Notes to Financial Statements (Unaudited)
1 Significant Accounting Policies
Eaton Vance Municipal Income 2028 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 Trusts investment objective is to provide current income exempt
from regular federal income tax. The Trust has a term of fifteen years and currently intends to cease its investment operations on or about June 30, 2028 and thereafter liquidate and distribute its net assets to holders of the Trusts
common shares.
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.
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 securitys
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 securitys disposition, the price and extent of public trading in similar
securities of the issuer or of comparable 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 entitys 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 and Related Income 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. Interest income is recorded on the basis of interest accrued, adjusted for amortization of
premium or accretion of discount.
C Federal Taxes The Trusts
policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its taxable, if any, and tax-exempt net investment income, and all or
substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary. The Trust intends to satisfy conditions which will enable it to designate distributions from the interest income generated
by its investments in non-taxable municipal securities, which are exempt from regular federal income tax when received by the Trust, as exempt-interest dividends. The portion of such interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item to shareholders.
As of July 31, 2021, 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.
D Legal Fees Legal fees and
other related expenses incurred as part of negotiations of the terms and requirement of capital infusions, or that are expected to result in the restructuring of, or a plan of reorganization for, an investment are recorded as realized losses.
Ongoing expenditures to protect or enhance an investment are treated as operating expenses.
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 Trusts 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 Trusts 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 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 Trusts 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.
Eaton Vance
Municipal Income 2028 Term Trust
July 31, 2021
Notes to Financial Statements (Unaudited) continued
G Floating Rate Notes Issued in Conjunction with Securities Held The Trust may invest in residual interest bonds, also referred to
as inverse floating rate securities, whereby the Trust may sell a variable or fixed rate bond for cash to a Special-Purpose Vehicle (the SPV), (which is generally organized as a trust), while at the same time, buying a residual interest in the
assets and cash flows of the SPV. The bond is deposited into the SPV with the same CUSIP number as the bond sold to the SPV by the Trust, and which may have been, but is not required to be, the bond purchased from the Trust (the Bond). The SPV also
issues floating rate notes (Floating Rate Notes) which are sold to third-parties. The residual interest bond held by the Trust gives the Trust the right (1) to cause the holders of the Floating Rate Notes to generally tender their notes at par,
and (2) to have the Bond held by the SPV transferred to the Trust, thereby terminating the SPV. Should the Trust exercise such right, it would generally pay the SPV the par amount due on the Floating Rate Notes and exchange the residual
interest bond for the underlying Bond. Pursuant to generally accepted accounting principles for transfers and servicing of financial assets and extinguishment of liabilities, the Trust accounts for the transaction described above as a secured
borrowing by including the Bond in its Portfolio of Investments and the Floating Rate Notes as a liability under the caption Payable for floating rate notes issued in its Statement of Assets and Liabilities. The Floating Rate Notes have
interest rates that generally reset weekly and their holders have the option to tender their notes to the SPV for redemption at par at each reset date. Accordingly, the fair value of the payable for floating rate notes issued approximates its
carrying value. If measured at fair value, the payable for floating rate notes would have been considered as Level 2 in the fair value hierarchy (see Note 6) at July 31, 2021. Interest expense related to the Trusts liability with respect
to Floating Rate Notes is recorded as incurred. The SPV may be terminated by the Trust, as noted above, or by the occurrence of certain termination events as defined in the trust agreement, such as a downgrade in the credit quality of the underlying
Bond, bankruptcy of or payment failure by the issuer of the underlying Bond, the inability to remarket Floating Rate Notes that have been tendered due to insufficient buyers in the market, or the failure by the SPV to obtain renewal of the liquidity
agreement under which liquidity support is provided for the Floating Rate Notes up to one year. At July 31, 2021, the amount of the Trusts Floating Rate Notes outstanding and the related collateral were $123,677,729 and $177,328,460,
respectively. The range of interest rates on the Floating Rate Notes outstanding at July 31, 2021 was 0.02% to 0.12%. For the six months ended July 31, 2021, the Trusts average settled Floating Rate Notes outstanding and the average
interest rate (annualized) including fees were $128,217,348 and 0.60%, respectively.
In certain circumstances, the Trust may enter into shortfall and
forbearance agreements with brokers by which the Trust agrees to reimburse the broker for the difference between the liquidation value of the Bond held by the SPV and the liquidation value of the Floating Rate Notes, as well as any shortfalls in
interest cash flows. The Trust had no shortfalls as of July 31, 2021.
The Trust may also purchase residual interest bonds in a secondary market
transaction without first owning the underlying bond. Such transactions are not required to be treated as secured borrowings. Shortfall agreements, if any, related to residual interest bonds purchased in a secondary market transaction are disclosed
in the Portfolio of Investments.
The Trusts investment policies and restrictions expressly permit investments in residual interest bonds. Such
bonds typically offer the potential for yields exceeding the yields available on fixed rate bonds with comparable credit quality and maturity. These securities tend to underperform the market for fixed rate bonds in a rising long-term interest rate
environment, but tend to outperform the market for fixed rate bonds when long-term interest rates decline. The value and income of residual interest bonds are generally more volatile than that of a fixed rate bond. The Trusts investment
policies do not allow the Trust to borrow money except as permitted by the 1940 Act. Management believes that the Trusts restrictions on borrowing money and issuing senior securities (other than as specifically permitted) do not apply to
Floating Rate Notes issued by the SPV and included as a liability in the Trusts Statement of Assets and Liabilities. As secured indebtedness issued by an SPV, Floating Rate Notes are distinct from the borrowings and senior securities to which
the Trusts restrictions apply. Residual interest bonds held by the Trust are securities exempt from registration under Rule 144A of the Securities Act of 1933.
H Interim Financial Statements The interim financial statements relating to July 31, 2021 and for the six months then
ended have not been audited by an independent registered public accounting firm, but in the opinion of the Trusts 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. In addition, at least annually, the Trust intends to distribute all
or substantially all of its net realized capital gains. 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 January 31, 2021, the Trust,
for federal income tax purposes, had deferred capital losses of $4,594,879 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
Trusts next taxable year and retain the same short-term or long-term character as when originally deferred. Of the deferred capital losses at January 31, 2021, $4,594,879 are short-term.
Eaton Vance
Municipal Income 2028 Term Trust
July 31, 2021
Notes to Financial Statements (Unaudited) continued
The cost and unrealized appreciation (depreciation) of investments of the Trust at July 31, 2021, as determined on a federal income tax basis, were as follows:
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Aggregate cost
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$
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190,581,243
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Gross unrealized appreciation
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$
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33,076,834
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Gross unrealized depreciation
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(2,343
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)
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Net unrealized appreciation
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$
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33,074,491
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3 Investment Adviser and Administration Fee and Other Transactions with Affiliates
The investment adviser and administration fee is earned by Eaton Vance Management (EVM) as compensation for investment advisory and administrative services rendered
to the Trust. On March 1, 2021, Morgan Stanley acquired Eaton Vance Corp. (the Transaction) and EVM became an indirect, wholly-owned subsidiary of Morgan Stanley. In connection with the
Transaction, the Trust entered into a new investment advisory and administrative agreement (the New Agreement) with EVM, which took effect on March 1, 2021. Pursuant to the New Agreement (and the Trusts investment advisory and
administrative agreement with EVM in effect prior to March 1, 2021), the investment adviser and administration fee is computed at an annual rate of 0.60% of the Trusts average daily total managed assets and is payable monthly. For
purposes of this calculation, total managed assets means total assets of the Trust, including any form of investment leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations
attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities or through the purchase of residual interest bonds),
(ii) the issuance of preferred stock or other similar preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Trusts investment objectives and policies, and/or (iv) any
other means, all as determined in accordance with generally accepted accounting principles. Accrued expenses includes other liabilities other than indebtedness attributable to leverage. For the six months ended July 31, 2021, the investment
adviser and administration fee amounted to $1,087,490.
Trustees and officers of the Trust who are members of EVMs organization receive
remuneration for their services to the Trust out of the investment adviser and administration 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 July 31, 2021, no significant amounts have been deferred. Certain officers and Trustees of the Trust are officers of EVM.
4 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $659,830 and $15,739,195, respectively, for the six months ended July 31,
2021.
5 Common Shares of Beneficial Interest
The Trust may issue common shares pursuant to its dividend reinvestment plan. Common shares issued by the Trust pursuant to its dividend reinvestment plan for the six months ended July 31, 2021 and the year
ended January 31, 2021 were 10,017 and 10,514, respectively.
In November 2013, the Board of Trustees initially approved a share repurchase program
for the Trust. Pursuant to the reauthorization of the share repurchase program by the Board of Trustees in March 2019, the Trust is authorized to repurchase up to 10% of its common shares outstanding as of the last day of the prior calendar year at
market prices when shares are trading at a discount to net asset value. The share repurchase program does not obligate the Trust to purchase a specific amount of shares. There were no repurchases of common shares by the Trust for the six months
ended July 31, 2021 and the year ended January 31, 2021.
6 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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Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
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Level 3 significant unobservable inputs (including a funds own assumptions in determining the fair value of investments)
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Eaton Vance
Municipal Income 2028 Term Trust
July 31, 2021
Notes to Financial Statements (Unaudited) continued
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 July 31, 2021, the hierarchy of inputs used in valuing the Trusts 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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Tax-Exempt Municipal Obligations
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$
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$
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336,045,395
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$
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$
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336,045,395
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Taxable Municipal Obligations
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11,288,068
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11,288,068
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Total Investments
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$
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$
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347,333,463
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$
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$
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347,333,463
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7 Risks and Uncertainties
Pandemic Risk
An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in
late 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 Trusts performance, or the performance of the securities in which the Trust invests.
Eaton Vance
Municipal Income 2028 Term Trust
July 31, 2021