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Rating Action:

Moody's assigns Aaa ratings to Nuveen Pennsylvania, California and New Jersey MuniFund Term Preferred Shares

16 Sep 2010

Ratings assigned to soon to be redeemed MuniPreferred Shares affirmed

New York, September 16, 2010 -- Moody's Investors Service has assigned ratings of Aaa to MuniFund Term Preferred (MTP) Shares to be issued by four state-specific Nuveen municipal closed-end bond funds (the "Funds") with a combined value of approximately $128 million. The MTP Shares, which are subject to a mandatory redemption in five years from the dates of issue, beginning or about September 22, 2010, include:

• Nuveen Pennsylvania Dividend Advantage Municipal Fund (NYSE: NXM): $26.7 million

• Nuveen Pennsylvania Dividend Advantage Municipal Fund 2 (NYSE: NVY): $27.3 million

• Nuveen California Premium Income Municipal Fund (NYSE: NCU): $37.0 million

• Nuveen New Jersey Dividend Advantage Municipal Fund 2 (NYSE: NUJ): $36.9 million

RATINGS RATIONALE

The ratings reflect the funds' strong capacity to meet their dividend payment obligations, their preferred share over-collateralization levels and adherence to conservative asset coverage maintenance provisions, deleveraging procedures in the event of a coverage ratio breach as well as Nuveen's effective portfolio management practices," said Moody's Senior Vice President Henry Shilling.

The four funds, whose primary investment objectives are to generate current income exempt from both regular federal income taxes and Pennsylvania, California and New Jersey personal income taxes, respectively, intend to use the net proceeds from the sale of MTP Shares to refinance and redeem each fund's outstanding Municipal Auction Rate Cumulative Preferred Shares ("MuniPreferred shares) in their entirety. Once issued, leverage is expected to vary somewhat from present levels, subject to over-allotments. Still, on a pro-forma basis, including exposure to tender option bonds, leverage is will range from a low of 37% to a high of 40%. On the same pro-forma basis but excluding tender option bonds, leverage ranges from a low of 28% to a high of 38%.

The MTP shares are subject to a term redemption in five years, on or about October 1, 2015, but may be optionally redeemed on or after October 1, 2011. In addition, there are mandatory redemption provisions that are triggered if any of the funds fail to maintain and cure asset coverage ratios of 225%, as defined in each fund's prospectus, or effective leverage ratios, including preferred shares and tender option bonds, of 50%--coverage ratios that are more conservative than the Investment Company Act of 1940's 200% coverage ratio for preferred stock. The maintenance of Moody's coverage ratios and guidelines are also applicable.

On a pro-forma basis, NXM, NVY, NCU, and NUJ are projected to achieve Moody's coverage ratios of 150%, 140%, 143% and 141%, respectively, based on factors consistent with ratings of Aaa. These are well in excess of Moody's 100% coverage ratios applicable to these funds.

In addition, the ratings on the MuniPreferred shares issued by each of the four funds were affirmed. The MuniPreferred shares will be defeased by the proceeds from the MTP shares and then redeemed after a required notice period has elapsed. The most recent rating actions affecting obligations issued by the four funds occurred at the time of the initial Aaa rating assignments in 2002 or prior to that year.

Nuveen Asset Management is the fund's investment adviser, responsible for determining the fund's overall investment strategy. Nuveen Investments and its affiliates had approximately $150 billion of assets under management as of June 30, 2010, of which approximately $73.8 billion was in municipal securities.

Moody's uses a market value type approach to rate the obligations issued by closed-end funds. Under this form of analysis, a fund's assets serve as collateral and provide an asset coverage cushion that protects investors against a sudden and severe decline in the value of the portfolio assets for a given exposure period and target rating level. The asset coverage cushion accounts for the sum of a fund's liabilities, including the face amount of preferred stock outstanding or other debt instruments, accumulated and projected interest and dividend payments and certain fund expenses that must be fully covered by the discounted value of eligible securities. In addition, the analysis extends to the fund's intrinsic ability to generate income to cover dividend payments.

Other inputs in the determination of the rating are: a) quantitative assessments of total leverage, the fund's capital structure, amount and nature of the collateral, including credit quality of investments, diversification guidelines, and exposure period, and b) qualitative assessments of each fund's structural and organizational considerations, governing documents combined with requirements to perform in accordance such documents, and monitoring practices, portfolio management, and other relevant investment policies.

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Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

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New York
Henry Shilling
Senior Vice President
Global Managed Investments Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Daniel Serrao
Senior Vice President
Global Managed Investments Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's assigns Aaa ratings to Nuveen Pennsylvania, California and New Jersey MuniFund Term Preferred Shares
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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