Fund Description: Vanguard Mortgage-Backed Securities Index Fund is an exchange-traded index fund or Index ETF which is a separate investment portfolio of the Vanguard Scottsdale Fund, an investment management company. INVESTMENT OBJECTIVE: Vanguard Mortgage-Backed Securities Index Fund seeks to track the performance of the, Barclays Capital U.S. MBS Float Adjusted Index. INDEX DESCRIPTION: The Barclays Capital U.S. MBS Float Adjusted Index covers U.S. agency mortgage-backed pass-through securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). To be included in the Index, pool aggregates must have at least $250 million currently outstanding and a weighted average maturity of at least 1 year. FUND STRATEGY: The Fund employs a passive management or indexing investment approach designed to track the performance of the Index. The Fund invests by sampling the Index, meaning that it holds a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics. The Fund’s investments will be selected through the sampling process, and at least 80% of the Fund’s assets will be invested in bonds included in the Index. The Fund maintains a dollar-weighted average maturity consistent with that of the Index, which, as of June 30, 2009, was 5.76 years. The Fund may invest in derivatives only if the expected risks and rewards of the derivatives are consistent with the investment objective, policies, strategies, and risks of the Fund. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold), or a market index (such as the S&P 500 Index). A small portion of the Fund’s assets may be invested in shares of bond exchange-traded funds. ETFs provide returns similar to those of the bonds listed in the index or in a subset of the Index. ETFs may be purchased when doing so will reduce the Fund’s transaction costs or add value because the instruments are favorably priced. FUND MANAGEMENT: The Vanguard Group, Inc.serves as the investment advisor to the Fund through its Fixed Income Group.