SEC Form N-CSRS filed by Ares Dynamic Credit Allocation Fund Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-22535

 

 

ARES DYNAMIC CREDIT ALLOCATION FUND, INC.

(Exact name of registrant as specified in charter)

 

1800 AVENUE OF THE STARS

SUITE 1400

LOS ANGELES, CALIFORNIA 90067

(Address of principal executive offices)(Zip code)

 

(Name and Address of Agent for Service)		Copy to:
Ian Fitzgerald 1800 Avenue of the Stars, Suite 1400 Los Angeles, California 90067		P. Jay Spinola, Esq. Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, New York 10019

 

Registrant’s telephone number, including area code: (310) 201-4100

 

Date of fiscal year end: December 31

 

Date of reporting period: June 30, 2024

 

 

 

Item 1. Report to Stockholders.

 

(a)       Report to Stockholders is attached herewith.

 

 

Ares Dynamic Credit Allocation Fund, Inc.
(NYSE: ARDC)

Semi-Annual Report

June 30, 2024

Ares Dynamic Credit Allocation Fund, Inc.

Contents

Letter to Shareholders					1
Fund Profile & Financial Data					4
Schedule of Investments					6
Statement of Assets and Liabilities					16
Statement of Operations					17
Statements of Changes in Net Assets					18
Statement of Cash Flows					19
Financial Highlights					20
Notes to Financial Statements					23
Proxy & Portfolio Information					43
Dividend Reinvestment Plan					44
Corporate Information					45
Privacy Notice					46
Directors and Officers					47

Ares Dynamic Credit Allocation Fund, Inc.

Letter to Shareholders

As of June 30, 2024

Dear Shareholders,

We thank you for your support of the Ares Dynamic Credit Allocation Fund, Inc. ("ARDC" or the "Fund") and recognize the trust and confidence that you have demonstrated in Ares through your investment in ARDC.

Throughout the first half of 2024, the Ares management team at ARDC employed a thoughtful and disciplined approach to investing and portfolio management in order to seek to position the Fund to benefit from the current higher market rate environment while reducing risk. This letter provides our assessment of the market environment, our portfolio strategy and opportunities that may lay ahead.

Economic Conditions and Market Update

The capital markets backdrop was generally healthy in the first half of 2024 as inflation gradually tempered and continued economic growth supported overall healthy corporate credit performance. By June 2024, Core PCE, the Federal Reserve's (Fed's) preferred inflation measure, decreased 160 bps year over year to 2.6%.¹​ Despite lower inflation, real GDP remained positive in the first half of the year, growing at an annual rate of 2.8% in second quarter 2024.²​

Supported by a healthy overall economy, corporate credit continued to perform well with healthy earnings growth and declining default rates. As measured by the S&P 500, corporate earnings increased an estimated 8.4% in the first half of the year,³​ while the last twelve-month default rates for leveraged loans and high yield decreased 90-100 bps from year-end 2023. By the end of June 2024, the default rates for leverage loans and high yield bonds decreased to 1.1% and 1.2%, respectively, well below their long-term historical averages of approximately 3%.⁴​ With a supportive backdrop, high yield bonds, leveraged loans and the S&P 500 generated total returns of 2.6%,⁵​ 4.4%⁶​ and 15.3%,⁷​ respectively, for the first six months of 2024.

Consistent with the broader credit markets, healthy corporate credit performance contributed to CLOs' investment performance. As one measure, BB CLOs generated total returns of 11.24% year to date in 2024, outperforming BB-rated corporate loans by over 700 bps.⁸​ CLOs continued to perform well with only 0.4% of defaulted assets held in CLO portfolios as of June 30, 2024.⁹​

As we look to the months ahead, we are closely monitoring macroeconomic and geopolitical conditions to assess developments that may affect ARDC. Against this backdrop, we are mindful that the labor market has shown signs of cooling, as the unemployment rate reached 4.1% by June 2024, a 40 bp increase year-to-date, and job openings decreased 7.9% in the first six months of the year.¹⁰​ These results further fueled anticipation of a shift to more accommodative monetary policy later in 2024.

In these markets, we believe our deep credit capabilities and our dynamic allocation strategy positions us to proactively manage exposures to identify relative value opportunities created by shifts in sentiment on rates, growth expectations, and idiosyncratic credit news positions. We remain focused on investment selection as we expect single-name dispersion to continue to be a notable source of potential risk in the coming months.

Portfolio Positioning and Performance

With elevated base rates prevalent throughout the first half of the year, we continued to find attractive risk adjusted returns in leveraged loans relative to high yield bonds, which generated higher spreads on similarly rated securities. For example, BB-rated loans generated over 100 bps of higher spreads relative to BB-rated bonds on average during the first six months of the year.¹¹​ As a result, we reduced ARDC's exposure to bonds by 400 bps to 34% while increasing exposure to loans. In addition, we continued to shift the portfolio to what we believe are higher credit quality investments. Reflecting this focus, we increased the Fund's allocation to first lien loans and bonds by 490 bps to 50.1% in the first half of the year and maintained over half of the portfolio in BB or higher rated investments.

In terms of our CLO positioning, we have slightly rotated out of CLO debt and into CLO equity, increasing our exposure to CLO equity by 90 bps in the first half of the year. Spread compression on CLO debt has created compelling near-term opportunities to increase our allocation to CLO equity,¹²​ which we believe will benefit from high cash on cash yields, well-priced locked up liabilities and long reinvestment periods that allow the manager to take advantage of loan market volatility. As an asset class, we remain constructive on CLOs as a whole as we believe the non-mark-to-market nature of CLO capital structures, active credit management and flexibility to actively manage the portfolio during dislocations should ultimately be accretive to returns for our investors. Underpinning our positive view of the opportunity are our deep credit capabilities and experience managing these assets, which includes the tracking of every loan held within every CLO the Fund holds on a daily basis.

Ares Dynamic Credit Allocation Fund, Inc.

Letter to Shareholders (continued)

As of June 30, 2024

We believe ARDC's portfolio is well positioned in this environment due to our highly diversified portfolio with low duration. Reflecting this disciplined approach to risk management, our portfolio is diversified across 241 issuers and 23 industries. The average position size across ARDC is 0.4% and the largest position is 1.2%.¹³​ ARDC's effective duration of 1.1 was approximately one-third of the high yield index at June 2024, which is consistent with our approach of operating with low interest rate risk in the Fund.

Supported by ARDC's positioning and our portfolio investment allocations, ARDC's performance remained strong through the first half of 2024. ARDC's year-to-date stock based total returns of 13.81% compared favorably to our peer set median of 9.35%,¹⁴​ and ARDC's year-to-date portfolio net investment total returns of 6.44% were also higher than the peer set median of 5.09%.¹⁵​ Over longer time horizons, including the past one, three and five years ended June 30, 2024, ARDC has outperformed the peer set median based on both stock-based total returns and portfolio net investment total returns.^14,15​

Looking Ahead

As the second half of 2024 begins, it remains unclear whether the Fed has succeeded in achieving a soft landing, though market participants are generally in agreement that rate cuts are very likely by the end of the year. We also continue to monitor potential headwinds including the 2024 elections and elevated geopolitical tensions. We believe ARDC is well positioned in this environment as we continue to leverage the strengths of the Ares platform, including our tenured portfolio managers and quantitative risk team and our balance sheet positioning with our low leverage profile to remain active and tactical in our rotation among asset classes, sectors and specific credits.

We appreciate the trust and confidence you have demonstrated in Ares through your investment in ARDC. We thank you again for your continued support.

Best Regards,

Ares Capital Management II LLC

Ares Dynamic Credit Allocation Fund, Inc.

ARDC is a closed-end fund that trades on the New York Stock Exchange under the symbol "ARDC" and is externally managed by Ares Capital Management II LLC (the "Adviser"), a subsidiary of Ares Management Corporation. ARDC's investment objective is to provide an attractive level of total return, primarily through current income and, secondarily, through capital appreciation by investing in a broad, dynamically-managed portfolio of below investment grade senior secured loans, high yield corporate bonds and collateralized loan obligation securities. Thank you again for your continued support of ARDC. If you have any questions about the Fund, please call 1-877-855-3434, or visit the Fund's website at www.arespublicfunds.com.

Note: The opinions of the Adviser expressed herein are subject to change without notice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed. This communication is distributed for informational purposes only and should not be considered investment advice or an offer of any security for sale. This material may contain "forward-looking" information that is not purely historical in nature. No representations are made as to the accuracy of such information or that such information will be realized. Actual events or conditions are unlikely to be consistent with, and may differ materially from, those assumed. Past performance is not indicative of future results. Ares does not undertake any obligation to publicly update or review any forward-looking information, whether as a result of new information, future developments or otherwise, except as required by law.

Indices are provided for illustrative purposes only and not indicative of any investment. They have not been selected to represent appropriate benchmarks or targets for ARDC. Rather, the indices shown are provided solely to illustrate the performance of well-known and widely recognized indices. Any comparisons herein of the investment performance of ARDC to an index are qualified as follows: (i) the volatility of such index will likely be materially different from that of ARDC; (ii) such index will, in many cases, employ different investment guidelines and criteria than ARDC and, therefore, holdings in ARDC will differ significantly from holdings of the securities that comprise such index and ARDC may invest in different asset classes altogether from the illustrative index, which may materially impact the performance of ARDC relative to the index; and (iii) the performance of such index is disclosed solely to allow for comparison on ARDC's performance to that of a well-known index. Comparisons to indices have limitations because indices have risk profiles, volatility, asset composition and other material characteristics that will differ from ARDC. The indices do not reflect the deduction of fees or expenses. You cannot invest directly in an index. No representation is being made as to the risk profile of any benchmark or index relative to the risk profile of ARDC. There can be no assurance that the future performance of any specific investment, or product will be profitable, equal any corresponding indicated historical performance, or be suitable for a portfolio.

This may contain information sourced from Bank of America, used with permission. Bank of America's Global Research division's fixed income index platform is licensing the ICE BofA Indices and related data "as is," makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofA Indices or any data included in, related to, or derived therefrom, assumes no liability in connection with their use and does not sponsor, endorse, or recommend Ares, or any of its products or services.

The ICE BofA US High Yield Index ("H0A0") tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market. Qualifying securities must have a below investment grade rating (based on an average of Moody's, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one-year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $100 million. Index constituents are capitalization-weighted based on their current amount outstanding times the market price plus accrued interest. Accrued interest is calculated assuming next-day settlement. Cash flows from bond payments that are received during the month are retained in the

Ares Dynamic Credit Allocation Fund, Inc.

Letter to Shareholders (continued)

As of June 30, 2024

index until the end of the month and then are removed as part of the rebalancing. Cash does not earn any reinvestment income while it is held in the index. The index is rebalanced on the last calendar day of the month, based on information available up to and including the third business day before the last business day of the month. No changes are made to constituent holdings other than on month end rebalancing dates. Inception date: August 31, 1986.

The Credit Suisse Institutional Leveraged Loan Index ("CSLLI") is designed to mirror the investable universe of the $US-denominated leveraged loan market. The index inception is January 1992. The index frequency is daily, weekly and monthly. New loans are added to the index on their effective date if they qualify according to the following criteria: 1) Loan facilities must be rated "5B" or lower. That is, the highest Moody's/S&P ratings are Baa1/BB+ or Ba1/BBB+. If unrated, the initial spread level must be Libor plus 125 basis points or higher. 2) Only fully-funded term loan facilities are included. 3) The tenor must be at least one year. 4) Issuers must be domiciled in developed countries; issuers from developing countries are excluded.

The Standard & Poor's 500, often abbreviated as the S&P 500, or just "the S&P", is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices.

REF: TC-03960

¹​ U.S. Bureau of Economic Analysis, Personal Consumption Expenditures Excluding Food and Energy, July 26, 2024.

²​ U.S. Bureau of Economic Analysis, Gross Domestic Product, Second Quarter 2024 (Advance Estimate), July 25, 2024.

³​ Yardeni S&P 500 Earnings Forecast, August 2, 2024

⁴​ J.P. Morgan Default Monitor, July 1, 2024. Represents the par weighted default rate for the respective asset classes. Historical averages based on the 25-year average default rate for high yield bonds and leveraged loans of 3.0% and 2.9%, respectively.

⁵​ Measured by the ICE BofA High Yield Master II Index ("H0A0").

⁶​ Measured by the Credit Suisse Leveraged Loan Index ("CSLLI").

⁷​ Bloomberg as of June 28, 2024.

⁸​ J.P. Morgan CLOIE Monitor for BB CLOs and Pitchbook U.S. BB Leveraged Loan Index as of June 30, 2024.

⁹​ Includes CLOs in their reinvestment period. BofA Global Research, "BAML CLO Factbook," with data from Bloomberg, Intex as of June 30, 2024.

¹⁰​ U.S. Bureau of Labor Statistics, August 2, 2024.

¹¹​ Measured by spreads on BB securities in the Credit Suisse Leveraged Loan Index ("CSLLI") and ICE BofA High Yield Master II Index ("H0A0").

¹²​ BofA Global Research, "BAML CLO Factbook," as of June 30, 2024.

¹³​ As of June 30, 2024. Diversification does not assure profit or protect against market loss.

¹⁴​ Market price-based total returns reflect annualized stock-based total returns assuming dividend reinvestment. Peer set includes the following closed end funds: ACP, AIF, BGB, BGH, DHF, DSU, GHY, HFRO, HNW, KIO and XFLT. Past performance is not indicative of future results.

¹⁵​ Net investment total returns reflect annualized NAV-based total returns assuming dividend reinvestment. Peer set includes the following closed end funds: ACP, AIF, BGB, BGH, DHF, DSU, GHY, HFRO, HNW, KIO and XFLT. Past performance is not indicative of future results.

Ares Dynamic Credit Allocation Fund, Inc.

Fund Profile & Financial Data

June 2024

Seeks attractive risk-adjusted total returns with a focus on high current income and an opportunity for capital appreciation.

Fund Highlights as of 6.30.24

Distribution Rate1​				9.47%
Managed Assets2​				$526M
Weighted Average Coupon				8.90%

1 Dividend per share annualized and divided by the June 30, 2024 market price per share. The distribution rate alone is not indicative of Fund performance.

2 Total assets of the Fund (including any assets attributable to financial leverage) minus accrued liabilities (other than debt representing financial leverage).

Ares Credit Group as of 6.30.24

AUM				$323.1B
Credit Investment Team				500+
Portfolio Companies				~3,400

Investment Approach

_● Dynamically allocates across investment opportunities primarily in high yield bonds, senior loans and CLO securities

_● Designed to navigate evolving market conditions through deep fundamental credit analysis and in-depth due diligence

_● Tenured team with 20+ year track record benefits from the market intelligence, relationships and resources of the Ares platform

Current Portfolio Mix as of 6.30.24

63.8% Floating Rate³​

3 Calculated as a percentage of debt securities only.

This data is subject to change on a daily basis. As of 6.30.24, the Fund held a negative traded cash balance of -2.6%.

Fund Overview and Characteristics as of 6.30.24

Ticker				ARDC
Market/Share				$14.89
NAV/Share				$14.72
Monthly Dividend				$0.1175
Number of Issuers				241
Number of Instruments				283
Average Position Size				0.35%
Weighted Average Loan YTM4​				7.75%
Weighted Average Bond YTM5​				7.05%
Weighted Average CLO YTM6​				10.95%
Effective Duration7​				1.06
Month-End Leverage8​				36.04%
Asset Coverage9​				5.87
Preferred Stock Asset Coverage10​				2.77
Expense Ratio11​				4.90%
Inception Date				11/27/2012
Common Shares Outstanding				22.9 million
NAV Ticker				XADCX
CUSIP				04014F102

4  The weighted-average gross yield to maturity on the pool of loans.

5  The weighted-average gross yield to maturity on the pool of bonds.

6  The weighted-average gross yield to maturity on the pool of CLO debt securities.

7  The effective duration measures a bond's sensitivity to interest rates.

8  As a percentage of total managed assets. The Fund utilizes leverage as part of its investment strategy and currently has borrowings under a credit facility as well as mandatory redeemable preferred shares. The Fund's leverage under the credit facility without the use of mandatory redeemable preferred shares was 17.03%.

9  Calculated pursuant to the Investment Company Act of 1940. Represents the ratio of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities outstanding. The Fund has $90 million aggregate principal outstanding on a $212 million revolving funding facility with an institutional lender, pursuant to which the Fund expects to borrow funds to make additional investments, subject to available borrowing base and leverage limitations.

10  Calculated pursuant to the Investment Company Act of 1940. Represents the ratio of the total assets of the Fund, less all liabilities and indebtedness not represented by senior securities, divided by sum of total outstanding debt and aggregate value of the involuntary liquidation preference of the preferred stock of $100 million.

11  Represents the ratio of annualized expenses, inclusive of interest expense and amortization of debt issuance, to net assets for the semi-annual period ended June 30, 2024.

Performance as of 6.30.24

				ARDC NAV				ARDC Market
Year to Date					6.44	%			13.81	%
3 Years					4.72	%			6.98	%
5 Years					5.44	%			9.30	%
Since Inception*					5.68	%			6.27	%

* Since Inception of fund (11/27/2012).
Source: Ares

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. The NAV total return takes into account the Fund's total annual expenses and does not reflect transaction charges. If transaction charges were reflected, NAV total return would be reduced. Since Inception returns assume a purchase of common shares at the initial offering price of $20.00 per share for market price returns or initial net asset value (NAV) of $19.10 per share for NAV returns. Returns for periods of less than one year are not annualized. All distributions are assumed to be reinvested either in accordance with the dividend reinvestment plan (DRIP) for market price returns or NAV for NAV returns.

www.arespublicfunds.com

Not FDIC-Insured. Not Bank Guaranteed, May Lose Value

Ares Dynamic Credit Allocation Fund, Inc.

Fund Profile & Financial Data (continued)

June 2024

Investment Strategy

The Fund invests primarily in a broad, dynamically managed portfolio of (i) senior secured loans ("Senior Loans") made primarily to companies whose debt is rated below investment grade; (ii) corporate bonds ("Corporate Bonds") that are primarily high yield issues rated below investment grade; (iii) other fixed-income instruments of a similar nature that may be represented by derivatives; and (iv) securities of collateralized loan obligations ("CLOs") and other asset-backed issuers. The Fund utilizes leverage as part of its investment strategy and may incur leverage in an aggregate amount of up to 33 1/3% of the Fund's Managed Assets by borrowing under a credit facility. Ares Capital Management II LLC, the Fund's investment adviser (the "Adviser"), is an affiliate of Ares Management Corporation ("Ares"). The Adviser will seek to implement the Fund's investment strategy through the application of several techniques, including: (i) investing in a diversified portfolio of loans and other debt investments across a broad range of industries with varying characteristics and return profiles; (ii) adhering to the established credit underwriting processes of Ares and doing substantial pre-investment credit analysis, utilizing publicly available credit and industry information as well as other information about the borrowers and issuers; (iii) monitoring the credit quality of the obligors in the Fund's investments and, as appropriate, on a risk adjusted return basis, selling investments in underperforming issuers; and (iv) holding cash and engaging in derivative credit and interest rate hedges. The Adviser will allocate the Fund's portfolio dynamically among investments in the various targeted credit markets to seek to manage interest rate and credit risk and the duration of the Fund's portfolio.

Top 10 Holdings¹⁴​ as of 6.30.24

Caesars Entertainment Inc					1.22	%
Power Solutions					1.22	%
Sprint					1.04	%
Chart Industries					1.03	%
Ford Motor Credit Company					0.99	%
HCA Healthcare Inc					0.93	%
Williams Cos Inc/The					0.93	%
Summit Materials Inc					0.92	%
Gems Education					0.92	%
Autodata, Inc.					0.91	%

14 Market value percentage may represent multiple instruments by the named issuer and/or multiple issuers being consolidated to the extent they are owned by the same parent company. These values may be different than the issuer concentrations in certain regulatory filings.

Industry Allocation¹²​ as of 6.30.24

12 Credit Suisse industry classifications weighted by market value. These values may be different than industry classifications in certain regulatory filings.

Ratings Distribution¹³​ as of 6.30.24

13 Based on S&P and/or Moody's rating. Credit quality is an assessment of the credit worthiness of an issuer of a security. AAA is the highest rating, meaning the obligor's capacity to meet its financial commitments is strong. As ratings decrease, the obligor is considered more speculative by market participants. Credit ratings apply only to the bonds and preferred securities in the portfolio and not to the shares of the fund which are not rated and will fluctuate in value.

This data is subject to change on a daily basis. As of 6.30.24, the Fund held a negative traded cash balance of -2.6%.

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans 61.2%^(b)(c)(d)​

				Principal Amount(a)​				Value(a)​
Automobiles & Components 1.7%
Clarios Global, LP, 1st Lien Term Loan, 3M SOFR + 3.00%, 8.34%, 05/06/2030				$	2,805			$	2,809
Wand NewCo 3, Inc., 1st Lien Term Loan, 1M SOFR + 3.75%, 9.09%, 01/30/2031					3,000				3,018
									5,827
Capital Goods 9.3%
Artera Services, LLC, 1st Lien Term Loan, 3M SOFR + 4.50%, 9.84%, 02/15/2031					2,444				2,453
Chart Industries, Inc., 1st Lien Term Loan, 1M SOFR + 3.25%, 8.68%, 03/15/2030					4,011				4,021
Crown Subsea Communications Holding, Inc., 1st Lien Term Loan, 3M SOFR + 4.75%, 10.08%, 01/30/2031					3,630				3,633
Gulfside Supply, Inc., 1st Lien Term Loan, 05/29/2031(e)(f)​					1,500				1,500
Kaman Corporation, 1st Lien Term Loan, 3M SOFR + 3.50%, 8.83%, 04/21/2031					2,000				2,010
Kodiak Building Partners, Inc., 1st Lien Term Loan, 3M SOFR + 3.75%, 9.09%, 03/12/2028					1,870				1,880
Osmosis Buyer, Ltd., 1st Lien Term Loan, 1M SOFR + 4.25%, 9.58%, 07/31/2028					4,489				4,492
Pike Corp., 1st Lien Term Loan, 1M SOFR + 3.00%, 8.46%, 01/21/2028					1,283				1,285
TransDigm, Inc., 1st Lien Term Loan, 3M SOFR + 2.50%, 7.84%, 02/28/2031					3,494				3,501
Traverse Midstream Partners, LLC, 1st Lien Term Loan, 3M SOFR + 3.50%, 8.83%, 02/16/2028					2,747				2,752
Tutor Perini Corp., 1st Lien Term Loan, 1M SOFR + 4.75%, 10.21%, 08/18/2027					1,295				1,295
White Cap Supply Holdings, LLC, 1st Lien Term Loan, 10/19/2029(f)​					2,500				2,503
									31,325
Commercial & Professional Services 1.6%
GFL Environmental, Inc., 1st Lien Term Loan (Canada), 3M SOFR + 2.50%, 7.83%, 05/31/2027					3,409				3,411
ISolved, Inc., 1st Lien Term Loan, 1M SOFR + 3.50%, 8.84%, 10/15/2030					2,035				2,037
									5,448

Senior Loans^(b)(c)(d)​ (continued)

				Principal Amount(a)​				Value(a)​
Consumer Discretionary Distribution & Retail 1.2%
Peer Holding III B.V., 1st Lien Term Loan (Netherlands), 3M SOFR + 3.25%, 8.59%, 10/28/2030				$	3,990			$	3,993
Consumer Durables & Apparel 1.7%
Lakeshore Learning Materials, LLC, 1st Lien Term Loan, 1M SOFR + 3.50%, 8.96%, 09/29/2028					2,475				2,465
Recess Holdings, Inc., 1st Lien Term Loan, 1M SOFR + 4.50%, 9.84%, 02/20/2030					3,128				3,145
									5,610
Consumer Services 6.6%
Amer Sports Company, 1st Lien Term Loan, 3M SOFR + 3.25%, 8.58%, 02/17/2031(e)​					1,496				1,504
Belfor Holdings, Inc., 1st Lien Term Loan, 1M SOFR + 3.75%, 9.09%, 11/01/2030					1,193				1,199
Caesars Entertainment, Inc., 1st Lien Term Loan, 3M SOFR + 2.75%, 8.10%, 02/06/2031					3,491				3,488
Century DE Buyer, LLC, 1st Lien Term Loan, 3M SOFR + 4.00%, 9.33%, 10/30/2030					3,491				3,491
Fugue Finance, LLC, 1st Lien Term Loan (Netherlands), 3M SOFR + 3.75%, 9.10%, 02/26/2031					1,250				1,259
Gems Menasa Cayman, Ltd., 1st Lien Term Loan (Cayman Islands), 3M SOFR + 5.00%, 10.19%, 07/31/2026					3,482				3,491
Ontario Gaming GTA, LP, 1st Lien Term Loan (Canada), 3M SOFR + 4.25%, 9.59%, 08/01/2030					3,980				3,994
Whatabrands, LLC, 1st Lien Term Loan, 3M SOFR + 2.75%, 8.09%, 08/03/2028					3,950				3,949
									22,375
Energy 1.2%
Gulf Finance, LLC, 1st Lien Term Loan, 1M SOFR + 6.25%, 11.69%, 08/25/2026					1,347				1,354
Prairie ECI Acquiror, LP, 1st Lien Term Loan, 1M SOFR + 4.75%, 10.09%, 08/01/2029					347				346
TransMontaigne Operating Company, LP, 1st Lien Term Loan, 1M SOFR + 3.50%, 8.96%, 11/17/2028					2,494				2,497
									4,197

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans^(b)(c)(d)​ (continued)

				Principal Amount(a)​				Value(a)​
Financial Services 1.9%
Athena Holdco S.A.S., 1st Lien Term Loan (France), 3M EURIBOR + 4.00%, 7.72%, 04/14/2031				€	3,020			$	3,244
GTCR W Merger Sub, LLC, 1st Lien Term Loan, 3M SOFR + 3.00%, 8.34%, 01/31/2031				$	3,000				2,999
									6,243
Food & Beverage 2.3%
Chobani, LLC, 1st Lien Term Loan, 1M SOFR + 3.25%, 8.71%, 10/25/2027					2,946				2,953
Chobani, LLC, 1st Lien Term Loan, 1M SOFR + 3.75%, 9.08%, 10/25/2027					1,493				1,498
Froneri Lux Finco SARL, 1st Lien Term Loan (Luxembourg), 6M EURIBOR + 2.13%, 5.99%, 01/29/2027				€	3,000				3,196
									7,647
Healthcare Equipment & Services 6.6%
Bausch + Lomb Corp., 1st Lien Term Loan (Canada), 3M SOFR + 3.25%, 8.69%, 05/10/2027				$	1,485				1,468
Bausch + Lomb Corp., 1st Lien Term Loan (Canada), 3M SOFR + 4.00%, 9.34%, 09/29/2028					1,985				1,979
CNT Holdings I Corp., 1st Lien Term Loan, 3M SOFR + 3.50%, 8.83%, 11/08/2027					2,414				2,418
Ensemble RCM, LLC, 1st Lien Term Loan, 3M SOFR + 3.00%, 8.33%, 08/01/2029(f)​					3,828				3,812
Mamba Purchaser, Inc., 1st Lien Term Loan, 1M SOFR + 3.25%, 8.58%, 10/16/2028(f)​					2,733				2,730
Medline Borrower, LP, 1st Lien Term Loan, 10/23/2028(f)​					1,250				1,250
Medline Borrower, LP, 1st Lien Term Loan, 1M SOFR + 2.75%, 8.09%, 10/23/2028					2,249				2,252
Resonetics, LLC, 1st Lien Term Loan, 3M SOFR + 3.75%, 9.08%, 06/06/2031(f)​					2,672				2,675
Sotera Health Holdings, LLC, 1st Lien Term Loan, 1M SOFR + 3.25%, 8.59%, 05/30/2031					1,750				1,744
Waystar Technologies, Inc., 1st Lien Term Loan, 3M SOFR + 2.75%, 8.10%, 10/22/2029(e)​					2,057				2,057
									22,385

Senior Loans^(b)(c)(d)​ (continued)

				Principal Amount(a)​				Value(a)​
Insurance 2.5%
Acrisure, LLC, 1st Lien Term Loan, 11/06/2030(f)​				$	1,251			$	1,248
Howden Group Holdings, Ltd., 1st Lien Term Loan (Great Britain), 3M SOFR + 3.50%, 8.84%, 02/15/2031					2,494				2,497
HUB International, Ltd., 1st Lien Term Loan, 3M SOFR + 3.25%, 8.58%, 06/20/2030					4,507				4,515
									8,260
Materials 3.6%
Derby Buyer, LLC, 1st Lien Term Loan, 1M SOFR + 3.50%, 8.84%, 11/01/2030					1,496				1,502
Nouryon Finance B.V., 1st Lien Term Loan (Netherlands), 3M SOFR + 3.50%, 8.83%, 04/03/2028					3,047				3,052
Summit Materials, LLC, 1st Lien Term Loan, 3M SOFR + 2.50%, 7.80%, 01/12/2029					1,995				2,007
Touchdown Acquirer, Inc., 1st Lien Term Loan, 2.00%, 02/21/2031(g)​					539				2
Touchdown Acquirer, Inc., 1st Lien Term Loan, 3M SOFR + 4.00%, 9.35%, 02/21/2031					2,461				2,469
WR Grace Holdings, LLC, 1st Lien Term Loan, 3M SOFR + 3.25%, 8.59%, 09/22/2028					3,260				3,270
									12,302
Media & Entertainment 5.8%
Altice Financing S.A., 1st Lien Term Loan (Luxembourg), 3M SOFR + 5.00%, 10.33%, 10/31/2027					2,487				2,135
Creative Artists Agency, LLC, 1st Lien Term Loan, 1M SOFR + 3.25%, 8.59%, 11/27/2028					4,286				4,302
Formula One Management, Ltd., 1st Lien Term Loan (Great Britain), 3M SOFR + 2.25%, 7.59%, 01/15/2030					2,000				2,003
Gray Television, Inc., 1st Lien Term Loan, 1M SOFR + 3.00%, 8.44%, 12/01/2028(f)​					3,225				2,899
OVG Business Services, LLC, 1st Lien Term Loan, 3M SOFR + 3.00%, 8.35%, 06/13/2031					1,500				1,495
Univision Communications, Inc., 1st Lien Term Loan, 3M SOFR + 4.25%, 9.59%, 06/24/2029					982				981

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Senior Loans^(b)(c)(d)​ (continued)

				Principal Amount(a)​				Value(a)​
Virgin Media Bristol, LLC, 1st Lien Term Loan, 3M SOFR + 3.25%, 8.66%, 03/31/2031				$	3,000			$	2,827
William Morris Endeavor Entertainment, LLC, 1st Lien Term Loan, 3M SOFR + 2.75%, 8.21%, 05/18/2025					2,900				2,902
									19,544
Pharmaceuticals, Biotechnology & Life Sciences 1.7%
Catalent Pharma Solutions, Inc., 1st Lien Term Loan, 1M SOFR + 3.00%, 8.34%, 02/22/2028(e)​					2,743				2,743
Packaging Coordinators Midco, Inc., 1st Lien Term Loan, 3M SOFR + 3.25%, 8.59%, 11/30/2027					2,887				2,895
									5,638
Software & Services 8.4%
Access CIG, LLC, 1st Lien Term Loan, 3M SOFR + 5.00%, 10.33%, 08/18/2028					2,239				2,249
Applied Systems, Inc., 1st Lien Term Loan, 3M SOFR + 3.50%, 8.84%, 02/24/2031					550				554
Asurion, LLC, 1st Lien Term Loan, 1M SOFR + 4.00%, 9.44%, 08/19/2028					2,475				2,445
BEP Intermediate Holdco, LLC, 1st Lien Term Loan, 1M SOFR + 3.75%, 9.09%, 04/25/2031(e)​					3,080				3,088
Genesys Cloud Services Holdings II, LLC, 1st Lien Term Loan, 1M SOFR + 3.75%, 9.21%, 12/01/2027					2,993				3,011
Ivanti Software, Inc., 1st Lien Revolving Loan, PRIME + 3.50%, 8.84%, 12/01/2025(e)(g)​					250				22
Netsmart, Inc., 1st Lien Term Loan, 1M SOFR + 3.75%, 9.21%, 10/01/2027					3,473				3,479
Open Text Corp., 1st Lien Term Loan (Canada), 1M SOFR + 2.25%, 7.59%, 01/31/2030					1,868				1,875
Project Boost Purchaser, LLC, 1st Lien Term Loan, 1M SOFR + 3.50%, 8.96%, 05/30/2026					4,713				4,713
Proofpoint, Inc., 1st Lien Term Loan, 1M SOFR + 3.00%, 8.34%, 08/31/2028					3,970				3,971
Quartz Acquireco, LLC, 1st Lien Term Loan, 3M SOFR + 2.75%, 8.09%, 06/28/2030					2,979				2,979
									28,386

Senior Loans^(b)(c)(d)​ (continued)

				Principal Amount(a)​				Value(a)​
Technology Hardware & Equipment 0.9%
Emrld Borrower, LP, 1st Lien Term Loan, 06/18/2031(f)​				$	3,000			$	2,996
Telecommunication Services 0.7%
Delta TopCo, Inc., 1st Lien Term Loan, 3M SOFR + 3.50%, 8.85%, 11/30/2029					1,750				1,748
Lumen Technologies, Inc., 1st Lien Term Loan, 1M SOFR + 6.00%, 11.34%, 06/01/2028					913				752
									2,500
Transportation 2.9%
AAdvantage Loyality IP, Ltd., 1st Lien Term Loan, 3M SOFR + 4.75%, 10.34%, 04/20/2028					3,077				3,175
Apple Bidco, LLC, 1st Lien Term Loan, 1M SOFR + 3.50%, 8.84%, 09/22/2028					2,222				2,225
Hertz Corp., 1st Lien Term Loan, 06/30/2028(f)​					2,885				2,604
SkyMiles IP, Ltd., 1st Lien Term Loan, 3M SOFR + 3.75%, 9.08%, 10/20/2027					859				878
Uber Technologies, Inc., 1st Lien Term Loan, 3M SOFR + 2.75%, 8.09%, 03/03/2030					786				789
									9,671
Utilities 0.6%
Hamilton Projects Acquiror, LLC, 1st Lien Term Loan, 3M SOFR + 3.75%, 9.09%, 05/31/2031					2,000				2,011
Total Senior Loans (Cost: $206,034)									206,358

Corporate Bonds 51.7%

Automobiles & Components 1.2%
Clarios Global, LP, 6.75%, 05/15/2025(d)​					2,000				2,000
Clarios Global, LP, 8.50%, 05/15/2027(d)​					1,500				1,508
Wand NewCo 3, Inc., 7.63%, 01/30/2032(d)​					500				517
									4,025

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Corporate Bonds (continued)

				Principal Amount(a)​				Value(a)​
Capital Goods 3.6%
Bombardier, Inc., (Canada), 8.75%, 11/15/2030(d)​				$	2,500			$	2,702
Builders FirstSource, Inc., 6.38%, 03/01/2034(d)​					3,150				3,120
Chart Industries, Inc., 7.50%, 01/01/2030(d)​					1,000				1,034
Chart Industries, Inc., 9.50%, 01/01/2031(d)​					250				271
Specialty Building Products Holdings, LLC, 6.38%, 09/30/2026(d)​					3,000				2,947
United Rentals, Inc., 6.13%, 03/15/2034(d)​					2,000				1,993
									12,067
Consumer Discretionary Distribution & Retail 1.4%
Bath & Body Works, Inc., 6.63%, 10/01/2030(d)​					1,000				1,003
Bath & Body Works, Inc., 9.38%, 07/01/2025(d)​					1,151				1,188
Constellation Automotive Financing PLC, (Great Britain), 4.88%, 07/15/2027				£	2,500				2,655
									4,846
Consumer Durables & Apparel 0.7%
Ashton Woods USA, LLC, 6.63%, 01/15/2028(d)​				$	2,500				2,497
Consumer Services 6.6%
Caesars Entertainment, Inc., 8.13%, 07/01/2027(d)​					2,773				2,829
Gems Menasa Cayman, Ltd., (Cayman Islands), 7.13%, 07/31/2026(d)​					1,250				1,243
Hilton Domestic Operating Co., Inc., 5.75%, 05/01/2028(d)​					3,500				3,483
International Game Technology PLC, (Great Britain), 6.50%, 02/15/2025(d)​					2,861				2,863
IRB Holding Corp., 7.00%, 06/15/2025(d)​					1,173				1,173
Lottomatica SpA, (Italy), 7.13%, 06/01/2028(d)​				€	2,482				2,799
MGM Resorts International, 6.50%, 04/15/2032				$	2,500				2,489
Six Flags Theme Parks, Inc., 7.00%, 07/01/2025(d)​					2,517				2,525

Corporate Bonds (continued)

				Principal Amount(a)​				Value(a)​
Station Casinos, LLC, 6.63%, 03/15/2032(d)​				$	1,200			$	1,194
Vail Resorts, Inc., 6.50%, 05/15/2032(d)​					1,500				1,518
									22,116
Consumer Staples Distribution & Retail 0.5%
Albertsons Cos., Inc., 7.50%, 03/15/2026(d)​					1,500				1,521
Energy 11.5%
Antero Resources Corp., 7.63%, 02/01/2029(d)​					2,222				2,285
Archrock Partners, LP, 6.88%, 04/01/2027(d)​					2,500				2,510
Ascent Resources Utica Holdings, LLC, 8.25%, 12/31/2028(d)​					2,501				2,562
Blue Racer Midstream, LLC, 6.63%, 07/15/2026(d)​					1,500				1,499
Blue Racer Midstream, LLC, 7.00%, 07/15/2029(d)​					1,500				1,528
Citgo Petroleum Corp., 7.00%, 06/15/2025(d)​					3,500				3,499
DCP Midstream Operating, LP, 8.13%, 08/16/2030					3,330				3,796
Kodiak Gas Services, LLC, 7.25%, 02/15/2029(d)​					1,150				1,179
Moss Creek Resources Holdings, Inc., 7.50%, 01/15/2026(d)​					1,284				1,286
Moss Creek Resources Holdings, Inc., 10.50%, 05/15/2027(d)​					1,500				1,537
Occidental Petroleum Corp., 8.88%, 07/15/2030					3,500				4,032
Sunoco, LP, 7.25%, 05/01/2032(d)​					3,125				3,232
Tallgrass Energy Partners, LP, 7.38%, 02/15/2029(d)​					1,500				1,507
Transocean, Inc., (Cayman Islands), 6.80%, 03/15/2038					1,061				878
Transocean, Inc., (Cayman Islands), 8.75%, 02/15/2030(d)​					675				708
Western Midstream Operating, LP, 5.25%, 02/01/2050					2,125				1,866
Williams Cos., Inc., 8.75%, 03/15/2032					4,000				4,787
									38,691

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Corporate Bonds (continued)

				Principal Amount(a)​				Value(a)​
Equity Real Estate Investment Trusts (REITs) 2.1%
HAT Holdings I, LLC, 8.00%, 06/15/2027(d)​				$	3,778			$	3,927
VICI Properties LP, 5.75%, 02/01/2027(d)​					3,000				3,001
									6,928
Financial Services 3.4%
Ally Financial, Inc., 8.00%, 11/01/2031					2,000				2,211
CHS/Community Health Systems, Inc., 10.88%, 01/15/2032(d)​					1,500				1,560
Ford Motor Credit Co., LLC, 6.80%, 05/12/2028					2,500				2,577
Ford Motor Credit Co., LLC, 6.95%, 06/10/2026					1,000				1,019
Ford Motor Credit Co., LLC, 7.35%, 11/04/2027					1,465				1,527
Nationstar Mortgage Holdings, Inc., 7.13%, 02/01/2032(d)​					2,500				2,514
									11,408
Healthcare Equipment & Services 1.9%
HCA, Inc., 7.69%, 06/15/2025					4,750				4,828
Sotera Health Holdings, LLC, 7.38%, 06/01/2031(d)​					1,600				1,603
									6,431
Insurance 0.7%
Acrisure LLC, 7.50%, 11/06/2030(d)​					1,081				1,083
Howden U.K. Refinance PLC, (Great Britain), 7.25%, 02/15/2031(d)​					1,400				1,394
									2,477
Materials 3.0%
Crown Cork & Seal Co., Inc., 7.38%, 12/15/2026					4,350				4,495
Kobe U.S. Midco 2, Inc., 9.25%, 11/01/2026(d)(h)​					1,471				1,203
Summit Materials, LLC, 6.50%, 03/15/2027(d)​					2,750				2,755
Trident TPI Holdings, Inc., 12.75%, 12/31/2028(d)​					1,500				1,638
									10,091

Corporate Bonds (continued)

				Principal Amount(a)​				Value(a)​
Media & Entertainment 4.4%
Belo Corp., 7.25%, 09/15/2027				$	3,250			$	3,266
Charter Communications Operating, LLC, 6.10%, 06/01/2029					1,650				1,657
Charter Communications Operating, LLC, 6.55%, 06/01/2034					1,650				1,655
Live Nation Entertainment, Inc., 6.50%, 05/15/2027(d)​					3,250				3,269
Nexstar Broadcasting, Inc., 5.63%, 07/15/2027(d)​					2,000				1,900
Univision Communications, Inc., 6.63%, 06/01/2027(d)​					1,000				957
Univision Communications, Inc., 8.00%, 08/15/2028(d)​					2,000				1,951
									14,655
Semiconductors & Semiconductor Equipment 0.7%
Amkor Technology, Inc., 6.63%, 09/15/2027(d)​					2,500				2,507
Software & Services 2.0%
Leidos, Inc., 7.13%, 07/01/2032					2,500				2,714
Open Text Corp., (Canada), 6.90%, 12/01/2027(d)​					1,500				1,558
SS&C Technologies, Inc., 6.50%, 06/01/2032(d)​					2,500				2,524
									6,796
Technology Hardware & Equipment 1.3%
Dell International, LLC, 6.02%, 06/15/2026					875				884
Dell International, LLC, 6.10%, 07/15/2027					1,500				1,539
Insight Enterprises, Inc., 6.63%, 05/15/2032(d)​					1,500				1,524
Sensata Technologies, Inc., 6.63%, 07/15/2032(d)​					500				503
									4,450
Telecommunication Services 3.5%
Altice France Holding S.A., (Luxembourg), 10.50%, 05/15/2027(d)​					2,000				798
Altice France S.A., (France), 8.13%, 02/01/2027(d)​					500				375
Iliad Holding S.A.S, (France), 6.50%, 10/15/2026(d)​					3,000				2,986

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Corporate Bonds (continued)

				Principal Amount(a)​				Value(a)​
Iliad Holding S.A.S, (France), 7.00%, 10/15/2028(d)​				$	1,000			$	992
Level 3 Financing, Inc., 11.00%, 11/15/2029(d)​					1,250				1,279
Sprint, LLC, 7.63%, 03/01/2026					5,250				5,395
									11,825
Transportation 2.7%
GLP Capital, LP, 5.38%, 04/15/2026					3,000				2,976
Mileage Plus Holdings, LLC, 6.50%, 06/20/2027(d)​					3,450				3,456
Uber Technologies, Inc., 7.50%, 09/15/2027(d)​					1,000				1,020
Uber Technologies, Inc., 8.00%, 11/01/2026(d)​					1,500				1,513
									8,965
Utilities 0.5%
CQP Holdco, LP, 7.50%, 12/15/2033(d)​					1,750				1,815
Total Corporate Bonds (Cost: $175,279)									174,111

Collateralized Loan Obligations 44.4%^(d)(e)​

Collateralized Loan Obligations — Debt 29.6%(b)(c)​
AMMC CLO XI, Ltd., (Cayman Islands), 3M LIBOR + 6.06%, 11.39%, 04/30/2031					2,000				2,009
AMMC CLO XXII, Ltd., (Cayman Islands), 3M LIBOR + 5.76%, 11.09%, 04/25/2031					3,000				3,015
Atrium XV, (Cayman Islands), 3M LIBOR + 6.50%, 11.85%, 07/16/2037					1,188				1,193
Bain Capital Credit CLO 2020-1, Ltd., (Cayman Islands), 3M LIBOR + 7.15%, 12.47%, 04/18/2033					1,000				1,007
Bain Capital Credit CLO, Ltd. 2017-2, (Cayman Islands), 3M LIBOR + 7.12%, 12.45%, 07/25/2034					3,000				3,009
Bain Capital Credit CLO, Ltd. 2021-5, (Cayman Islands), 3M LIBOR + 6.76%, 12.09%, 10/23/2034					2,000				1,970
Ballyrock CLO 26, Ltd., (Cayman Islands), 3M LIBOR + 6.10%, 11.43%, 07/25/2037					950				955

Collateralized Loan Obligations^(d)(e)​ (continued)

				Principal Amount(a)​				Value(a)​
Barings CLO, Ltd. 2020-I, (Cayman Islands), 3M LIBOR + 6.91%, 12.24%, 10/15/2036				$	1,000			$	1,003
Benefit Street Partners CLO XXXIV, Ltd., (Cayman Islands), 3M LIBOR + 6.70%, 12.03%, 07/25/2037					500				506
Benefit Street Partners CLO XXXV, Ltd., (Jersey), 3M LIBOR + 6.10%, 11.43%, 04/25/2037					750				744
Brookhaven Park CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.50%, 11.79%, 04/19/2037					500				502
Canyon Capital CLO, Ltd. 2018-1, (Cayman Islands), 3M LIBOR + 6.01%, 11.34%, 07/15/2031					750				727
Captree Park CLO, Ltd., (Jersey), 3M LIBOR + 6.00%, 11.33%, 07/20/2037					875				881
Carlyle US CLO 2024-2, Ltd., (Cayman Islands), 3M LIBOR + 6.85%, 12.18%, 04/25/2037					1,000				1,006
Carlyle US CLO 2024-3, Ltd., (Cayman Islands), 3M LIBOR + 6.40%, 11.70%, 07/25/2036					1,600				1,609
Carlyle US CLO, 2019-3 Ltd., (Cayman Islands), 3M LIBOR + 7.34%, 12.67%, 04/20/2037					1,650				1,693
Carlyle US CLO, 2021 11A Ltd., (Cayman Islands), 3M LIBOR + 6.50%, 12.10%, 07/25/2037					500				500
Carlyle US CLO, Ltd. 2021-10, (Cayman Islands), 3M LIBOR + 6.76%, 12.09%, 10/20/2034					1,000				1,004
Cedar Funding CLO II, Ltd., (Cayman Islands), 3M LIBOR + 7.56%, 12.89%, 04/20/2034					1,750				1,734
CIFC Funding Ltd. 2021-1A, (Cayman Islands), 3M LIBOR + 6.00%, 11.34%, 07/25/2037					1,150				1,156
CIFC Funding, Ltd. 2019-4A, (Cayman Islands), 3M LIBOR + 6.86%, 12.19%, 10/15/2034					1,500				1,508
CIFC Funding, Ltd. 2021-VI, (Cayman Islands), 3M LIBOR + 6.51%, 11.84%, 10/15/2034					2,000				2,007
CIFC Funding, Ltd. 2021-VII, (Cayman Islands), 3M LIBOR + 6.61%, 11.94%, 01/23/2035					2,406				2,421

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations^(d)(e)​ (continued)

				Principal Amount(a)​				Value(a)​
Crestline Denali CLO XIV, Ltd., (Cayman Islands), 3M LIBOR + 6.61%, 11.94%, 10/23/2031				$	2,000			$	1,970
Denali Capital CLO XII, Ltd., (Cayman Islands), 3M LIBOR + 6.16%, 11.49%, 04/15/2031					2,500				2,472
Dryden 115 CLO, Ltd., (Jersey), 3M LIBOR + 7.10%, 12.40%, 04/18/2037					1,000				1,006
Elmwood CLO 20, Ltd., (Cayman Islands), 3M LIBOR + 6.00%, 11.32%, 01/17/2037					2,000				2,043
Elmwood CLO 28, Ltd., (Cayman Islands), 3M LIBOR + 6.00%, 11.34%, 04/17/2037					500				503
Elmwood CLO I, Ltd., (Cayman Islands), 3M LIBOR + 6.40%, 11.71%, 04/20/2037					3,000				3,091
Elmwood CLO II, Ltd., (Cayman Islands), 3M LIBOR + 7.06%, 12.39%, 04/20/2034					1,650				1,658
Flatiron CLO 21, Ltd., (Cayman Islands), 3M LIBOR + 6.26%, 11.59%, 07/19/2034					375				378
Generate CLO 14, Ltd., (Cayman Islands), 3M LIBOR + 6.75%, 12.08%, 04/22/2037					500				507
Generate CLO 16, Ltd., (Cayman Islands), 3M LIBOR + 6.15%, 11.47%, 07/20/2037					500				504
Generate CLO VIII, Ltd., (Cayman Islands), 3M LIBOR + 7.21%, 12.54%, 10/20/2034					1,000				1,004
Golub Capital Partners CLO 60B, Ltd., (Cayman Islands), 3M LIBOR + 6.00%, 11.33%, 10/25/2034					1,250				1,256
Holding B B.V., (Jersey), 3M LIBOR + 8.32%, 13.65%, 07/15/2035					1,125				1,141
Invesco CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.41%, 11.74%, 07/15/2034					1,000				985
KKR CLO 45A Ltd, (Cayman Islands), 3M LIBOR + 7.30%, 12.60%, 04/15/2035					1,000				1,022
Madison Park Funding LIX, Ltd., (Cayman Islands), 3M LIBOR + 6.40%, 11.73%, 04/18/2037					1,350				1,356
Madison Park Funding LXIX Ltd., (Cayman Islands), 3M LIBOR + 6.25%, 6.30%, 07/25/2037					1,000				1,005
Madison Park Funding XIV, Ltd., (Cayman Islands), 3M LIBOR + 8.03%, 13.36%, 10/22/2030					2,500				2,187
Madison Park Funding XXVIII, Ltd., (Cayman Islands), 3M LIBOR + 7.86%, 13.19%, 07/15/2030					1,000				975
Madison Park Funding XXXI, Ltd., (Cayman Islands), 3M LIBOR + 6.40%, 11.74%, 07/23/2037					775				779

Collateralized Loan Obligations^(d)(e)​ (continued)

				Principal Amount(a)​				Value(a)​
Madison Park Funding XXXII, Ltd., (Cayman Islands), 3M LIBOR + 6.46%, 11.79%, 01/22/2031				$	3,000			$	3,010
Madison Park Funding XXXV, Ltd., (Cayman Islands), 3M LIBOR + 6.36%, 11.69%, 04/20/2032					1,500				1,511
Madison Park Funding XXXVI, Ltd., (Cayman Islands), 3M LIBOR + 7.05%, 12.38%, 04/15/2035					1,000				1,007
Madison Park Funding XXXVII, Ltd., (Cayman Islands), 3M LIBOR + 6.60%, 11.92%, 04/15/2037					500				504
Magnetite XIX, Ltd., (Cayman Islands), 3M LIBOR + 6.66%, 11.98%, 04/17/2034					2,000				2,020
Magnetite XXIV, Ltd., (Cayman Islands), 3M LIBOR + 6.40%, 11.73%, 04/15/2035					2,750				2,774
Northwoods Capital XII-B, Ltd., (Cayman Islands), 3M LIBOR + 6.05%, 11.39%, 06/15/2031					2,000				1,859
Oak Hill Credit Partners X-R, Ltd., (Cayman Islands), 3M LIBOR + 6.51%, 11.84%, 04/20/2034					1,500				1,517
Octagon Investment Partners 49, Ltd., (Cayman Islands), 3M LIBOR + 7.33%, 12.62%, 04/15/2037					1,000				1,014
OHA Credit Funding 12, Ltd. 2022-12, (Bermuda), 3M LIBOR + 8.00%, 13.33%, 07/20/2036					1,975				2,070
OHA Credit Funding 3, Ltd., (Cayman Islands), 3M LIBOR + 6.51%, 11.84%, 07/02/2035					1,000				1,008
OHA Credit Funding 4, Ltd., (Cayman Islands), 3M LIBOR + 6.66%, 11.99%, 10/22/2036					1,000				1,012
OHA Credit Partners VII, Ltd., (Cayman Islands), 3M LIBOR + 6.51%, 11.84%, 02/20/2034					3,000				3,013
OHA Loan Funding 2013-1, Ltd., (Cayman Islands), 3M LIBOR + 5.90%, 11.22%, 04/23/2037					1,500				1,518
RR 21, Ltd. 2022-21, (Bermuda), 3M LIBOR + 7.65%, 12.98%, 07/15/2035					1,500				1,512
RR 6, Ltd., (Cayman Islands), 3M LIBOR + 6.11%, 11.44%, 04/15/2036					900				879
Sixth Street CLO XX, Ltd, (Cayman Islands), 3M LIBOR + 6.41%, 11.74%, 10/20/2034					1,500				1,510
Sound Point CLO XXVI, Ltd., (Cayman Islands), 3M LIBOR + 7.12%, 12.45%, 07/20/2034					1,000				945

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations^(d)(e)​ (continued)

				Principal Amount(a)​				Value(a)​
Tallman Park CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.61%, 11.94%, 04/20/2034				$	2,000			$	2,011
TCI-Flatiron CLO, Ltd. 2018-1, (Cayman Islands), 3M LIBOR + 6.41%, 11.74%, 01/29/2032					3,000				3,013
TICP CLO IX, Ltd., (Cayman Islands), 3M LIBOR + 5.86%, 11.19%, 01/20/2031					1,000				1,004
TICP CLO VI, Ltd. 2016-2, (Cayman Islands), 3M LIBOR + 6.51%, 11.84%, 01/15/2034					2,250				2,260
TICP CLO XIII, Ltd., (Cayman Islands), 3M LIBOR + 6.46%, 11.79%, 04/15/2034					1,250				1,256
Trestles CLO, Ltd. 2017-1, (Cayman Islands), 3M LIBOR + 6.51%, 11.84%, 04/25/2032					1,000				1,003
Voya CLO, Ltd. 2013-3, (Cayman Islands), 3M LIBOR + 6.16%, 11.49%, 10/18/2031					2,750				2,698
									99,929
Collateralized Loan Obligations — Equity 14.8%
AIMCO CLO XI, Ltd., (Cayman Islands), 13.83%, 10/17/2034					1,985				1,703
AIMCO CLO XVI, Ltd., (Cayman Islands), 14.63%, 01/17/2035					1,208				947
AIMCO CLO XX, Ltd., (Jersey), 14.79%, 10/16/2036					1,588				1,509
AIMCO CLO XXII, Ltd., (Jersey), 04/19/2037					410				395
Allegro CLO V, Ltd., (Cayman Islands), 84.63%, 10/16/2030					2,000				220
Bain Capital Credit CLO 2024-2, Ltd., (Cayman Islands), 07/15/2037					960				894
Bain Capital Credit CLO, Ltd. 2020-2, (Cayman Islands), 45.04%, 07/19/2034					1,250				641
Bain Capital Credit CLO, Ltd. 2022-1, (Cayman Islands), 18.11%, 04/18/2035					1,500				924
Canyon Capital CLO, Ltd. 2019-1, (Cayman Islands), 16.58%, 07/15/2037					1,000				378
Carlyle Global Market Strategies CLO, Ltd. 2018-3, (Cayman Islands), 1.85%, 10/15/2030					3,223				1,133
Carlyle US CLO 2024-3, Ltd., (Cayman Islands), 07/25/2036					2,250				1,946
Cedar Funding CLO V, Ltd., (Cayman Islands), 18.22%, 07/17/2031					2,546				1,159
CIFC Funding 2024-III, Ltd., (Cayman Islands), 07/21/2037					400				365

Collateralized Loan Obligations^(d)(e)​ (continued)

				Principal Amount(a)​				Value(a)​
CIFC Funding, Ltd. 2020-3A, (Cayman Islands), 21.96%, 10/20/2034				$	1,750			$	1,346
CIFC Funding, Ltd. 2021-5A, (Cayman Islands), 17.32%, 07/15/2034					2,250				1,513
Dryden 98 CLO, Ltd., (Cayman Islands), 16.27%, 04/20/2035					1,100				727
Elmwood CLO 26, Ltd., (Cayman Islands), 04/18/2037					500				431
Elmwood CLO XI, Ltd., (Cayman Islands), 19.45%, 10/20/2034					1,200				1,086
Invesco CLO 2021-3, Ltd., (Cayman Islands), 15.88%, 10/22/2034					1,130				654
Invesco CLO 2021-3, Ltd., (Cayman Islands), 10/22/2034					113				30
KKR CLO 50 Ltd, (Cayman Islands), 04/20/2037					1,151				989
LCM XV, LP, (Cayman Islands), 273.09%, 07/20/2030					5,875				179
Madison Park Funding LIII, Ltd., (Cayman Islands), 17.28%, 04/21/2035					2,188				1,719
Madison Park Funding LIX, Ltd., (Cayman Islands), 13.14%, 04/18/2037					2,762				2,181
Madison Park Funding LXVII, Ltd., (Cayman Islands), 04/25/2037					250				248
Madison Park Funding XII, Ltd., (Cayman Islands), 07/20/2026					4,000				8
Madison Park Funding XXII, Ltd., (Cayman Islands), 5.76%, 01/15/2033					4,500				2,399
Madison Park Funding XXXI, Ltd., (Cayman Islands), 07/23/2037					2,000				1,098
Madison Park Funding XXXII, Ltd., (Cayman Islands), 21.23%, 01/22/2048					2,000				1,062
Madison Park Funding, Ltd., (Cayman Islands), 12.36%, 04/21/2035					1,500				1,257
Magnetite XXVIII, Ltd., (Cayman Islands), 23.41%, 01/20/2035					2,500				1,983
Magnetite XXXVIII, Ltd., 04/15/2037					250				229
Oaktree CLO, Ltd. 2015-1, (Cayman Islands), 10/20/2027					4,000				120
OHA Credit Partners VII, Ltd., (Cayman Islands), 29.22%, 02/20/2034					2,672				1,370
OHA Credit Partners XIV, Ltd., (Cayman Islands), 4.95%, 01/21/2030					753				602
OHA Credit Partners XVI, (Cayman Islands), 19.83%, 10/18/2034					1,635				1,296
OHA Loan Funding, Ltd. 2016-1, (Cayman Islands), 07/20/2037					3,613				2,858

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Collateralized Loan Obligations^(d)(e)​ (continued)

				Principal Amount(a)​				Value(a)​
RR 19, Ltd., (Cayman Islands), 12.73%, 10/15/2035				$	2,350			$	1,929
RRX 7 Ltd. 2022-7, (Cayman Islands), 12.65%, 07/15/2122					3,875				2,583
Signal Peak CLO VIII, Ltd., (Cayman Islands), 10.92%, 04/20/2033					4,000				2,315
Signal Peak CLO XI Ltd., (Cayman Islands), 07/18/2037					1,750				1,557
Voya CLO 2024-1, Ltd., (Cayman Islands), 04/15/2037					2,142				1,913
Wellman Park CLO, Ltd., (Cayman Islands), 15.81%, 07/15/2034					2,500				1,770
Wellman Park CLO, Ltd., (Cayman Islands), 07/15/2034					5,000				96
West CLO, Ltd. 2013-1, (Cayman Islands), 11/07/2025					500				—
									49,762
Total Collateralized Loan Obligations (Cost: $153,170)									149,691
Total Investments — 157.3% (Cost: $534,483)								$	530,160
Liabilities in Excess of Other Assets — (57.3%)									(193,040	)
Net Assets — 100.0%								$	337,120

  

  

Ares Dynamic Credit Allocation Fund, Inc.

Schedule of Investments (continued)

June 30, 2024 (Unaudited)

(in thousands, except shares, percentages and as otherwise noted)

Footnotes:

(a)  Investment holdings in foreign currencies are converted to U.S. Dollars using period end spot rates. Investments are in United States enterprises and all principal balances shown are in U.S. Dollars unless otherwise noted.

(b)  Variable rate loans bear interest at a rate that may be determined by reference to the Secured Overnight Financing Rate ("SOFR"), the London Interbank Offered Rate ("LIBOR"), Euro InterBank Offered Rate ("EURIBOR"), the U.S. Prime Rate ("PRIME"), or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower's option, which reset annually, semi-annually, quarterly, bi-monthly, monthly or daily. SOFR based contracts may include a credit spread adjustment that is charged in addition to the base rate and the stated spread. For each such loan, Ares Dynamic Credit Allocation Fund, Inc. (the "Fund") has provided the interest rate in effect on the date presented.

(c)  Variable rate coupon rate shown as of June 30, 2024.

(d)  Senior Loans, Collateralized Loan Obligations and Corporate Bonds exempt from registration under Rule 144A, which as of June 30, 2024 represented 140.3% of the Fund's net assets or 89.2% of the Fund's total assets, are subject to legal restrictions on sales.

(e)  Investments whose values were determined using significant unobservable inputs (Level 3) (See Note 4 of the Notes to Financial Statements).

(f)  This loan or a portion of this loan represents an unsettled loan purchase. The interest rate will be determined at the time of settlement and will be based upon a spread plus the applicable reference rate determined at the time of purchase.

(g)  As of June 30, 2024, the Fund had entered into the following commitment to fund a revolving senior secured loan. Such commitment is subject to the satisfaction of certain conditions set forth in the documents governing this loan and there can be no assurance that such conditions will be satisfied. See Note 2 of the Notes to Financial Statements for further information on revolving loan commitments.

Unfunded issuer				Total revolving commitments				Less: drawn commitments				Total undrawn commitments
Ivanti Software, Inc.				$	250			$	(74	)		$	176
Touchdown Acquirer Inc.					539				—				539
Total				$	789			$	(74	)		$	715

(h)  Includes a PIK provision

  As of June 30, 2024, the aggregate cost of securities for Federal income tax purposes was $534,523.
Unrealized appreciation and depreciation on investments for Federal income tax purposes are as follows:

Gross unrealized appreciation				$	6,724
Gross unrealized depreciation					(11,087	)
Net unrealized depreciation				$	(4,363	)

Currencies:

£  British Pounds

€  Euro Currency

$  U.S. Dollars

Abbreviations:

144A  Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.

CLO  Collateralized Loan Obligation

Ares Dynamic Credit Allocation Fund, Inc.

Statement of Assets and Liabilities

June 30, 2024 (Unaudited)
(in thousands, except per share data)

Assets:
Investments, at value (cost $534,483)				$	530,160
Cash and cash equivalents					6,514
Cash denominated in foreign currency, at value (cost $397)					400
Interest and principal receivable					6,988
Receivable for securities sold					3,853
Other assets					190
Total assets					548,105
Liabilities:
Mandatory redeemable preferred shares (liquidation preference $100,000, net of unamortized deferred issuance costs of $718)					99,282
Debt					89,604
Payable for securities purchased					19,857
Payable for investment advisory fees					814
Payable for interest expense and commitment fees					739
Accrued expenses and other payables					689
Total liabilities					210,985
Net assets				$	337,120
Net assets consist of:
Paid-in capital				$	439,773
Accumulated overdistributed earnings					(102,653	)
Net assets				$	337,120
Common shares:
Net assets				$	337,120
Shares outstanding (authorized 1 billion shares of $0.001 par value)					22,915
Net asset value per share				$	14.71

See accompanying Notes to Financial Statements.

Ares Dynamic Credit Allocation Fund, Inc.

Statement of Operations

For the six months ended June 30, 2024 (Unaudited)
(in thousands)

Investment income:
Interest				$	25,671
Total investment income					25,671
Expenses:
Interest and credit facility fees (Notes 6 and 7)					4,274
Investment advisory fees (Note 3)					2,614
Administrative services of the adviser (Note 3)					598
Other expenses					445
Total expenses					7,931
Tax expense (Note 9)					227
Total expenses					8,158
Net investment income					17,513
Net realized and unrealized gains/(losses) on investments and foreign currency
Net realized losses on investments					(10,045	)
Net realized gains on foreign currency					17
Net unrealized gains on investments					13,441
Net unrealized gains on foreign currency					234
Net realized and unrealized gains on investments and foreign currency					3,647
Total increase in net assets resulting from operations				$	21,160

See accompanying Notes to Financial Statements.