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Announcement:

Moody's affirms short-term and long-term ratings of VRDP shares issued by four Nuveen municipal closed-end funds

10 Aug 2012

Approximately $500 million of VRDP shares affected

New York, August 10, 2012 -- Moody's Investors Service has affirmed the short-term and long-term ratings of Variable Rate Demand Preferred (VRDP) shares issued by two national and two state-specific closed-end funds in connection with the replacement of their liquidity support provider. The VRDP Purchase Agreements supporting the VRDP shares will be provided by Deutsche Bank Trust Company Americas (DBTCA), rated P-1/A-2, stable, replacing Deutsche Bank AG, acting through its New York Branch (P-1/A-2, stable), effective as of August 30, 2012. The VRDP shares' short-term ratings are based on the liquidity support from the VRDP Purchase Agreement provider. The VRDP shares' long-term ratings, at Aa1 (national funds) and Aa2 (state-specific funds), are based on each fund's adjusted leverage, portfolio profile and fixed charge coverage combined with an assessment of the VRDP shares' relative priority of claim.

The four funds, each managed by Nuveen Fund Advisors, Inc., and the corresponding VRDP shares are listed below:

• Nuveen Dividend Advantage Municipal Fund 2 (NXZ) 1,960 @$100,000 per share for $196 million Variable Rate Demand Preferred Shares Series 2 (VRDP) mandatory redemption 6/1/2040/Deutsche Bank Trust Company Americas backed liquidity, Affirmed P-1/Aa1

• Nuveen Premium Income Municipal Opportunity Fund (NPX) 2,190 shares @$100,000 per share for $219 million Variable Rate Demand Preferred Shares Series 2 (VRDP) mandatory redemption 6/1/2040/Deutsche Bank Trust Company Americas backed liquidity, Affirmed P-1/Aa1

• Nuveen California AMT-Free Municipal Income Fund (NKX) 355 shares @$100,000 per share for $35.5 million Variable Rate Demand Preferred Shares Series 2 (VRDP) mandatory redemption 6/1/2040/Deutsche Bank Trust Company Americas backed liquidity, Affirmed P-1/Aa2

• Nuveen New York Dividend Advantage Municipal Income Fund (NKO) 500 shares @$100,000 for $50 million Variable Rate Demand Preferred Shares Series 2 (VRDP) mandatory redemption 6/1/2040/Deutsche Bank Trust Company Americas backed liquidity, Affirmed P-1/Aa2

RATINGS RATIONALE

Short-Term Ratings

Summary

The short-term ratings are based upon the VRDP Purchase Agreement provided by Deutsche Bank Trust Company Americas, which ensures that VRDP holders will be able to tender their shares unconditionally based on DBTCA's support as the liquidity provider. The revised VRDP Purchase Agreement with DBTCA is substantially the same in all material respects as the current VRDP Purchase Agreement with Deutsche Bank AG, acting through its New York Branch.

Credit Discussion

The liquidity provider agrees to purchase any rated shares that have been tendered for and not successfully remarketed on the 7th day after notice of tender. The VRDP Purchase Agreement has no automatic termination events or conditions precedent to funding, making it an unconditional agreement to purchase un-remarketed shares. The Prime-1 rating will expire upon the termination of the VRDP Purchase Agreement which is scheduled to terminate as of August 29, 2013 subject to an automatic one-year extension to August 29, 2014, unless terminated by written notice given at least 90-days in advance, and subject to further extension thereafter as provided in the agreement. The VRDP Purchase Agreement includes mandatory purchase events to address "roll over" risk and any unscheduled termination of the VRDP Purchase Agreement. Additionally, VRDP shares are subject to mandatory tender for remarketing upon the occurrence of mandatory tender events, which include (i) downgrade of the liquidity provider rating to a certain level; (ii) failure of the fund to pay scheduled dividends; (iii) breach of an effective leverage covenant continued for 60-days (if declared a mandatory tender event by the liquidity provider); (iv) occurrence of an extraordinary corporate event; (v) failure of the fund to remit fees to the liquidity provider for services rendered (if declared a mandatory tender event by the liquidity provider); (vi) designation of a special rate period and (vii) substitution of the liquidity provider. The liquidity provider has a mandatory purchase obligation with respect to all outstanding VRDP shares upon termination of the VRDP Purchase Agreement and to the extent that an alternate VRDP Purchase Agreement is not put in place. The occurrence of any mandatory purchase events would begin a process whereby all VRDP holders would be notified of a mandatory purchase event and their shares subject to purchase by the liquidity provider.

In addition to mandatory tender events, VRDP shareholders have the option to tender their VRDP shares for remarketing and purchase seven business days after providing notice to the tender and paying agent. If the remarketing agent is unable to sell any or all of the tendered shares submitted by VRDP shareholders pursuant to either a mandatory tender event or an optional tender, the tender and paying agent will deliver all unsold VRDP shares to the liquidity provider for purchase on such purchase date.

Long Term Ratings

NKO, NXZ, NPX and NKX , with assets of $165.4 million, $634.5 million, $752.4 million and $872.8 million, respectively, as of June 30, 2012, seek current income exempt from regular Federal income tax or both federal income tax and California (NKX) and New York (NKO) personal income taxes. The funds are modestly levered with effective leverage ranging from 35% to 36%, including tender option bonds.

The long-term ratings assigned to the VRDP Shares are based on the following key rating factors:

Factor 1: Adjusted Leverage

Risk adjusted asset coverage ratios are strong and the risk of an Investment Company of 1940 Act (1940 Act) breach are low for each of funds. For NKO, NXZ, NPX and NKX, these are 172%, 162%, 171% and 165%, respectively, and between 5 times and 6 times, consistent with a score of Aaa.

CEFs that invest in national and state-specific municipal securities

CEFs that invest in nationally diversified municipal securities have the highest risk-adjusted asset coverage ratios. A risk-adjusted asset coverage ratio discounts portfolio assets based on the historical price volatility of a CEF's municipal debt securities and compares that value to the CEF's debt and preferred obligations. All national municipal funds achieve a score consistent with the Aaa rating category for this metric, with an average coverage of 1.6 times the standard for the Aaa level.

The second metric in Moody's analysis of leverage assesses the risk that a fund will breach the regulatory coverage requirement imposed by the Investment Company Act of 1940 ('40 Act), based on the historical volatility of the fund and its current capital structure. The majority of municipal CEFs achieve a score consistent with Aaa for this factor. A few CEFs with total leverage in excess of 40% score in the Aa range because higher leverage increases the likelihood of a '40 Act breach.

Factor 2: Portfolio Profile

The funds' portfolio profile, which captures the credit quality and liquidity of each fund's holdings, reflects the strong credit quality of municipal holdings that are invested on a national basis or concentrated in California (A1, stable) and New York (Aa2, stable), across various general obligation, tax obligation, revenue bonds, pre-refunded bonds as well as other security types.

This is offset by weaker liquidity metrics, due to the funds' single-state focus and industry and sector concentrations, which could be exacerbated in any future municipal market downturn.

Nationally diversified and state specific municipal CEFs hold securities with very strong credit quality across various general obligation, tax obligation, revenue bonds, pre-refunded bonds and other security types. Municipal CEFs have a profile consistent with the Aa level for this factor, incorporating the high credit quality of their portfolios, offset somewhat by lower liquidity and limited price transparency in the municipal market. Funds orientated toward high yields with assets rated below A2 on average score in the A to Baa range for this factor.

The portfolio profile factor includes sector and issuer concentration metrics based on relative size and the number of heterogeneous sectors and/or issuers. Nationally diversified CEFs typically have sector and issuer concentration characteristics consistent with the Aa or Aaa rating categories, though funds with greater sector focus or fewer more concentrated issuers are assessed at the single-A level for this factor. At the same time, the portfolio profile for state-specific funds incorporates the risk associated with geographical concentration. In Moody's opinion, general tax revenue and revenue from municipal projects within the same state are derived from the same regional economy, which concentrates risk from fiscal and political problems at the state level. Accordingly, Moody's adjusts its concentration metrics for state-specific funds to account for increased security performance and price correlation risks. Of the 18 states in which Moody's rates securities issued by state-specific CEFs, the revenue bases of four states -- Connecticut, Massachusetts, Michigan and Virginia -- are considered to be less diversified than those of the other states, and the scores are adjusted accordingly.

The average raw score for state-specific CEFs is Aa1 for the concentration metric; the scores range from Aaa to A1, with the latter applying to funds with greater sector concentration or more concentrated issuers. Adjusted for geographical concentration, scores for this metric range from Aa3 to Baa1, with the average at A1.

Factor 3: Fixed Charge Coverage

The long-term ratings of the VRDP shares are further supported by high quality, 9 times-to-10 times, fixed charge coverage ratios, calculated on a trailing one year basis, evidencing the strong capacity of NKO, NXZ, NPX and NKX meet periodic dividend payments from recurring earnings.

National and state-specific CEFs demonstrate excellent fixed charge coverage, reflecting strong coverage of periodic payments associated with financing activities out of recurring earnings after deducting basic operating expenses.

On average, state-specific municipal CEFs achieve a score consistent with Aaa for this metric, with average coverage levels in excess of 10 times for both one- and five-year periods. Coverage ratios vary significantly among funds, based largely on whether their liabilities are fixed or floating. While funds with long-term fixed rate capital do not perform as well on this metric as those with floating rate liabilities, Moody's does factor in the positive effect of fixed rate debt and preferred obligations when rates eventually rise.

Senior Rating Profile

The complete evaluation of the quantitative factors produces an indicative senior rating level for a CEF's leverage. In the case of the national municipal CEFs, the senior indicative rating is generally Aaa while the corresponding senior indicative rating for state-specific municipal CEFs is generally Aa1.

Relative Priority of Claim

In addition to assessing the key rating factors described above, Moody's considers the priority of claim of a fund's specific security types and any other qualitative factors relevant to the fund's credit profile. In the case of preferred securities, which is the instrument class associated with these ratings, a one-notch downward adjustment from the rating suggested by the key factors is made to reflect the weaker position of investors holding preferred stock relative to those holding senior unsecured debt obligations.

The principal methodology used in this rating was "Moody's Methodology for Rating Securities Issued by U.S. Closed-End Funds" published in May 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Henry Shilling
Senior Vice President
Managed Investments Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Daniel Serrao
Associate Managing Director
Managed Investments Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms short-term and long-term ratings of VRDP shares issued by four Nuveen municipal closed-end funds
No Related Data.
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