Fitch Takes Rating Actions on Nuveen Muni CEF Preferred Shares

Fitch Ratings has taken the rating actions listed below for the following Variable Rate Demand Preferred Shares (VRDP Shares) issued by three separate Nuveen closed-end funds. The funds are managed by Nuveen Fund Advisors, LLC (NFA) and subadvised by Nuveen Asset Management, LLC (NAM).

Nuveen AMT-Free Municipal Income Fund (NEA)

$219,000,000 of VRDP Shares, Series 1, final mandatory redemption on June 1, 2040

--Long-term rating affirmed at 'AAA';

--Short-term rating downgraded to 'F1'.

Nuveen California AMT-Free Municipal Income Fund (NKX)

$35,500,000 of VRDP Shares, Series 2, final mandatory redemption on June 1, 2040

--Long-term rating affirmed at 'AAA';

--Short-term rating downgraded to 'F1'.

Nuveen New York AMT-Free Municipal Income Fund (NRK)

$50,000,000 of VRDP Shares, Series 4, final mandatory redemption on June 1, 2040

--Long-term rating affirmed at 'AAA';

--Short-term rating downgraded to 'F1'.

Fitch affirms the long-term ratings for the VRDP Shares listed above and has downgraded the short-term ratings based on the financial strength of their liquidity provider Deutsche Bank Trust Company Americas (DBTCA, 'A/F1' Outlook Negative).

On May 19th, among other bank rating actions, Fitch downgraded the ratings of DBTCA and parent Deutsche Bank AG to 'A/F1'/Outlook Negative from 'A+/F1+'/Outlook Negative. Based on this action, Fitch downgrades the short-term ratings of the VRDP Shares listed above. No other Nuveen preferred share ratings are impacted these bank rating actions.

KEY RATING DRIVERS

The 'AAA' long-term ratings of the VRDP Shares primarily reflect:

--Sufficient asset coverage provided to the preferred shares as calculated per each fund's over-collateralization (OC) tests;

--The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines;

--The legal and regulatory parameters that govern each fund's operations;

--Both the short- and long-term ratings also reflect the capabilities of NFA as investment advisor and NAM as subadvisor.

The 'F1' short-term ratings of the VRDP Shares primarily reflect:

--The credit strength of the VRDP Shares' liquidity provider DBTCA ('A/F1', Outlook Negative);

--The terms and conditions of the VRDP Shares purchase agreements.

FUND PROFILES

NEA, NKX and NRK are closed-end management investment companies regulated by the Investment Company Act of 1940. The funds invest in municipal securities that are exempt from regular federal and any applicable state income taxes. The fund may invest up to 20% of assets in below investment grade and or unrated securities.

FUND LEVERAGE

As of April 30, 2015, NEA had approximately $1,832 million in assets. Total leverage on a pro forma consolidated basis consisted of approximately $500.9 million of preferred shares including Series 1 VRDP Shares, and $152.2 million of tender option bond obligations.

As of April 30, 2015, NKX had approximately $1,124.3 million in assets. Total leverage on a pro forma consolidated basis consisted of approximately $327.6 million of preferred shares including Series 2 VRDP Shares, and $47.9 million of tender option bond obligations.

As of April 30, 2015, NRK had approximately $1,936.9 million in assets. Total leverage on a pro forma consolidated basis consisted of approximately $567.8 million of preferred shares including Series 4 VRDP Shares, and $114.1 million of tender option bond obligations.

ASSET COVERAGE

As of April 30, 2015, asset coverage for the total outstanding preferred shares of NEA, NKX and NRK, as calculated in accordance with the Investment Company Act of 1940, was in excess of the minimum asset coverage of 225% required by the funds' governing documents for the preferred shares.

As of April 30, 2015, the effective leverage ratio for NEA was 35.6%, NKX 33.4% and NRK 35.2%. These effective leverage ratios are below the 45% maximum effective leverage ratio allowed by the funds' governing documents for the preferred shares.

STRUCTURAL PROTECTIONS

In the event of asset coverage declines, the funds' governing documents require the funds to reduce leverage in order to restore compliance with the applicable asset coverage test.

Failure to cure a breach of the asset coverage requirement by the allotted cure date results in mandatory preferred share redemption. If a fund is in breach, it must redeem sufficient preferred shares to restore compliance. To facilitate redemption, the funds will deposit sufficient funds with a third-party tender and paying agent.

For VRDP Shares, a breach of the effective leverage ratio is a breach of the fee agreement with the liquidity provider, and, at the option of the liquidity provider, may result in mandatory tender of VRDP Shares of the applicable series for remarketing (see VRDP Purchase Obligation section below for additional details). However, in the event of a breach, Fitch expects the funds to redeem a sufficient number of preferred shares or reduce the amount of tender option bonds (TOBs) in order to restore compliance.

For the asset coverage and effective leverage ratio tests, the total market value exposure periods (i.e. the pre-specified time period allotted for valuation, cure and redemption in the event of a breach) are within the 60 business day guidelines provided in Fitch's criteria.

VRDP PURCHASE OBLIGATION

The short-term rating assigned to the VRDP Shares is directly linked to the short-term creditworthiness of the liquidity provider. The VRDP Shares are supported by a purchase agreement to ensure full and timely payment for all tendered VRDP Shares plus any accumulated and unpaid dividends. The purchase agreement is unconditional and irrevocable.

The VRDP purchase agreement requires the liquidity provider to purchase all VRDP Shares of the applicable series tendered for sale that were not successfully remarketed. The liquidity provider must also purchase all outstanding VRDP Shares of the applicable series if the fund has not obtained an alternate purchase agreement prior to the termination of the purchase agreement being replaced or following the downgrade of the liquidity provider's rating below 'F2' (or equivalent).

The role of the liquidity provider under the fee agreement relating to the purchase obligation has a scheduled termination date. Subsequent to the scheduled termination date, the fee agreement can be extended with the existing liquidity provider, or a new liquidity provider may be selected. Any future changes to the terms of the fee agreements or any prospective replacement that weakens the structural protections discussed above may have negative rating implications.

STRESS TESTS

Fitch performed various stress tests on the funds to assess the strength of the structural protections available to the VRDP Shares compared to the rating stresses outlined in Fitch's closed-end fund rating criteria. These tests included determining various 'worst case' scenarios where the funds' leverage and portfolio composition migrated to the outer limits of their operating and investment guidelines.

Only under remote circumstances, such as increasing the funds' issuer concentration, while simultaneously migrating the portfolios to a mix of 80% 'BBB', 10+ years to maturity bonds and 20% high yield bonds, did the asset coverage available to the VRDP Shares fall below the 'AAA' long-term rating level, and instead passed at an 'AA' long-term rating level.

Given the highly unlikely nature of the stress scenarios, and the minimal rating impact, Fitch views the funds' permitted investments, municipal issuer diversification framework and mandatory deleveraging mechanisms as consistent with 'AAA' long-term ratings.

Short-term ratings assigned to the remarketable VRDP Shares were not subject to the above stress tests as these are linked directly to the short term rating of the liquidity provider.

THE FUND ADVISOR

The funds' investment advisor is NFA, a subsidiary of Nuveen. NFA is responsible for each fund's overall investment strategies and their implementation. The sub-advisor, NAM, is a subsidiary of NFA that oversees the funds' day-to-day operations. Nuveen and its affiliates had nearly $233 billion of assets under management as of March 31, 2015.

RATINGS SENSITIVITIES

The ratings assigned to the preferred shares may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of each fund, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause ratings to be lowered by Fitch.

Certain terms relevant to key VRDP structural protections, including minimum asset coverage and the effective leverage ratio are set forth in the fee agreement relating to the purchase agreement and are renewed on a periodic basis. Any future changes to these terms that weaken the structural protections may have negative rating implications.

The short-term rating assigned to the VRDP Shares of each series may also be sensitive to changes in the financial condition of the liquidity providers. A downgrade of a liquidity provider to 'F2' would result in a downgrade of the short-term ratings of the applicable VRDP Shares to 'F2,' absent other mitigants. A downgrade below 'F2', on the other hand, would not necessarily result in a downgrade of the short-term rating of the applicable VRDP Shares, given the features in the transactions that would result in a mandatory tender of the VRDP Shares for remarketing, or purchase by the liquidity provider in the event of a failed remarketing.

The funds have the ability to assume economic leverage through derivative transactions which may not be captured by the minimum asset coverage test or effective leverage ratio. The funds do not currently engage in speculative derivative activities and do not envision engaging in material amounts of such activity in the future. In fact, such activity is limited by the funds' investment guidelines and could run counter to their investment objectives of achieving tax-exempt income. Material derivative exposure in the future could have potential negative rating implications if it adversely affects asset coverage available to rated preferred shares.

For additional information about Fitch rating guidelines applicable to debt and preferred stock issued by closed-end funds, please review the criteria referenced below, which can be found on Fitch's web site at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

The sources of information used to assess this rating were the public domain and Nuveen Fund Advisors.

Opt-in to receive Fitch's forthcoming research on closed-end funds:

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Applicable Criteria and Related Research:

--'Rating Closed-End Fund Debt and Preferred Stock' (Sept. 4, 2014);

--'Global Rating Criteria for Asset-Backed Commercial Paper' (Oct. 30, 2014);

--'Leveraged Closed-End Funds Weather U.S. Rate Shock Scenarios' (Oct. 7, 2014).

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985158

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