Vanguard Retirement Savings Master Trust

Annual Report December 31, 2014 Vanguard Retirement Savings Master Trust

The mission continues On May 1, 1975, Vanguard began operations, a fledgling company based on the simple but revolutionary idea that a mutual fund company should be managed solely in the interest of its investors. Four decades later, that revolutionary spirit continues to animate the enterprise. Vanguard remains on a mission to give investors the best chance of investment success. As we mark our 40th anniversary, we thank you for entrusting your assets to Vanguard and giving us the opportunity to help you reach your financial goals in the decades to come. Contents Your Trust s 2014 Total Returns 1 Chairman s Letter 2 Advisor s Report 4 Portfolio Profile 6 Performance Summary 7 Financial Statements 9 Glossary 19 Please note: The opinions expressed in this report are just that informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus. See the Glossary for definitions of investment terms used in this report. About the cover: Since our founding, Vanguard has drawn inspiration from the enterprise and valor demonstrated by British naval hero Horatio Nelson and his command at the Battle of the Nile in 1798. The photograph displays a replica of a merchant ship from the same era as Nelson s flagship, the HMS Vanguard.

2014 Total Returns 1 Periods Ended December 31, 2014 One Year Three Years Five Years Vanguard Retirement Savings Master Trust 2.14% 2.29% 2.67% Stable Value Funds Average 2 1.69 1.93 2.32 1 Returns are gross of investment management fees and net of contract fees. 2 Source: Hueler Analytics Stable Value Pooled Fund Universe. This is an equal-weighted total return average across all participating funds in the Hueler Universe and is net of contract fees and gross of stable value management fees. Hueler s data are copyrighted and are not for reproduction or redistribution. 1

Dear Trust Participant, Chairman s Letter The U.S. bond market produced strong returns for investors in 2014, defying expectations. In the first half of the year, concerns about European economic weakness caused a flight to U.S. bonds, notably to longer-dated issues. (Increased demand produces higher prices and lower yields.) During the second half, the focus turned to a possible rise in interest rates as U.S. economic growth gained momentum and the Federal Reserve moved to end its bond-purchase program during the fourth quarter. Demand for U.S. bonds nevertheless remained robust because of continued concerns over slow economic growth globally. The strong performance of the assets supporting Vanguard Retirement Savings Master Trust s contracts conservative, high-credit-quality bond trusts (as defined by nationally recognized rating agencies) is reflected in the Trust s market value/book value (MV/BV) ratio. That ratio increased from 102.72% as of December 31, 2013, to 103.04% as of December 31, 2014. The total return earned by investors remained ahead of the stable value funds average, as reported by Hueler Analytics, and continued to outpace inflation as measured by the Consumer Price Index. 2

During the first quarter of the year, the Trust s assets were positioned to be modestly more conservative: Assets were reallocated from Vanguard Fiduciary Trust Company Intermediate-Term Bond Trust to VFTC Short-Term Bond Trust. Furthermore, over the year, the average duration of the Trust declined from 2.77 years to 2.50 years. The Trust continues to be well-diversified not only with the assets supporting the Trust s contracts, but also across the issuers of the contracts. Vanguard Retirement Savings Master Trust can serve as a conservative option in a carefully structured investment plan. By emphasizing high credit quality and diversification, the Trust seeks to provide a relatively predictable return from current income with no change in principal value. It has accomplished these objectives through volatile and challenging markets, as demonstrated over the past several years. We look forward to reporting to you again next year. Thank you for entrusting your assets to Vanguard. Sincerely, F. William McNabb III Chairman and Chief Executive Officer February 18, 2015 Market Barometer Average Annual Total Returns Periods Ended December 31, 2014 One Year Three Years Five Years Bonds Barclays U.S. Aggregate Bond Index (Broad taxable market) 5.97% 2.66% 4.45% Barclays Municipal Bond Index (Broad tax-exempt market) 9.05 4.30 5.16 Citigroup Three-Month U.S. Treasury Bill Index 0.03 0.04 0.06 Stocks Russell 1000 Index (Large-caps) 13.24% 20.62% 15.64% Russell 2000 Index (Small-caps) 4.89 19.21 15.55 Russell 3000 Index (Broad U.S. market) 12.56 20.51 15.63 FTSE All-World ex US Index 3.31 9.41 4.75 CPI Consumer Price Index 0.76% 1.33% 1.69% 3

Advisor s Report Bond performance during the fourth quarter capped a strong 2014. Through August, moderate economic growth and low inflation in the United States, coupled with slow economic growth globally and continuing geopolitical tensions, kept interest rates low, resulting in solid returns for investors in U.S. bonds. (Bond prices move inversely to yields.) The U.S. economy gained momentum during the fourth quarter, and the Federal Reserve ended its bond buyback program. Demand for bonds nevertheless remained robust, notably for longer-duration issues, because of weaker economic growth overseas and the effects of tumbling oil prices on inflation concerns. Reflecting the flattening of the yield curve versus 2013, yields of 2-year U.S. Treasuries as of December 31, 2014, had risen to 0.69%, and 5-year U.S. Treasuries had dropped to 1.68%. The yield of 10-year Treasuries at year-end was 2.19%. The assets supporting the Retirement Savings Master Trust s contracts are managed conservatively in trusts reserved for stable value funds, with an average credit-quality rating of Aa1. The total return of these investments diversified among U.S. Treasury securities, high-quality mortgage-backed securities, corporate bonds, and asset-backed securities was also positive for the year. As a result, the Trust s market value to book value (MV/BV) ratio increased from 102.72% as of December 31, 2013, to 103.04% as of December 31, 2014. As we reported last year, we shortened the Trust s duration and reduced its allocation to mortgage-backed securities in fourth-quarter 2013, consistent with Vanguard s outlook. In January 2014, we completed the transition to this strategy, transferring approximately 18% of the Trust s assets from Vanguard Fiduciary Trust Company Intermediate-Term Bond Trust to VFTC Short-Term Bond Trust. 1 The duration of Vanguard Retirement Savings Trust was 2.50 years as of December 31, 2014, compared with 2.77 years as of December 31, 2013. The Trust s gross yield is determined by the current yield of the investments underlying the contracts and a smoothing of market value gains or losses over time. Prior to the actions taken in late 2013 and early 2014 to shorten the Trust s duration, we had lengthened the time over which market value gains (reported in the MV/BV ratio) were amortized through the Trust s yield to protect investors from a possible spike in interest rates. This resulted in a slight decrease in income to investors. The Trust s gross yield was 2.06% as of year-end 2013. With the shift in allocation referenced above, we returned the amortization period to that of the Trust s duration, resulting in an increase in the Trust s gross yield to 2.43% as of March 31, 2014. The gross yield of the Trust was 2.39% as of December 31, 2014. 4 1 Please note that we anticipate moving to a mutual fund structure for VRST s core underlying investments in 2015. The holdings and strategies of the mutual funds will be substantially identical to those of the current trusts, VFTC Intermediate-Term Bond Trust and VFTC Short-Term Bond Trust, and will be used exclusively for stable value portfolios.

Continuing to diversify issuer exposures in the Trust, we placed a new contract with Metropolitan Life (rated AA-/Aa3 by Standard & Poor s and Moody s Investors Service), backed by the MetLife Short- Term and MetLife Intermediate-Term Separate Accounts managed by VFTC exclusively for Vanguard s stable value funds. During the fourth quarter, Moody s downgraded Japan s sovereign rating, citing concerns over future economic growth. As a result, the rating of Bank of Tokyo-Mitsubishi was also lowered, from Aa3 to A1. The average credit quality of the Trust s investments was Aa1, unchanged from prior years. We continue to work with our current issuers, diversify by adding new ones, and position the assets supporting the Trust s contracts to provide protection from major market risk. Amid changes in the investment and stable value markets, Vanguard Retirement Savings Master Trust provides a conservative investment option that helps protect principal. We look forward to reporting to you again next year. Susan F. Graef, CFA, Principal Paul M. Jakubowski, Principal Vanguard Fiduciary Trust Company February 20, 2015 5

Retirement Savings Master Trust Portfolio Profile As of December 31, 2014 Financial Attributes Number of Contract Issuers 9 Gross Spot Yield 2.39% Average Duration 2.5 MV/BV Ratio 103.04% Average Quality Aa1 Investments (in millions) $17,294 Distribution of Investments 1 Synthetic Investment Contracts Constant Duration Contracts 93.3% Finite-Term Contracts 0.0 Traditional Investment Contracts 2.6 Cash Investments 4.1 Total 100.0% Distribution by Duration 2 Under 1 Year 18.2% 1 to 3 Years 37.8 3 to 5 Years 25.9 5 to 10 Years 18.0 Over 10 Years 0.1 Total 100.0% Synthetic Underlying Fund Exposure 2 VFTC Short-Term Bond Trust 41.4% VFTC Intermediate-Term Bond Trust 31.8 Prudential Core Conservative Intermediate Bond Fund 6.7 New York Life Collective Investment Trust 5.4 Met Life Intermediate Separate Account 4.1 Met Life Short Separate Account 4.0 Total 93.4% Distribution by Sector 2 Corporate 21.5% Treasury 19.9 Asset-Backed 13.9 Pass-Through MBS 13.7 Agency 12.3 Foreign 7.5 Cash Equivalent 5.8 CMBS 2.9 Traditional Contracts 2.5 Total 100.0% Investment Focus Average Maturity Short Med. Long Distribution by Credit Quality 3 Credit Quality High Government 46.1% Aaa 21.3 Aa1 0.7 Aa2 6.4 Aa3 6.6 A1 6.0 A2 8.1 A3 4.8 Total 100.0% Medium Low 1 Based on total Trust book value. 2 Based on total Trust market value. 3 Credit-quality ratings for each issue are obtained from Moody s Investors Service (Moody s), Fitch Ratings (Fitch), and Standard & Poor s (S&P). When ratings of all three agencies are available, the median rating is used. When ratings are available from only two agencies, the lower rating is used. When only one rating is available, that rating is used. Percentages based on total market value. See the Glossary for definitions of investment terms used in this report. 6

Retirement Savings Master Trust Performance Summary All of the returns in this report represent past performance, which cannot be used to predict future returns that may be achieved by the Master Trust. An investment in the Master Trust is neither insured nor guaranteed by the U.S. government nor by Vanguard, and there is no assurance that the Master Trust will be able to maintain a stable net asset value of $1 per unit. Fiscal-Year Total Returns (%): September 30, 2005 December 31, 2014 VRST Stable Value Master Funds Trust 1 Average 2 2005 4.32% 4.36% 2006 4.54 4.66 2007 4.83 4.93 December 2007 3 4.86 4.94 December 2008 4.59 4.58 December 2009 3.29 3.12 December 2010 3.23 3.12 December 2011 3.26 2.69 December 2012 2.69 2.26 December 2013 2.05 1.84 December 2014 2.14 1.69 Average Annualized Returns Final Value Periods Ended December 31, 2014 of a $10,000 One Year Five Years Ten Years Investment 4 VRST Master Trust 1 2.14% 2.67% 3.50% $14,111 Stable Value Funds Average 2 1.69 2.32 3.34 13,886 1 Returns are gross of investment management fees and net of contract fees. 2 Source: Hueler Analytics Stable Value Pooled Fund Universe. This is an equal-weighted total return average across all participating funds in the Hueler Universe and is net of contract fees and gross of stable value management fees. Hueler s data are copyrighted and are not for reproduction or redistribution. 3 The 2005 2007 returns are reported on an annual basis ended September 30. Beginning in 2007 and going forward, the returns are reported on an annual basis ended December 31. 4 Growth from December 31, 2004, through December 31, 2014. Note: See Financial Highlights table for income information for the Master Trust for the past five years. For Vanguard Retirement Savings Trust unitholders, see the Financial Highlights in the insert for income information for the past five years. 7

Retirement Savings Master Trust The Value of Investing for the Long Term: December 31, 2004 December 31, 2014 This chart presents the growth of a hypothetical $10,000 investment made in the Master Trust ten years ago. $16,000 14,111 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 8,000 8

Retirement Savings Master Trust Financial Statements Schedule of Investments As of December 31, 2014 This Statement provides a detailed listing of the Trust s holdings, including each contract s value on the last day of the reporting period. Investments are grouped and subtotaled by type of investment (traditional contracts issued by insurance companies and banks, synthetic investment contracts, and short-term investments). The net value of other assets and liabilities is added to the value of Total Investments to calculate the Trust s Net Assets. Investments Adjustment Issuer Rating: at Fair to Contract Contract S&P/Moody s Interest Maturity Value Value Value VRST Master Trust (unaudited) Rate Date 1 ($000) ($000) ($000) Investment Contracts (97.1%) Traditional Contracts Issued by Insurance Companies and Banks (2.6%) Metropolitan Life Insurance Co. AA-/Aa3 1.530% 7/13/15 116,255 (769) 115,486 Metropolitan Life Insurance Co. AA-/Aa3 0.740% 2/7/14 54,083 (23) 54,060 Metropolitan Life Insurance Co. AA-/Aa3 0.710% 4/21/17 22,986 46 23,032 Metropolitan Life Insurance Co. AA-/Aa3 1.530% 7/13/15 5,697 (38) 5,659 New York Life Insurance Co. AA+/Aaa 1.690% 12/17/18 149,283 2,602 151,885 New York Life Insurance Co. AA+/Aaa 0.850% 11/16/15 101,646 (538) 101,108 Total Traditional Contracts Issued by Insurance Companies and Banks 449,950 1,280 451,230 Wrap Investments Contract Adjustment Issuer Rating: at Fair at Fair to Contract Contract S&P/Moody s Interest Value Value Value Value (unaudited) Rate ($000) ($000) ($000) ($000) Synthetic Investment Contracts (94.5%) American General Life Insurance Co. (6.9%) A+/A2 2.198% 2 VFTC Intermediate-Term Bond Trust 3 523,978 (12,336) 511,642 VFTC Short-Term Bond Trust 3 674,667 (15,883) 658,784 Bank of Tokyo Mitsubishi (11.1%) A+/A1 2.239% 2 VFTC Intermediate-Term Bond Trust 3 826,888 (20,220) 806,668 VFTC Short-Term Bond Trust 3 1,110,496 (27,154) 1,083,342 JPMorgan Chase Bank (14.3%) A+/Aa3 2.482% 2 VFTC Intermediate-Term Bond Trust 3 1,055,245 (33,770) 1,021,475 VFTC Short-Term Bond Trust 3 1,479,045 (47,332) 1,431,713 Metropolitan Life Insurance Co. (8.3%) AA-/Aa3 1.957% 2 The Metropolitan Life Separate Account Trust 3 1,438,533 (24,917) 1,413,616 9

Retirement Savings Master Trust Wrap Investments Contract Adjustment Issuer Rating: at Fair at Fair to Contract Contract S&P/Moody s Interest Value Value Value Value (unaudited) Rate ($000) ($000) ($000) ($000) New York Life Insurance Co. (5.5%) AA+/Aaa 2.676% 2 The New York Life Trust Company Vanguard Synthetic GIC Collective Investment Trust 4 962,029 (26,466) 935,563 Prudential (6.0%) AA-/A1 3.561% 2 VFTC Intermediate-Term Bond Trust 3 489,576 (24,081) 465,495 VFTC Short-Term Bond Trust 3 587,104 (28,879) 558,225 Prudential (6.7%) AA-/A1 3.044% 2 Prudential Core Conservative Intermediate Bond Fund 5 1,201,855 (58,244) 1,143,611 State Street Bank & Trust (14.0%) AA-/Aa3 2.525% 2 VFTC Intermediate-Term Bond Trust 3 1,137,983 (35,929) 1,102,054 VFTC Short-Term Bond Trust 3 1,324,101 (41,805) 1,282,296 Transamerica Premier Life (13.5%) AA-/A1 2.409% 2 VFTC Intermediate-Term Bond Trust 3 1,043,124 121 (33,227) 1,010,018 VFTC Short-Term Bond Trust 3 1,337,734 156 (42,611) 1,295,279 United of Omaha (8.2%) A+/A1 2.747% 2 VFTC Intermediate-Term Bond Trust 3 591,670 (21,179) 570,491 VFTC Short-Term Bond Trust 3 869,914 (31,139) 838,775 Total Synthetic Investment Contracts 16,653,942 277 (525,172) 16,129,047 Total Investment Contracts 17,103,892 277 (523,892) 16,580,277 Short-Term Investments (4.2%) Vanguard Prime Money Market Fund Investor Shares 6 0.01% 713,761 713,761 Total Investments (101.3%) 17,817,653 277 (523,892) 17,294,038 Other Assets and Liabilities Net ( 1.3%) (227,596) Net Assets (100%) 17,066,442 See Note A in Notes to Financial Statements. 1 The maturity date for an investment contract represents the date when either the entire contract matures or the final portion of the contract matures. 2 The interest rate will change quarterly (but will not fall below zero) based upon the performance of the underlying investment portfolio. The contract has no stated maturity date. The contract can be terminated by either party after providing 60 days notice. 3 The underlying investment portfolio is composed of corporate bonds, asset-backed/commercial mortgage-backed securities, U.S. Treasury securities, and government-agency securities and is managed by Vanguard Fixed Income Group. 4 The underlying investment portfolio is composed of corporate bonds, asset-backed/commercial mortgage-backed securities, U.S. Treasury securities, and government-agency securities and is managed by New York Life Investment Management LLC. 5 The underlying investment portfolio is composed of corporate bonds, asset-backed/commercial mortgage-backed securities, U.S. Treasury securities, and government-agency securities and is managed by Prudential Trust Company. 6 Rate shown is the 7-day yield. See accompanying Notes, which are an integral part of the Financial Statements. 10

Retirement Savings Master Trust Statement of Assets and Liabilities December 31, 2014 2013 ($000) ($000) Assets Investments at Fair Value 17,817,653 18,767,395 Wrap Contracts at Fair Value 277 312 Other Assets 116,007 553,456 Total Assets 17,933,937 19,321,163 Liabilities Liabilities 343,603 869,528 Net Assets Reflecting All Investments at Fair Value 17,590,334 18,451,635 Adjustment from Fair Value to Contract Value for Fully Benefit-Responsive Investment Contracts (523,892) (500,269) Net Assets 17,066,442 17,951,366 Applicable to 17,066,442,229 and 17,951,365,951 outstanding units of beneficial interest, respectively (unlimited authorization) Net Asset Value Per Unit (Net Assets Divided by Units Outstanding) $1.00 $1.00 Change in Adjustment from Fair Value to Contract Value for Fully Benefit-Responsive Investment Contracts Beginning of the Period (500,269) (992,494) Increase (Decrease) due to Changes in the Fully Benefit-Responsive Investment Contracts (23,623) 492,225 End of the Period (523,892) (500,269) See accompanying Notes, which are an integral part of the Financial Statements. 11

Retirement Savings Master Trust Statement of Operations and Changes in Net Assets Year Ended December 31, 2014 2013 ($000) ($000) Operations Income Interest 410,037 411,805 Dividends 59 130 Total Income 410,096 411,935 Expenses Wrap Fee 38,377 38,499 Investment Management Fee 1,845 1,978 Total Expenses Note C 40,222 40,477 Net Investment Income 369,874 371,458 Distributions to Unitholder Trusts Total Distributions (369,874) (371,458) Transactions with Unitholder Trusts (at $1.00 per unit) Contributions 8,996,404 9,465,729 Contributions from Reinvestment of Distributions 334,779 330,445 Withdrawals (10,216,107) (10,567,161) Net Increase (Decrease) in Net Assets (884,924) (770,987) Net Assets Beginning of Period 17,951,366 18,722,353 End of Period 17,066,442 17,951,366 12 See accompanying Notes, which are an integral part of the Financial Statements.

Retirement Savings Master Trust Financial Highlights For a Unit Outstanding Year Ended December 31, Throughout Each Period 2014 2013 2012 2011 2010 Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 Investment Activities Net Investment Income.021.020.027.032.032 Total from Investment Operations.021.020.027.032.032 Distributions Net Investment Income (.021) (.020) (.027) (.032) (.032) Total Distributions (.021) (.020) (.027) (.032) (.032) Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 Total Return 2.14% 2.05% 2.69% 3.26% 3.23% Ratios/Supplemental Data Net Assets, End of Period (Millions) $17,066 $17,951 $18,722 $18,887 $17,256 Ratio of Total Expenses to Average Net Assets Note C 0.23% 0.22% 0.20% 0.17% 0.09% Ratio of Net Investment Income to Average Net Assets 2.10% 2.01% 2.64% 3.19% 3.16% Average Yield Earned by Trust 1 2.30% 1.98% 2.22% 3.09% 3.36% Average Yield Earned by Trust Credited to Participants 2 1.89% 1.56% 1.82% 2.68% 3.01% 1 The average yield earned by the Trust (which may differ from the interest rate credited to participants in the Trust). This average yield is calculated by dividing the annualized earnings of all investments in the Trust on the last day of the fiscal year (irrespective of the interest rate credited to participants in the Trust) by the fair value of all investments in the Trust. This yield is a requirement under GAAP (see Notes to Financial Statements). 2 The average yield earned by the Trust with an adjustment to reflect the actual interest rate credited to participants in the Trust. This average yield is calculated by dividing the annualized earnings credited to participants on the last day of the fiscal year (irrespective of the actual earnings of the investments in the Trust) by the fair value of all investments in the Trust. This yield is a requirement under GAAP (see Notes to Financial Statements). See accompanying Notes, which are an integral part of the Financial Statements. 13

Retirement Savings Master Trust Notes to Financial Statements VRST Master Trust (the Trust ) is a collective investment trust established on July 1, 2001, under Section 404 of the Pennsylvania Banking Code. The Trust provides for the collective investment of assets of tax-exempt pension and profit-sharing plans, primarily in a pool of investment contracts that are issued by insurance companies and commercial banks and in contracts that are backed by bond trusts that are selected by the Trustee, Vanguard Fiduciary Trust Company. The issuers ability to meet these obligations may be affected by economic developments in their respective companies and industries. A. The following significant accounting policies confirm to generally accepted accounting principles (GAAP) for U.S. Investment Companies. The Trust consistently follows such accounting policies when preparing its financial statements. 1. Security Valuation: Investments held by the Trust are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets of the Trust attributable to fully benefit-responsive investment contracts, because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the underlying defined-contribution plans. The accompanying Schedule of Investments reflects both the fair value and the adjustment to contract value for each investment contract deemed fully benefit-responsive. The Statement of Assets and Liabilities presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement of Operations and Changes in Net Assets is prepared on a contract value basis. Traditional investment contracts issued by insurance companies and banks are nontransferable, but provide for benefit-responsive withdrawals by plan participants at contract value. For traditional investment contracts, fair value comprises the expected future cash flows for each contract discounted to present value. Contract value represents contributions made plus interest accrued at the contract rate, less withdrawals. The crediting rate on traditional contracts is typically fixed for the life of the investment. Synthetic investment contracts consist of investments together with contracts under which a bank or other institution provides for benefit-responsive withdrawals by plan participants at contract value. For synthetic investment contracts, the fair value comprises the aggregate market values of the underlying investments in bond trusts or mutual funds and the value of the wrap contracts, if any. The difference between valuation at contract value and fair value is reflected over time through the crediting rate formula provided for in the Trust s synthetic contracts. The crediting rate of the contract resets every quarter based on the performance of the underlying investment portfolio. To the extent that the Trust has unrealized gains and losses (that are accounted for, under contract value accounting, through the value of the synthetic contract), the interest crediting rate may differ from then-current market rates. An investor currently redeeming Trust units may forgo a benefit, or avoid a loss, related to a future crediting rate different from then-current market rates. 14

Retirement Savings Master Trust Investments in mutual funds and bond trusts are valued at the net asset value of each fund or trust determined as of the close of the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. 2. Federal Income Taxes: The Internal Revenue Service has determined that the Trust qualifies as a group trust arrangement that is exempt from federal income tax under Section 501(a) of the Internal Revenue Code. Accordingly, no provision for federal income taxes is required in the financial statements. 3. Income and Distributions: Dividend income represents income from a Vanguard money market fund that is an affiliate of the Trust; such income is accrued daily. Interest income is calculated and accrued daily using the daily deposit balance in the respective investment contract at the crediting rate of the contract. Distributions of net investment income to unitholders are declared daily and reinvested monthly. 4. Limitations on Contract Value Transactions: The existence of certain conditions can limit the Trust s ability to transact at contract value with issuers of its investment contracts. Specifically, any event outside the normal operation of the Trust that causes a withdrawal from an investment contract may result in a negative market value adjustment with respect to the withdrawal. Examples of such events include, but are not limited to, partial or complete legal termination of the Trust or a unitholder, tax disqualification of the Trust or unitholder, and certain Trust amendments if issuers consent is not obtained. As of December 31, 2014, the occurrence of an event outside the normal operation of the Trust that would cause a withdrawal from an investment contract is not considered to be probable. In general, issuers may terminate the contract and settle at other than contract value if there is a change in the qualification status of a participant, employer, or plan; a breach of material obligations under the contract and misrepresentation by the contract holder; or failure of the underlying portfolio to conform to the preestablished investment guidelines. B. Sensitivity Analysis: The following analysis is intended to provide the likely reaction of the Trust s crediting rate to various changes in current yield, both with static and a decrease in net assets. This analysis is required by GAAP and is for illustrative purposes only. It reflects the sensitivity to the rate reset process currently employed for the synthetic investment contracts in the Trust, which represent approximately 95% of the Trust s net assets. The crediting rate on the Trust and total returns actually achieved by investors in the future may vary significantly due to market, plan, and cash flow events. Average Interest Crediting Rate 1 2.39% Current Market Interest Rate 2 1.39% Duration 3 2.64 Market Value/Book Value Ratio 3 103.25% 15

Retirement Savings Master Trust No Change in Net Assets Change in Current Market Interest Rate 50% 25% 0% 25% 50% Market Interest Rate (YTM) 0.70% 1.04% 1.39% 1.74% 2.09% Estimated Initial Portfolio Crediting Rate Reset 2.63% 2.63% 2.63% 2.62% 2.61% Estimated Portfolio Crediting Rate at the End of Period March 31, 2015 2.44% 2.48% 2.51% 2.54% 2.56% June 30, 2015 2.28% 2.34% 2.40% 2.46% 2.51% September 30, 2015 2.13% 2.22% 2.31% 2.39% 2.47% December 31, 2015 1.99% 2.11% 2.22% 2.33% 2.44% 10% Decrease in Net Assets Change in Current Market Interest Rate 50% 25% 0% 25% 50% Market Interest Rate (YTM) 0.70% 1.04% 1.39% 1.74% 2.09% Estimated Initial Portfolio Crediting Rate Reset 2.84% 2.80% 2.76% 2.72% 2.67% Estimated Portfolio Crediting Rate at the End of Period March 31, 2015 2.63% 2.64% 2.63% 2.62% 2.61% June 30, 2015 2.45% 2.48% 2.51% 2.54% 2.56% September 30, 2015 2.28% 2.35% 2.41% 2.46% 2.52% December 31, 2015 2.13% 2.22% 2.31% 2.39% 2.48% 1 The average interest crediting rate is the blended contract yield of the Trust as of December 31, 2014. 2 Current market interest rate is the weighted average option-adjusted yield-to-maturity (YTM) of the investments underlying the Trust s synthetic contracts. 3 The duration and market value/book value ratios represent those characteristics of the Trust s synthetic contracts as of December 31, 2014. C. Units of the Trust are offered only to other eligible Vanguard Fiduciary Trust Company trusts (the Unitholder Trusts ) and to tax-qualified pension plans ( qualified plans ). The Trustee does not charge any fees to the Trust; instead, each Unitholder Trust and qualified plan is charged its own Trustee fee. Withdrawals may be initiated by the Unitholder Trusts or qualified plans for the primary purposes of funding an authorized distribution, withdrawal, or loan disbursement by a participating pension or profit-sharing plan to an employee or beneficiary covered thereunder, or for the purpose of the participating plan making an employee-directed transfer to another investment election of the employee s interest in the plan. A wrap fee is paid to all issuers of synthetic investment contracts. During the year ended December 31, 2014, the wrap fee represented an annual rate of 0.22% of the Trust s average net assets. Underlying investment portfolios not managed by Vanguard are subject to an investment management fee. During the year ended December 31, 2014, the investment management fee represented an annual rate of 0.01% of the Trust s average net assets. D. During the year ended December 31, 2014, the Trust made purchases of $1,988,507,000 and sales of $3,220,444,000 of investment securities other than temporary cash investments. Detailed information on security transactions can be obtained from the Trustee upon request. 16

Retirement Savings Master Trust E. Various inputs may be used to determine the value of the Trust 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 Trust s own assumptions used to determine the fair value of investments). The following table summarizes the Trust s investments as of December 31, 2014, based on the inputs used to value them: Level 1 Level 2 Level 3 Investments at Fair Value ($000) ($000) ($000) Traditional Investment Contracts 449,950 Synthetic Investment Contracts 16,653,942 Wrap Contracts 277 Short-Term Investments 713,761 Total 713,761 17,104,169 F. Management has determined that no material events or transactions occurred subsequent to December 31, 2014, that would require recognition or disclosure in these financial statements. 17

Report of Independent Auditors To the Board of Directors of Vanguard Fiduciary Trust Company We have audited the accompanying financial statements of Retirement Savings Master Trust (the Trust ), which comprise the statement of assets and liabilities as of December 31, 2014 and December 31, 2013, including the schedule of investments as of December 31, 2014, the related statement of operations and changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are hereafter collectively referred to as financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Trust s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Retirement Savings Master Trust at December 31, 2014 and December 31, 2013, including the schedule of investments as of December 31, 2014, the results of its operations and changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in accordance with accounting principles generally accepted in the United States of America. April 9, 2015 18

Glossary Average Duration. An estimate of how much a bond s price will fluctuate in response to a change in interest rates. To see how the price could shift, multiply the bond s duration by the change in rates. If interest rates rise by 1 percentage point, the price of a bond with a duration of five years would decline by about 5%. If rates decrease by a percentage point, the bond s price would rise by 5%. The Master Trust s average duration is reported for all bond and cash investments held by the Master Trust. The Master Trust s price will not change due to changing interest rates, because all bond investments are held within contracts. Average Quality. An indicator of credit risk, this figure is the average of the credit ratings assigned to the Master Trust s holdings by credit-rating agencies. Agencies assign credit ratings after appraising an issuer s ability to meet its obligations. Quality is graded on a scale, with Aaa indicating the most creditworthy issuers. Cash Investments. The percentage of the Master Trust s net assets invested in cash equivalents highly liquid, short-term, interest-bearing instruments. Distribution of Investments. An indicator of principal risk. In general, the higher the concentration in alternative contracts, the smaller the Master Trust s average exposure to any single investment s performance and the more likely the Master Trust as a whole will maintain a stable principal value. Gross Spot Yield. The weighted average contract yield as of the report date, gross of stable value management and contract fees. MV/BV Ratio. The ratio of the market value of the bonds and/or bond funds backing synthetic investment contracts relative to the book value of the contracts. Contracts provide for the payment of participant benefits at book value under normal circumstances. When this ratio is less than 100%, the occurrence of an event or condition that is outside the normal operation of the plan (for example, layoffs, plan amendments, sale of a division, or participant withdrawals due to a plan sponsor s insolvency or bankruptcy), if adequate notice has not been provided to Vanguard, could cause participant benefits to be paid at less than book value. Synthetic Investment Contracts. Individually negotiated investments, these contracts are supported by a portfolio of high-quality fixed income assets and mutual funds as well as the financial strength of the issuing financial institution. Returns earned on the contracts vary with the performance of the underlying fixed income assets and mutual funds. These assets back the contract and are owned by the trustee (for example, Vanguard Fiduciary Trust Company) on behalf of the Master Trust. These contracts are also called alternative investment contracts. Traditional Investment Contracts. Individually negotiated investments, the terms of which specify liquidity, yield, interest payments, and maturity (return of principal). These contracts are direct obligations of the issuing companies and are backed only by the financial strength of those companies. 19

Vanguard Retirement Savings Master Trust Vanguard Retirement Savings Master Trust is a collective investment fund for tax-qualified pension and profit-sharing plan assets; it is not a mutual fund. The Trust seeks to provide participants with an attractive rate of interest and safety of principal by investing in investment contracts issued by financial institutions and in contracts that are backed by high-quality bonds and bond mutual funds owned by the Trustee on behalf of the Trust. The principal and interest of these contracts are not guaranteed by the federal government or The Vanguard Group. It is Vanguard s expectation that each unit of the Trust will maintain a constant net asset value of $1. However, there is no assurance that this will be the case. The Trustee for the program is Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., organized and existing under the banking laws of the Commonwealth of Pennsylvania. Investment and administrative services are provided to the Trust by Vanguard Fixed Income Group. Directors of Vanguard Fiduciary Trust Company F. William McNabb III Chairman, President, and Chief Executive Officer Mortimer J. Buckley Senior Vice President Paul A. Heller Senior Vice President Martha G. King Senior Vice President Chris D. McIsaac Senior Vice President Michael S. Miller Senior Vice President Glenn W. Reed Senior Vice President Heidi Stam Senior Vice President and General Counsel

P.O. Box 2600 Valley Forge, PA 19482-2600 Connect with Vanguard > vanguard.com Participant Services > 800-523-1188 CFA is a registered trademark owned by CFA Institute. All comparative stable value fund data are from Hueler Analytics Stable Value Pooled Fund Universe, unless otherwise noted. 2015 The Vanguard Group, Inc. All rights reserved. Q340 042015

Vanguard Retirement Savings Trust As of December 31, 2014 This section includes a summary of the performance of Vanguard Retirement Savings Trust (VRST) as well as the Trust s financial statements. Contents Performance Summary 1 Statement of Net Assets 2 Statement of Operations and Changes in Net Assets 3 Financial Highlights 4 Notes to Financial Statements 5 Report of Independent Auditors 7 Performance Summary The performance information in the table and chart takes into account all expenses and fees. (Performance figures for the Master Trust, which are presented in the accompanying report, are gross of investment management fees and net of contract fees.) All of the data represent past performance, which cannot be used to predict future returns that may be achieved by the Trust. An investment in the Trust is neither insured nor guaranteed by the U.S. government nor by Vanguard, and there is no assurance that the Trust will be able to maintain a stable net asset value of $1 per unit. Fiscal-Year Total Returns (%): September 30, 2005 December 31, 2014 Stable Value Retirement Funds Savings Trust 1 Average 2 2005 4.00% 3.98% 2006 4.23 4.29 2007 3 4.52 4.55 December 2007 3 4.54 4.57 December 2008 4.28 4.22 December 2009 2.98 2.77 December 2010 2.92 2.78 December 2011 2.94 2.37 December 2012 2.37 1.93 December 2013 1.73 1.55 December 2014 1.82 1.39 Average Annualized Returns Final Value Periods Ended December 31, 2014 of a $10,000 One Year Five Years Ten Years Investment 4 Retirement Savings Trust 1 1.82% 2.36% 3.19% $13,688 Stable Value Funds Average 2 1.39 2.00 3.00 13,433 1 Net of investment management fees and fees paid to issuers of synthetic investment contracts. As of December 31, 2014, these fees were 0.31% and 0.22%, respectively. 2 Supplied by Hueler Analytics Stable Value Pooled Universe, net of fees paid to issuers of synthetic investment contracts and estimated investment management fees of 0.30% for the year ended December 31, 2014. 3 The 2005 2007 returns are reported on an annual basis ended September 30. Beginning in 2007 and going forward, the returns are reported on an annual basis ended December 31. 4 Growth from December 31, 2004, through December 31, 2014. 1

The Value of Investing for the Long Term: December 31, 2004 December 31, 2014 This chart presents the growth of a hypothetical $10,000 investment made in the Retirement Savings Trust ten years ago. $15,000 13,688 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 8,000 Financial Statements These statements should be read in conjunction with the financial statements of VRST Master Trust, which appear in the accompanying report. Statement of Net Assets As of December 31, 2014 This Statement shows the Trust s investment in the VRST Master Trust. Other assets are added to, and liabilities are subtracted from, the value of Total Investments to calculate the Trust s Net Assets. Fair Value Units ($000) Investments (100%) VRST Master Trust 4,554,045,642 4,554,046 Total Investments 4,554,046 Other Assets and Liabilities Other Assets 80,524 Liabilities (80,524) Net Assets (100%) Applicable to 4,554,045,642 outstanding units of beneficial interest (unlimited authorization) 4,554,046 Net Asset Value Per Unit $1.00 2 See Note A in Notes to Financial Statements. See accompanying Notes, which are an integral part of the Financial Statements.

Statement of Operations and Changes in Net Assets Year Ended December 31, 2014 2013 ($000) ($000) Operations Income Income Distributions Received from VRST Master Trust 113,943 153,628 Expense Trustee Fee Note C 16,013 22,382 Net Investment Income 97,930 131,246 Distributions to Trust Participants Net Investment Income (97,930) (131,246) Transactions with Trust Participants (at $1.00 per unit) Contributions 1,302,560 2,497,490 Contributions from Reinvestment of Distributions 97,930 131,246 Withdrawals (2,992,095) (5,020,947) Net Increase (Decrease) in Net Assets (1,591,605) (2,392,211) Net Assets Beginning of Period 6,145,651 8,537,862 End of Period 4,554,046 6,145,651 See accompanying Notes, which are an integral part of the Financial Statements. 3

Financial Highlights For a Unit Outstanding Year Ended December 31, Throughout Each Period 2014 2013 2012 2011 2010 Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 Investment Activities Net Investment Income.018.017.023.029.029 Total from Investment Operations.018.017.023.029.029 Distributions Net Investment Income (.018) (.017) (.023) (.029) (.029) Total Distributions (.018) (.017) (.023) (.029) (.029) Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 Total Return 1.82% 1.73% 2.37% 2.94% 2.92% Ratios/Supplemental Data Net Assets, End of Period (Millions) $4,554 $6,146 $8,538 $9,775 $9,992 Ratio of Total Expenses to Average Net Assets Note C 0.30% 0.30% 0.30% 0.29% 0.28% Ratio of Net Investment Income to Average Net Assets 1.81% 1.71% 2.34% 2.90% 2.88% 4 See accompanying Notes, which are an integral part of the Financial Statements.

Notes to Financial Statements Vanguard Retirement Savings Trust (the Trust ) is a collective investment trust established on January 1, 1989, under Section 404 of the Pennsylvania Banking Code. Vanguard Fiduciary Trust Company serves as Trustee to the Trust. The Trust provides for the collective investment of assets of tax-exempt pension and profit-sharing plans. The Trust invests solely in VRST Master Trust. The underlying investments of VRST Master Trust are primarily in a pool of investment contracts that are issued by insurance companies and commercial banks and in contracts that are backed by bond funds and trusts. The issuers ability to meet these obligations may be affected by economic developments in their respective companies and industries. A. Significant Accounting Policies 1. Security Valuation: The Trust s investment in VRST Master Trust is valued at the unit value of VRST Master Trust. 2. Federal Income Taxes: The Internal Revenue Service has determined that the Trust qualifies as a group trust arrangement that is exempt from federal income tax under Section 501(a) of the Internal Revenue Code. Accordingly, no provision for federal income taxes is required in the financial statements. 3. Distributions: Distributions of net investment income to unitholders are declared daily and reinvested on the first business day of the following month. 4. Income: Distributions received from the VRST Master Trust are accrued daily. B. Withdrawals may be made for the primary purposes of funding an authorized distribution, withdrawal, or loan disbursement by a participating pension or profit-sharing plan to an employee or beneficiary covered thereunder, or for the purpose of the participating plan making an employeedirected transfer to another investment election of the employee s interest in the plan. Certain plan-directed withdrawals may be subject to market value adjustments calculated in accordance with the provisions of the investment contracts. C. The Trust pays the Trustee a fee calculated at an annual percentage rate of the Trust s proportionate share of the total investments of VRST Master Trust. During the year ended December 31, 2014, the rate charged to the Trust was 0.30%. Assets subject to the Trustee fee are reduced by the Trust s proportionate share of VRST Master Trust s investments in Vanguard mutual funds. The fee is determined by the Trustee and may be adjusted periodically. Direct expenses of the Trust are paid by the Trustee in accordance with the Trust agreement. D. During the year ended December 31, 2014, the Trust made purchases of $1,400,490,000 and sales of $2,992,095,000 of units of VRST Master Trust. Detailed information on security transactions can be obtained from the Trustee on request. E. Various inputs may be used to determine the value of the Trust 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 Trust s own assumptions used to determine the fair value of investments). 5

At December 31, 2014, the Trust s sole investment was in VRST Master Trust, which was valued based on Level 2 inputs. F. Management has determined that no material events or transactions occurred subsequent to December 31, 2014, that would require recognition or disclosure in these financial statements. 6

Report of Independent Auditors To the Board of Directors of Vanguard Fiduciary Trust Company We have audited the accompanying financial statements of Vanguard Retirement Savings Trust (the Trust ), which comprise the statement of net assets as of December 31, 2014, the related statement of operations and changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are hereafter collectively referred to as financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Trust s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vanguard Retirement Savings Trust at December 31, 2014, the results of its operations and changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in accordance with accounting principles generally accepted in the United States of America. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania April 9, 2015 7

2015 The Vanguard Group, Inc. All rights reserved. F340 042015