Richard Bernstein Equity Strategy Fund (I)¹

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 Index⁹ rose 10.86% during the quarter, while the MSCI Emerging Markets Index¹⁰ gained 14.08%. In the U.S., the S&P 500 Index¹¹ surged 12.59%, while the Dow Jones Industrial Average¹² advanced 8.84%. Large-cap stocks narrowly outperformed their small-cap counterparts, with the Russell 1000 Index¹³ jumping 12.90% versus 12.44% for the Russell 2000 Index¹⁴. Across market capitalizations, growth stocks outperformed value stocks.

Performance Summary 

In the quarter ended March 31, 2012 Eaton Vance Richard Bernstein Equity Strategy Fund A share (the "Fund") underperformed the MSCI All Country World Index³ (the "benchmark"). The Fund returned 8.27% at net asset value, whereas the benchmark returned 11.88%.

• The Fund's defensive posture at the beginning of the quarter negatively influenced its relative performance compared to the benchmark, both geographically and within sectors.
• The quarter began with the "risk-on" trade in full effect, as emerging markets and cyclical sectors led global equity markets higher. As the "risk-on" trade began to fade somewhat in mid-February, the Fund's relative performance improved.

Contributors 

In terms of GICS sectors, the Fund's underweight position in energy positively contributed to performance.

• The Fund continued to overweight small-cap stocks during the quarter, which outperformed their large-cap counterparts and thereby bolstered performance.

Detractors 

Fund performance relative to the benchmark was negatively impacted by its overweight to the U.S. market and its underweights to Europe and emerging markets.

• In terms of GICS sectors, the Fund's underweight position in financials and technology and its overweight in utilities detracted from relative performance.
• The Fund's modest allocation to cash during the quarter detracted from Fund performance due to a rise in global equity markets over the period.

Investment Outlook And Fund Positioning 

The S&P 500 Index recorded its strongest first-quarter gain since 1998, while the European sovereign debt crisis seemed to move in a positive direction. For the remainder of 2012, we continue to believe that the biggest risks may lie in the emerging markets because these markets were the primary beneficiaries of the global credit bubble.

Although the U.S. corporate sector remains the world's strongest corporate sector, we believe the increased number of negative earnings surprises have made it increasingly clear that the current profit cycle may be slowing. As of quarter-end, U.S.-based equities continued to be the Fund's largest country allocation, with an underweight to emerging markets. The Fund remained defensively positioned, with health care, consumer staples and utilities as its largest sector weightings.

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.

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. In emerging countries, these risks may be more significant. Smaller companies are generally subject to greater price fluctuations, limited liquidity, higher transaction costs and higher investment risk than larger, established companies. Derivatives instruments can be used to take both long and short positions, be highly volatile, result in economic leverage (which can magnify losses), and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk. If a counterparty is unable to honor its commitments, the value of Fund shares may decline and/or the Fund could experience delays in the return of collateral or other assets held by the counterparty. 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.

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. In emerging countries, these risks may be more significant. Smaller companies are generally subject to greater price fluctuations, limited liquidity, higher transaction costs and higher investment risk than larger, established companies. Derivatives instruments can be used to take both long and short positions, be highly volatile, result in economic leverage (which can magnify losses), and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk. If a counterparty is unable to honor its commitments, the value of Fund shares may decline and/or the Fund could experience delays in the return of collateral or other assets held by the counterparty. 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.