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Fitch Upgrades Claymore Dividend and Income Fund Pfd Shares to 'AAA'

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  Published in Business and Finance on Thursday, December 24th 2009 at 9:55 GMT by Market Wire
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NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has upgraded to 'AAA' from 'AA' the rating assigned to the following auction market preferred shares (AMPS) issued by Claymore Dividend and Income Fund (NYSE: DCS), a closed-end fund sub-advised by Manning & Napier Advisors, Inc:

--Series M7 - 400 shares, upgraded to 'AAA' from 'AA';

--Series W7 - 400 shares, upgraded to 'AAA' from 'AA';

--Series F7 - 400 shares, upgraded to 'AAA' from 'AA'.

Fitch notes the following series of AMPS have been paid in full following the full redemption of outstanding shares:

--Series W28 - fully redeemed on Aug. 12, 2009;

--Series F28 - fully redeemed on Aug. 28, 2009.

The upgrade reflects the sufficiency of current asset coverage ratios, as well as adoption of Fitch's revised rating criteria for debt and preferred stock issued by closed-end funds.

Fitch evaluated DCS' capital structure in accordance with the Fitch OC Tests as outlined in the criteria report 'Closed-End Fund Debt and Preferred Stock Rating Criteria' published Aug. 17, 2009. Within this framework, Fitch reviewed the amount of discounted assets available to outstanding AMPS, portfolio diversification, quality of investment manager and other legal and structural considerations, and determined them to be consistent with a 'AAA' rating. The rating does not address the liquidity of the AMPS nor the ability to auction these shares at an auction date.

At the time of the upgrade, the Fund's overcollateralization tests, as calculated in accordance with the Fitch 'AAA' rating guidelines outlined in Fitch's closed-end fund rating criteria, is in excess of 100%, which is the minimum asset coverage deemed consistent with an 'AAA' rating. Also at the time of the upgrade, the Fund's asset coverage ratio, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), is in excess of 200%, which is the minimum asset coverage required by the 1940 Act.

A key component of Fitch's rating criteria for closed-end funds is the existence of redemption/de-leveraging procedures designed to redeem all, or a portion of outstanding AMPS in the event of a breach of certain asset coverage ratios, in order to restore asset coverage levels to an amount consistent with the assigned rating. DCS has adopted Fitch's revised ratings criteria for debt and preferred stock issued by closed-end funds, including incorporating updated redemption/de-leveraging procedures into the Fund's documents.

On Nov. 26, 2008 Fitch downgraded the AMPS issued by DCS to 'AA' from 'AAA' and placed them on Rating Watch Negative. These actions were taken due to material declines in DCS' portfolio market value due to exposure to financial institutions and certain derivative positions. Since that time, DCS has improved and stabilized asset coverage ratios by deleveraging the DCS portfolio and benefiting from the improved market conditions. The deleveraging activities undertaken included closing out all derivative positions, thus lowering the economic leverage of DCS. The Fund has also modified its investment strategy and appointed Manning & Napier Advisors, Inc. as sub-advisor. Fitch removed the AMPS from Rating Watch Negative on Aug. 19, 2009, reflecting the improved asset coverage and positive changes in portfolio strategy.

DCS is an investment company registered under the Investment Act of 1940 and invests primarily in dividend-paying common and preferred stocks. The Fund's inception date is Jan. 27, 2004 and had net assets of over $144 million as of Dec. 22,2009. Claymore Advisors, LLC, an affiliate of Claymore Securities, Inc., serves as the Fund's investment advisor.

Applicable criteria is available on Fitch's web site at '[ www.fitchratings.com ]': 'Closed-End Fund Debt and Preferred Stock Rating Criteria', dated Aug. 17, 2009.

Additional information is available at [ www.fitchratings.com ].

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: [ HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS ]. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '[ WWW.FITCHRATINGS.COM ]'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.