to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Federal Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable and tax-exempt income to its shareholders.
At November 30, 2022, the Fund had net tax basis capital loss carryforwards of approximately $21,823,000, including short-term losses ($10,386,000) and long-term losses ($11,437,000), which may be applied against realized net taxable capital gains indefinitely.
At May 31, 2023, the aggregate cost of investments for federal income tax purposes was $594,960,715. The net unrealized depreciation for all investments based on tax cost was $9,485,029. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $14,499,252 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $23,984,281.
The Fund has reviewed the tax positions for the open tax years as of November 30, 2022 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund’s financial statements. The Fund’s federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund are declared and distributed to shareholders monthly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss and premium amortization on debt securities. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Preferred Shares. At May 31, 2023, the Fund had issued and outstanding 3,975 Variable Rate MuniFund Term Preferred Shares, Series 2020-1 (“Series 2020-1 VMTPS” ) with an aggregate liquidation preference of
