michael davern, cfa

NOT FDIC INSURED MAY LOSE VALUE NOT BANK GUARANTEED

MUNICIPAL MARKET UPDATE

May 7, 2014

Michael S Davern, CFA

SVP, Senior Market Strategist

Municipals Have Been Resilient During Uncertain Environments

*As of 4/30/14. Source: barcaplive.com. Past performance is no guarantee of future results. All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Index returns include reinvestment of income and do not reflect investment advisory and other fees that would reduce performance in an actual client account. Indexes are unmanaged and unavailable for direct investment.

5.51% Average

Annualized Return

2

Slowly Shifting to Better Economic Growth in 2014

> U.S. economic growth picks up in the second half as the economy continues to slowly recover

> Unemployment declines in 2014 and the pace may accelerate with the ending of long term unemployment insurance

> Despite better growth, inflation remains contained, although slightly higher than 2013

> The Fed will complete tapering the quantitative easing program in 2014

> The 10-year Treasury yield will generally remain in the 2.75% to 3.25% range.

> Municipals will outperform Treasuries, as better technicals favor municipal outperformance

There are risks on the horizon, but there are technical and

fundamental reasons to remain constructive on municipal bonds

Certain statements may be deemed forward-looking statements. Please note that any such statements are not guarantees or intended to constitute a prediction of any future performance; actual results or developments may differ materially from those projected.

3

Why are Bond Yields so Low?

Short Covering?Chinese Bank purchasesRates are high relative to rest of Developed WorldEM growth slowing ROW growth ratesDeclining Federal DeficitPension buying at long end; Bank buying at the short endAccommodative Central BanksWorldwide Inflation lowFlight to safety bidLower expected Endpoint

To get rates up: Growth > 4%; Inflation >2%; End of Fear Trade;

Fed Tightening to start in 2015

Certain statements may be deemed forward-looking statements. Please note that any such statements are not guarantees or intended to constitute a prediction of any future performance; actual results or developments may differ materially from those projected.

4

16 Consecutive Quarters of Positive Tax Revenue Growth for States

Source: The Nelson A. Rockefeller Institute of Government, State Revenue Report No. 95, April 2014.

5

Defaults Return to Pre-Crisis Levels

Latest data available. Data represents defaults on the entire universe of bonds, both rated and unrated.Source: Industry Overview, Municipals Weekly, Bank of America/Merrill Lynch Research, April 25, 2014.*Chapman Strategic Advisors, LLC.

6

Only two Chapter 9 bankruptcy filings occurred in the first quarter of 2014 –an Arkansas solid waste district and a Mississippi regional hospital*

Chapter 9: Not All Municipal Distress is the Same for Bondholders

Best OUTCOME FOR BONDHOLDERS Worst

Central Falls, RIHarrisburg, PA

American AirlinesJefferson County, AL

Vallejo, CAStockton, CA

San Bernardino, CADetroit, MI

• Central Falls makes bondholders top priority

• Harrisburg avoids BK with State support

• American Airlines airport facility leases held value

• Enterprise revenue bonds were deemed secure in the Jefferson County case

• CalPERS remains an issue

• Some selective defaults; others paid in full

• Potential cuts for bondholders

• GO pledge may be considered unsecured

• Pensions can be altered

• Some selective defaults; others paid in full

7

2014 Begins with Municipal Mutual Fund Inflows

Source: ICI.org, Weekly Estimated Long-Term Mutual Fund Flows.

8

“In 2014, Americans will pay $3.0 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2% of income.” – Tax Foundation

Taxable-Equivalent Yield of a 3% Tax-Exempt Municipal Bond

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Source: Bloombergbriefs.com, April 30, 2014. Taxable equivalent yield of a three percent tax-exempt municipal bond yield depending on the individual state income tax rate. The tax rates for the highest earners include the 39.6 percent federal income tax, the top individual income tax rate for a given state and the 3.8 percent Medicare tax on investment income.

The taxable equivalent yield represents the yield that must be earned on a fully taxable investment to equal the yield on a municipal investment on an after-tax basis. With respect to investments that generate qualified dividend income that is taxable at a maximum rate of 20%, the taxable equivalent yield is lower.

The tax-exempt yields presented are for illustration purposes only and do not represent or predict the tax-exempt yield of any Nuveen investment. The yields do not take into account certain items such as the effects of the federal alternative minimum tax or capital gains taxes. In addition, some income may be subject to state and local taxes. Income from municipal bonds could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliance conduct of a bond issuer Neither Nuveen Asset Management, LLC nor its employees provide legal or tax advice. You must consult with your personal legal or tax advisor regarding your personal circumstances.

2014 New Issue Supply is Expected to be Below Average

Securities Industry and Financial Markets Association*Citi Research, U.S. Municipal Strategy Municipal Market Comment, February 21, 2014.

10-year average:$376.03

10

According to the Bond Buyer, through April 30, 2014, new issuance is down 26% versus the same time last year. This translates to a $245 billion annualized rate of issuance for 2014.

Low Rate Environment Leading to More Calls;Result: Lower Net Supply

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Source: Barclays Research. Net new issuance equals municipal issuance minus advance refundings, current refundings and maturing bonds,

Municipals’ Value Relative to Treasuries

Source: Bloomberg. Fair value Municipal 30-Year Index AAA General Obligation bonds, 30-year U.S. Treasury yields. Past performance is no guarantee of future results.

Current ratio: 1.20Average ratio: 1.05

12

Recent Yield Curve Shift Heavily Duration Oriented

Source: Thomson Reuters MMD. Past Performance is no guarantee of future results.

13

BBB and High Yield Municipal Spreads Remain Wide

Source: Standard & Poor’s AAA and BBB municipal bond yield curves for bonds due in 20 years, Barclays for High Yield Index, Thompson Reuters. Charts show data to the earliest period available. Past performance is no guarantee of future results. Ratings shown are from S&P and are subject to change. AAA,AA,A, and BBB are investment grade ratings; BB,B, CCC/CC/C and D are below-investment grade ratings.

HY-AAA spread average: 240 bps

BBB-AAA spread average: 102 bps

139 bps

356 bps

14

High Yield Municipals are Cheap Relative to High Yield Corporates

15

Average: 0.75

Current Ratio: 1.35

Current Muni Yield: 6.78%

Current Corp Yield: 5.04%

Source: Barcaplive. Barclays High Yield Municipal Index & Barclays U.S. High Yield Corporate Index. Past performance is no guarantee of future results.

2014 Outlook

Opportunities

> Supply and demand characteristics have shifted

> States’ fiscal conditions are improving broadly

> Incidence of payment defaults is declining but higher versus pre-crisis levels

> In our opinion, the best value in the municipal market is in bonds with wide credit spreads

Challenges

> While defaults could remain low, headline ratings downgrades are outpacing upgrades

> Headline risks can affect liquidity and pricing

> Fed winding down bond purchases

Investing involves risk, including possible loss of principal. This information should not be relied upon as investment advice or recommendations. Additional disclosures are provided on page 23.

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Appendix

Longer Maturities Underperformed in 2013

Source: Barcaplive.com. Data as of 12/31/13. 1, 5, 10, 20 and 22+ year returns based on segments of the Barclays Municipal Bond Index: Barclays 1-Year Municipal Bond Index, Barclays 5-Year Municipal Bond Index Barclays 10-Year Municipal Bond Index, Barclays 20-Year Municipal Bond Index, Barclays Long Bond Municipal Bond Index; high yield bonds by the Barclays High Yield Municipal Bond Index. Past performance is no guarantee of future results. All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Index returns include reinvestment of income and do not reflect investment advisory and other fees that would reduce performance in an actual client account. Indexes are unmanaged and unavailable for direct investment.

18

Longer Maturities Have Outperformed Year to Date 2014

Source: Barcaplive.com. Data as of 4/30/14. 1, 5, 10, 20 and 22+ year returns based on segments of the Barclays Municipal Bond Index: Barclays 1-Year Municipal Bond Index, Barclays 5-Year Municipal Bond Index Barclays 10-Year Municipal Bond Index, Barclays 20-Year Municipal Bond Index, Barclays Long Bond Municipal Bond Index; high yield bonds by the Barclays High Yield Municipal Bond Index. Past performance is no guarantee of future results. All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Index returns include reinvestment of income and do not reflect investment advisory and other fees that would reduce performance in an actual client account. Indexes are unmanaged and unavailable for direct investment.

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The Way Rates Rise Can DetermineHow Fixed Income May React

Period 1 2/4/94-2/1/95

Period 2 6/30/99-5/16/00

Period 3 6/30/04-6/29/06

Current Period (4/30/14)

Starting Fed Funds Target Rate Level1

3% 4.75% 1% 0-0.25%

Number of Hikes 7 6 17 ?

Magnitude (total increase)

3.00% 1.75% 4.25% ?

Duration 12 months 10 months 24 months ?

Yield Curve Steepness2 1.95% 1.40% 2.92% 3.14%

Barclays Municipal Bond Index Cumulative Return for Calendar Years Period3

11.38% 9.39% 13.39% ?

Other Economic Variables • Economy expanding above trend, inflation rising

• Pre-emptive tightening

• Strong economy, full employment, inflationary concerns

• Pre-emptive tightening

• Low inflation, trend-like growth

• Removal of policy accommodation at a measured pace

• Low inflation and low wage growth

• Fed expects to maintain an accommodative environment through 2014

• Tightening will likely be a normalization of policy.

Source: Thompson Reuters MMD, newyorkfed.org, barcaplive.com, Nuveen Asset Management. Data shown applies to the actual time periods noted in the table. 1. www.newyorkfed.org/markets/statistics/ dlyrates/fedrate.html. 2. Yield difference between MMD 2- and 30-year yields. 3. barcaplive.com. Returns Period 1 from 12/31/93 to 12/31/95, Period 2 from 12/31/98 to 12/31/00, Period 3 from 12/31/03 to 12/31/06. Different benchmarks and economic periods will produce different results. Index returns include reinvestment of income and do notreflect investment advisory and other fees that would reduce performance in an actual account. All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Each period has its own specific factors that may help or hurt the total returns of bonds. These may be economic in nature or technically driven. Past performance is no guarantee of future results.

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Municipal Bonds Have Historically Defaulted at Rates Lower Than Equivalently Rated Corporates

1 Special Comment: U.S. Municipal Bond Defaults and Recoveries, 1970-2012, Moody’s Investors Service, May 2013. The universe represents 16,000 bonds rated by Moody’s in this study.Past performance is no guarantee of future results.

5 Year History 10 Year History

Rating Corporate Municipal Difference Corporate Municipal Difference

Aaa 0.11% 0.00% 0.11% 0.50% 0.00% 0.50%

Aa 0.38% 0.01% 0.37% 0.92% 0.01% 0.91%

A 0.87% 0.02% 0.85% 2.48% 0.05% 2.43%

Baa 1.88% 0.12% 1.76% 4.74% 0.30% 4.44%

Ba 10.20% 1.63% 8.57% 19.72% 2.85% 16.87%

B 24.68% 10.02% 14.66% 42.00% 13.88% 28.12%

Caa-C 50.61% 10.74% 39.87% 69.63% 12.66% 56.97%

Moody’s Average Cumulative Default Rates, 1970-2012, Municipals vs. Corporates1

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Correlation with High Yield Municipals is Low

Municipal high yield bonds tend to be less cyclical than corporate bonds due to the essential, public purpose which is often involved. This helps to explain the low correlations.

Source: Zephyr StyleADVISOR; data as of 4/30/14. Correlations for these indices are for period 7/1/99 to 4/30/14, dating back to inception of the Nuveen High Yield Municipal Bond Fund on 6/7/99. Correlation is a statistical measure of how two securities move in relation to each other. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation (a correlation co-efficient of -1) means that securities will move by an equal amount in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; their movements in relation to one another are completely random. For a full description of the indices identified on this page, please refer to slides 24 and 25.

Past performance is no guarantee of future results. High yield or lower-rated bonds and municipal bonds carry greater credit risk, and are subject to greater price volatility. Additional disclosures are provided on page 23.

Barclays

High Yield

Muni

Barclays

U.S.

Corporate

High Yield

Barclays

U.S.

Aggregate

Bond

Barclays

U.S.

Municipal

Bond

Barclays

U.S.

Corporate

Investment

Grade

Barclays

U.S.

Treasury

Long

Barclays

Global Ex

U.S.

Treasury

Bond

Barclays

Asset

Backed

Securities

Barclays

MBS

(fixed rate)

Barclays

Emerging

Market S&P 500

Barclays High Yield Muni 1

Barclays U.S. Corporate High Yield 0.47 1

Barclays U.S. Aggregate Bond 0.22 0.16 1

Barclays U.S. Municipal Bond 0.61 0.28 0.67 1

Barclays U.S. Corporate Investment Grade 0.37 0.55 0.83 0.65 1

Barclays U.S. Treasury Long 0.04 -0.17 0.83 0.5 0.55 1

Barclays Global Ex U.S. Treasury Bond 0.10 0.19 0.56 0.34 0.51 0.39 1

Barclays Asset Backed Securities 0.61 0.42 0.55 0.6 0.63 0.24 0.29 1

Barclays MBS (fixed rate) 0.13 -0.01 0.89 0.53 0.61 0.72 0.47 0.45 1

Barclays Emerging Market 0.40 0.70 0.47 0.39 0.68 0.18 0.35 0.47 0.36 1

S&P 500 0.23 0.64 -0.09 -0.02 0.20 -0.31 0.14 0.05 -0.16 0.54 1

Correlation Matrix: July 1, 1999 - April 30, 2014

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The Debate Over Muni Tax Exemption Continues; Projected Revenue Gain From Taxation is Likely Minimal

Value of repealing interest exclusion for new issues of state and local bonds (billions)

2013-2017 $22.3 (Morgan Stanley study)

2013-2022 $124.3 (U.S. Congress Committee)

Value of eliminating popular deductions (ex-health insurance) (billions)

2013-2022 $2,625 (U.S. Congress Committee)

Why is Tax Exemption at Risk?

>Government seeking new revenues

>Everything is on the table

>Exemption benefits taxpayers in the top tax brackets the most

>Municipal bonds deemed “inefficient” – yields are higher than they theoretically should be for highest tax bracket investors

Why Could Tax Exemption Remain?

>Benefit to issuers helps local communities

>Enhanced market access for smaller issuers

>Constitutional arguments: states’ rights; contract law

>Taxation generates minimal new revenue if not retroactive

>Recent events underscore need for capital (e.g., 9/11, Katrina, Sandy, “Great Recession”)

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Risks and Important Disclosures

Clients should consult their financial advisors regarding unknown financial terms and concepts.

This information is intended for use by clients with their financial advisors. Clients should consult their financial advisors before making any investment decisions. Financial advisors should consider the suitability of the manager, strategy and program for itsclients on an initial and ongoing basis.

This presentation is for general information purposes only and should not be construed as specific tax or investment advice. Past performance does not guarantee future results. Charts are for illustrative purposes only and do not reflect any Nuveen investment.

A WORD ON RISKInvesting involves risk; principal loss is possible. Debt or fixed income securities are subject to credit risk, market risk and interest rate risk. The value of and income generated by debt securities will decrease or increase based on changes in market interest rates, the credit quality of issuers and general economic and market conditions. As interest rates rise, bond prices fall. Credit risk refers to an issuer’s ability to make interest and principal payments when due. High yield or lower rated bonds carry heightened credit risk and potential for default. Investors investing in municipal securities should contact their tax advisor regarding the suitability of tax-exempt investments in their portfolio. If sold prior to maturity, municipal securities are subject to gain/losses based on the level of interest rates, market conditions and the credit quality of the issuer. Income may be subject to the alternative minimum tax (AMT), and in some cases other federal income taxes, and/or state and local taxes, based on state of residence. Income from municipal bonds held by a portfolio could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer.

The statements contained in this presentation are the opinions of Nuveen Asset Management, LLC and data available at the time ofpublication. It contains information from third party sources believed to be reliable but are not guaranteed as to accuracy and not intended to be all inclusive. It does not constitute an offer, solicitation, or recommendation regarding securities or investment strategy and is not intended to predict or depict performance of any investment. Past performance is no guarantee of future results.

Nuveen Asset Management, LLC is a registered investment adviser and an affiliate of Nuveen Investments, Inc.

24

Index Definitions

The Municipal Market Data 10- and 30-year insured scales are compilations of the previous day’s actual trades for AAA-rated 10- and 30-year insured bonds, respectively.

The Barclays 1-Year Municipal Bond Index measures the returns of general obligation bonds, revenue bonds, insured bonds and pre-refunded bonds, all in the maturity range of 1 to 2 years.





The Barclays Asset Backed Securities Index has three subsectors: credit and charge cards, autos and utility. The index includes pass-through, bullet and controlled amortization structures. It includes only the senior class of each ABS issue and the ERISA-eligible B and C tranche. The Manufactured Housing sector was removed as of January 1, 2008, and the Home Equity Loan sector was removed as of October 1, 2009.

The Barclays Emerging Market Index is an unmanaged index of fixed and floating rate USD-denominated debt from emerging markets in the Americas, Europe, Middle East, Africa and Asia.

The Barclays Ex U.S. Treasury Bond Index includes public obligations of the U.S. Treasury with a remaining maturity of one year or more. Securities must be a U.S. Treasury security to be included.

The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if they fall within the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. The index excludes emerging market debt.

25

Index Definitions

The Barclays U.S. Corporate Investment Grade Index includes publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity and quality requirements. To qualify, bonds must be SEC-registered. Securities must be an investment grade credit security.

The Barclays High Yield Municipal Bond Index is an unmanaged index composed of municipal bonds rated below BBB/Baa.

The Barclays Municipal Bond Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and pre-refunded bonds.

The Barclays Long Municipal Bond Index measures the returns of general obligation bonds, revenue bonds, insured bonds and pre-refunded bonds, with maturities of more than 22 years.

The Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities and asset-backed securities.

The Barclays U.S. Treasury Index includes public obligations of the U.S. Treasury. Treasury bills are excluded by the maturity constraint but are part of a separate Short Treasury Index. In addition, certain special issues, such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS, are excluded. STRIPS are excluded from the index because their inclusion would result in double-counting. Barclays Capital U.S.

The Barclays U.S. Treasury Long Index includes securities in the long maturity range of the U.S. Treasury Index. Securities must have a maturity of 10 years or more. The U.S. Treasury Index represents public obligations of the U.S. Treasury with a remaining maturity of one year or more.

The Barclays U.S. Mortgage-Backed Securities (MBS) Index covers agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARM) issued by Ginnie Mae (GNMA), Fannie Mae (FNMA) and Freddie Mac (FHLMC).

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy.

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michael davern, cfa

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