Parametric International Equity Fund (Investor)¹ Share
Class

Investor

• Institutional
• Investor

A Word On The Markets  as of Mar 31, 2013

Developed equity markets, as measured by the MSCI EAFE Index (the Index)³, rallied in the first quarter of 2013, rising 5.13%. The majority of the gains occurred in January, when the Index rose 5.30%, followed by a slight dip in February and modest gains in March. Equities maintained last year’s upward climb, as central banks in Europe and the Pacific continued to provide supportive liquidity conditions, helping both regions to post gains for the period.

All but four of the 22 countries in the Index posted gains for the quarter. Greece was the top-performing Index country, while Ireland and Japan were also strong performers. Italy was the worst performer, followed by Spain and Austria.

Sector returns were mostly positive, with defensive sectors generally outperforming cyclical sectors. Top-performing economic sectors included health care and consumer staples. The worst-performing sectors were materials and energy.

Performance Summary 

Parametric International Equity Fund (the Fund) outperformed its benchmark, the MSCI EAFE Index (the Index), for the quarter ended March 31, 2013, returning 5.21% for Investor Shares at net asset value versus the Index’s 5.13% return.

Contributors 

Factors contributing to the Fund’s relative performance compared to the Index during the quarter:

• The Fund’s underweight to the United Kingdom, which underperformed the Index, contributed to relative performance.
• The Fund’s underweight to the financials sector, which underperformed the Index, also contributed to relative performance.
• The Fund’s overweight to mid-cap stocks, which outperformed the Index, further boosted relative performance.

Detractors 

Factors detracting from the Fund’s relative performance compared to the Index during the quarter:

• The Fund’s underweight to Japan, which outperformed the Index, detracted from relative performance.
• The Fund’s overweight to Italy, which underperformed the Index, also detracted from relative performance.
• The Fund’s overweight to the telecommunication services sector, which underperformed the Index, was another drag on relative performance.

Investment Outlook And Fund Positioning 

Many commentators have continued to express concerns over lackluster growth prospects in developed equity markets, contrasting sharply with the steady rally in stock prices since mid-2012. Bulls maintain that analysts have been unduly pessimistic, while bears fear the markets have gotten ahead of themselves in the absence of markedly improved fundamentals. Although the near-term path remains unclear, we believe the equity markets are likely to experience growth over the long term.

How does one invest in this space with so much noise and uncertainty? We believe managing risk through broad market exposure to developed countries (ex-U.S.), avoiding concentrations, treating recent volatility as an asset and rebalancing are all key aspects that help inform thoughtful investment decisions. The Fund’s objective is to seek long-term capital appreciation by employing a top-down, disciplined and structured investment process that emphasizes broad exposure and diversification across developed markets outside the United States, as well as across economic sectors and issuers.

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. Diversification cannot assure a profit or eliminate the risk of loss.

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.

No attribution information is available.

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.