Notes to Financial Statements (Unaudited)
1 Significant Accounting Policies
Eaton Vance High Income 2021 Target Term Trust (the
Trust) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company. The Trust’s investment objectives are high current income and
to return $9.85 per share, the original net asset value per common share before deducting offering costs of $0.02 per common share (“Original NAV”), to holders of common shares on or about July 1, 2021 (the “Termination
Date”). On or about the Termination Date, the Trust intends to cease its investment operations, liquidate its portfolio, retire or redeem its leverage facilities, and seek to return Original NAV to common shareholders, unless the term is
extended for one period of up to six months by a vote of the Trust’s Board of Trustees.
The following is a summary of significant accounting
policies of the Trust. The policies are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The Trust is an investment company and follows accounting and reporting guidance in the Financial
Accounting Standards Board (FASB) Accounting Standards Codification Topic 946.
A Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.
Debt
Obligations. Debt obligations are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported
trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, interest rates, anticipated prepayments, benchmark curves or information pertaining to the issuer, as well as industry and
economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term debt obligations purchased with a remaining maturity
of sixty days or less for which a valuation from a third party pricing service is not readily available may be valued at amortized cost, which approximates fair value.
Senior Floating-Rate Loans. Interests in senior floating-rate loans (Senior Loans) for which reliable market quotations are readily available are valued generally at the average mean of bid and ask
quotations obtained from a third party pricing service.
Affiliated Fund. The Trust may invest in Eaton Vance Cash Reserves Fund, LLC (Cash
Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). While Cash Reserves Fund is not a registered money market mutual fund, it conducts all of its investment activities in accordance with the requirements of Rule
2a-7 under the 1940 Act. Investments in Cash Reserves Fund are valued at the closing net asset value per unit on the valuation day. Cash Reserves Fund generally values its investment securities based on available market quotations provided by a
third party pricing service.
Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed
unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Trust in a manner that most fairly reflects the security’s “fair value”, which is the amount that the Trust might
reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may
include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or
entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the
company’s or entity’s financial statements, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis.
Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income — Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date for dividends received
in cash and/or securities.
D Federal Taxes — The Trust intends to
make monthly distributions of net investment income and any net realized capital gains in amounts necessary to maintain its taxation as a regulated investment company for U.S. federal income tax purposes. For the purpose of pursuing its investment
objective of returning Original NAV, the Trust may retain a portion of its net investment income and some or all of its net capital gains, which would result in the Trust paying U.S. federal excise and corporate income taxes.
As of September 30, 2020, the Trust had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Trust
files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Use of Estimates — The preparation of the financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those
estimates.
F Indemnifications — Under the Trust’s
organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Trust. Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have personal liability for the obligations of the Trust. However, the Trust’s Declaration of Trust contains an express disclaimer of liability on the part of Trust
shareholders and the By-laws provide that the Trust shall assume, upon request by the shareholder, the
Eaton Vance
High Income 2021 Target Term Trust
September 30, 2020
Notes to Financial Statements (Unaudited) — continued
defense on behalf of any Trust shareholders. Moreover, the By-laws also provide for indemnification out of Trust property of any shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Trust enters into agreements with service providers that may contain indemnification clauses. The Trust’s maximum exposure
under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred.
G Interim Financial Statements — The interim financial statements relating to
September 30, 2020 and for the six months then ended have not been audited by an independent registered public accounting firm, but in the opinion of the Trust’s management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders and Income Tax
Information
The Trust intends to make monthly distributions of net investment income to common shareholders. The Trust may also distribute net realized
capital gains, if any, generally not more than once per year. Distributions are recorded on the ex-dividend date. Distributions to shareholders are determined in accordance with income tax regulations, which may differ from U.S. GAAP. As required by
U.S. GAAP, only distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in
capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income.
At March 31, 2020, the Trust, for
federal income tax purposes, had deferred capital losses of $701,421 which would reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus
would reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Trust of any liability for federal income or excise tax. The deferred capital losses are treated as arising on the first day of the
Trust’s next taxable year and retain the same short-term or long-term character as when originally deferred. Of the deferred capital losses at March 31, 2020, $51,963 are short-term and $649,458 are long-term.
The cost and unrealized appreciation (depreciation) of investments of the Trust at September 30, 2020, as determined on a federal income tax basis, were as
follows:
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Aggregate cost
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$
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204,316,819
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Gross unrealized appreciation
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$
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3,554,086
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Gross unrealized depreciation
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(1,760,559
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)
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Net unrealized appreciation
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$
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1,793,527
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3 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by EVM, a wholly-owned subsidiary of Eaton Vance Corp., as compensation for investment advisory services rendered to the Trust.
The fee is computed at an annual rate of 0.70% of the Trust’s average daily managed assets and is payable monthly. Managed assets as referred to herein represent total assets of the Trust (including assets attributable to borrowings, any
outstanding preferred shares, or other forms of leverage) less accrued liabilities (other than liabilities representing borrowings or such other forms of leverage). For the six months ended September 30, 2020, the investment adviser fee
amounted to $773,606. The Trust invests its cash in Cash Reserves Fund. EVM does not currently receive a fee for investment advisory services provided to Cash Reserves Fund. EVM also serves as administrator of the Trust, but receives no
compensation.
Trustees and officers of the Trust who are members of EVM’s organization receive remuneration for their services to the Trust out of
the investment adviser fee. Trustees of the Trust who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months
ended September 30, 2020, no significant amounts have been deferred. Certain officers and Trustees of the Trust are officers of EVM.
During the six
months ended September 30, 2020, EVM reimbursed the Trust $7,640 for a net realized loss due to a trading error. The amount of the reimbursement had an impact on total return of less than 0.01%.
4 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations and including maturities and principal repayments on Senior Loans, aggregated $32,375,942 and
$81,595,503, respectively, for the six months ended September 30, 2020.
Eaton Vance
High Income 2021 Target Term Trust
September 30, 2020
Notes to Financial Statements (Unaudited) — continued
5 Common Shares of Beneficial Interest
The Trust may issue common shares pursuant to its
dividend reinvestment plan. There were no common shares issued by the Trust for the six months ended September 30, 2020. Common shares issued by the Trust pursuant to its dividend reinvestment plan for the year ended March 31, 2020 were
3,543.
6 Credit Agreement
The Trust has entered into a Credit Agreement, as amended (the Agreement) with a bank to borrow up to a limit of $60 million. Borrowings under the Agreement are
secured by the assets of the Trust. Interest is charged at a rate above the London Interbank Offered Rate (LIBOR) and is payable monthly. Under the terms of the Agreement, in effect through May 27, 2021, the Trust pays a facility fee of
0.15% per annum on the borrowing limit. In connection with the renewal of the Agreement in June 2020, the Trust paid an upfront fee of $60,000 which is being amortized to interest expense over a period of one year. The unamortized balance at
September 30, 2020 is approximately $40,000 and is included in prepaid upfront fees on notes payable in the Statement of Assets and Liabilities. The Trust is required to maintain certain net asset levels during the term of the Agreement. At
September 30, 2020, the Trust had no borrowings outstanding under the Agreement. Facility fees for the six months ended September 30, 2020 totaled $45,750 and are included in interest expense and fees on the Statement of Operations. For
the six months ended September 30, 2020, the average borrowings under the Agreement and average annual interest rate (excluding fees) were $12,420,765 and 1.16%, respectively.
7 Investments in Affiliated Funds
At September 30, 2020, the value of the
Trust’s investment in affiliated funds was $6,205,447, which represents 2.9% of the Trust’s net assets. Transactions in affiliated funds by the Trust for the six months ended September 30, 2020 were as follows:
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Name of affiliated fund
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Value,
beginning
of period
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Purchases
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Sales
proceeds
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Net
realized
gain (loss)
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Change in
unrealized
appreciation
(depreciation)
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Value, end
of period
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Dividend
income
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Units, end
of period
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Short-Term Investments
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Eaton Vance Cash Reserves Fund, LLC
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$
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2,952,215
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$
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79,497,081
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$
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(76,245,218
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)
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$
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483
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$
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886
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$
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6,205,447
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$
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2,374
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6,205,447
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8 Fair Value Measurements
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The
three-tier hierarchy of inputs is summarized in the three broad levels listed below.
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Level 1 – quoted prices in active markets for identical investments
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•
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Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
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•
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Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments)
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In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is
determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those
securities.
At September 30, 2020, the hierarchy of inputs used in valuing the Trust’s investments, which are carried at value, were as
follows:
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Asset Description
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Level 1
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Level 2
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Level 3
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Total
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Corporate Bonds & Notes
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$
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—
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$
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197,879,659
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$
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—
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$
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197,879,659
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Senior Floating-Rate Loans
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—
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2,025,240
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—
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2,025,240
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Short-Term Investments
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—
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6,205,447
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—
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6,205,447
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Total Investments
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$
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—
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$
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206,110,346
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$
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—
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$
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206,110,346
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Eaton Vance
High Income 2021 Target Term Trust
September 30, 2020
Notes to Financial Statements (Unaudited) — continued
9 Risks and Uncertainties
Credit Risk
The Trust primarily invests in lower rated and comparable quality unrated high yield securities. These investments have different risks than investments in debt
securities rated investment grade. Risk of loss upon default by the borrower is significantly greater with respect to such debt than with other debt securities because these securities are generally unsecured and are more sensitive to adverse
economic conditions, such as recession or increasing interest rates, than are investment grade issuers.
Pandemic Risk
An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December 2019 and subsequently spread internationally. This
coronavirus has resulted in closing borders, enhanced health screenings, changes to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general concern and
uncertainty. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political, social and economic risks and disrupt normal market conditions and operations. The impact of this outbreak has negatively
affected the worldwide economy, the economies of individual countries, individual companies, and the market in general, and may continue to do so in significant and unforeseen ways, as may other epidemics and pandemics that may arise in the future.
Any such impact could adversely affect the Trust’s performance, or the performance of the securities in which the Trust invests.
10 Subsequent Event
On October 8, 2020,
Morgan Stanley and Eaton Vance Corp. (“Eaton Vance”) announced that they had entered into a definitive agreement under which Morgan Stanley would acquire Eaton Vance. Under the Investment Company Act of 1940, as amended, consummation of
this transaction may be deemed to result in the automatic termination of an Eaton Vance Fund’s investment advisory agreement, and, where applicable, any related sub-advisory agreement. On November 10, 2020, the Trust’s Board approved a new
investment advisory agreement. The new investment advisory agreement will be presented to Trust shareholders for approval, and, if approved, would take effect upon consummation of the transaction. Shareholders of record of the Trust at the close of
business on October 29, 2020 who have voting power with respect to such shares are entitled to be present and vote at a joint special meeting of shareholders to be held on January 7, 2021 and at any adjournments or postponements thereof.
Eaton Vance
High Income 2021 Target Term Trust
September 30, 2020
Board of Trustees’ Contract Approval
Overview of the Contract Review Process
The Investment Company Act of 1940, as amended (the
“1940 Act”), provides, in substance, that the investment advisory agreement between a fund and its investment adviser will continue in effect from year-to-year only if its continuation is approved on an annual basis by a vote of the
fund’s board of trustees, including a majority of the trustees who are not “interested persons” of the fund (“independent trustees”), cast in person at a meeting called for the purpose of considering such approval.
At a meeting held on April 22, 2020 (the “April 2020 Meeting”), the Boards of Trustees/Directors comprised of the
same individuals (collectively, the “Board”) that oversees a majority of the registered investment companies advised by Eaton Vance Management or its affiliate, Boston Management and Research (the “Eaton Vance Funds”), including
a majority of the independent trustees (the “Independent Trustees”), voted to approve the continuation of existing investment advisory agreements and sub-advisory
agreements(1) for each of the Eaton Vance Funds for an additional one-year period. The Board relied upon the affirmative recommendation of its Contract Review Committee,
which is a committee exclusively comprised of Independent Trustees. Prior to making its recommendation, the Contract Review Committee reviewed information furnished by the adviser and sub-adviser to each of the Eaton Vance Funds (including
information specifically requested by the Board) for a series of formal meetings held between February and April 2020. Members of the Contract Review Committee also considered information received at prior meetings of the Board and its committees,
to the extent such information was relevant to the Contract Review Committee’s annual evaluation of the investment advisory agreements and sub-advisory agreements.
In connection with its evaluation of the investment advisory agreements and sub-advisory agreements, the Board considered various information relating to the Eaton Vance Funds. This included information applicable
to all or groups of Eaton Vance Funds, which is referenced immediately below, and information applicable to the particular Eaton Vance Fund covered by this report (additional fund-specific information is referenced below under “Results of the
Contract Review Process”). (For funds that invest through one or more underlying portfolios, references to “each fund” in this section may include information that was considered at the portfolio-level.)
Information about Fees, Performance and Expenses
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A report from an independent data provider comparing advisory and other fees paid by each fund to such fees paid by comparable funds, as identified by the
independent data provider (“comparable funds”);
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A report from an independent data provider comparing each fund’s total expense ratio (and its components) to those of comparable funds;
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A report from an independent data provider comparing the investment performance of each fund (including, as relevant, total return data, income data, Sharpe
ratios and information ratios) to the investment performance of comparable funds and, as applicable, benchmark indices, over various time periods;
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In certain instances, data regarding investment performance relative to customized groups of peer funds and blended indices identified by the adviser in
consultation with the Portfolio Management Committee of the Board;
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Comparative information concerning the fees charged and services provided by the adviser and sub-adviser to each fund in managing other accounts (which may
include other mutual funds, collective investment funds and institutional accounts) using investment strategies and techniques similar to those used in managing such fund(s), if any;
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Profitability analyses with respect to the adviser and sub-adviser to each of the funds;
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Information about Portfolio Management and Trading
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Descriptions of the investment management services provided to each fund, as well as each of the funds’ investment strategies and policies;
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The procedures and processes used to determine the fair value of fund assets, when necessary, and actions taken to monitor and test the effectiveness of such
procedures and processes;
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Information about the policies and practices of each fund’s adviser and sub-adviser (in the context of a sub-adviser, only those with trading
responsibilities) with respect to trading, including their processes for seeking best execution of portfolio transactions;
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Information about the allocation of brokerage transactions and the benefits, if any, received by the adviser and sub-adviser (in the context of a sub-adviser,
only those with trading responsibilities) to each fund as a result of brokerage allocation, including, as applicable, information concerning the acquisition of research through client commission arrangements and policies with respect to “soft
dollars”;
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Data relating to the portfolio turnover rate of each fund;
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Information about each Adviser and Sub-adviser
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Reports detailing the financial results and condition of the adviser and sub-adviser to each fund;
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Information regarding the individual investment professionals whose responsibilities include portfolio management and investment research for the funds, and, for
portfolio managers and certain other investment professionals, information relating to their responsibilities with respect to managing other mutual funds and investment accounts, as applicable;
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(1)
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Not all Eaton Vance Funds have entered into a sub-advisory agreement with a sub-adviser. Accordingly, references to “sub-adviser” or “sub-advisory
agreement” in this “Overview” section may not be applicable to the particular Eaton Vance Fund covered by this report.
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Eaton Vance
High Income 2021 Target Term Trust
September 30, 2020
Board of Trustees’ Contract Approval — continued
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The Code of Ethics of the adviser and its affiliates and the sub-adviser of each fund, together with information relating to compliance with, and the
administration of, such codes;
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Policies and procedures relating to proxy voting and the handling of corporate actions and class actions;
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Information concerning the resources devoted to compliance efforts undertaken by the adviser and its affiliates and the sub-adviser of each fund, if any,
including descriptions of their various compliance programs and their record of compliance;
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Information concerning the business continuity and disaster recovery plans of the adviser and its affiliates and the sub-adviser of each fund, if any;
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A description of Eaton Vance Management’s and Boston Management and Research’s oversight of sub-advisers, including with respect to regulatory and
compliance issues, investment management and other matters;
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Other Relevant Information
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Information concerning the nature, cost and character of the administrative and other non-investment advisory services provided by Eaton Vance Management and its
affiliates;
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Information concerning oversight of the relationship with the custodian, subcustodians and fund accountants by the adviser and/or administrator to each of the
funds;
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For an Eaton Vance Fund structured as an exchange-listed closed-end fund, information concerning the benefits of the closed-end fund structure, as well as, where
relevant, the closed-end fund’s market prices, trading volume data, distribution rates and other relevant matters; and
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The terms of each investment advisory agreement and sub-advisory agreement.
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During the various meetings of the Board and its committees throughout the twelve months ended April 2020, the Trustees received information from portfolio managers and other investment professionals of the
advisers and sub-advisers of the funds regarding investment and performance matters, and considered various investment and trading strategies used in pursuing the funds’ investment objectives. The Trustees also received information regarding
risk management techniques employed in connection with the management of the funds. The Board and its committees evaluated issues pertaining to industry and regulatory developments, compliance procedures, fund governance and other issues with
respect to the funds, and received and participated in reports and presentations provided by Eaton Vance Management, Boston Management and Research and fund sub-advisers, with respect to such matters. In addition to the formal meetings of the Board
and its committees, the Independent Trustees held regular teleconferences to discuss, among other topics, matters relating to the continuation of investment advisory agreements and sub-advisory agreements.
The Contract Review Committee was advised throughout the contract review process by Goodwin Procter LLP, independent legal counsel for the Independent Trustees. The
members of the Contract Review Committee, with the advice of such counsel, exercised their own business judgment in determining the material factors to be considered in evaluating each investment advisory agreement and sub-advisory agreement and the
weight to be given to each such factor. The conclusions reached with respect to each investment advisory agreement and sub-advisory agreement were based on a comprehensive evaluation of all the information provided and not any single factor.
Moreover, each member of the Contract Review Committee may have placed varying emphasis on particular factors in reaching conclusions with respect to each investment advisory agreement and sub-advisory agreement. In evaluating each investment
advisory agreement and sub-advisory agreement, including the fee structures and other terms contained in such agreements, the members of the Contract Review Committee were also informed by multiple years of analysis and discussion with the adviser
and sub-adviser to each of the Eaton Vance Funds.
In voting its approval of the continuation of existing investment advisory agreements and
sub-advisory agreements at the April 2020 Meeting, the Board relied on an order issued by the Securities and Exchange Commission on March 25, 2020, which provided temporary relief from the in-person voting requirements under Section 15 of
the 1940 Act in response to the impacts of the COVID-19 pandemic.
Results of the Contract Review Process
Based on its consideration of the foregoing, and such other information it deemed relevant, including the factors and conclusions described below, the Contract
Review Committee concluded that the continuation of the investment advisory and administrative agreement between Eaton Vance High Income 2021 Target Term Trust (the “Fund”) and Eaton Vance Management (the “Adviser”), including
its fee structure, is in the interests of shareholders and, therefore, recommended to the Board approval of the agreement. Based on the recommendation of the Contract Review Committee, the Board, including a majority of the Independent Trustees,
voted to approve continuation of the investment advisory and administrative agreement for the Fund.
Nature, Extent
and Quality of Services
In considering whether to approve the investment advisory and administrative agreement for the Fund, the Board evaluated the
nature, extent and quality of services provided to the Fund by the Adviser.
The Board considered the Adviser’s management capabilities and
investment processes in light of the types of investments held by the Fund, including the education, experience and number of investment professionals and other personnel who provide portfolio management, investment research, and similar services to
the Fund, including recent changes to such personnel. In particular, the Board considered the abilities and experience of the Adviser’s investment professionals in analyzing special considerations relevant to investing in high-yield debt. In
this regard, the Board considered the experience of
Eaton Vance
High Income 2021 Target Term Trust
September 30, 2020
Board of Trustees’ Contract Approval — continued
the investment professionals in managing other funds that invest in high-yield debt. The Board also considered information regarding the management of the Fund’s portfolio in the context of the target term
structure and noted the Adviser’s experience with this structure. The Board also took into account the resources dedicated to portfolio management and other services, the compensation methods of the Adviser and other factors, including the
reputation and resources of the Adviser to recruit and retain highly qualified research, advisory and supervisory investment professionals. In addition, the Board considered the time and attention devoted to the Eaton Vance Funds, including the
Fund, by senior management, as well as the infrastructure, operational capabilities and support staff in place to assist in the portfolio management and operations of the Fund, including the provision of administrative services. The Board also
considered the business-related and other risks to which the Adviser or its affiliates may be subject in managing the Fund. The Board considered the deep experience of the Adviser and its affiliates with managing and operating funds organized as
exchange-listed closed-end funds, such as the Fund. In this regard, the Board considered, among other things, the Adviser’s and its affiliates’ experience with implementing leverage arrangements, monitoring and assessing trading price
discounts and premiums and adhering to the requirements of securities exchanges.
The Board considered the compliance programs of the Adviser and
relevant affiliates thereof. The Board considered compliance and reporting matters regarding, among other things, personal trading by investment professionals, disclosure of portfolio holdings, late trading, frequent trading, portfolio valuation,
business continuity and the allocation of investment opportunities. The Board also considered the responses of the Adviser and its affiliates to requests in recent years from regulatory authorities, such as the Securities and Exchange Commission and
the Financial Industry Regulatory Authority.
The Board considered other administrative services provided or overseen by Eaton Vance Management and its
affiliates, including transfer agency and accounting services. The Board evaluated the benefits to shareholders of investing in a fund that is a part of a large fund complex offering exposure to a variety of asset classes and investment disciplines.
After consideration of the foregoing factors, among others, the Board concluded that the nature, extent and quality of services provided by the Adviser,
taken as a whole, are appropriate and consistent with the terms of the investment advisory and administrative agreement.
Fund Performance
The Board
compared the Fund’s investment performance to that of comparable funds identified by an independent data provider (the peer group), as well as a customized peer group of similarly managed funds. The Board’s review included comparative
performance data with respect to the Fund for the one- and three-year periods ended September 30, 2019. In this regard, the Board noted that the performance of the Fund was lower than the median performance of the Fund’s peer group and
custom peer group for the three-year period. The Board noted the Fund’s annualized total return over the three-year period and considered such information in the context of the Fund’s limited duration structure.
Management Fees and Expenses
The Board considered contractual fee rates payable by the Fund for advisory and administrative services (referred to collectively as “management fees”).
As part of its review, the Board considered the Fund’s management fees and total expense ratio for the one-year period ended September 30, 2019, as compared to those of comparable funds, before and after giving effect to any undertaking to
waive fees or reimburse expenses. The Board also considered factors that had an impact on the Fund’s total expense ratio relative to comparable funds.
After considering the foregoing information, and in light of the nature, extent and quality of the services provided by the Adviser, the Board concluded that the management fees charged for advisory and
related services are reasonable.
Profitability and “Fall-Out” Benefits
The Board considered the level of profits realized by the Adviser and relevant affiliates thereof in providing investment advisory and administrative services to
the Fund and to all Eaton Vance Funds as a group. The Board considered the level of profits realized without regard to marketing support or other payments by the Adviser and its affiliates to third parties in respect of distribution or other
services.
The Board concluded that, in light of the foregoing factors and the nature, extent and quality of the services rendered, the profits realized
by the Adviser and its affiliates are deemed not to be excessive.
The Board also considered direct or indirect fall-out benefits received by the Adviser
and its affiliates in connection with their respective relationships with the Fund, including the benefits of research services that may be available to the Adviser as a result of securities transactions effected for the Fund and other investment
advisory clients.
Economies of Scale
In reviewing management fees and profitability, the Board also considered the extent to which the Adviser and its affiliates, on the one hand, and the Fund, on the other hand, can expect to realize benefits from
economies of scale as the assets of the Fund increase. The Board acknowledged the difficulty in accurately measuring the benefits resulting from economies of scale, if any, with respect to the management of any specific fund or group of funds. The
Board reviewed data summarizing the increases and decreases in the assets of the Fund and of all Eaton Vance Funds as a group over various time
Eaton Vance
High Income 2021 Target Term Trust
September 30, 2020
Board of Trustees’ Contract Approval — continued
periods, and evaluated the extent to which the total expense ratio of the Fund and the profitability of the Adviser and its affiliates may have been affected by such increases or decreases. Based upon the
foregoing, the Board concluded that the Fund currently shares in the benefits from economies of scale, if any, when they are realized by the Adviser. The Board also considered the fact that the Fund is not continuously offered and that the
Fund’s assets are not expected to increase materially in the foreseeable future. Accordingly, the Board did not find that the implementation of breakpoints in the advisory fee schedule is warranted at this time.
Eaton Vance
High Income 2021 Target Term Trust
September 30, 2020