Large-Cap Growth Fund (R)

A Word On The Markets  as of Mar 31, 2012

Investor confidence snapped back in the first quarter of 2012 as equity markets staged a powerful rally. After the extreme volatility of 2011, U.S. and global stocks began climbing in early January and continued their rapid ascent nearly uninterrupted before cooling slightly in late March. Several key market indices reached post-financial crisis highs during the quarter.

Among upbeat economic indicators, falling unemployment in the U.S. helped drive stocks higher, and even the long-depressed housing market showed signs of improvement. The Federal Reserve's renewed commitment to keeping interest rates low for the foreseeable future provided an additional tailwind. Concerns about political gridlock in Washington and the upcoming elections appeared to have little negative impact on the world markets for the time being. Encouraging steps toward resolving Europe's debt crisis boosted international markets and helped sustain U.S. stock gains. Cautionary influences on world markets included ongoing worries about China's slowing economy and elevated oil prices fueled by geopolitical tensions in the Middle East.

The breadth of the market rally across geographies and market segments was reflected in the returns delivered by the major U.S. and overseas indexes. The MSCI EAFE Index¹⁰ rose 10.86% during the quarter, while the MSCI Emerging Markets Index¹¹ gained 14.08%. In the U.S., the S&P 500 Index¹² surged 12.59%, while the Dow Jones Industrial Average¹³ advanced 8.84%. Large-cap stocks narrowly outperformed their small-cap counterparts, with the Russell 1000 Index¹⁴ jumping 12.90% versus 12.44% for the Russell 2000 Index¹⁵. Across market capitalizations, growth stocks outperformed value stocks.

Performance Summary 

Eaton Vance Large-Cap Growth Fund's A shares outperformed its benchmark, the Russell 1000 Growth Index, for the quarter ended March 31, 2012, returning 14.94% at net asset value versus the benchmark's 14.69% return.

• In general, growth stocks outperformed their value counterparts during the quarter. Within the growth space, the market's preference for larger-capitalization and higher-quality names generally provided a tailwind for the Fund's performance relative to the benchmark.
• The Fund's relative performance was primarily due to favorable sector allocations. Stock selection decisions, while a detractor overall, helped relative results in several individual sectors.
• The best-performing benchmark sectors were information technology, consumer discretionary and financials, while the weakest were utilities, energy and telecommunication services. Nine of the 10 benchmark sectors delivered positive performance for the quarter, while the Fund posted positive returns in all eight sectors in which it was invested.

Contributors 

The Fund outperformed the benchmark in several sectors during the quarter. Effective stock selection in financials and consumer discretionary bolstered relative performance compared to the benchmark, aided by an underweight position in the lagging energy sector.

• Stock selection was particularly strong in financials, led by an out-of-benchmark position in JPMorgan Chase. Overweight positions in Wells Fargo and American Express also helped lift relative results within the sector.
• Within consumer discretionary, an overweight position in specialty mattress manufacturer Tempur-Pedic International, which rose sharply during the quarter, was a key driver of relative outperformance. Lack of exposure to McDonald's, a large benchmark position, also proved beneficial.
• Among other leading individual contributors, a sizable underweight position in Exxon Mobil had a positive impact on the Fund's relative return, as did overweight positions in EMC and semiconductor firm Broadcom.

Detractors 

Of the sectors in which the Fund underperformed the benchmark, stock selection in industrials and information technology was significant headwinds to Fund performance.

• In industrials, an out-of-benchmark holding in railroad giant Norfolk Southern and an overweight position in aerospace leader Boeing, both of which underperformed the overall sector by a wide margin, held back performance relative to the benchmark.
• In information technology, overweight positions in Google, Cypress Semiconductor and speech recognition company Nuance hurt relative returns, as all three stocks lagged the broader sector. Underweight positions in Apple and Microsoft, both of which performed strongly, also detracted.
• Also detracting from relative performance was an investment in U.K. based pharmaceutical maker, Shire PLC, an out-of-benchmark holding.

Investment Outlook And Fund Positioning 

Better employment and other data have raised hopes that U.S. economic growth may continue to accelerate in the period ahead, potentially giving investor sentiment an added boost. However, investors should not be surprised if the market pulls back later in 2012, particularly following the strong run-up we have just experienced in Q4. Much will depend on the pace of the U.S. recovery, the extent of China's economic slowdown, the global impact of high energy prices, political developments, and whether further progress is made in Europe.

We continue to emphasize U.S.-centric, large-capitalization companies with above-average growth prospects and financial strength, which we believe may offer attractive valuation and growth opportunities in an improved but still uncertain global economic environment.

At quarter-end, relative to the benchmark the Fund's largest sector overweight was in information technology, while its largest underweight was in energy.

The views expressed in this report are those of portfolio manager(s) and are current only through the date stated at the top of this page. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. This commentary may contain statements that are not historical facts, referred to as "forward looking statements". The Fund's actual future results may differ significantly from those stated in any forward-looking statement, depending on factors such as changes in securities or financial markets or general economic conditions, the volume of sales and purchases of Fund shares, the continuation of investment advisory, administrative and service contracts, and other risks discussed from time to time in the Fund's filings with the Securities and Exchange Commission.

Fund invests in an affiliated investment company (Portfolio) with the same objective(s) and policies as the Fund. References to investments are to the Portfolio's holdings. Portfolio profile subject to change due to active management. Percentages may not total 100% due to rounding.

About Risk 

Fund share values are sensitive to stock market volatility. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions. No Fund is a complete investment program and you may lose money investing in a Fund. The Fund may engage in other investment practices that may involve additional risks and you should review the Fund prospectus for a complete description.

Additional Notes 

Source: Factset.

Attribution analysis shows the contribution of indicated factor exposures to a portfolio's relative total return versus a designated benchmark. Results are based on each day's ending holdings, and linked to generate attribution over longer periods. Portfolio returns do not reflect applicable expenses and trading costs, or variations in transaction prices from end of day values.

Allocation Effect 

Measures portfolio's excess return due to over or under-weighting a sector.

Selection Effect 

Measures portfolio's excess return from selecting individual stocks within each sector.

Fund invests in an affiliated investment company (Portfolio) with the same objective(s) and policies as the Fund. References to investments are to the Portfolio's holdings. Portfolio profile subject to change due to active management. Percentages may not total 100% due to rounding.

About Risk 

Fund share values are sensitive to stock market volatility. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions. No Fund is a complete investment program and you may lose money investing in a Fund. The Fund may engage in other investment practices that may involve additional risks and you should review the Fund prospectus for a complete description.