1 Q INVESTMENT COMMENTARY Calvert Emerging Markets Equity Fund A:CVMAX C:CVMCX I:CVMIX R:CVMRX The Fund normally invests at least 80% of its assets in equity securities of companies located in emerging market countries, seeking those whose products/services or industrial/business practices contribute towards addressing sustainability challenges in their local and/or international markets. Key Takeaways Emerging market equities fell sharply in the second quarter to underperform developed equity markets. The strength of the U.S. dollar (USD), tightening global liquidity and escalating trade tensions between the U.S. and China were significant headwinds. The Fund underperformed its benchmark, MSCI Emerging Markets Index, which fell 7.86%. Stock selection had a negative impact during the period, particularly the Fund s holdings in Taiwan, South Africa and India. Currency weakness associated with the Fund s overweight to China also hurt. Brazil was the weakest market as higher oil prices led truckers to strike, bringing large parts of the economy to a standstill amid ongoing political uncertainty. MORNINGSTAR RATING 1 HHHHH The fund received the ratings in the Diversified Emerging Markets category for Class A shares, based on risk adjusted returns. Rating Time Period # of Funds HHHH 3 Years 688 HHHHH 5 Years 489 HHHHH Overall 688 CALVERT S APPROACH TO RESPONSIBLE INVESTING WHO WE ARE Calvert Research and Management is a recognized leader in Responsible Investing. Our mission is to deliver superior long term performance to our clients and to enable them to achieve positive impact. WHAT WE OFFER Serving financial advisors and their clients, as well as a wide array of institutional investors, Calvert s investment strategies feature integrated environmental, social, and governance (ESG) research and corporate engagement. HOW WE STAND APART At Calvert Research and Management, our integrated responsible investment approach sets us apart from many other investment managers. YOUR MANAGEMENT TEAM MARKET OVERVIEW Emerging market equities fell 7.96% in USD terms in the second quarter, as measured by the MSCI Emerging Markets Index, underperforming the MSCI All Country World Index, which returned 0.53%. The strength of the USD, tightening global liquidity and escalating trade tensions between the U.S. and China were significant headwinds. President Trump threatened new tariffs on $200 billion in Chinese imports as the two nations moved closer to a potential trade war. These escalating tensions contributed to weakness across a number of Asian emerging markets. Korea and Thailand fell sharply MARKET S Quarter ended 06/30/2018 HERMES INVESTMENT MANAGEMENT (SUB ADVISOR) Gary Greenberg, CFA Head of Global Emerging Markets, Hermes Investment Management Joined Hermes Investment Management 2010 Managed Fund since inception Elena Tedesco, CFA Co Portfolio Manager, Hermes Investment Management Joined Hermes Investment Management 2002 Managed Fund since inception MAJOR GLOBAL EQUITY INDICES VALUE CORE GROWTH S&P % 3.43% 5.25% Russell % 3.57% 5.76% Russell % 7.75% 7.23% MSCI EAFE 2.64% 1.24% 0.11% MSCI Emerging Markets 8.94% 7.96% 7.01% Source: S&P, Russell, MSCI
2 Q Calvert Emerging Markets Equity Fund Investment Commentary 2 and underperformed while China posted a negative return but outperformed. Brazil was the weakest market amid ongoing political uncertainty and deteriorating outlook as long U.S. bond yields rose and USD strength led to an unwind of the carry trade. Higher oil prices added fuel to the fire and led truckers to strike, bringing large parts of the economy to a standstill. Those markets vulnerable to ongoing, tightening global liquidity also came under pressure, notably Turkey where currency weakness led the central bank to implement an emergency rate hike in May. Early presidential elections also added to the negative sentiment. All sectors ended the quarter in negative territory. Financials fell the most, dropping 12.55% while energy outperformed the market, falling 4.60%. PERFORMANCE REVIEW For the second quarter of 2018, Calvert Emerging Markets Equity Fund (the Fund) underperformed MSCI Emerging Markets Index (the Index), which returned 7.96% in USD terms. Stock selection had a negative impact during the period, particularly the Fund s holdings in Taiwan, South Africa and India. Currency weakness associated with the overweight China also hurt. The Fund s active country weights included an overweight to China, India, and the United Arab Emirates and underweights to South Korea, Malaysia and Thailand. Major changes during the period included an increased overweight to China and an underweight South Africa resulting from the switch out of Naspers into Tencent. We also moved the Fund from overweight to underweight positions in Taiwan and Brazil; and reduced exposure to Turkey as the Fund s position in Arcelik was reduced. At the sector level, the Fund remained overweight in financials (increased), consumer discretionary (reduced) and information technology. The Fund was underweight in energy, materials and telecommunication services. We used market weakness to add to a number of names in the Fund, including Tencent, TSMC, Alibaba, Samsonite, Sberbank and Mail.ru. We trimmed the Fund s position in ICBC to add to China Construction Bank. We are selling the Fund s holding of Arcelik, a Turkish white goods manufacturer, due to increasing foreign exchange headwinds and USD related cost imbalances. We trimmed positions in Itau Unibanco and BB Segruidades, the Brazilian bank and insurer, given the deteriorating company outlook and macroeconomic headwinds. CONTRIBUTORS AIA, a Hong Kong listed insurer, was the largest performance contributor. AIA has outperformed year to date due to strong growth across all regions, most notably in China. Turnarounds in Singapore and Thailand produced strong results, as did AIA s resilient business line in Hong Kong. HDFC, one of India s leading private banks, moved higher given strong loan growth. The bank continued to capitalize on its customer base and distribution strengths, gaining market share. Non exposure to Banco Bradesco aided returns as Brazilian banks underperformed due to their sensitivity to deteriorating macroeconomic conditions. DETRACTORS The Foschini Group, a leading South African retailer, was the largest performance detractor. Its share price fell, reflecting investor concerns over the sustainability of growth amid the challenging consumer environment, and an overreaction (we believe) to slightly weaker fiscal year 2018 results. Itau Unibanco, a Brazilian bank, fell in line with the market sell off due to the weakening real. In addition, a truck driver strike paralyzed the economy and amplified political uncertainty. Duratex, a Brazilian manufacturer of construction materials, moved lower on poor results in its sanitary metal fittings and vitreous china business due to weaker domestic growth, a slow recovery of civil construction and weakening credit availability in Brazil.
3 Q Calvert Emerging Markets Equity Fund Investment Commentary 3 PORTFOLIO CHARACTERISTICS as of 06/30/2018 Weighted Average Market Cap 122.5B 95.4B Number of Holdings Price/Earnings (LTM) 14.8x 13.1x Price/Earnings (NTM) 12.1x 11.8x Price/Book 2.2x 1.6x ROA 9.0% 9.0% LT Debt/Capital 19.0% 20.8% GICS SECTORS VS. 2 SECTOR MSCI EMERGING MARKETS INDEX DIFFERENCE Consumer Discretionary 16.86% 9.78% 7.08% Consumer Staples 4.63% 6.67% -2.04% Energy 1.06% 7.16% -6.10% Financials 30.95% 22.80% 8.15% Health Care 3.34% 3.20% 0.14% Industrials 4.76% 5.18% -0.42% Information Technology 33.98% 27.88% 6.10% Materials 1.91% 7.62% -5.71% Real Estate 3.00% -3.00% Telecom Services 0.57% 4.27% -3.70% Utilities 1.04% 2.43% -1.39% Cash 0.89% 0.89% TOP 10 HOLDINGS (%) 2 Tencent Holdings Ltd 8.31 Taiwan Semiconductor Manufacturing Co Ltd 5.81 Samsung Electronics Co Ltd 5.41 Alibaba Group Holding Ltd 5.17 Techtronic Industries Co Ltd 3.67 China Construction Bank Corp 3.25 AIA Group Ltd 3.17 Industrial & Commercial Bank of China Ltd 3.17 KB Financial Group Inc 3.12 Samsonite International SA 2.47 REGIONS 2 MSCI EMERGING MARKETS INDEX DIFFERENCE Asia/Pacific 75.37% 74.87% 0.50% Latin America/Caribbean 10.99% 10.76% 0.23% Europe 5.97% 6.52% -0.55% Africa 3.45% 6.19% -2.74% Middle East 3.33% 1.66% 1.67% Cash & Other Assets 0.89% 0.89%
4 Q Calvert Emerging Markets Equity Fund Investment Commentary 4 QUARTERLY ATTRIBUTION (%) ENDING 06/30/2018 COUNTRY AVG. WEIGHT TOTAL CONTRIB. TO AVG. WEIGHT TOTAL CONTRIB. TO ATTRIBUTION ALLOCATION EFFFECT ATTRIBUTION SELECTION EFFECT Mexico United Arab Emirates Thailand Peru Malaysia Poland Chile Philippines Egypt Pakistan United Kingdom Czech Republic Greece Turkey Hungary Korea Colombia Qatar Indonesia China Russia India Brazil South Africa Taiwan Calvert Programs Cash Total ATTRIBUTION TOTAL EFFECT MARKET OUTLOOK Our outlook for emerging markets, based on our views of market fundamentals and the likely outcomes of political disputes, is positive overall. At the time of this writing, emerging market equities have returned to their long term (10 year and 20 year) price to earnings average, and their long term (10 year) average estimated price to book ratio. In contrast, profitability is relatively healthy, with an estimated return on equity of 13.6%, nearly a standard deviation above the long term (10 year) mean. We take this situation to imply the market is worried that corporate profits will be impacted by trade or warfare. These events are hard to predict with accuracy, but it is clear that underlying economic fundamentals are strong in both developed and emerging markets at present, and the corporate earnings outlook is good. It is useful to note that earnings estimates for this year have dropped about 6% from peak levels in March, reflecting an 11% growth rate. On a year to date basis, China and Eastern Europe are still seeing positive revisions, particularly Russia (due in part
5 Q Calvert Emerging Markets Equity Fund Investment Commentary 5 to surging oil prices), while Latin America has seen the largest negative revisions, due to weak currencies. In our view, political tensions in Brazil and Mexico are now largely discounted by the markets. While it is no doubt possible that global trade and military tensions may escalate, we believe that the disputes will eventually be resolved, resulting in a calming of nerves. In any event, in examining the Fund s portfolio, we find little direct exposure to these disputes. Our outlook, based on our view of market fundamentals and assessment of the sociopolitical environment, is quite positive for the types of companies we invest in for the Fund over our typical time horizon of three to five years. We are following Warren Buffet s advice of buying when others are fearful. % AVERAGE ANNUAL S (AS OF 06/30/2018) Q2 YTD 1 YEAR 3 YEARS 5 YEARS LIFE OF A Shares at NAV I Shares at NAV A Shares with Max. 4.75% Sales Charge Benchmark Benchmark: MSCI Emerging Markets Index Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance is for the stated time period only; due to market volatility, the Fund s current performance may be lower or higher than quoted. For the Fund s performance as of the most recent month end, please refer to eatonvance.com. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) with all distributions reinvested. Returns for other classes of shares offered by the Fund are different. Performance less than or equal to one year is cumulative. The minimum investment is $1,000 for A Shares and $250,000 for I Shares. Minimums may be waived in certain situations. Please see the prospectus for additional information. FACTS A & I Shares Inception 10/29/2012 Class A Expense Ratio 3 Gross: 1.79% Net: 1.27% Class I Expense Ratio 3 Gross: 1.31% Net: 0.92%
6 Q Calvert Emerging Markets Equity Fund Investment Commentary 6 Effective December 31, 2016, Eaton Vance Distributors, Inc. replaced Calvert Investment Distributors, Inc. as the Fund s principal underwriter following the acquisition by Calvert Research and Management ( CRM ) of substantially all the business assets of Calvert Investment Management, Inc. ( CIM ). CRM has also replaced CIM as the investment adviser to the Fund. See the Fund s updated prospectus dated January 3, Portfolio characteristics exclude 3 securities in Calvert s High Impact Investments program, which represented 0.189% of the portfolio as of 06/30/2018. High Social Impact Investments are investments that, in the Adviser s opinion, offer the opportunity for significant sustainability and social impact. These investments are generally illiquid and involve high risks. See the Fund s prospectus for details and calvert.com for a complete list of Fund holdings. 1 The Morningstar Rating for funds, or star rating, is calculated for managed products (including mutual funds and exchange traded funds) with at least a three year history. Exchange traded funds and open ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk Adjusted Return measure that accounts for variation in a managed product s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three, five, and 10 year (if applicable) Morningstar Rating metrics. The weights are: 100% three year rating for months of total returns, 60% five year rating/40% three year rating for months of total returns, and 50% 10 year rating/30% five year rating/20% three year rating for 120 or more months of total returns. While the 10 year overall star rating formula seems to give the most weight to the 10 year period, the most recent three year period actually has the greatest impact because it is included in all three rating periods. Star ratings do not reflect the effect of any applicable sales load Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. 2 Percent of total net assets. Top 10 Holdings excludes cash and equivalents. Portfolio profile subject to change due to active management. Percentages may not total 100% due to rounding. 3 Source: Fund prospectus. Net expense ratio reflects a contractual expense reimbursement that continues through 1/31/19. Without the reimbursement, if applicable, performance would have been lower. 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. Index Definitions: MSCI Emerging Markets Index is an unmanaged index of emerging markets common stocks. MSCI All Country World Index is an unmanaged free float adjusted market capitalization weighted index designed to measure the equity market performance of developed and emerging markets. S&P 500 Index is an unmanaged index of large cap stocks commonly used as a measure of U.S. stock market performance. Russell 1000 Value Index is an unmanaged index of U.S. large cap value stocks. Russell 1000 Index is an unmanaged index of 1,000 U.S. large cap stocks. Russell 1000 Growth Index is an unmanaged index of U.S. large cap growth stocks. Russell 2000 Value Index is an unmanaged index of U.S. small cap value stocks. Russell 2000 Index is an unmanaged index of 2,000 U.S. small cap stocks. Russell 2000 Growth Index is an unmanaged index of U.S. small cap growth stocks. MSCI EAFE Index is an unmanaged index of equities in the developed markets, excluding the U.S. and Canada. MSCI indexes are net of foreign withholding taxes. Source: MSCI. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder. Unless otherwise stated, index returns do not reflect the effect of any applicable sales charges, commissions, expenses, taxes or leverage, as applicable. It is not possible to invest directly in an index. Historical performance of the index illustrates market trends and does not represent the past or future performance of the fund. About Risk: The value of investments held by the Fund may increase or decrease in response to economic, and financial events (whether real, expected or perceived) in the U.S. and global markets. The value of equity securities is 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, currency exchange rates or other conditions. In emerging countries, these risks may be more significant. Investing primarily in responsible investments carries the risk that, under certain market conditions, the Fund may underperform funds that do not utilize a responsible investment strategy. 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. Calvert funds are available at NAV for RIAs and Wrap Programs. Not all share classes are available to all investors. See a fund s prospectus for details. For more information on any Calvert fund, please contact your financial advisor or visit calvert.com for a free summary prospectus and/or prospectus. An investor should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing. The summary prospectus and prospectus contain this and other information. Read them carefully before you invest or send money Eaton Vance Distributors, Inc. Member FINRA/SIPC Two International Place, Boston, MA eatonvance.com