 JPY 570,000 5,378
Spectranetics Corp. Cvt. 2.625% 6/1/34 USD 14,940 18,992
Terumo Corp. Cvt. 0.000% 12/6/21 JPY 730,000 6,819
1 Wright Medical Group Inc. Cvt. 2.000% 2/15/20 USD 15,830 16,058
          479,439
Industrials (9.1%)          
1 51job Inc. Cvt. 3.250% 4/15/19 USD 5,425 5,679
Aecon Group Inc. Cvt. 5.500% 12/31/18 CAD 4,503 3,746
Air Lease Corp. Cvt. 3.875% 12/1/18 USD 2,409 3,504
Astaldi SPA Cvt. 4.500% 1/31/19 EUR 600 745
Chart Industries Inc. Cvt. 2.000% 8/1/18 USD 5,995 5,781
China Merchants Holdings Pacific Ltd. Cvt. 1.250% 11/6/17 HKD 16,000 2,303
Daifuku Co. Ltd. Cvt. 0.000% 10/2/17 JPY 100,000 998
DP World Ltd. Cvt. 1.750% 6/19/24 USD 5,200 5,543
GVM Debentures Lux 1 SA Cvt. 5.750% 2/14/18 EUR 4,600 5,328
1 Huron Consulting Group Inc. Cvt. 1.250% 10/1/19 USD 12,680 13,774
Johnson Electric Holdings Ltd. Cvt. 1.000% 4/2/21 USD 9,000 9,461
Kawasaki Kisen Kaisha Ltd. Cvt. 0.000% 9/26/18 JPY 530,000 5,544
KEYW Holding Corp. Cvt. 2.500% 7/15/19 USD 9,445 7,633
Larsen & Toubro Ltd. Cvt. 0.675% 10/22/19 USD 4,867 5,371
LIXIL Group Corp. Cvt. 0.000% 3/4/22 JPY 770,000 6,654
Macquarie Infrastructure Co. LLC Cvt. 2.875% 7/15/19 USD 6,660 7,838
MISUMI Group Inc. Cvt. 0.000% 10/22/18 USD 4,600 5,477
Nagoya Railroad Co. Ltd. Cvt. 0.000% 12/11/24 JPY 750,000 6,834
OCI Cvt. 3.875% 9/25/18 EUR 5,200 7,115
Prysmian SPA Cvt. 1.250% 3/8/18 EUR 3,300 4,017
Sacyr SA Cvt. 4.000% 5/8/19 EUR 4,400 4,889
Schindler Holding AG Cvt. 0.375% 6/5/17 CHF 3,300 3,525
Shine Power International Ltd. Cvt. 0.000% 7/28/19 HKD 4,000 491
Siemens Financieringsmaatschappij NV Cvt. 1.050% 8/16/17 USD 2,000 2,250
Siemens Financieringsmaatschappij NV Cvt. 1.650% 8/16/19 USD 8,500 9,979
Societa Iniziative Autostradali e Servizi SPA          
Cvt. 2.625% 6/30/17 EUR 1,195 1,437
1 SolarCity Corp. Cvt. 1.625% 11/1/19 USD 20,635 18,107
Tong Jie Ltd. Cvt. 0.000% 2/18/18 HKD 30,000 3,907
1 UTi Worldwide Inc. Cvt. 4.500% 3/1/19 USD 15,095 17,114
          175,044
Information Technology (25.4%)          
Advanced Semiconductor Engineering Inc.          
Cvt. 0.000% 9/5/18 USD 3,800 4,953
Alcatel-Lucent Cvt. 0.000% 1/30/19 EUR 1,144 1,425
Alcatel-Lucent Cvt. 0.130% 1/30/20 EUR 3,067 3,919
1 AOL Inc. Cvt. 0.750% 9/1/19 USD 21,320 21,507

 

 

  ASM Pacific Technology Ltd. Cvt. 2.000% 3/28/19 HKD 18,000 2,457
1 Brocade Communications Systems Inc. Cvt. 1.375% 1/1/20 USD 16,445 17,452
  Canadian Solar Inc. Cvt. 4.250% 2/15/19 USD 5,175 5,052
  Cap Gemini SA Cvt. 0.000% 1/1/19 EUR 1,657 2,344
  Cardtronics Inc. Cvt. 1.000% 12/1/20 USD 13,885 13,590
1 Ciena Corp. Cvt. 3.750% 10/15/18 USD 16,895 21,425
1 Citrix Systems Inc. Cvt. 0.500% 4/15/19 USD 24,000 25,005
  Davis and Henderson Corp Cvt 6.000% 9/30/18 CAD 4,578 5,170
  Econocom Group Cvt. 1.500% 1/15/19 EUR 4,701 5,498
1 Electronics For Imaging Inc. Cvt. 0.750% 9/1/19 USD 5,235 5,310
  Epistar Corp. Cvt. 0.000% 8/7/18 USD 5,700 6,254
1 Euronet Worldwide Inc. Cvt. 1.500% 10/1/44 USD 685 724
  Indra Sistemas SA Cvt. 1.750% 10/17/18 EUR 1,400 1,461
  InvenSense Inc. Cvt. 1.750% 11/1/18 USD 8,120 8,211
  j2 Global Inc. Cvt. 3.250% 6/15/29 USD 17,446 20,303
  Mentor Graphics Corp. Cvt. 4.000% 4/1/31 USD 9,475 11,607
1 Microchip Technology Inc. Cvt. 1.625% 2/15/25 USD 16,265 17,282
  Nihon Unisys Ltd. Cvt. 0.000% 6/20/16 JPY 350,000 3,299
  NVIDIA Corp. Cvt. 1.000% 12/1/18 USD 32,065 38,638
1 NXP Semiconductor NV Cvt. 1.000% 12/1/19 USD 31,242 34,151
  ON Semiconductor Corp. Cvt. 2.625% 12/15/26 USD 13,017 17,305
1 Palo Alto Networks Inc. Cvt. 0.000% 7/1/19 USD 4,170 5,875
  Photronics Inc. Cvt. 3.250% 4/1/19 USD 7,947 8,374
1 Red Hat Inc. Cvt. 0.250% 10/1/19 USD 28,000 33,145
  Salesforce.com Inc. Cvt. 0.250% 4/1/18 USD 21,640 26,266
  Semiconductor Manufacturing International          
  Corp. Cvt. 0.000% 11/7/18 USD 4,500 4,771
1 SunEdison Inc. Cvt. 0.250% 1/15/20 USD 13,980 14,242
1 SunEdison Inc. Cvt. 2.375% 4/15/22 USD 11,920 13,261
1 SunPower Corp. Cvt. 0.875% 6/1/21 USD 7,290 7,153
  Synchronoss Technologies Inc. Cvt. 0.750% 8/15/19 USD 12,370 13,808
1 Trina Solar Ltd. Cvt. 3.500% 6/15/19 USD 2,975 2,808
  TTM Technologies Inc. Cvt. 1.750% 12/15/20 USD 11,808 12,708
  Verint Systems Inc. Cvt. 1.500% 6/1/21 USD 24,100 27,444
1 Vishay Intertechnology Inc. Cvt. 2.250% 5/15/41 USD 10,635 9,352
  WebMD Health Corp. Cvt. 2.500% 1/31/18 USD 2,690 2,739
  WebMD Health Corp. Cvt. 1.500% 12/1/20 USD 10,320 10,926
  Yandex NV Cvt. 1.125% 12/15/18 USD 2,721 2,219
            489,433
Materials (4.4%)          
  APERAM Cvt. 0.625% 7/8/21 USD 7,400 8,096
  Buzzi Unicem SPA Cvt. 1.375% 7/17/19 EUR 3,700 4,664
  Cemex SAB de CV Cvt. 3.750% 3/15/18 USD 4,355 5,378
  Chemtrade Logistics Income Fund Cvt. 5.750% 12/31/18 CAD 332 292
1 Chemtrade Logistics Income Fund Cvt. 5.250% 6/30/21 CAD 5,331 4,424
  Gabriel Finance LP Cvt. 2.000% 11/26/16 EUR 4,100 4,618
  Logo Star Ltd. Cvt. 1.500% 11/22/18 HKD 24,000 4,007
  NV Bekaert SA Cvt. 0.750% 6/18/18 EUR 5,200 5,752
  Outokumpu OYJ Cvt. 3.250% 2/26/20 EUR 6,900 7,934
  RTI International Metals Inc. Cvt. 1.625% 10/15/19 USD 17,660 17,406
  Salzgitter Finance BV Cvt. 2.000% 11/8/17 EUR 4,650 6,330
1,2 ShengdaTech Inc. Cvt. 6.500% 12/15/15 USD 305 1
  Teijin Ltd. Cvt. 0.000% 12/12/18 JPY 140,000 1,346
  Teijin Ltd. Cvt. 0.000% 12/10/21 JPY 610,000 6,075
  Toray Industries Inc. Cvt. 0.000% 8/31/21 JPY 560,000 5,975
  United States Steel Corp. Cvt. 2.750% 4/1/19 USD 2,615 3,136
            85,434

 

 

Telecommunication Services (0.1%)          
Inmarsat PLC Cvt. 1.750% 11/16/17 USD 2,000 2,837
 
Utilities (1.6%)          
Chugoku Electric Power Co. Inc. Cvt. 0.000% 3/25/20 JPY 580,000 5,085
ENN Energy Holdings Ltd. Cvt. 0.000% 2/26/18 USD 5,500 5,899
Northland Power Inc. Cvt. 5.000% 6/30/19 CAD 3,056 2,533
Northland Power Inc. Cvt. 4.750% 6/30/20 CAD 6,225 5,104
Parpublica - Participacoes Publicas SGPS SA          
Cvt. 5.250% 9/28/17 EUR 2,850 3,537
Suez Environnement Co. Cvt. 0.000% 2/27/20 EUR 2,336 3,013
Superior Plus Corp. Cvt. 6.000% 6/30/19 CAD 1,067 898
YTL Corp. Finance Labuan Ltd. Cvt. 1.875% 3/18/15 USD 4,200 4,179
          30,248
Total Convertible Bonds (Cost $1,669,798)         1,745,625
        Shares  
Convertible Preferred Stocks (7.5%)          
Energy (2.2%)          
1 Chesapeake Energy Corp. Pfd. 5.750%     15,490 15,577
Goodrich Petroleum Corp. Pfd. 5.375%     229,453 2,467
Halcon Resources Corp. Pfd. 5.750%     16,120 5,602
McDermott International Inc. Pfd. 6.250%     421,500 4,468
1 Penn Virginia Corp. Pfd. 6.000%     132,578 8,316
Rex Energy Corp. Pfd. 6.000%     81,900 3,975
Sanchez Energy Corp. Pfd. 4.875%     55,760 2,077
          42,482
Financials (1.6%)          
American Tower Corp. Pfd. 5.500%     114,400 11,583
Crown Castle International Corp. Pfd. 4.500%     118,500 12,620
Wintrust Financial Corp. Pfd. 5.000%     5,640 7,163
          31,366
Health Care (2.0%)          
Actavis plc Pfd. 5.500%     18,500 18,826
Alere Inc. Pfd. 3.000%     28,706 9,380
Amsurg Corp. Pfd. 5.250%     94,300 11,457
          39,663
Industrials (0.5%)          
Genesee & Wyoming Inc. Pfd. 5.000%     72,440 9,348
 
Materials (0.1%)          
ArcelorMittal Pfd. 6.000%     78,500 1,367
 
Telecommunication Services (1.1%)          
Iridium Communications Inc. Pfd. 6.750%     27,290 9,565
Iridium Communications Inc. Pfd. 7.000%     101,800 11,408
          20,973
Total Convertible Preferred Stocks (Cost $162,503)         145,199
Temporary Cash Investment (1.8%)          
Money Market Fund (1.8%)          
3 Vanguard Market Liquidity Fund          
(Cost $35,217) 0.134%     35,216,658 35,217
Total Investments (99.9%) (Cost $1,867,758)         1,926,270
Other Assets and Liabilities-Net (0.1%)         1,145
Net Assets (100%)         1,927,415

 

 

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, 2015, the
aggregate value of these securities was $486,094,000, representing 25.2% 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 dollar.
CHF—Swiss franc.
EUR—Euro.
GBP—British pound.
HKD—Hong Kong dollar.
JPY—Japanese yen.
KRW—South Korean won.
SEK—Swedish krona.
SGD—Singapore dollar.
USD—U.S. dollar.

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 February 28, 2015, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Common Stocks 229 — —
Convertible Bonds — 1,737,690 7,935
Convertible Preferred Stocks 30,409 114,790 —
Temporary Cash Investments 35,217 — —
Forward Currency Contracts—Assets — 7,405 —
Forward Currency Contracts—Liabilities — (571) —
Total 65,855 1,859,314 7,935

 

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

At February 28, 2015, the fund had open forward currency contracts to receive and deliver currencies as follows. Unrealized appreciation (depreciation) on open forward currency contracts, except for Hong Kong dollar and Singapore dollar currency contracts, is treated as realized gain (loss) for tax purposes.

        Contract Amount (000)  
            Unrealized
  Contract         Appreciation
  Settlement         (Depreciation)
Counterparty Date   Receive   Deliver ($000)
UBS AG 4/23/15 USD 176,951 EUR 153,360 5,219
UBS AG 4/23/15 USD 72,273 JPY 8,569,340 582
UBS AG 4/23/15 USD 36,026 CAD 43,812 1,007
UBS AG 4/23/15 USD 29,449 GBP 19,446 (561)

 

 

UBS AG 4/23/15 USD 19,568 HKD 151,700 9
UBS AG 4/23/15 USD 7,783 SGD 10,425 144
UBS AG 4/23/15 USD 5,288 SEK 43,285 93
UBS AG 4/23/15 USD 4,048 CHF 3,539 328
UBS AG 4/23/15 USD 3,668 KRW 4,009,870 23
UBS AG 4/23/15 USD 1,579 CAD 1,989 (10)
            6,834
Refer to the Statement of Net Assets for currency abbreviations.        

 

At February 28, 2015, counterparties had deposited in segregated accounts securities with a value of $3,407,000 in connection with open forward currency contracts.

E. At February 28, 2015, the cost of investment securities for tax purposes was $1,867,841,000. Net unrealized appreciation of investment securities for tax purposes was $58,429,000, consisting of unrealized gains of $149,836,000 on securities that had risen in value since their purchase and $91,407,000 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, 2015  

 

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, 2015  

 

  VANGUARD CONVERTIBLE SECURITIES FUND
 
By: /s/ THOMAS J. HIGGINS*
  THOMAS J. HIGGINS
  CHIEF FINANCIAL OFFICER
 
Date: April 16, 2015  

 

* 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.