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Rating Action:

Moody's assigns Prime-1/Aaa ratings to Nuveen VRDP Shares of New York and California closed-end funds

18 Aug 2010

Approximately $594 million in Variable Rate Demand Preferred Shares ("VRDP") issued to redeem auction rate securities of four closed-end funds

New York, August 18, 2010 -- Moody's Investors Service has assigned Prime-1/Aaa ratings to Nuveen VRDP Shares of New York and California closed-end funds, as follows:

• Nuveen California Quality Income Municipal Fund, Inc. (NUC), $158.1 million

• Nuveen California Select Quality Municipal Fund, Inc. (NVC), $158.9 million

• Nuveen New York Investment Quality Municipal Fund, Inc. (NQN), $112.3 million

• Nuveen New York Select Quality Municipal Fund, Inc. (NVN), $164.8 million

RATINGS RATIONALE

The short-term ratings, which address Moody's expectation of timely repayment of liquidation preference of the VRDP Shares in the event of an optional or mandatory tender, are based upon the VRDP Shares liquidity purchase agreement and liquidity provider, Citibank, N.A. (currently rated A1/P-1). Moody's Prime-1 rating assigned to the VRDP shares reflects a view on the certainty of timely repayment on demand with seven days notice.

Moody's long-term ratings assigned to the Variable Rate Demand Preferred Shares reflect an assessment of the underlying funds' ability to make regular dividend payments and its mandatory redemption in August 2040 or if necessary to affect a partial redemption to cure an asset coverage breach beforehand. Both Moody's coverage ratios as well as the Investment Company Act of 1940 (1940 Act) coverage ratios are all substantially in excess of the preferred share obligations inclusive of projected dividend expenses. The organization of the funds, and portfolio investment practices in addition to deleveraging protocols spelled out in the VRDP statement of rights and preferences (their charter) represent additional qualitative positives in support of Moody's rating conclusion.

The Prime-1 ratings reflect Moody's assessment that VRDP shareholders will be able to tender their shares unconditionally to Citibank, N.A. , the liquidity provider. The liquidity provider agrees to purchase the shares that are not successfully remarketed on any business day with a 7-day tender notice for sale. As such, Moody's short-term ratings associated with the VRDP Shares are linked to the creditworthiness of the liquidity provider and may change whenever the short-term rating of the bank is changed or if the liquidity provider itself changes. The liquidity agreement has no automatic termination events or conditions precedent to funding, making it an unconditional agreement to purchase unremarketed shares. The Prime-1 rating will expire with the termination of the VRDP Shares purchase agreement, currently scheduled for August 18, 2011, approximately one year from the settlement date of the respective offerings.

Moody's notes that mandatory tender events in the purchase agreements are automatic and address "roll over" risk of the liquidity purchase agreement. The occurrence of these events would put in motion a notification process whereby VRDP Shareholders (through the tender and paying agent) are apprised of a mandatory tender. Included in the mandatory tender events are the following: missed monthly dividend, downgrade of the liquidity provider's short term rating to Prime-3, failure to pay monthly liquidity provider fee (if declared a mandatory tender event by the liquidity provider), obtainment of an alternate purchase agreement, declaration of a special rate period, breach of the effective leverage covenant referred to below continued for 60 days (if declared a mandatory tender event by the liquidity provider) and the occurrence of an extraordinary corporate event of the liquidity provider. If a remarketing event following a mandatory tender fails, then the liquidity provider is unconditionally obliged to purchase the VRDP Shares subject to a mandatory tender for purchase by the liquidity provider.

Such obligation is unconditional and irrevocable. The liquidity provider also has a mandatory purchase obligation with respect to all outstanding VDRP Shares upon termination of the VRDP Shares purchase agreement. In the event of such mandatory purchase or a failed full or partial remarketing, the liquidity provider and any other holder of VRDP Shares is entitled to earn dividends stepped-up to the full maximum rate, calculated as a spread to a base rate which escalates over time.

VRDP shareholders will have the option to tender their VRDP Shares for remarketing and purchase on any business day not less than seven days after delivery of a notice of tender, to a tender and paying agent appointed by the funds at the purchase price. The remarketing agent will use its best efforts to remarket any VRDP Shares so tendered. In the event no remarketing occurs on or before the relevant purchase date, or VRDP Shares remain unsold pursuant to an attempted remarketing, the tender and paying agent will deliver all unsold VRDP Shares to the liquidity provider for purchase on such purchase date.

Moody's Aaa long-term ratings assigned to the VRDP Shares reflect the adequacy of portfolio assets to support preferred shares which are scheduled to mandatorily redeem in 2040. The rating is supported by modest leverage, strong coverage ratios and asset maintenance procedures which require funds to delever if coverage ratios are breached. This is in addition to redemption requirements which supplement the 1940 Investment Company Act.

Each fund is required to redeem an amount of rated preferred shares when these exceed 45% of fund managed assets to bring the fund back into compliance with that ratio. In addition, the liquidity profile of each portfolio is consistent with the collateral discount factors that seek to simulate pricing stress in the event of a forced liquidation of assets to meet a mandatory redemption. In this connection, Moody's historical asset coverage levels for each fund, since their inception, have generally not declined below Moody's minimum basic maintenance amounts. The credit quality of portfolio assets and investment strategies to diversify by issuer and sector also support asset coverage levels.

At the same time, 1940 Act asset coverage ratios, which are presently in excess of 300%, have consistently been maintained at levels in line with Moody's ratings. Given levels of overcollateralization and the types of assets owned by the funds, the Aaa ratings reflect Moody's view that the funds will pay the VRDP full liquidation preference amounts plus accumulated dividends and certain fund expenses upon redemption, either due to a mandatory or voluntary redemption, including the redemption of VRDP Shares in approximately 30 years from the settlement date of the respective offerings.

That said, Moody's long-term ratings may be downgraded if asset coverage levels decline or in the event future changes to any of the funds' capital structures are deemed to restrict a fund's ability to meet dividends as well as preferred share optional or mandatory redemptions. Moody's observes that excessive concentrations could also adversely impact its long term credit ratings.

Rated leverage levels is expected to remain at current levels after the existing preferred securities are refinanced. These range from a low of 36% to a high of 40% of managed assets, respectively. Each fund also employs additional leverage in the form of tender option bonds which boost investable assets. Moody's notes that asset coverage tests and redemption provisions will also constrain these "effective" leverage levels. In parallel, over the life of the liquidity agreement with Citibank NA, the funds will adhere to an asset coverage test which mandates that each fund delever when "effective" leverage exceeds 45%.

At about the time of their issuance, asset coverage levels for each of the funds are as follows:

Moody's (>1.0x) 1940 Act (>2.0x)

• Nuveen California Quality Income Municipal Fund, Inc. (NUC), 1.3X, 3.1X

• Nuveen California Select Quality Municipal Fund, Inc. (NVC), 1.3X, 3.15X

• Nuveen New York Investment Quality Municipal Fund, Inc. (NQN), 1.35X, 3.41X

• Nuveen New York Select Quality Municipal Fund, Inc. (NVN), 1.39X, 3.20X

Once issued, proceeds from the VRDP Shares will be used to redeem the outstanding ARPS issued by each of the funds. This will be achieved by segregating sufficient cash and deposit securities plus dividends payable to redemptions for distribution to registered owners following the requisite notification period. The Aaa ratings on the following ARPS are affirmed:

• Nuveen California Quality Income Municipal Fund, Inc. (NUC), Series M, W and F

• Nuveen California Select Quality Municipal Fund, Inc. (NVC), Series T, W and TH

• Nuveen New York Investment Quality Municipal Fund, Inc. (NQN), Series M, T and F

• Nuveen New York Select Quality Municipal Fund, Inc. (NVN), Series T, W and TH

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.

The principal methodology used in rating the issues with respect to their short-term ratings was Variable Rate Instruments Supported by Third-Party Liquidity Providers, published in November 2006. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found Moody's website.

The long-term ratings approach uses asset-specific advance rates over a predetermined short-time horizon to calculate the market value risk of the fund's investment portfolio as a whole for structures with triggers that cause partial or full liquidation of the investment pool.

The credit ratings assigned to preferred stock issued by these funds were evaluated using factors we believe to be relevant to the credit profile of each issuer, such as the objectives of the fund, its strategies for achieving its objectives, and the management characteristics of its sponsor. These attributes are compared against those of other funds and these ratings are believed to be comparable to ratings assigned to preferred stock issued by closed end funds of similar risk.

REGULATORY DISCLOSURES

Information sources used to prepare the credit ratings are, the following: parties involved in the ratings, parties not involved in the ratings and public information

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

The last rating actions taken with respect to these funds occurred when ratings of Aaa were originally assigned by Moody's to these tranches and are listed below:

• Nuveen California Quality Income Municipal Fund, Inc. (NUC), July 27, 2001

• Nuveen California Select Quality Municipal Fund, Inc. (NVC), September 25, 1991

• Nuveen New York Investment Quality Municipal Fund, Inc. (NQN), March 14, 1991

• Nuveen New York Select Quality Municipal Fund, Inc. (NVN), September 25, 1991

Moody's Investors Service adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from reliable sources; however, Moody's Investors Service does not and cannot in every instance independently verify, audit or validate information received in the rating process.

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

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

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 Prime-1/Aaa ratings to Nuveen VRDP Shares of New York and California closed-end funds
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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