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4550 Montgomery Ave, Suite 1000N, Bethesda, MD 20814 301.951.4800 | www.Calvert.com Portfolio Commentary: Q4 2014 Calvert Equity Portfolio Richard B. England, CFA; Managing Director (Equities) and Principal, Atlanta Capital Management Company, LLC Paul J. Marshall, CFA; Vice President, Principal and Portfolio Manager, Atlanta Capital Management Company, LLC Performance • In the fourth quarter of 2014, Calvert Equity Portfolio (Class A shares at NAV) outperformed its Standard & Poor’s (S&P) 500 Index benchmark. • Sector weighting aided relative performance. • The Portfolio’s underweight in the poorly performing energy sector helped during the period. Historical Fund Performance Average Annual Total Returns as of 12/31/14. Inception Date 8/24/87. CALVERT EQUITY PORTFOLIO QTR A Shares at NAV 5.92% A Shares at Max load of 4.75% 0.89% S & P 500 Index 4.93% Source: Calvert Investments, Inc. * Since Inception YTD 11.04% 5.78% 13.69% 1YR 11.04% 5.78% 13.69% 3YRS 18.71% 16.80% 20.41% 5YRS 13.90% 12.80% 15.45% 10YRS 7.60% 7.08% 7.67% SI* 8.26% 8.07% N/A% Expense ratio: 1.23%. Performance data quoted already reflects deduction of fund operating expenses. The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Indexes reflect no deductions for fees or expenses. An investor cannot invest directly in an index. Visit www.calvert.com to obtain performance data current to the most recent month-‐end. Returns for periods of less than one year are not annualized. Market Review In sharp contrast to the third quarter, the stock market spent nearly all of the fourth quarter logging broad moves up or down. The directionally higher movements once again won out as we closed out the year just off of a record high. There continues to be, however, a meaningful May Lose Value. Not FDIC Insured. Not a Deposit. Not NCUA/NCUSIF Insured. No Credit Union Guarantee. Calvert Equity Portfolio | Q4 2014 2 reluctance to bull market enthusiasm. The fourth quarter certainly started out on a sour note. A sell-‐off that began in mid-‐September picked up steam as October opened and by its nadir in mid-‐October had very nearly reached the official definition of a correction – a 10% downdraft in prices. The downdraft in stock prices reversed course in mid-‐October and bounded higher even more steeply than the slide that preceded it. Solid third quarter earnings certainly played a role in the sharp sentiment reversal. Near the top of the list of what spooked markets in October was Russian adventurism in Ukraine. The presence of Russian troops and heavy weapons in southeast Ukraine fueled fears that the situation would get out of hand. Worries increased that Russia’s brazenness would necessitate ever-‐escalating sanctions that would end up undermining the already weak European recovery. While Russia was probably the most meaningful reason for market jitters, two others gathered more media attention and seemed to push markets lower in the short run: Ebola and ISIS. The United States seemed caught flat-‐footed on the emergence of ISIS onto the scene, and health authorities struggled to stay out in front of the Ebola crisis. Traders responded by turning inward and selling everything tied to global travel. There were a few more factors that contributed to the pessimistic sentiment but one in particular might seem counterintuitive: falling oil prices. While sliding gasoline prices and cheaper heating oil are a clear positive for consumers, the more oil slid the more worries rose about the impact from the expected decline in U.S. production. Most economists view the net impact on the U.S. economy as a positive, but the lower oil goes the harder that benefit is to quantify. Though the list of factors pushing the market lower was long, the list of what prompted the reversal and bounce to new highs by Thanksgiving was pretty short. It didn’t hurt that the United States and its partners scored some early successes against ISIS and the containment of Ebola, but what mattered most was earnings. Given all the things spooking the markets in September and early October, market participants had set low expectations for third quarter earnings. Given all the noted concerns as well as the strong dollar, there was an expectation that results might be soft and guidance and outlooks tempered. On balance, the foreign exchange headwinds were noted, but both third quarter results and outlook commentary were comforting and stocks responded favorably. Portfolio Review Sector allocation helped relative outperformance during the fourth quarter. In a market of broad moves up and down, sector allocation helped relative outperformance. The energy sector added to relative performance during the period. Though energy equities faced a decline, the Portfolio’s underweight position relative to the benchmark proved beneficial. It has been difficult to find energy stocks that both pass Calvert’s investment criteria and have attractive growth/valuation characteristics. In the first half of the year, that difficulty led to relative underperformance when energy did well, but in the second half of the year it has led to outperformance as energy has weakened. Sector allocation also boosted returns in the consumer sectors. Calvert Equity Portfolio | Q4 2014 3 Stock selection was positive this quarter though not broadly so. Positive stock selection in the consumer discretionary sector was paced by the Portfolio’s retail holdings. In particular, the retail holdings Lowes, Ross Stores, and Nordstrom performed strongly in the quarter and added to returns. Retail holdings in the consumer staples sector drove beneficial stock selection as well. CVS continued to perform well and Costco caught a bid too after reporting better than expected results. Whole Foods jumped over 30% on greater confidence in their execution. The more traditional staples stocks, such as packaged food and consumer products, posted much more pedestrian returns, at least partially a function of greater exposure to a rising dollar. Financials also benefitted from favorable stock selection. In other sectors, stock selection detracted from relative returns. Technology was the worst performing sector for stock selection, where VMware, and particularly Google, were drags on performance. Sentiment on both VMware and Google is poor, which we believe makes each stock particularly attractive on the basis of upside potential versus downside risk. Not owning Oracle, Hewlett Packard, and Yahoo was not beneficial. The Portfolio’s stock selection in healthcare was negative despite the outperformance of most of its holdings. The missing piece in that equation was Gilead. Though Gilead has been beneficial in the past, it was hit hard when the pharmacy benefit manager Express Scripts announced a deal to use competitor Abbvie’s newly approved Hepatitis C drug, almost exclusively, on its most restrictive formulary. Finally, stock selection in the energy sector proved unhelpful as well. Outlook The future of the market looks positive for 2015, but we expect modest earnings in the face of European quantitative easing and interest rate hikes in the United States. It is difficult to be too negative on the markets for the year ahead. Earnings will likely grow, the multiple on those earnings is not onerous, the U.S. economy will likely again be the global standout, and it is very hard to imagine a recession on the horizon. On the other hand, it is difficult to be excited about the prospects for U.S. stocks either. Multiples are not cheap, earnings growth should be modest in 2015, and markets will have to sort out the conflicting impacts of likely quantitative easing (QE) in Europe and the beginning of interest rate increases in the United States. Earnings should grow in 2015 but that growth is likely to be modest as global growth is mixed. The stronger dollar is a headwind, and the collapse in oil prices presents a challenge to earnings growth for the energy and industrials sectors. On balance we expect S&P 500 earnings to grow just 5%-‐6% in 2015. Whether valuation levels expand or contract in 2015 likely depends on how the effects of sanctions on Russia, growth in Europe, and how the pace of improvement in China and the emerging markets play out. Three months ago it was easy to note a significant undervaluation in the sort of stocks that populate the Portfolio. After a solid fourth quarter that is less true. We remain positively disposed towards the Portfolio’s stocks but it is tougher to be enthusiastic. A more synchronous Calvert Equity Portfolio | Q4 2014 4 global economic expansion would help, but that does not seem to be in the cards over the next few months, though economic growth and rising stock prices should continue. This commentary represents the opinions of its author as of 12/31/14, and may change based on market and other conditions. The author’s opinions are not intended to forecast future events, guarantee future results, or serve as investment advice. As of December 31 2014, Calvert Equity Portfolio’s holdings included Lowes (3.27% of the Portfolio), Ross Stores (1.67%), Nordstrom (1.14%), CVS (4.87%), Costco (2.67%), Whole Foods (1.11%), VMware (1.31%), Google (4.38%), Oracle (0.00%), Hewlett Packard (0.00%), Yahoo (0.00%), Gilead (3.50%), Express Scripts (2.81%), and Abbvie (0.00%). Calvert may or may not still invest in, and is not recommending any action on, companies listed. For the most recently available information on individual holdings in each Calvert fund, visit www.calvert.com. Current and future portfolio holdings are subject to market risk. Investment in mutual funds involves risk, including possible loss of principal invested. You could lose money on your investment in the Portfolio, or the Portfolio could underperform, because of the following risks: a) the market prices of stocks held by the Portfolio may fall, b) the individual investments of the Portfolio may not perform as expected, and c) the Portfolio’s management practices may not achieve the desired result. In addition, large-‐cap companies may be unable to respond quickly to new competitive challenges such as changes in technology, and also may not be able to attain the high growth rate of successful smaller companies, especially during extended periods of economic expansion. For more information on any Calvert fund, please contact your financial advisor, call Calvert at 800.368.2748, or visit www.calvert.com for a free summary prospectus and/or prospectus. An institutional investor should call Calvert at 800.327.2109. 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. Calvert funds are available at NAV for RIAs and Wrap Programs. Not all funds available at all firms. Calvert mutual funds are underwritten and distributed by Calvert Investment Distributors, Inc., member FINRA and subsidiary of Calvert Investments, Inc. PC10919-‐201412