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:   August 31, 2015

 

Item 1: Schedule of Investments

 

 

Vanguard Convertible Securities Fund

Schedule of Investments
As of August 31, 2015

        Face Market
    Maturity   Amount Value•
  Coupon Date Currency  (000) ($000)
Convertible Bonds (93.5%)          
Consumer Discretionary (9.6%)          
Cineplex Inc. Cvt. 4.500% 12/31/18 CAD 5,713 4,623
Enterprise Funding Ltd. Cvt. 3.500% 9/10/20 GBP 1,600 2,256
FF Group Finance Luxembourg Cvt. 1.750% 7/3/19 EUR 8,000 7,272
1 GNC Holdings Inc. Cvt. 1.500% 8/15/20 USD 9,125 8,789
Iconix Brand Group Inc. Cvt. 1.500% 3/15/18 USD 19,322 15,699
Iida Group Holdings Co. Ltd. 0.000% 6/18/20 JPY 500,000 4,526
Jarden Corp. Cvt. 1.125% 3/15/34 USD 20,449 23,682
K's Holdings Corp. Cvt. 0.000% 12/20/19 JPY 500,000 4,887
Liberty Media Corp. Cvt. 1.375% 10/15/23 USD 24,325 23,504
Lotte Shopping Co. Ltd. Cvt. 0.000% 1/24/18 KRW 4,200,000 3,573
NH Hoteles SA Cvt. 4.000% 11/8/18 EUR 5,700 7,819
Priceline.com Inc. Cvt. 0.350% 6/15/20 USD 29,325 34,494
ResortTrust Inc. Cvt. 0.000% 12/1/21 JPY 560,000 5,427
1 Restoration Hardware Holdings Inc. Cvt. 0.000% 7/15/20 USD 7,195 6,925
Sony Corp. Cvt. 0.000% 9/30/22 JPY 1,062,000 9,209
Sumitomo Forestry Co. Ltd. Cvt. 0.000% 8/24/18 JPY 430,000 3,631
Takashimaya Co. Ltd. Cvt. 0.000% 12/11/20 JPY 670,000 5,955
          172,271
Consumer Staples (3.0%)          
Hengan International Group Co. Ltd. Cvt. 0.000% 6/27/18 HKD 32,000 4,299
Herbalife Ltd. Cvt. 2.000% 8/15/19 USD 18,165 16,530
J Sainsbury PLC Cvt. 1.250% 11/21/19 GBP 3,200 4,996
Marine Harvest ASA Cvt. 0.875% 5/6/19 EUR 4,300 5,664
Olam International Ltd. Cvt. 6.000% 10/15/16 USD 5,000 5,156
Rallye SA Cvt. 1.000% 10/2/20 EUR 3,380 3,849
Sonae Investments BV Cvt. 1.625% 6/11/19 EUR 5,300 5,908
Vector Group Ltd. Cvt. 1.750% 4/15/20 USD 6,325 6,997
          53,399
Energy (5.4%)          
Aabar Investments PJSC Cvt. 1.000% 3/27/22 EUR 7,000 8,071
BW Group Ltd. Cvt. 1.750% 9/10/19 USD 5,800 4,912
Cheniere Energy Inc. Cvt. 4.250% 3/15/45 USD 10,765 7,677
Cobalt International Energy Inc. Cvt. 3.125% 5/15/24 USD 13,015 8,891
1 Scorpio Tankers Inc. Cvt. 2.375% 7/1/19 USD 27,680 28,493
SEACOR Holdings Inc. Cvt. 2.500% 12/15/27 USD 19,165 18,662
Subsea 7 SA Cvt. 1.000% 10/5/17 USD 400 360
1 Whiting Petroleum Corp. Cvt. 1.250% 4/1/20 USD 24,355 20,565
          97,631
Financials (11.0%)          
AmTrust Financial Services Inc. Cvt. 2.750% 12/15/44 USD 13,070 11,779
Aroundtown Property Holdings PLC Cvt. 3.000% 5/5/20 EUR 6,900 8,498
AYC Finance Ltd. Cvt. 0.500% 5/2/19 USD 2,886 3,059
Azimut Holding SPA Cvt. 2.125% 11/25/20 EUR 10,300 13,032
Beni Stabili SpA SIIQ Cvt. 0.875% 1/31/21 EUR 6,200 6,801
BES Finance Ltd. Cvt. 3.500% 12/6/15 USD 2,000 1,983
BNP Paribas SA Cvt. 0.250% 9/27/16 EUR 7,200 8,375
Caja de Ahorros y Pensiones de Barcelona          
Cvt. 1.000% 11/25/17 EUR 10,400 12,575

 

 

CapitaCommercial Trust Cvt. 2.500% 9/12/17 SGD 6,000 4,374
CapitaLand Ltd. Cvt. 2.800% 6/8/25 SGD 12,750 8,403
Carillion Finance Jersey Ltd. Cvt. 2.500% 12/19/19 GBP 4,000 6,473
Colony Financial Inc. Cvt. 5.000% 4/15/23 USD 9,164 9,353
Cosmos Boom Investment Ltd. Cvt. 0.500% 6/23/20 USD 4,600 4,272
Deutsche Euroshop AG Cvt. 1.750% 11/20/17 EUR 2,100 3,028
Deutsche Wohnen AG Cvt. 0.500% 11/22/20 EUR 1,100 1,757
1 DH Corp. Cvt. 5.000% 9/30/20 CAD 12,318 10,243
1 Element Financial Corp. Cvt. 5.125% 6/30/19 CAD 14,279 13,400
1 Element Financial Corp. Cvt. 4.250% 6/30/20 CAD 7,385 6,119
Encore Capital Group Inc. Cvt. 3.000% 7/1/20 USD 7,668 7,994
Industrivarden AB Cvt. 0.000% 5/15/19 SEK 13,000 1,746
INTU Jersey Ltd. Cvt. 2.500% 10/4/18 GBP 1,900 3,169
National Bank of Abu Dhabi PJSC Cvt. 1.000% 3/12/18 USD 1,000 1,012
Nexity SA Cvt. 0.630% 1/1/20 EUR 3,623 4,662
Portfolio Recovery Associates Inc. Cvt. 3.000% 8/1/20 USD 15,863 16,279
1 RWT Holdings Inc. Cvt. 5.625% 11/15/19 USD 7,800 7,337
St. Modwen Properties Securities Jersey Ltd.          
Cvt. 2.875% 3/6/19 GBP 4,800 7,679
T&D Holdings Inc. Cvt. 0.000% 6/5/20 JPY 490,000 4,203
Unibail-Rodamco SE Cvt. 0.000% 1/1/22 EUR 1,467 1,668
Unite Jersey Issuer Ltd. Cvt. 2.500% 10/10/18 GBP 4,100 8,224
          197,497
Health Care (17.6%)          
Alere Inc. Cvt. 3.000% 5/15/16 USD 4,208 5,142
Allscripts Healthcare Solutions Inc. Cvt. 1.250% 7/1/20 USD 7,410 7,623
Brookdale Senior Living Inc. Cvt. 2.750% 6/15/18 USD 16,890 19,160
Cepheid Inc. Cvt. 1.250% 2/1/21 USD 13,570 14,316
Emergent Biosolutions Inc. Cvt. 2.875% 1/15/21 USD 8,041 9,946
Fresenius Medical Care AG & Co. KGaA Cvt. 1.125% 1/31/20 EUR 800 1,049
HealthSouth Corp. Cvt. 2.000% 12/1/43 USD 7,581 9,235
Healthways Inc. Cvt. 1.500% 7/1/18 USD 6,620 6,198
1 HeartWare International Inc. Cvt. 1.750% 12/15/21 USD 11,093 11,793
Hologic Inc. Cvt. 2.000% 3/1/42 USD 11,496 15,369
Hologic Inc. Cvt. 0.000% 12/15/43 USD 9,485 11,945
1 Horizon Pharma Investment Ltd. Cvt. 2.500% 3/15/22 USD 10,794 13,337
Illumina Inc. Cvt. 0.500% 6/15/21 USD 17,340 20,418
Insulet Corp. Cvt. 2.000% 6/15/19 USD 10,879 10,464
1 Ironwood Pharmaceuticals Inc. Cvt. 2.250% 6/15/22 USD 6,405 5,872
Jazz Investments I Ltd. Cvt. 1.875% 8/15/21 USD 32,052 36,539
1 Medicines Co. Cvt. 2.500% 1/15/22 USD 17,120 23,626
Medidata Solutions Inc. Cvt. 1.000% 8/1/18 USD 14,805 16,545
1 Molina Healthcare Inc. Cvt. 1.625% 8/15/44 USD 12,785 17,531
Nikkiso Co. Ltd. Cvt. 0.000% 8/2/18 JPY 245,000 2,003
NuVasive Inc. Cvt. 2.750% 7/1/17 USD 17,330 23,482
Orpea Cvt. 1.750% 1/1/20 EUR 905 1,586
Qiagen NV Cvt 0.375% 3/19/19 USD 3,400 3,751
Qiagen NV Cvt 0.875% 3/19/21 USD 4,200 4,727
Terumo Corp. Cvt. 0.000% 12/6/21 JPY 940,000 8,752
1 Wright Medical Group Inc. Cvt. 2.000% 2/15/20 USD 15,830 15,612
          316,021
Industrials (9.4%)          
51job Inc. Cvt. 3.250% 4/15/19 USD 6,240 5,858
Aecon Group Inc. Cvt. 5.500% 12/31/18 CAD 4,503 3,584
China Merchants Holdings Pacific Ltd. Cvt. 1.250% 11/6/17 HKD 14,000 1,876
DP World Ltd. Cvt. 1.750% 6/19/24 USD 5,600 6,202

 

 

Echo Global Logistics Inc. Cvt. 2.500% 5/1/20 USD 9,555 8,731
GVM Debentures Lux 1 SA Cvt. 5.750% 2/14/18 EUR 6,200 6,247
1 Huron Consulting Group Inc. Cvt. 1.250% 10/1/19 USD 14,185 15,506
Johnson Electric Holdings Ltd. Cvt. 1.000% 4/2/21 USD 11,000 11,770
Kawasaki Kisen Kaisha Ltd. Cvt. 0.000% 9/26/18 JPY 530,000 4,678
KEYW Holding Corp. Cvt. 2.500% 7/15/19 USD 9,445 7,739
Larsen & Toubro Ltd. Cvt. 0.675% 10/22/19 USD 6,325 6,499
LIXIL Group Corp. Cvt. 0.000% 3/4/22 JPY 810,000 6,531
MISUMI Group Inc. Cvt. 0.000% 10/22/18 USD 4,600 5,072
Nagoya Railroad Co. Ltd. Cvt. 0.000% 12/11/24 JPY 750,000 6,629
OCI Cvt. 3.875% 9/25/18 EUR 5,200 6,842
Park24 Co. Ltd. Cvt. 0.000% 4/26/18 JPY 270,000 2,377
Prysmian SPA Cvt. 1.250% 3/8/18 EUR 3,300 4,017
Sacyr SA Cvt. 4.000% 5/8/19 EUR 4,400 4,277
Schindler Holding AG Cvt. 0.375% 6/5/17 CHF 3,300 3,542
Siemens Financieringsmaatschappij NV Cvt. 1.050% 8/16/17 USD 1,750 1,846
Siemens Financieringsmaatschappij NV Cvt. 1.650% 8/16/19 USD 5,250 5,843
Societa Iniziative Autostradali e Servizi SPA          
Cvt. 2.625% 6/30/17 EUR 1,195 1,475
SolarCity Corp. Cvt. 2.750% 11/1/18 USD 7,600 7,819
1 SolarCity Corp. Cvt. 1.625% 11/1/19 USD 19,050 16,478
Tong Jie Ltd. Cvt. 0.000% 2/18/18 HKD 30,000 3,948
UTi Worldwide Inc. Cvt. 4.500% 3/1/19 USD 14,880 12,862
          168,248
Information Technology (28.7%)          
Advanced Semiconductor Engineering Inc.          
Cvt. 0.000% 3/27/18 USD 6,600 6,154
Alcatel-Lucent Cvt. 0.000% 1/30/19 EUR 235 273
Alcatel-Lucent Cvt. 0.130% 1/30/20 EUR 3,067 3,594
ASM Pacific Technology Ltd. Cvt. 2.000% 3/28/19 HKD 18,000 2,346
1 Brocade Communications Systems Inc. Cvt. 1.375% 1/1/20 USD 15,185 15,033
1 CalAmp Corp. Cvt. 1.625% 5/15/20 USD 8,355 7,613
Canadian Solar Inc. Cvt. 4.250% 2/15/19 USD 6,555 5,539
Cardtronics Inc. Cvt. 1.000% 12/1/20 USD 13,885 13,434
Citrix Systems Inc. Cvt. 0.500% 4/15/19 USD 29,320 30,694
Cornerstone OnDemand Inc. Cvt. 1.500% 7/1/18 USD 11,000 11,282
Econocom Group Cvt. 1.500% 1/15/19 EUR 5,418 6,355
1 Electronics For Imaging Inc. Cvt. 0.750% 9/1/19 USD 16,780 17,409
Epistar Corp. Cvt. 0.000% 8/7/18 USD 2,100 2,029
1 Euronet Worldwide Inc. Cvt. 1.500% 10/1/44 USD 19,024 21,747
Finisar Corp. Cvt. 0.500% 12/15/33 USD 7,990 7,481
1 FireEye Inc. Cvt. 1.000% 6/1/35 USD 10,300 9,952
1 FireEye Inc. Cvt. 1.625% 6/1/35 USD 5,615 5,352
Intel Corp. Cvt. 2.950% 12/15/35 USD 2,140 2,508
j2 Global Inc. Cvt. 3.250% 6/15/29 USD 17,661 20,774
1 LinkedIn Corp. Cvt. 0.500% 11/1/19 USD 24,385 23,623
1 Microchip Technology Inc. Cvt. 1.625% 2/15/25 USD 20,595 19,308
Micron Technology Inc. Cvt. 3.000% 11/15/43 USD 2,020 1,767
Nuance Communications Inc. Cvt. 1.500% 11/1/35 USD 5,350 5,494
NVIDIA Corp. Cvt. 1.000% 12/1/18 USD 15,475 19,083
1 NXP Semiconductor NV Cvt. 1.000% 12/1/19 USD 31,242 33,917
1 ON Semiconductor Corp. Cvt. 1.000% 12/1/20 USD 26,340 24,578
1 Proofpoint Inc. Cvt. 0.750% 6/15/20 USD 11,830 12,104
1 Red Hat Inc. Cvt. 0.250% 10/1/19 USD 28,000 33,477
Salesforce.com Inc. Cvt. 0.250% 4/1/18 USD 21,400 26,202
SanDisk Corp. Cvt. 0.500% 10/15/20 USD 7,410 7,127

 

 

  Semiconductor Manufacturing International          
  Corp. Cvt. 0.000% 11/7/18 USD 4,500 4,843
  Siliconware Precision Industries Co. Ltd. Cvt. 0.000% 10/31/19 USD 4,000 4,157
  STMicroelectronics NV Cvt. 0.000% 7/3/19 USD 400 394
  STMicroelectronics NV Cvt. 1.000% 7/3/21 USD 4,800 4,891
  SunEdison Inc. Cvt. 2.000% 10/1/18 USD 2,280 2,170
1 SunEdison Inc. Cvt. 0.250% 1/15/20 USD 12,765 8,521
  SunEdison Inc. Cvt. 2.750% 1/1/21 USD 3,160 2,915
  SunPower Corp. Cvt. 0.875% 6/1/21 USD 4,145 3,772
  Synchronoss Technologies Inc. Cvt. 0.750% 8/15/19 USD 12,410 13,155
  Trina Solar Ltd. Cvt. 3.500% 6/15/19 USD 2,975 2,629
  TTM Technologies Inc. Cvt. 1.750% 12/15/20 USD 13,523 12,467
  Verint Systems Inc. Cvt. 1.500% 6/1/21 USD 24,100 25,365
  Web.com Group Inc. Cvt. 1.000% 8/15/18 USD 13,795 12,976
  WebMD Health Corp. Cvt. 2.500% 1/31/18 USD 3,025 3,033
  WebMD Health Corp. Cvt. 1.500% 12/1/20 USD 15,265 15,685
  Yandex NV Cvt. 1.125% 12/15/18 USD 2,721 2,247
            515,469
Materials (6.2%)          
  APERAM Cvt. 0.625% 7/8/21 USD 7,400 8,042
  Buzzi Unicem SPA Cvt. 1.375% 7/17/19 EUR 3,700 5,019
1 Cemex SAB de CV Cvt. 3.720% 3/15/20 USD 18,740 18,482
  Cemex SAB de CV Cvt. 3.720% 3/15/20 USD 8,800 8,679
  Chemtrade Logistics Income Fund Cvt. 5.750% 12/31/18 CAD 332 263
1 Chemtrade Logistics Income Fund Cvt. 5.250% 6/30/21 CAD 5,331 4,123
  Gabriel Finance LP Cvt. 2.000% 11/26/16 EUR 4,100 4,843
  NV Bekaert SA Cvt. 0.750% 6/18/18 EUR 5,200 5,678
  Outokumpu OYJ Cvt. 3.250% 2/26/20 EUR 6,900 7,656
  RTI International Metals Inc. Cvt. 1.625% 10/15/19 USD 19,030 19,553
  Salzgitter Finance BV Cvt. 2.000% 11/8/17 EUR 3,150 4,514
1,2 ShengdaTech Inc. Cvt. 6.500% 12/15/15 USD 305 1
  Teijin Ltd. Cvt. 0.000% 12/12/18 JPY 140,000 1,308
  Teijin Ltd. Cvt. 0.000% 12/10/21 JPY 610,000 5,843
  Toray Industries Inc. Cvt. 0.000% 8/31/21 JPY 560,000 6,178
  United States Steel Corp. Cvt. 2.750% 4/1/19 USD 10,890 11,475
            111,657
Telecommunication Services (0.9%)          
  America Movil SAB de CV 0.000% 5/28/20 EUR 4,800 5,590
  Billion Express Investments Ltd. Cvt. 0.750% 10/18/15 USD 2,400 2,391
  Inmarsat PLC Cvt. 1.750% 11/16/17 USD 2,000 2,886
  Telecom Italia SPA Cvt. 1.125% 3/26/22 EUR 5,100 6,083
            16,950
Utilities (1.7%)          
  Chugoku Electric Power Co. Inc. Cvt. 0.000% 3/25/20 JPY 580,000 5,275
  ENN Energy Holdings Ltd. Cvt. 0.000% 2/26/18 USD 5,500 5,995
  Northland Power Inc. Cvt. 5.000% 6/30/19 CAD 2,661 2,068
  Northland Power Inc. Cvt. 4.750% 6/30/20 CAD 6,225 4,851
1 Pattern Energy Group Inc. Cvt. 4.000% 7/15/20 USD 8,495 8,176
  Suez Environnement Co. Cvt. 0.000% 2/27/20 EUR 2,336 3,028
  Superior Plus Corp. Cvt. 6.000% 6/30/19 CAD 2,558 2,012
            31,405
Total Convertible Bonds (Cost $1,691,856)         1,680,548

 

 

    Shares  
Convertible Preferred Stocks (4.7%)      
Energy (1.1%)      
1 Chesapeake Energy Corp. Pfd. 5.750% 12,470 5,479
Halcon Resources Corp. Pfd. 5.750% 16,120 2,992
McDermott International Inc. Pfd. 6.250% 393,800 7,313
Rex Energy Corp. Pfd. 6.000% 81,800 2,189
Sanchez Energy Corp. Pfd. 4.875% 84,603 1,747
      19,720
Financials (1.6%)      
American Tower Corp. Pfd. 5.500% 182,100 18,449
Crown Castle International Corp. Pfd. 4.500% 104,700 10,930
      29,379
Health Care (1.9%)      
Alere Inc. Pfd. 3.000% 39,776 14,111
Allergan plc Pfd. 5.500% 19,600 20,053
      34,164
Materials (0.1%)      
ArcelorMittal Pfd. 6.000% 78,500 1,016
 
Total Convertible Preferred Stocks (Cost $109,132)     84,279
Temporary Cash Investment (1.7%)      
Money Market Fund (1.7%)      
3 Vanguard Market Liquidity Fund      
(Cost $30,579) 0.168% 30,578,734 30,579
Total Investments (99.9%) (Cost $1,831,567)     1,795,406
Other Assets and Liabilities-Net (0.1%)4     1,905
Net Assets (100%)     1,797,311

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, 2015, the aggregate
value of these securities was $490,521,000, representing 27.3% 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 $5,020,000 has been segregated as collateral for open forward currency contracts.
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 August 31, 2015, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Convertible Bonds — 1,680,547 1
Convertible Preferred Stocks — 84,279 —
Temporary Cash Investments 30,579 — —
Forward Currency Contracts—Assets — 2,091 —
Forward Currency Contracts—Liabilities — (6,422) —
Total 30,579 1,760,495 1

 

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 August 31, 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, Singapore dollar and Taiwan 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 10/22/15 JPY 390,200 USD 3,285 (64)
UBS AG 10/22/15 JPY 339,600 USD 2,746 57
UBS AG 10/22/15 GBP 1,452 USD 2,239 (12)
UBS AG 10/22/15 USD 178,981 EUR 163,275 (4,387)
UBS AG 10/22/15 USD 91,709 JPY 11,344,280 (1,940)
UBS AG 10/22/15 USD 51,903 CAD 67,326 734
UBS AG 10/22/15 USD 36,099 GBP 23,215 486
UBS AG 10/22/15 USD 13,613 SGD 18,688 402
UBS AG 10/22/15 USD 12,849 HKD 99,605 (2)
UBS AG 10/22/15 USD 6,586 TWD 205,285 273
UBS AG 10/22/15 USD 3,713 KRW 4,279,295 101
UBS AG 10/22/15 USD 3,645 CHF 3,480 38
UBS AG 10/22/15 USD 1,749 SEK 14,910 (15)
UBS AG 10/22/15 USD 858 CAD 1,132 (2)
            (4,331)
Refer to the Schedule of Investmetns for currency abbreviations.

 

E. At August 31, 2015, the cost of investment securities for tax purposes was $1,831,630,000. Net unrealized depreciation of investment securities for tax purposes was $36,224,000, consisting of unrealized gains of $79,381,000 on securities that had risen in value since their purchase and $115,605,000 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 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: October 16, 2015

  

 

 

 VANGUARD CONVERTIBLE SECURITIES FUND

 

By:

 /s/ THOMAS J. HIGGINS*
  THOMAS J. HIGGINS
  CHIEF FINANCIAL OFFICER

 

Date: October 16, 2015

  

 

* 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.