Contents

AboutYour Fund's Expenses	1
Financial Statements	4

About Your Fund’s Expenses

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

A fund‘s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

The accompanying table illustrates your fund’s costs in two ways:

•

Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“

•

Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

1

Six Months Ended February 28, 2023
	Beginning Account Value 8/31/2022	Ending Account Value 2/28/2023	Expenses Paid During Period
Based on Actual Fund Return
Mortgage-Backed Securities Index Fund
ETF Shares	$1,000.00	$976.90	$0.20
Admiral™ Shares	1,000.00	976.50	0.34
Institutional Shares	1,000.00	976.70	0.25
Based on Hypothetical 5% Yearly Return
Mortgage-Backed Securities Index Fund
ETF Shares	$1,000.00	$1,024.60	$0.20
Admiral Shares	1,000.00	1,024.45	0.35
Institutional Shares	1,000.00	1,024.55	0.25

The calculations are based on expenses incurred in the most recent six-month period. The fund's annualized six-month expense ratios for that period are 0.04% for ETF Shares, 0.07% for Admiral Shares, and 0.05% for Institutional Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

2

Mortgage-Backed Securities Index Fund

Distribution by Stated Maturity

As of February 28, 2023

0 - 10 Years	2.5%
10 - 20 Years	16.2
20 - 30 Years	81.1
30 - 40 Years	0.2

The table reflects the fund’s investments, except for short-term investments. The agency and mortgage-backed securities may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking its target index as closely as possible.

3

Mortgage-Backed Securities Index Fund

Financial Statements (unaudited)

Schedule of Investments

As of February 28, 2023

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

			Coupon	Maturity Date	Face Amount ($000)	Market Value• ($000)
U.S. Government and Agency Obligations (99.5%)
Conventional Mortgage-Backed Securities (99.5%)
1,2	Freddie Mac Gold Pool		2.000%	1/1/28–12/1/31	4,606	4,235
1,2	Freddie Mac Gold Pool		2.500%	5/1/23–2/1/43	71,869	66,699
1,2	Freddie Mac Gold Pool		3.000%	1/1/26–6/1/49	249,863	228,208
1,2	Freddie Mac Gold Pool		3.500%	9/1/25–2/1/49	240,714	224,834
1,2	Freddie Mac Gold Pool		4.000%	3/1/24–6/1/49	154,325	148,305
1,2	Freddie Mac Gold Pool		4.500%	3/1/23–11/1/48	70,999	70,151
1,2	Freddie Mac Gold Pool		5.000%	3/1/23–11/1/48	22,362	22,487
1,2	Freddie Mac Gold Pool		5.500%	10/1/26–6/1/41	20,083	20,300
1,2	Freddie Mac Gold Pool		6.000%	1/1/24–5/1/40	10,479	10,854
1,2	Freddie Mac Gold Pool		7.000%	7/1/28–12/1/38	92	96
1	Ginnie Mae I Pool		2.500%	6/15/27–6/15/28	142	130
1	Ginnie Mae I Pool		3.000%	1/15/26–3/15/45	12,385	11,125
1	Ginnie Mae I Pool		3.500%	2/15/26–9/15/49	21,105	19,870
1	Ginnie Mae I Pool		4.000%	7/15/24–6/15/49	15,005	14,350
1	Ginnie Mae I Pool		4.500%	8/15/33–7/15/49	20,100	19,909
1	Ginnie Mae I Pool		5.000%	3/15/34–4/15/41	8,541	8,676
1	Ginnie Mae I Pool		6.500%	5/15/24–1/15/39	61	61
1	Ginnie Mae I Pool		7.000%	10/15/27	1	1
1	Ginnie Mae II Pool		1.500%	2/20/51–12/20/51	17,183	13,819
1,3,4	Ginnie Mae II Pool		2.000%	8/20/50–3/15/53	732,551	614,192
1,3,4	Ginnie Mae II Pool		2.500%	6/20/27–3/15/53	739,555	642,343
1,4	Ginnie Mae II Pool		3.000%	10/20/26–3/15/53	739,879	666,331
1,4	Ginnie Mae II Pool		3.500%	12/20/25–3/15/53	561,705	523,269
1	Ginnie Mae II Pool		4.000%	9/20/25–2/20/53	386,293	369,658
1,4	Ginnie Mae II Pool		4.500%	2/20/39–3/15/53	298,626	291,879
1,4	Ginnie Mae II Pool		5.000%	2/20/39–3/15/53	186,337	185,605
1,4	Ginnie Mae II Pool		5.500%	2/20/49–3/15/53	99,722	100,020
1,4	Ginnie Mae II Pool		6.000%	3/15/53	48,660	49,359
1,4	Ginnie Mae II Pool		6.500%	10/20/28–3/15/53	22,774	23,303
1	Ginnie Mae II Pool		7.000%	4/20/38–11/20/38	30	33
1,2	UMBS Pool		1.500%	7/1/35–9/1/51	950,463	770,241
1,2,4	UMBS Pool		2.000%	4/1/23–3/25/53	3,993,993	3,322,040
1,2,4	UMBS Pool		2.500%	3/1/27–3/25/53	2,859,446	2,463,516
1,2,4	UMBS Pool		3.000%	10/1/26–3/25/53	1,831,543	1,642,765
1,2,4	UMBS Pool		3.500%	8/1/25–3/25/53	1,150,394	1,068,769
1,2,4	UMBS Pool		4.000%	4/1/23–3/25/53	918,400	875,037
1,2,4	UMBS Pool		4.500%	4/1/23–3/25/53	661,549	643,143
1,2,4	UMBS Pool		5.000%	8/1/23–3/25/53	467,607	463,683
1,2,4	UMBS Pool		5.500%	11/1/24–3/25/53	274,045	276,478

4

Mortgage-Backed Securities Index Fund

			Coupon	Maturity Date	Face Amount ($000)	Market Value• ($000)
1,2,4	UMBS Pool		6.000%	5/1/23–3/25/53	142,360	145,360
1,2,4	UMBS Pool		6.500%	1/1/53–3/25/53	51,635	53,115
1,2,4	UMBS Pool		7.000%	10/1/33–3/25/38	6,140	6,346
						16,080,595
Nonconventional Mortgage-Backed Securities (0.0%)
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.290%		3.116%	12/1/41	17	17
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.310%		3.560%	9/1/37	10	10
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.477%		3.585%	3/1/43	86	87
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.552%		3.802%	10/1/37	17	18
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.560%		2.319%	7/1/43	196	196
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.592%		3.627%	6/1/43	23	24
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.627%		4.127%	3/1/38	2	2
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.669%		3.864%	10/1/42	32	32
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.690%		3.940%	10/1/39–9/1/42	123	124
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.693%		3.866%	8/1/39	17	17
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.700%		3.950%	12/1/40	36	36
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.724%		3.322%	5/1/42	10	10
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.739%		3.919%	11/1/39	5	5
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.774%		3.884%	5/1/42	7	7
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.794%		3.725%	3/1/42	16	16
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.797%		4.098%	8/1/42	40	40
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.805%		4.055%	11/1/41	23	23
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.810%		4.060%	10/1/40–12/1/40	1	2
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.812%		4.193%	3/1/41	23	23
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.813%		4.063%	11/1/41	4	4
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.813%		4.074%	1/1/42	29	29
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.815%		3.447%	5/1/41	11	11
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.815%		4.065%	11/1/40–12/1/41	22	23
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.826%		3.759%	2/1/42	25	25
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.830%		4.308%	4/1/41	15	15
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.834%		4.153%	2/1/41	1	1
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.835%		3.210%	5/1/40	1	1
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.835%		4.117%	1/1/40	1	1
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.838%		4.012%	9/1/40	23	23
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.839%		4.089%	12/1/39	33	33
1,2,5	Fannie Mae Pool, 12M USD LIBOR + 1.914%		3.289%	4/1/37	3	3
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.640%		3.890%	11/1/43	43	44
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.660%		3.910%	10/1/37	2	2
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.695%		3.159%	2/1/37	8	9
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.745%		3.995%	12/1/40	5	5
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.846%		4.141%	2/1/42	7	7
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.880%		3.864%	6/1/41	11	11
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.881%		3.601%	6/1/40	3	3
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.891%		4.141%	9/1/40	8	8
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.898%		4.149%	12/1/39	4	4
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.900%		4.150%	6/1/40	1	1

5

Mortgage-Backed Securities Index Fund

			Coupon	Maturity Date	Face Amount ($000)	Market Value• ($000)
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.910%		2.410%	2/1/41	1	1
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 1.910%		2.700%	2/1/41	25	25
1,2,5	Freddie Mac Non Gold Pool, 12M USD LIBOR + 2.085%		2.585%	3/1/38	5	5
1,5	Ginnie Mae II Pool, 1YR CMT + 1.500%		2.625%	1/20/41–8/20/41	134	130
1,5	Ginnie Mae II Pool, 1YR CMT + 1.500%		2.750%	11/20/40–12/20/42	110	107
1,5	Ginnie Mae II Pool, 1YR CMT + 1.500%		2.875%	4/20/41	2	2
1,5	Ginnie Mae II Pool, 1YR CMT + 2.000%		3.375%	5/20/41	1	1
1,5	Ginnie Mae II Pool, 1YR CMT + 2.000%		4.250%	11/20/40	2	2
						1,225
Total U.S. Government and Agency Obligations (Cost $18,117,612)						16,081,820
					Shares
Temporary Cash Investments (1.5%)
Money Market Fund (1.5%)
6	Vanguard Market Liquidity Fund (Cost $245,909)		4.640%		2,459,621	245,937
Total Investments (101.0%) (Cost $18,363,521)						16,327,757
Other Assets and Liabilities—Net (-1.0%)						(158,593)
Net Assets (100%)						16,169,164

Cost is in $000.

•	See Note A in Notes to Financial Statements.

1	The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.
2	The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
3	Securities with a value of $5,419,000 have been segregated as collateral for certain open To Be Announced (TBA) transactions.
4	Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of February 28, 2023.
5	Variable-rate security; rate shown is effective rate at period end. Certain variable-rate securities are not based on a published reference rate and spread but are determined by the issuer or agent based on current market conditions.
6	Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

	12M—12-month.
	1YR—1-year.
	CMT—Constant Maturing Treasury Rate.
	LIBOR—London Interbank Offered Rate.
	UMBS—Uniform Mortgage-Backed Securities.
	USD—U.S. dollar.

See accompanying Notes, which are an integral part of the Financial Statements.

6

Mortgage-Backed Securities Index Fund

Statement of Assets and Liabilities

As of February 28, 2023

($000s, except shares, footnotes, and per-share amounts)	Amount
Assets
Investments in Securities, at Value
Unaffiliated Issuers (Cost $18,117,612)	16,081,820
Affiliated Issuers (Cost $245,909)	245,937
Total Investments in Securities	16,327,757
Investment in Vanguard	587
Receivables for Investment Securities Sold	554,778
Receivables for Accrued Income	44,141
Receivables for Capital Shares Issued	11,500
Total Assets	16,938,763
Liabilities
Due to Custodian	803
Payables for Investment Securities Purchased	765,387
Payables for Capital Shares Redeemed	2,471
Payables for Distributions	693
Payables to Vanguard	245
Total Liabilities	769,599
Net Assets	16,169,164
At February 28, 2023, net assets consisted of:
Paid-in Capital	18,416,103
Total Distributable Earnings (Loss)	(2,246,939)
Net Assets	16,169,164
ETF Shares—Net Assets
Applicable to 323,353,308 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	14,806,058
Net Asset Value Per Share—ETF Shares	$45.79
Admiral Shares—Net Assets
Applicable to 62,377,458 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	1,139,856
Net Asset Value Per Share—Admiral Shares	$18.27
Institutional Shares—Net Assets
Applicable to 9,016,133 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	223,250
Net Asset Value Per Share—Institutional Shares	$24.76

See accompanying Notes, which are an integral part of the Financial Statements.

7

Mortgage-Backed Securities Index Fund

Statement of Operations

	Six Months Ended February 28, 2023
	($000)
Investment Income
Income
Interest1	231,117
Total Income	231,117
Expenses
The Vanguard Group—Note B
Investment Advisory Services	200
Management and Administrative—ETF Shares	1,867
Management and Administrative—Admiral Shares	333
Management and Administrative—Institutional Shares	43
Marketing and Distribution—ETF Shares	322
Marketing and Distribution—Admiral Shares	31
Marketing and Distribution—Institutional Shares	4
Custodian Fees	64
Shareholders’ Reports—ETF Shares	462
Shareholders’ Reports—Admiral Shares	26
Shareholders’ Reports—Institutional Shares	—
Trustees’ Fees and Expenses	3
Other Expenses	7
Total Expenses	3,362
Expenses Paid Indirectly	(49)
Net Expenses	3,313
Net Investment Income	227,804
Realized Net Gain (Loss) on Investment Securities Sold1	(112,087)
Change in Unrealized Appreciation (Depreciation) of Investment Securities1	(472,432)
Net Increase (Decrease) in Net Assets Resulting from Operations	(356,715)

1	Interest income, realized net gain (loss), capital gain distributions received, and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $5,762,000, $183,000, $1,000, and ($87,000), respectively. Purchases and sales are for temporary cash investment purposes.

See accompanying Notes, which are an integral part of the Financial Statements.

8

Mortgage-Backed Securities Index Fund

Statement of Changes in Net Assets

	Six Months Ended February 28, 2023		Year Ended August 31, 2022
	($000)		($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	227,804		269,246
Realized Net Gain (Loss)	(112,087)		(124,045)
Change in Unrealized Appreciation (Depreciation)	(472,432)		(1,756,647)
Net Increase (Decrease) in Net Assets Resulting from Operations	(356,715)		(1,611,446)
Distributions
ETF Shares	(200,847)		(229,467)
Admiral Shares	(16,601)		(21,594)
Institutional Shares	(3,046)		(2,331)
Total Distributions	(220,494)		(253,392)
Capital Share Transactions
ETF Shares	924,758		1,036,092
Admiral Shares	(32,445)		(37,825)
Institutional Shares	50,961		73,757
Net Increase (Decrease) from Capital Share Transactions	943,274		1,072,024
Total Increase (Decrease)	366,065		(792,814)
Net Assets
Beginning of Period	15,803,099		16,595,913
End of Period	16,169,164		15,803,099

See accompanying Notes, which are an integral part of the Financial Statements.

9

Mortgage-Backed Securities Index Fund

Financial Highlights

ETF Shares
For a Share Outstanding Throughout Each Period	Six Months Ended February 28, 2023	Year Ended August 31,
		2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$47.53	$53.47	$54.36	$53.26	$51.38	$53.00
Investment Operations
Net Investment Income1	.663	.842	.581	1.197	1.564	1.325
Net Realized and Unrealized Gain (Loss) on Investments	(1.760)	(5.995)	(.768)	1.146	1.859	(1.683)
Total from Investment Operations	(1.097)	(5.153)	(.187)	2.343	3.423	(.358)
Distributions
Dividends from Net Investment Income	(.643)	(.787)	(.594)	(1.243)	(1.543)	(1.262)
Distributions from Realized Capital Gains	—	—	(.109)	—	—	—
Total Distributions	(.643)	(.787)	(.703)	(1.243)	(1.543)	(1.262)
Net Asset Value, End of Period	$45.79	$47.53	$53.47	$54.36	$53.26	$51.38
Total Return	-2.31%	-9.71%	-0.35%	4.45%	6.80%	-0.67%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$14,806	$14,405	$15,055	$11,643	$10,316	$7,193
Ratio of Total Expenses to Average Net Assets	0.04%2	0.04%2	0.04%	0.05%	0.05%	0.07%
Ratio of Net Investment Income to Average Net Assets	2.91%	1.67%	1.08%	2.22%	3.01%	2.56%
Portfolio Turnover Rate3	53%	170%	316%	218%	190%	279%
The expense ratio and net investment income ratio for the current period have been annualized.

1	Calculated based on average shares outstanding.
2	The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.04%.
3	Includes 39%, 113%, 237%, 11%, 34%, and 78%, respectively, attributable to mortgage-dollar-roll activity.

See accompanying Notes, which are an integral part of the Financial Statements.

10

Mortgage-Backed Securities Index Fund

Financial Highlights

Admiral Shares
For a Share Outstanding Throughout Each Period	Six Months Ended February 28, 2023	Year Ended August 31,
		2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$18.98	$21.37	$21.72	$21.26	$20.51	$21.17
Investment Operations
Net Investment Income1	.262	.328	.211	.470	.622	.528
Net Realized and Unrealized Gain (Loss) on Investments	(.710)	(2.391)	(.292)	.463	.742	(.674)
Total from Investment Operations	(.448)	(2.063)	(.081)	.933	1.364	(.146)
Distributions
Dividends from Net Investment Income	(.262)	(.327)	(.225)	(.473)	(.614)	(.514)
Distributions from Realized Capital Gains	—	—	(.044)	—	—	—
Total Distributions	(.262)	(.327)	(.269)	(.473)	(.614)	(.514)
Net Asset Value, End of Period	$18.27	$18.98	$21.37	$21.72	$21.26	$20.51
Total Return2	-2.35%	-9.72%	-0.38%	4.43%	6.77%	-0.68%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$1,140	$1,219	$1,419	$1,159	$841	$725
Ratio of Total Expenses to Average Net Assets	0.07%3	0.07%3	0.07%	0.07%	0.07%	0.07%
Ratio of Net Investment Income to Average Net Assets	2.88%	1.62%	0.98%	2.18%	2.99%	2.56%
Portfolio Turnover Rate4	53%	170%	316%	218%	190%	279%
The expense ratio and net investment income ratio for the current period have been annualized.

1	Calculated based on average shares outstanding.
2	Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.
3	The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.07%.
4	Includes 39%, 113%, 237%, 11%, 34%, and 78%, respectively, attributable to mortgage-dollar-roll activity.

See accompanying Notes, which are an integral part of the Financial Statements.

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Mortgage-Backed Securities Index Fund

Financial Highlights

Institutional Shares
For a Share Outstanding Throughout Each Period	Six Months Ended February 28, 2023	Year Ended August 31,
		2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$25.72	$28.96	$29.44	$28.81	$27.79	$28.69
Investment Operations
Net Investment Income1	.360	.467	.393	.641	.846	.721
Net Realized and Unrealized Gain (Loss) on Investments	(.962)	(3.258)	(.503)	.636	1.011	(.920)
Total from Investment Operations	(.602)	(2.791)	(.110)	1.277	1.857	(.199)
Distributions
Dividends from Net Investment Income	(.358)	(.449)	(.311)	(.647)	(.837)	(.701)
Distributions from Realized Capital Gains	—	—	(.059)	—	—	—
Total Distributions	(.358)	(.449)	(.370)	(.647)	(.837)	(.701)
Net Asset Value, End of Period	$24.76	$25.72	$28.96	$29.44	$28.81	$27.79
Total Return	-2.33%	-9.70%	-0.38%	4.48%	6.80%	-0.68%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$223	$179	$122	$171	$119	$70
Ratio of Total Expenses to Average Net Assets	0.05%2	0.05%2	0.05%	0.05%	0.05%	0.05%
Ratio of Net Investment Income to Average Net Assets	2.92%	1.71%	1.35%	2.20%	3.01%	2.58%
Portfolio Turnover Rate3	53%	170%	316%	218%	190%	279%
The expense ratio and net investment income ratio for the current period have been annualized.

1	Calculated based on average shares outstanding.
2	The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.05%.
3	Includes 39%, 113%, 237%, 11%, 34%, and 78%, respectively, attributable to mortgage-dollar-roll activity.

See accompanying Notes, which are an integral part of the Financial Statements.

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Mortgage-Backed Securities Index Fund

Notes to Financial Statements

Vanguard Mortgage-Backed Securities Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: ETF Shares, Admiral Shares, and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.

Significant market disruptions, such as those caused by pandemics (e.g., COVID-19 pandemic), natural or environmental disasters, war (e.g., Russia's invasion of Ukraine), acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Any such disruptions could have an adverse impact on the value of the fund's investments and fund performance.

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

1. 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. Bonds and temporary cash investments 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. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral, as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset 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 by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.

2. To Be Announced (TBA) Transactions: A TBA transaction is an agreement to buy or sell mortgage-backed securities with agreed-upon characteristics (face amount, coupon, maturity) for settlement at a future date. The fund may be a seller of TBA transactions to reduce its exposure to the mortgage-backed securities market or in order to sell mortgage-backed securities it owns under delayed-delivery arrangements. When the fund is a buyer of TBA transactions, it maintains cash or short-term investments in an amount sufficient to meet the purchase price at the settlement date of the TBA transaction. The primary risk associated with TBA transactions is that a counterparty may default on its obligations. The fund mitigates its counterparty risk by, among other things, performing a credit analysis of counterparties, allocating transactions among numerous counterparties, and monitoring its exposure to each counterparty. The fund may also enter into a Master Securities Forward Transaction Agreement (MSFTA) with certain counterparties and require them to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. Under an MSFTA, upon a counterparty default (including bankruptcy), the fund may terminate any TBA transactions with that counterparty, determine the net amount owed by either party in accordance with its MSFTA, and sell or retain any collateral held up to the net amount owed to the fund under the MSFTA.

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Mortgage-Backed Securities Index Fund

At February 28, 2023, counterparties had deposited in segregated accounts securities with a value of $375,000 and cash of $300,000 in connection with TBA transactions.

3. Mortgage Dollar Rolls: The fund enters into mortgage-dollar-roll transactions, in which the fund sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar securities in the future at a predetermined price. The proceeds of the securities sold in mortgage-dollar-roll transactions are typically invested in high-quality short-term fixed income securities. The fund forgoes principal and interest paid on the securities sold, and is compensated by interest earned on the proceeds of the sale and by a lower price on the securities to be repurchased. The fund also enters into mortgage-dollar-roll transactions in which the fund buys mortgage-backed securities from a dealer pursuant to a TBA transaction and simultaneously agrees to sell similar securities in the future at a predetermined price. The securities bought in mortgage-dollar-roll transactions are used to cover an open TBA sell position. The fund continues to earn interest on mortgage-backed security pools already held and receives a lower price on the securities to be sold in the future. The fund accounts for mortgage-dollar-roll transactions as purchases and sales; as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to be received or paid in connection with open mortgage dollar rolls are included in Receivables for Investment Securities Sold or Payables for Investment Securities Purchased in the Statement of Assets and Liabilities.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

6. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.4 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund

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Mortgage-Backed Securities Index Fund

Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

For the six months ended February 28, 2023, the fund did not utilize the credit facilities or the Interfund Lending Program.

7. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2023, the fund had contributed to Vanguard capital in the amount of $587,000, representing less than 0.01% of the fund’s net assets and 0.23% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

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Mortgage-Backed Securities Index Fund

C.  The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended February 28, 2023, custodian fee offset arrangements reduced the fund’s expenses by $49,000 (an annual rate of less than 0.01% of average net assets).

D.  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). Any investments valued with significant unobservable inputs are noted on the Schedule of Investments.

The following table summarizes the market value of the fund's investments as of February 28, 2023, based on the inputs used to value them:

	Level 1 ($000)	Level 2 ($000)	Level 3 ($000)	Total ($000)
Investments
Assets
U.S. Government and Agency Obligations	—	16,081,820	—	16,081,820
Temporary Cash Investments	245,937	—	—	245,937
Total	245,937	16,081,820	—	16,327,757

E.  As of February 28, 2023, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

	Amount ($000)
Tax Cost	18,376,921
Gross Unrealized Appreciation	17,069
Gross Unrealized Depreciation	(2,066,233)
Net Unrealized Appreciation (Depreciation)	(2,049,164)

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2022, the fund had available capital losses totaling $122,392,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2023; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

F.  During the six months ended February 28, 2023, the fund purchased $9,252,822,000 of investment securities and sold $8,315,323,000 of investment securities, other than temporary cash investments.

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Mortgage-Backed Securities Index Fund

G.  Capital share transactions for each class of shares were:

	Six Months Ended February 28, 2023			Year Ended August 31, 2022
	Amount ($000)	Shares (000)		Amount ($000)	Shares (000)
ETF Shares
Issued	1,351,143	29,727		3,012,787	60,434
Issued in Lieu of Cash Distributions	—	—		—	—
Redeemed	(426,385)	(9,425)		(1,976,695)	(38,950)
Net Increase (Decrease)—ETF Shares	924,758	20,302		1,036,092	21,484
Admiral Shares
Issued	259,396	14,124		518,758	25,847
Issued in Lieu of Cash Distributions	12,701	696		16,300	816
Redeemed	(304,542)	(16,669)		(572,883)	(28,821)
Net Increase (Decrease)—Admiral Shares	(32,445)	(1,849)		(37,825)	(2,158)
Institutional Shares
Issued	56,334	2,278		95,097	3,492
Issued in Lieu of Cash Distributions	3,046	123		2,331	87
Redeemed	(8,419)	(338)		(23,671)	(853)
Net Increase (Decrease)—Institutional Shares	50,961	2,063		73,757	2,726

At February 28, 2023, one shareholder was the record or beneficial owner of 39% of the fund’s net assets. If this shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

H.  Management has determined that no events or transactions occurred subsequent to February 28, 2023, that would require recognition or disclosure in these financial statements.

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© 2023 The Vanguard Group, Inc.
All rights reserved.
U.S. Patent No. 6,879,964.
Vanguard Marketing Corporation, Distributor.

Q16482 042023