Vanguardfi Intermediate-Term Tax-Exempt Fund

Vanguard? Vanguard? Intermediate-Term Tax-Exempt Fund

Product Summary Intermediate-term municipal bonds. Seeks moderate current income exempt from federal tax. Invests primarily in high-quality municipal securities. Seeks to maintain a dollar-weighted average nominal maturity between 6 and 12 years.

Quality

Vanguard Style View: Muni National Interm

High-quality, intermediate-term municipal bonds.

Duration Short Medium Long

High

Avg Below

Inv Grd

Central tendency Expected range of fund holdings

Quarterly Commentary The financial markets were volatile in the fourth quarter of 2022 but regained some of the ground lost earlier in the year. Even amid fears of a global recession, investor sentiment improved on the prospect that inflation, while still running hot, might have peaked. Another boost came from major central banks including the Federal Reserve, the Bank of England, and the European Central Bank slowing the pace of their interest rate hikes late in the quarter. Corporate bonds benefited from the shift in sentiment, helping the broad U.S. investment-grade bond market to return almost 2% (as measured by the Bloomberg U.S. Aggregate Float Adjusted Index) for the three months. The municipals market returned 4.10% (as measured by the Bloomberg Municipal Bond Index). For the quarter, the 2-year AAA municipal bond yield decreased by 40 basis points (bps), the 10-year AAA yield decreased 62 bps, and the 30-year AAA yield decreased 32 bps. For the 12 months ended December 30th, the 2-year AAA municipal bond yield increased 243 bps, the 10-year AAA yield increased 159 bps, and the 30-year AAA yield increased 209 bps. (A basis point is one-hundredth of a percentage point.) Total issuance for the quarter ended December 31 was $76 billion, with $19 billion being issued in December. At quarter-end, the attractiveness of municipals relative to Treasuries, expressed as a ratio at the 10-year maturity point, stood at 68%. For the quarter ending December 30, Vanguard Intermediate-Term Tax-Exempt Fund outperformed its benchmark, the Bloomberg 1?15 Year Municipal Bond Index (+3.59%), and the average return of its peer group (+3.26%). A duration overweight contributed to returns; a credit overweight detracted. By sector, selection within hospital revenue and electric/gas bonds boosted returns; selection within industrial development revenue and pollution control revenue bonds detracted. For the 12 months ending December 30, the fund underperformed its benchmark (?5.95%) but outperformed its peer-group average (?7.64%). Curve positioning over the year added to returns overall, while an overweight allocation to credit detracted. Selection within lease/fee bonds and industrial development revenue bonds and pollution control revenue bonds helped performance most. Selection within hospital revenue, special assessment, electric/gas, and water/sewer bonds detracted.

As of December 31, 2022

People and Process Vanguard Intermediate-Term Tax-Exempt Fund seeks to provide a moderate and sustainable level of current income that is exempt from federal personal income taxes. The fund has no limitations on the maturity of individual securities but is expected to maintain a dollar-weighted average maturity of 6 to 12 years. At least 75% of the securities held by the fund are municipal bonds in the top three credit-rating categories as determined by a nationally recognized statistical rating organization or, if unrated, determined to be of comparable quality by the advisor. The fund may invest up to 20% of its assets in medium-grade bonds, as determined by a rating organization or by the advisor. The remaining 5% may be invested in securities with lower credit ratings or, if unrated, determined to be of comparable quality by the advisor. The fund's advisor, Vanguard Fixed Income Group, seeks to add value by making small adjustments to the fund's maturity structure based on factors such as interest-rate outlook and slope of the yield curve. Vanguard's independent research capabilities assist in identifying specific issues and market sectors that represent good relative value.

Vanguard Fixed Income Group Launched in 1975, The Vanguard Group, Malvern, Pennsylvania, is among the world's largest equity and fixed income managers. As chief investment officer, Gregory Davis, CFA, oversees Vanguard's Equity Index, Quantitative Equity, and Fixed Income Groups. Sara Devereux, principal and global head of Fixed Income Group, has direct oversight responsibility for all money market, bond, and stable value portfolios managed by the Fixed Income Group. The Fixed Income Group offers actively managed investments in U.S. Treasury, corporate, and tax-exempt securities, as well as passively managed index portfolios. Since 1981, it has refined techniques in total-return management, credit research, and index sampling to seek to deliver consistent performance with transparency and risk control. The group has advised Vanguard Intermediate-Term Tax-Exempt Fund since 1981. Investment Manager Biographies James M. D'Arcy, CFA. Portfolio manager. Advised the fund since 2013. Worked in investment management since 1996. B.A., University of Colorado.

Vanguard Intermediate-Term Tax-Exempt Fund

Total Returns

Intermediate-Term Tax-Exempt Fund Investor Shares (9/1/1977) Admiral Shares (2/12/2001)

Bloomberg 1-15 Year Municipal Bond Index Intermediate Municipal Funds Average

Expense Ratio

0.17% 0.09

-- --

Quarter

3.77% 3.79

3.59 3.26

Year to Date

-6.91% -6.83

-5.95 -7.64

1 Year

-6.91% -6.83

-5.95 -7.64

3 Years

-0.35% -0.27

-0.22 -0.72

5 Years

1.36% 1.44

1.44 0.97

10 Years

1.97% 2.06

1.95 1.44

The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at performance. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. Figures for periods of less than one year are cumulative returns. All other figures represent average annual returns. Performance figures include the reinvestment of all dividends and any capital gains distributions. All returns are net of expenses. Note: Average fund returns are derived from data provided by Lipper, a Thomson Reuters Company. Admiral class shareholders are required to maintain specific minimum balances and meet other special criteria.

As of December 31, 2022

Vanguard Intermediate-Term Tax-Exempt Fund

Quarterly Returns: Investor Shares

Year 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012

1st Quarter -5.42% -0.34 -0.51 2.64 -1.10 1.41 1.61 0.79 2.64 0.37 1.23

2nd Quarter -2.46% 1.20 2.64 2.02 0.77 1.76 2.14 -0.88 2.01 -2.90 1.64

3rd Quarter -2.75% -0.31 1.26 1.34 -0.08 1.03 -0.30 1.59 1.32 0.53 2.25

4th Quarter 3.77% 0.55 1.66 0.63 1.67 0.26 -3.28 1.35 1.10 0.47 0.47

Inter.-Term Tax-Exempt

-6.91% 1.10 5.13 6.78 1.25 4.53 0.08 2.86 7.25 -1.56 5.70

Bloomberg 1-15 Year Municipal Index -5.95% 0.86 4.73 6.44 1.58 4.33 0.01 2.83 6.36 -1.05 4.74

Year-End

Assets (Millions)

$2,523 3,400 3,532 3,660 3,382 3,960 4,052 4,462 4,702 4,624 6,892

Quarterly Returns: Admiral Shares

Year 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012

1st Quarter -5.40% -0.32 -0.49 2.66 -1.07 1.43 1.63 0.81 2.66 0.39 1.25

2nd Quarter -2.44% 1.22 2.66 2.04 0.80 1.79 2.17 -0.86 2.03 -2.88 1.66

3rd Quarter -2.73% -0.29 1.28 1.36 -0.07 1.06 -0.27 1.61 1.34 0.55 2.27

4th Quarter 3.79% 0.57 1.68 0.65 1.69 0.28 -3.25 1.37 1.12 0.49 0.49

Inter.-Term Tax-Exempt

-6.83% 1.18 5.21 6.87 1.33 4.64 0.19 2.94 7.33 -1.48 5.78

Bloomberg 1-15 Year Municipal Index -5.95% 0.86 4.73 6.44 1.58 4.33 0.01 2.83 6.36 -1.05 4.74

Year-End

Assets (Millions) $63,209

85,444 78,309 69,895 55,593 52,678 45,314 41,833 36,110 28,644 31,261

As of December 31, 2022

Vanguard Intermediate-Term Tax-Exempt Fund

Fund Facts

Fund Number Ticker Newspaper Listing CUSIP Number Assets (millions)

(Total $65,731) Inception Expense Ratio

(as of 2/2022)

Investor Shares 0042 VWITX MuInt

922907209 $2,523

9/1/1977

0.17%

Admiral Shares

0542 VWIUX MuIntAdml 922907878 $63,209

2/12/2001

0.09%

Fixed Income Characteristics

Number of bonds Average stated maturity Average duration Short-term reserves

Distribution by Issuer

Asset-Backed Commercial Mortgage-Backed Finance Foreign Government Mortgage-Backed Industrial Treasury/Agency Utilities Other Total

Inter.-Term Tax-Exempt

12,164 9.3 years 5.0 years

1.2%

Bloomberg 1-15 Year Municipal Index 43,926 7.9 years 4.4 years

% of Portfolio 0.0% 0.0 0.0 0.0 0.0 0.0 0.0 0.0

100.0 100.0%

Volatility Measures

R-Squared

Beta

Bloomberg 1-15 Year Municipal Index Bloomberg Municipal Bond Index

0.99

1.08

1.00

0.86

R-squared and beta are calculated from trailing 36-month fund returns relative to the associated benchmark.

Distribution by Credit Quality

% of Portfolio

AAA

13.6%

AA

45.9

A

29.8

BBB

6.6

BB

1.2

B

0.1

Not Rated

2.8

Total

100.0%

Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). "NR" is used to classify securities for which a rating is not available. NR securities may include a fund's investment in Vanguard Market Liquidity Fund or Vanguard Municipal Cash Management Fund, each of which invests in high-quality money market instruments and may serve as a cash management vehicle for the Vanguard funds, trusts, and accounts. U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities appear under "U.S. Government." Credit-quality ratings for each issue are obtained from Moody's and S&P, and the higher rating for each issue is used.

Distribution by Stated Maturity

Under 1 Year 1 to 3 Years 3 to 5 Years 5 to 10 Years 10 to 20 Years 20 to 30 Years Over 30 Years Total

% of Portfolio

4.5 % 11.0 % 10.8 % 27.2 % 45.1 %

1.3 % 0.1 % 100.0 %

As of December 31, 2022

Vanguard Intermediate-Term Tax-Exempt Fund

Largest State Concentrations

New York California Texas Illinois Pennsylvania Florida New Jersey Michigan Georgia Ohio Total

% of Portfolio

14.6 9.5 9.2 5.8 5.7 4.7 3.9 3.3 3.1 2.8

62.6%

As of December 31, 2022

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