Ares Dynamic Credit Allocation Fund, Inc. Schedule of Investments March 31, 2023 (Unaudited) |
(in thousands, except shares, percentages and as otherwise noted)
| Principal Amount (a) | Value (a) | |||||||
| Senior Loans 35.1% (b)(c)(d) | ||||||||
| Automobiles & Components 0.3% | ||||||||
| Clarios Global, LP, 1st Lien Term Loan, 1M LIBOR + 3.25%, 8.09%, 04/30/2026 | $ | 1,000 | $ | 992 | ||||
| Capital Goods 5.1% | ||||||||
| Chart Industries, Inc., 1st Lien Term Loan, 3M LIBOR + 3.75%, 8.59%, 12/08/2029 | 3,300 | 3,288 | ||||||
| Gates Global, LLC, 1st Lien Term Loan, 1M SOFR + 3.50%, 8.31%, 11/16/2029 | 2,985 | 2,974 | ||||||
| Illuminate Merger Sub Corp., 2nd Lien Term Loan, 1M LIBOR + 6.75%, 11.59%, 07/23/2029 | 1,848 | 1,443 | ||||||
| Pike Corp., 1st Lien Term Loan, 01/21/2028 (e) | 3,000 | 2,980 | ||||||
| Traverse Midstream Partners, LLC, 1st Lien Term Loan, 3M SOFR + 3.75%, 8.73%, 02/16/2028 | 2,791 | 2,740 | ||||||
| Tutor Perini Corp., 1st Lien Term Loan, 1M LIBOR + 4.75%, 9.61%, 08/18/2027 | 2,985 | 2,770 | ||||||
| 16,195 | ||||||||
| Commercial & Professional Services 1.8% | ||||||||
| Indy US Bidco, LLC, 1st Lien Term Loan, 1M SOFR + 6.25%, 11.06%, 03/06/2028 | 979 | 849 | ||||||
| Nielsen Consumer, Inc., 1st Lien Term Loan, 03/06/2028 (e) | 2,021 | 1,750 | ||||||
| Restaurant Technologies, Inc., 1st Lien Term Loan, 3M SOFR + 4.25%, 9.15%, 04/02/2029 | 3,019 | 2,980 | ||||||
| 5,579 | ||||||||
| Consumer Durables & Apparel 1.9% | ||||||||
| Hanesbrands, Inc., 1st Lien Term Loan, 1M SOFR + 3.75%, 8.56%, 03/08/2030 (f) | 2,540 | 2,528 | ||||||
| Topgolf Callaway Brands Corp., 1st Lien Term Loan (Canada), 3M SOFR + 3.50%, 8.26%, 03/15/2030 | 3,500 | 3,474 | ||||||
| 6,002 | ||||||||
| Consumer Services 5.4% | ||||||||
| Equinox Holdings, Inc., 1st Lien Term Loan, 3M LIBOR + 9.00%, 14.16%, 03/08/2024 | 1,975 | 1,797 | ||||||
| Fertitta Entertainment, LLC, 1st Lien Term Loan, 1M SOFR + 4.00%, 8.81%, 01/27/2029 | 1,238 | 1,216 | ||||||
| Global Education Management Systems Establishment, 1st Lien Term Loan (Cayman Islands), 3M LIBOR + 5.00%, 10.24%, 07/31/2026 | 3,526 | 3,522 | ||||||
| Great Canadian Gaming Corp., 1st Lien Term Loan (Canada), 3M LIBOR + 4.00%, 8.95%, 11/01/2026 | 2,501 | 2,479 | ||||||
| IRB Holding Corp., 1st Lien Term Loan, 1M SOFR + 3.00%, 7.77%, 12/15/2027 | 728 | 715 | ||||||
| Penn National Gaming, Inc., 1st Lien Term Loan, 05/03/2029 (e) | 3,000 | 2,989 | ||||||
| Whatabrands, LLC, 1st Lien Term Loan, 1M LIBOR + 3.25%, 8.09%, 08/03/2028 | 2,487 | 2,458 | ||||||
| Wyndham Hotels and Resorts, Inc., 1st Lien Term Loan, 3M SOFR + 1.75%, 6.66%, 04/08/2027 (f) | 2,000 | 1,980 | ||||||
| 17,156 | ||||||||
| Energy 1.5% | ||||||||
| Gulf Finance, LLC, 1st Lien Term Loan, 1M SOFR + 6.75%, 11.60%, 08/25/2026 | 2,992 | 2,898 | ||||||
| Whitewater Whistler Holdings, LLC, 1st Lien Term Loan, 3M SOFR + 3.25%, 8.01%, 02/15/2030 (e) | 1,750 | 1,741 | ||||||
| 4,639 | ||||||||
| Financial Services 0.5% | ||||||||
| Axalta Coating Systems Dutch Holding B B.V, 1st Lien Term Loan (Netherlands), 3M SOFR + 3.00%, 7.90%, 12/20/2029 | 1,444 | 1,444 | ||||||
| Food & Beverage 2.2% | ||||||||
| Chobani, LLC, 1st Lien Term Loan, 1M SOFR + 3.50%, 8.42%, 10/25/2027 | 2,985 | 2,955 | ||||||
| Quirch Foods Holdings, LLC, 1st Lien Term Loan, 1M SOFR + 4.75%, 9.68%, 10/27/2027 (f) | 2,985 | 2,742 | ||||||
| Woof Holdings, Inc., 2nd Lien Term Loan, 1M LIBOR + 7.25%, 11.60%, 12/21/2028 (f) | 1,635 | 1,406 | ||||||
| 7,103 | ||||||||
| Healthcare Equipment & Services 1.5% | ||||||||
| Bausch + Lomb Corp., 1st Lien Term Loan (Canada), 3M SOFR + 3.25%, 8.46%, 05/10/2027 | 2,482 | 2,407 | ||||||
| MDVIP, Inc., 2nd Lien Term Loan, 1M LIBOR + 6.50%, 11.34%, 10/15/2029 (f) | 2,796 | 2,461 | ||||||
| 4,868 | ||||||||
| Materials 2.3% | ||||||||
| Ineos US Finance LLC, 1st Lien Term Loan, 11/08/2027 (e) | € | 1,102 | 1,188 | |||||
| Ineos US Finance, LLC, 1st Lien Term Loan, 02/18/2030 (e) | $ | 1,500 | 1,490 | |||||
| Starfruit Finco B.V., 1st Lien Term Loan (Netherlands), 03/02/2028 (e)(f) | 1,000 | 996 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. Schedule of Investments (continued) March 31, 2023 (Unaudited) |
(in thousands, except shares, percentages and as otherwise noted)
| Principal Amount (a) | Value (a) | |||||||
| Senior Loans 35.1% (b)(c)(d) (continued) | ||||||||
| Starfruit Finco B.V., 1st Lien Term Loan (Netherlands), 3M LIBOR + 2.75%, 7.53%, 10/01/2025 | $ | 3,478 | $ | 3,446 | ||||
| 7,120 | ||||||||
| Media & Entertainment 3.2% | ||||||||
| AVSC Holding Corp., 1st Lien Term Loan, 3M LIBOR + 3.25%, 8.06%, 03/03/2025 (e) | 789 | 755 | ||||||
| Creative Artists Agency, LLC, 1st Lien Term Loan, 1M SOFR + 3.50%, 8.31%, 11/27/2028 | 2,250 | 2,240 | ||||||
| Formula One Holdings, Ltd., 1st Lien Term Loan (Great Britain), 1M SOFR + 3.25%, 8.06%, 01/15/2030 | 2,000 | 2,001 | ||||||
| Lamar Media Corp., 1st Lien Term Loan, 1M LIBOR + 1.50%, 6.28%, 02/05/2027 | 1,035 | 1,012 | ||||||
| Univision Communications, Inc., 1st Lien Term Loan, 3M SOFR + 4.25%, 9.15%, 06/24/2029 | 995 | 985 | ||||||
| William Morris Endeavor Entertainment, LLC, 1st Lien Term Loan, 1M LIBOR + 2.75%, 7.60%, 05/18/2025 | 2,990 | 2,962 | ||||||
| 9,955 | ||||||||
| Software & Services 5.3% | ||||||||
| Asurion, LLC, 1st Lien Term Loan, 3M SOFR + 4.00%, 8.91%, 08/19/2028 | 3,483 | 3,206 | ||||||
| Asurion, LLC, 1st Lien Term Loan, 1M SOFR + 4.25%, 9.16%, 08/19/2028 | 1,000 | 925 | ||||||
| Byju's Alpha, Inc., 1st Lien Term Loan, 3M LIBOR + 8.00%, 12.93%, 11/24/2026 | 1,157 | 937 | ||||||
| CDK Global Inc., 1st Lien Term Loan, 3M SOFR + 4.25%, 9.15%, 07/06/2029 | 2,615 | 2,603 | ||||||
| Ivanti Software, Inc., 1st Lien Revolving Loan, PRIME + 2.75%, 10.75%, 12/01/2025 (f)(g) | 250 | (39 | ) | |||||
| Open Text Corp., 1st Lien Term Loan (Canada), 1M SOFR + 3.25%, 8.16%, 01/31/2030 (e) | 4,042 | 4,026 | ||||||
| Proofpoint, Inc., 2nd Lien Term Loan, 3M LIBOR + 6.25%, 11.09%, 08/31/2029 (f) | 3,000 | 3,000 | ||||||
| Quest Software US Holdings, Inc., 2nd Lien Term Loan, 3M SOFR + 7.50%, 12.33%, 02/01/2030 | 1,584 | 1,125 | ||||||
| Tibco Software, Inc., 2nd Lien Term Loan, 3M SOFR + 4.32%, 9.32%, 09/28/2029 (f) | 965 | 772 | ||||||
| 16,555 | ||||||||
| Telecommunication Services 0.9% | ||||||||
| CenturyLink, Inc., 1st Lien Term Loan, 1M SOFR + 2.00%, 6.92%, 01/31/2025 | 2,956 | 2,708 | ||||||
| Transportation 2.2% | ||||||||
| American Airlines, Inc., 1st Lien Term Loan, 3M LIBOR + 4.75%, 9.56%, 04/20/2028 | 3,846 | 3,900 | ||||||
| SkyMiles IP, Ltd., 1st Lien Term Loan, 3M LIBOR + 3.75%, 8.56%, 10/20/2027 | 1,900 | 1,967 | ||||||
| Uber Technologies, Inc., 1st Lien Term Loan, 03/03/2030 (e) | 995 | 992 | ||||||
| 6,859 | ||||||||
| Utilities 1.0% | ||||||||
| CQP Holdco, LP, 1st Lien Term Loan, 3M LIBOR + 3.50%, 8.66%, 06/05/2028 | 3,292 | 3,262 | ||||||
| Total Senior Loans (Cost: $112,741) | 110,437 | |||||||
| Corporate Bonds 70.5% | ||||||||
| Automobiles & Components 1.1% | ||||||||
| Clarios Global, LP, 6.75%, 05/15/2025 (c) | 2,000 | 2,021 | ||||||
| Clarios Global, LP, 8.50%, 05/15/2027 (c) | 1,500 | 1,506 | ||||||
| 3,527 | ||||||||
| Capital Goods 5.5% | ||||||||
| Chart Industries, Inc., 7.50%, 01/01/2030 (c) | 1,000 | 1,033 | ||||||
| Chart Industries, Inc., 9.50%, 01/01/2031 (c) | 250 | 264 | ||||||
| CP Atlas Buyer, Inc., 7.00%, 12/01/2028 (c) | 2,500 | 1,838 | ||||||
| Specialty Building Products Holdings, LLC, 6.38%, 09/30/2026 (c) | 3,000 | 2,745 | ||||||
| TransDigm, Inc., 8.00%, 12/15/2025 (c) | 5,000 | 5,100 | ||||||
| Tutor Perini Corp., 6.88%, 05/01/2025 (c) | 1,000 | 705 | ||||||
| United Rentals North America, Inc., 6.00%, 12/15/2029 (c) | 2,791 | 2,829 | ||||||
| VistaJet Malta Finance PLC, (Switzerland), 6.38%, 02/01/2030 (c) | 2,000 | 1,782 | ||||||
| VistaJet Malta Finance PLC, (Switzerland), 7.88%, 05/01/2027 (c) | 1,000 | 967 | ||||||
| 17,263 | ||||||||
| Commercial & Professional Services 0.5% | ||||||||
| Clean Harbors, Inc., 6.38%, 02/01/2031 (c) | 1,600 | 1,633 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. Schedule of Investments (continued) March 31, 2023 (Unaudited) |
(in thousands, except shares, percentages and as otherwise noted)
| Principal Amount (a) | Value (a) | |||||||
| Corporate Bonds (continued) | ||||||||
| Consumer Discretionary Distribution & Retail 1.4% | ||||||||
| Bath & Body Works, Inc., 6.63%, 10/01/2030 (c) | $ | 1,000 | $ | 975 | ||||
| Bath & Body Works, Inc., 9.38%, 07/01/2025 (c) | 1,151 | 1,230 | ||||||
| Constellation Automotive Financing PLC, (Great Britain), 4.88%, 07/15/2027 | £ | 2,500 | 2,243 | |||||
| 4,448 | ||||||||
| Consumer Durables & Apparel 0.9% | ||||||||
| Ashton Woods USA, LLC, 6.63%, 01/15/2028 (c) | $ | 3,000 | 2,720 | |||||
| Consumer Services 9.5% | ||||||||
| Caesars Entertainment, Inc., 6.25%, 07/01/2025 (c) | 3,250 | 3,250 | ||||||
| Caesars Entertainment, Inc., 8.13%, 07/01/2027 (c) | 2,773 | 2,829 | ||||||
| Caesars Resort Collection, LLC, 5.75%, 07/01/2025 (c) | 1,000 | 1,000 | ||||||
| Gems Menasa Cayman, Ltd., (Cayman Islands), 7.13%, 07/31/2026 (c) | 1,250 | 1,217 | ||||||
| Golden Entertainment, Inc., 7.63%, 04/15/2026 (c) | 3,750 | 3,782 | ||||||
| Hilton Domestic Operating Co., Inc., 5.75%, 05/01/2028 (c) | 3,500 | 3,500 | ||||||
| International Game Technology PLC, (Great Britain), 6.50%, 02/15/2025 (c) | 2,861 | 2,882 | ||||||
| IRB Holding Corp., 7.00%, 06/15/2025 (c) | 1,173 | 1,177 | ||||||
| MGM Resorts International, 6.75%, 05/01/2025 | 4,000 | 4,030 | ||||||
| Six Flags Theme Parks, Inc., 7.00%, 07/01/2025 (c) | 2,517 | 2,543 | ||||||
| VICI Properties LP, 5.63%, 05/01/2024 (c) | 888 | 880 | ||||||
| VICI Properties LP, 5.75%, 02/01/2027 (c) | 3,000 | 2,945 | ||||||
| 30,035 | ||||||||
| Consumer Staples Distribution & Retail 0.5% | ||||||||
| Albertsons Cos., Inc., 7.50%, 03/15/2026 (c) | 1,500 | 1,552 | ||||||
| Energy 12.7% | ||||||||
| Antero Resources Corp., 7.63%, 02/01/2029 (c) | 2,222 | 2,273 | ||||||
| Blue Racer Midstream, LLC, 6.63%, 07/15/2026 (c) | 1,500 | 1,455 | ||||||
| Blue Racer Midstream, LLC, 7.63%, 12/15/2025 (c) | 2,000 | 1,980 | ||||||
| Citgo Holding, Inc., 9.25%, 08/01/2024 (c) | 1,750 | 1,753 | ||||||
| Citgo Petroleum Corp., 7.00%, 06/15/2025 (c) | 2,250 | 2,220 | ||||||
| DCP Midstream Operating, LP, 8.13%, 08/16/2030 | 3,330 | 3,737 | ||||||
| Enviva Partners, LP, 6.50%, 01/15/2026 (c) | 2,500 | 2,275 | ||||||
| EQM Midstream Partners, LP, 6.50%, 07/01/2027 (c) | 750 | 727 | ||||||
| EQM Midstream Partners, LP, 6.50%, 07/15/2048 | 2,500 | 1,926 | ||||||
| Moss Creek Resources Holdings, Inc., 7.50%, 01/15/2026 (c) | 1,500 | 1,391 | ||||||
| Moss Creek Resources Holdings, Inc., 10.50%, 05/15/2027 (c) | 1,500 | 1,426 | ||||||
| NGL Energy Operating, LLC, 7.50%, 02/01/2026 (c) | 3,095 | 2,987 | ||||||
| Occidental Petroleum Corp., 8.88%, 07/15/2030 | 3,500 | 4,034 | ||||||
| Tallgrass Energy Partners, LP, 7.50%, 10/01/2025 (c) | 3,000 | 2,999 | ||||||
| Transocean, Inc., (Cayman Islands), 6.80%, 03/15/2038 | 750 | 519 | ||||||
| Transocean, Inc., (Cayman Islands), 8.75%, 02/15/2030 (c) | 750 | 765 | ||||||
| Transocean, Inc., (Cayman Islands), 11.50%, 01/30/2027 (c) | 750 | 775 | ||||||
| Western Midstream Operating, LP, 5.50%, 02/01/2050 | 2,125 | 1,816 | ||||||
| Williams Cos., Inc., 8.75%, 03/15/2032 | 4,000 | 4,804 | ||||||
| 39,862 | ||||||||
| Equity Real Estate Investment Trusts (REITs) 1.7% | ||||||||
| Brookfield Property REIT, Inc., 5.75%, 05/15/2026 (c) | 2,500 | 2,236 | ||||||
| Iron Mountain, Inc., 5.63%, 07/15/2032 (c) | 3,500 | 3,197 | ||||||
| 5,433 | ||||||||
| Financial Services 2.2% | ||||||||
| Ally Financial, Inc., 8.00%, 11/01/2031 | 2,000 | 2,098 | ||||||
| Ford Motor Credit Co., LLC, 5.13%, 06/16/2025 | 1,000 | 979 | ||||||
| Ford Motor Credit Co., LLC, 5.58%, 03/18/2024 | 1,000 | 993 | ||||||
| Ford Motor Credit Co., LLC, 7.35%, 11/04/2027 | 1,465 | 1,513 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. Schedule of Investments (continued) March 31, 2023 (Unaudited) |
(in thousands, except shares, percentages and as otherwise noted)
| Principal Amount (a) | Value (a) | |||||||
| Corporate Bonds (continued) | ||||||||
| TK Elevator Holdco GmbH, (Germany), 7.63%, 07/15/2028 (c) | $ | 1,594 | $ | 1,375 | ||||
| 6,958 | ||||||||
| Healthcare Equipment & Services 2.5% | ||||||||
| HCA, Inc., 7.69%, 06/15/2025 | 4,750 | 4,909 | ||||||
| RegionalCare Hospital Partners Holdings, Inc., 9.75%, 12/01/2026 (c) | 3,750 | 3,033 | ||||||
| 7,942 | ||||||||
| Materials 8.1% | ||||||||
| Avient Corp., 7.13%, 08/01/2030 (c) | 1,500 | 1,547 | ||||||
| Celanese US Holdings, LLC, 5.90%, 07/05/2024 | 1,500 | 1,500 | ||||||
| Celanese US Holdings, LLC, 6.05%, 03/15/2025 | 1,500 | 1,506 | ||||||
| Crown Cork & Seal Co., Inc., 7.38%, 12/15/2026 | 4,350 | 4,597 | ||||||
| First Quantum Minerals, Ltd., (Canada), 6.88%, 03/01/2026 (c) | 1,250 | 1,213 | ||||||
| First Quantum Minerals, Ltd., (Canada), 6.88%, 10/15/2027 (c) | 2,500 | 2,426 | ||||||
| Kobe US Midco 2, Inc., 9.25%, 11/01/2026 (c)(h) | 1,334 | 961 | ||||||
| Owens-Brockway Glass Container, Inc., 6.38%, 08/15/2025 (c) | 3,000 | 2,995 | ||||||
| Owens-Brockway Glass Container, Inc., 6.63%, 05/13/2027 (c) | 1,500 | 1,502 | ||||||
| Sealed Air Corp., 6.13%, 02/01/2028 (c) | 1,600 | 1,612 | ||||||
| Summit Materials, LLC, 6.50%, 03/15/2027 (c) | 2,750 | 2,724 | ||||||
| Trident TPI Holdings, Inc., 9.25%, 08/01/2024 (c) | 2,936 | 2,906 | ||||||
| 25,489 | ||||||||
| Media & Entertainment 7.7% | ||||||||
| Altice Financing S.A., (Luxembourg), 5.75%, 08/15/2029 (c) | 3,500 | 2,783 | ||||||
| Belo Corp., 7.25%, 09/15/2027 | 3,250 | 3,047 | ||||||
| CCO Holdings, LLC, 6.38%, 09/01/2029 (c) | 4,000 | 3,820 | ||||||
| CSC Holdings, LLC, 6.50%, 02/01/2029 (c) | 1,000 | 823 | ||||||
| CSC Holdings, LLC, 7.50%, 04/01/2028 (c) | 3,000 | 1,913 | ||||||
| Gray Television, Inc., 7.00%, 05/15/2027 (c) | 4,500 | 3,768 | ||||||
| Live Nation Entertainment, Inc., 6.50%, 05/15/2027 (c) | 3,250 | 3,287 | ||||||
| Nexstar Media, Inc., 5.63%, 07/15/2027 (c) | 2,000 | 1,856 | ||||||
| Univision Communications, Inc., 6.63%, 06/01/2027 (c) | 1,500 | 1,422 | ||||||
| Univision Communications, Inc., 7.38%, 06/30/2030 (c) | 1,500 | 1,418 | ||||||
| 24,137 | ||||||||
| Semiconductors & Semiconductor Equipment 0.8% | ||||||||
| Amkor Technology, Inc., 6.63%, 09/15/2027 (c) | 2,500 | 2,500 | ||||||
| Software & Services 1.6% | ||||||||
| Leidos, Inc., 7.13%, 07/01/2032 | 2,500 | 2,728 | ||||||
| Sabre GLBL, Inc., 7.38%, 09/01/2025 (c) | 2,750 | 2,457 | ||||||
| 5,185 | ||||||||
| Technology Hardware & Equipment 2.3% | ||||||||
| Dell International, LLC, 6.02%, 06/15/2026 | 2,350 | 2,410 | ||||||
| Dell International, LLC, 6.10%, 07/15/2027 | 1,500 | 1,574 | ||||||
| Seagate HDD Cayman, (Cayman Islands), 5.75%, 12/01/2034 | 3,500 | 3,195 | ||||||
| 7,179 | ||||||||
| Telecommunication Services 6.3% | ||||||||
| Altice France Holding S.A., (Luxembourg), 10.50%, 05/15/2027 (c) | 3,299 | 2,524 | ||||||
| Altice France S.A., (France), 8.13%, 02/01/2027 (c) | 500 | 463 | ||||||
| AT&T, Inc., 3.50%, 06/01/2041 | 2,500 | 1,970 | ||||||
| Connect Finco SARL, (Cayman Islands), 6.75%, 10/01/2026 (c) | 2,450 | 2,303 | ||||||
| Iliad Holding SASU, (France), 6.50%, 10/15/2026 (c) | 3,000 | 2,859 | ||||||
| Iliad Holding SASU, (France), 7.00%, 10/15/2028 (c) | 1,000 | 949 | ||||||
| Sable International Finance, Ltd., (Cayman Islands), 5.75%, 09/07/2027 (c) | 2,500 | 2,329 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. Schedule of Investments (continued) March 31, 2023 (Unaudited) |
(in thousands, except shares, percentages and as otherwise noted)
| Principal Amount (a) | Value (a) | |||||||
| Corporate Bonds (continued) | ||||||||
| Sprint, LLC, 7.63%, 03/01/2026 | $ | 5,250 | $ | 5,554 | ||||
| Telesat Canada, (Canada), 5.63%, 12/06/2026 (c) | 1,000 | 525 | ||||||
| Telesat Canada, (Canada), 6.50%, 10/15/2027 (c) | 913 | 283 | ||||||
| 19,759 | ||||||||
| Transportation 4.3% | ||||||||
| American Airlines, Inc., 11.75%, 07/15/2025 (c) | 750 | 821 | ||||||
| GLP Capital, LP, 5.38%, 04/15/2026 | 3,000 | 2,910 | ||||||
| Mileage Plus Holdings, LLC, 6.50%, 06/20/2027 (c) | 4,250 | 4,236 | ||||||
| Uber Technologies, Inc., 7.50%, 05/15/2025 (c) | 3,000 | 3,047 | ||||||
| Uber Technologies, Inc., 7.50%, 09/15/2027 (c) | 1,000 | 1,031 | ||||||
| Uber Technologies, Inc., 8.00%, 11/01/2026 (c) | 1,500 | 1,538 | ||||||
| 13,583 | ||||||||
| Utilities 0.9% | ||||||||
| Vistra Operations Co., LLC, 5.50%, 09/01/2026 (c) | 2,000 | 1,942 | ||||||
| Vistra Operations Co., LLC, 5.63%, 02/15/2027 (c) | 750 | 728 | ||||||
| 2,670 | ||||||||
| Total Corporate Bonds (Cost: $235,963) | 221,875 | |||||||
| Collateralized Loan Obligations 47.5% (c)(f) | ||||||||
| Collateralized Loan Obligations - Debt 34.6% (d) | ||||||||
| AMMC CLO XI, Ltd., (Cayman Islands), 3M LIBOR + 5.80%, 10.60%, 04/30/2031 | 2,000 | 1,712 | ||||||
| AMMC CLO XXII, Ltd., (Cayman Islands), 3M LIBOR + 5.50%, 10.32%, 04/25/2031 | 3,000 | 2,551 | ||||||
| Atlas Senior Loan Fund VII, Ltd., (Cayman Islands), 3M LIBOR + 8.05%, 13.01%, 11/27/2031 | 775 | 445 | ||||||
| Bain Capital Credit CLO, Ltd. 2017-2, (Cayman Islands), 3M LIBOR + 6.86%, 11.68%, 07/25/2034 | 3,000 | 2,762 | ||||||
| Bain Capital Credit CLO, Ltd. 2019-2, (Cayman Islands), 3M LIBOR + 6.32%, 11.11%, 10/17/2032 | 2,500 | 2,170 | ||||||
| Bain Capital Credit CLO, Ltd. 2019-4, (Cayman Islands), 3M LIBOR + 7.99%, 12.66%, 04/23/2035 | 1,000 | 898 | ||||||
| Bain Capital Credit CLO, Ltd. 2020-1, (Cayman Islands), 3M LIBOR + 8.25%, 13.05%, 04/18/2033 | 3,000 | 2,863 | ||||||
| Bain Capital Credit CLO, Ltd. 2021-5, (Cayman Islands), 3M LIBOR + 6.50%, 11.32%, 10/23/2034 | 2,000 | 1,759 | ||||||
| Barings CLO, Ltd. 2020-I, (Cayman Islands), 3M LIBOR + 6.65%, 11.44%, 10/15/2036 | 1,000 | 915 | ||||||
| Canyon Capital CLO, Ltd. 2018-1, (Cayman Islands), 3M LIBOR + 5.75%, 10.54%, 07/15/2031 | 750 | 605 | ||||||
| Carlyle Global Market Strategies CLO, Ltd. 2017-1, (Cayman Islands), 3M LIBOR + 6.00%, 10.81%, 04/20/2031 | 3,000 | 2,483 | ||||||
| Carlyle US CLO, Ltd. 2021-10, (Cayman Islands), 3M LIBOR + 6.50%, 11.31%, 10/20/2034 | 1,000 | 895 | ||||||
| Cedar Funding CLO II, Ltd., (Cayman Islands), 3M LIBOR + 7.30%, 12.11%, 04/20/2034 | 1,750 | 1,605 | ||||||
| CIFC Funding, Ltd. 2019-4A, (Cayman Islands), 3M LIBOR + 6.60%, 11.39%, 10/15/2034 | 1,500 | 1,381 | ||||||
| CIFC Funding, Ltd. 2021-VI, (Cayman Islands), 3M LIBOR + 6.25%, 11.04%, 10/15/2034 | 2,000 | 1,804 | ||||||
| CIFC Funding, Ltd. 2021-VII, (Cayman Islands), 3M LIBOR + 6.35%, 11.17%, 01/23/2035 | 2,406 | 2,147 | ||||||
| Crestline Denali CLO XIV, Ltd., (Cayman Islands), 3M LIBOR + 6.35%, 11.17%, 10/23/2031 | 2,000 | 1,452 | ||||||
| Crestline Denali CLO XV, Ltd., (Cayman Islands), 3M LIBOR + 7.35%, 12.16%, 04/20/2030 | 3,875 | 2,608 | ||||||
| Denali Capital CLO XII, Ltd., (Cayman Islands), 3M LIBOR + 5.90%, 10.69%, 04/15/2031 | 5,000 | 3,626 | ||||||
| Dryden 26 Senior Loan Fund, (Cayman Islands), 3M LIBOR + 5.54%, 10.33%, 04/15/2029 | 2,000 | 1,752 | ||||||
| Dryden 40 Senior Loan Fund, (Cayman Islands), 3M LIBOR + 5.75%, 10.61%, 08/15/2031 | 3,000 | 2,519 | ||||||
| Dryden 45 Senior Loan Fund, (Cayman Islands), 3M LIBOR + 5.85%, 10.64%, 10/15/2030 | 3,000 | 2,526 | ||||||
| Dryden 85 CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.50%, 11.29%, 10/15/2035 | 2,000 | 1,780 | ||||||
| Elmwood CLO I, Ltd., (Cayman Islands), 3M LIBOR + 7.71%, 12.52%, 10/20/2033 | 3,000 | 2,876 | ||||||
| Elmwood CLO II, Ltd., (Cayman Islands), 3M LIBOR + 6.80%, 11.61%, 04/20/2034 | 1,500 | 1,429 | ||||||
| Elmwood CLO III, Ltd., (Cayman Islands), 3M LIBOR + 6.50%, 11.31%, 10/20/2034 | 1,750 | 1,620 | ||||||
| Elmwood CLO VIII, Ltd., (Cayman Islands), 3M LIBOR + 6.00%, 10.81%, 01/20/2034 | 1,000 | 926 | ||||||
| Elmwood CLO VIII, Ltd., (Cayman Islands), 3M LIBOR + 8.00%, 12.81%, 01/20/2034 | 1,000 | 851 | ||||||
| Elmwood CLO XX, Ltd., (Cayman Islands), 3M LIBOR + 8.55%, 12.96%, 10/17/2034 | 1,700 | 1,692 | ||||||
| Generate CLO VIII, Ltd., (Cayman Islands), 3M LIBOR + 6.95%, 11.76%, 10/20/2034 | 1,000 | 932 | ||||||
| Highbridge Loan Management, Ltd. 2014-4, (Cayman Islands), 3M LIBOR + 7.36%, 12.16%, 01/28/2030 | 2,000 | 1,527 | ||||||
| ICG U.S. CLO, Ltd. 2018-2, (Cayman Islands), 3M LIBOR + 5.75%, 10.57%, 07/22/2031 | 1,200 | 879 | ||||||
| Invesco CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.15%, 10.94%, 07/15/2034 | 1,000 | 894 | ||||||
| LCM XVII, LP, (Cayman Islands), 3M LIBOR + 6.00%, 10.79%, 10/15/2031 | 3,750 | 2,826 | ||||||
| LCM XXIII, Ltd., (Cayman Islands), 3M LIBOR + 7.05%, 11.86%, 10/20/2029 | 3,000 | 2,158 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. Schedule of Investments (continued) March 31, 2023 (Unaudited) |
(in thousands, except shares, percentages and as otherwise noted)
| Principal Amount (a) | Value (a) | |||||||
| Collateralized Loan Obligations 47.5% (c)(f) (continued) | ||||||||
| Madison Park Funding XIV, Ltd., (Cayman Islands), 3M LIBOR + 7.77%, 12.59%, 10/22/2030 | $ | 2,500 | $ | 1,926 | ||||
| Madison Park Funding XXVI, Ltd., (Cayman Islands), 3M LIBOR + 6.50%, 11.30%, 07/29/2030 | 1,500 | 1,413 | ||||||
| Madison Park Funding XXVIII, Ltd., (Cayman Islands), 3M LIBOR + 7.60%, 12.39%, 07/15/2030 | 1,000 | 812 | ||||||
| Madison Park Funding XXXII, Ltd., (Cayman Islands), 3M LIBOR + 6.20%, 11.02%, 01/22/2031 | 3,000 | 2,745 | ||||||
| Madison Park Funding XXXV, Ltd., (Cayman Islands), 3M LIBOR + 6.10%, 10.91%, 04/20/2032 | 1,500 | 1,409 | ||||||
| Madison Park Funding XXXVI, Ltd., (Cayman Islands), 3M LIBOR + 7.05%, 11.71%, 04/15/2035 | 1,000 | 944 | ||||||
| Madison Park Funding XXXVII, Ltd., (Cayman Islands), 3M LIBOR + 6.15%, 10.94%, 07/15/2033 | 1,000 | 922 | ||||||
| Madison Park Funding, Ltd., (Cayman Islands), 04/21/2035 (e) | 1,500 | 1,308 | ||||||
| Magnetite XIX, Ltd., (Cayman Islands), 3M LIBOR + 6.40%, 11.19%, 04/17/2034 | 2,000 | 1,845 | ||||||
| Magnetite XXIV, Ltd., (Cayman Islands), 3M LIBOR + 6.40%, 11.06%, 04/15/2035 | 1,500 | 1,359 | ||||||
| Northwoods Capital XII-B, Ltd., (Cayman Islands), 3M LIBOR + 5.79%, 10.65%, 06/15/2031 | 2,000 | 1,463 | ||||||
| Oak Hill Credit Partners X-R, Ltd., (Cayman Islands), 3M LIBOR + 6.25%, 11.06%, 04/20/2034 | 1,500 | 1,389 | ||||||
| Oaktree CLO, Ltd. 2019-2, (Cayman Islands), 3M LIBOR + 6.77%, 11.56%, 04/15/2031 | 2,000 | 1,737 | ||||||
| OHA Credit Funding 3, Ltd., (Cayman Islands), 3M LIBOR + 6.25%, 11.06%, 07/02/2035 | 1,000 | 920 | ||||||
| OHA Credit Funding 4, Ltd., (Cayman Islands), 3M LIBOR + 6.40%, 11.22%, 10/22/2036 | 1,000 | 933 | ||||||
| OHA Credit Partners VII, Ltd., (Cayman Islands), 3M LIBOR + 6.25%, 11.17%, 02/20/2034 | 3,000 | 2,761 | ||||||
| OHA Credit Partners XI, Ltd., (Cayman Islands), 3M LIBOR + 7.90%, 12.71%, 01/20/2032 | 2,750 | 2,218 | ||||||
| Sixth Street CLO XX, Ltd, (Cayman Islands), 3M LIBOR + 6.15%, 10.96%, 10/20/2034 | 1,250 | 1,153 | ||||||
| Sound Point CLO XXVI, Ltd., (Cayman Islands), 3M LIBOR + 6.86%, 11.67%, 07/20/2034 | 1,000 | 835 | ||||||
| Tallman Park CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.35%, 11.16%, 04/20/2034 | 2,000 | 1,820 | ||||||
| TCI-Flatiron CLO, Ltd. 2018-1, (Cayman Islands), 3M LIBOR + 6.15%, 10.95%, 01/29/2032 | 3,000 | 2,691 | ||||||
| TICP CLO VI, Ltd. 2016-2, (Cayman Islands), 3M LIBOR + 6.25%, 11.04%, 01/15/2034 | 2,250 | 2,031 | ||||||
| TICP CLO XIII, Ltd., (Cayman Islands), 3M LIBOR + 6.20%, 10.99%, 04/15/2034 | 1,250 | 1,153 | ||||||
| Trestles CLO, Ltd. 2017-1, (Cayman Islands), 3M LIBOR + 6.25%, 11.07%, 04/25/2032 | 1,000 | 902 | ||||||
| Venture XXIV CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.72%, 11.53%, 10/20/2028 | 700 | 562 | ||||||
| Venture XXVII CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.35%, 11.16%, 07/20/2030 | 2,025 | 1,394 | ||||||
| Venture XXXVI CLO, Ltd., (Cayman Islands), 3M LIBOR + 6.92%, 11.73%, 04/20/2032 | 2,000 | 1,411 | ||||||
| Vibrant CLO X, Ltd., (Cayman Islands), 3M LIBOR + 6.19%, 11.00%, 10/20/2031 | 3,000 | 2,296 | ||||||
| Voya CLO, Ltd. 2013-3, (Cayman Islands), 3M LIBOR + 6.16%, 10.79%, 10/18/2031 | 2,750 | 2,330 | ||||||
| Voya CLO, Ltd. 2015-3, (Cayman Islands), 3M LIBOR + 6.20%, 11.01%, 10/20/2031 | 3,000 | 2,248 | ||||||
| 108,798 | ||||||||
| Collateralized Loan Obligations - Equity 12.9% | ||||||||
| AIMCO CLO XI, Ltd., (Cayman Islands), 25.85%, 10/17/2034 | 1,985 | 1,780 | ||||||
| AIMCO CLO XVI, Ltd., (Cayman Islands), 14.99%, 01/17/2035 | 1,150 | 941 | ||||||
| Allegro CLO V, Ltd., (Cayman Islands), 5.30%, 10/16/2030 | 2,000 | 381 | ||||||
| Bain Capital Credit CLO, Ltd. 2020-2, (Cayman Islands), 44.60%, 07/19/2034 | 1,250 | 827 | ||||||
| Bain Capital Credit CLO, Ltd. 2022-1, (Cayman Islands), 17.53%, 04/18/2035 | 1,500 | 926 | ||||||
| Canyon Capital CLO, Ltd. 2019-1, (Cayman Islands), 21.05%, 04/15/2032 | 1,000 | 515 | ||||||
| Carlyle Global Market Strategies CLO, Ltd. 2018-3, (Cayman Islands), 12.44%, 10/15/2030 | 3,223 | 1,324 | ||||||
| Cedar Funding CLO V, Ltd., (Cayman Islands), 18.03%, 07/17/2031 | 2,546 | 1,608 | ||||||
| Cedar Funding CLO VIII, Ltd., (Cayman Islands), 17.99%, 10/17/2034 | 2,930 | 1,350 | ||||||
| CIFC Funding, Ltd. 2018-5A, (Cayman Islands), 18.66%, 01/15/2032 | 375 | 180 | ||||||
| CIFC Funding, Ltd. 2020-3A, (Cayman Islands), 19.90%, 10/20/2034 | 1,750 | 1,385 | ||||||
| CIFC Funding, Ltd. 2021-5A, (Cayman Islands), 19.46%, 07/15/2034 | 2,250 | 1,692 | ||||||
| Dryden 98 CLO, Ltd., (Cayman Islands), 20.23%, 04/20/2035 | 1,100 | 841 | ||||||
| Elmwood CLO XI, Ltd., (Cayman Islands), 18.35%, 10/20/2034 | 1,200 | 1,073 | ||||||
| Halcyon Loan Advisors Funding, Ltd. 2017-1, (Cayman Islands), 4.77%, 06/25/2029 | 1,750 | 291 | ||||||
| ICG U.S. CLO, Ltd. 2021-1, (Cayman Islands), 15.55%, 04/17/2034 | 2,000 | 1,242 | ||||||
| Invesco CLO 2021-3, Ltd., (Cayman Islands), 15.21%, 10/22/2034 | 1,130 | 762 | ||||||
| Invesco CLO 2021-3, Ltd., (Cayman Islands), 10/22/2034 | 113 | 34 | ||||||
| LCM XV, LP, (Cayman Islands), 1.58%, 07/20/2030 | 5,875 | 548 | ||||||
| Madison Park Funding LIII, Ltd., (Cayman Islands), 18.18%, 04/21/2035 | 1,000 | 846 | ||||||
| Madison Park Funding LIX, Ltd., (Cayman Islands), 15.2%, 01/18/2034 | 2,250 | 1,794 | ||||||
| Madison Park Funding XII, Ltd., (Cayman Islands), 07/20/2026 | 4,000 | 106 | ||||||
| Madison Park Funding XXII, Ltd., (Cayman Islands), 22.22%, 01/15/2033 | 4,000 | 2,423 | ||||||
| Madison Park Funding XXXI, Ltd., (Cayman Islands), 17.63%, 01/23/2048 | 2,000 | 1,318 | ||||||
| Madison Park Funding XXXII, Ltd., (Cayman Islands), 26.54%, 01/22/2048 | 2,000 | 1,183 | ||||||
Ares Dynamic Credit Allocation Fund, Inc. Schedule of Investments (continued) March 31, 2023 (Unaudited) |
(in thousands, except shares, percentages and as otherwise noted)
| Principal Amount (a) | Value (a) | |||||||
| Collateralized Loan Obligations 47.5% (c)(f) (continued) | ||||||||
| Magnetite XXVIII, Ltd., (Cayman Islands), 20.65%, 01/20/2035 | $ | 2,500 | $ | 2,070 | ||||
| Oaktree CLO, Ltd. 2015-1, (Cayman Islands), 10/20/2027 | 4,000 | 245 | ||||||
| OHA Credit Partners VII, Ltd., (Cayman Islands), 21.25%, 02/20/2034 | 2,672 | 1,300 | ||||||
| OHA Credit Partners XVI, (Cayman Islands), 16.71%, 10/18/2034 | 1,635 | 1,249 | ||||||
| OHA Loan Funding, Ltd. 2016-1, (Cayman Islands), 20.13%, 01/20/2033 | 3,250 | 2,119 | ||||||
| RR 19, Ltd., (Cayman Islands), 15.49%, 10/15/2035 | 2,350 | 1,733 | ||||||
| Signal Peak CLO V, Ltd., (Cayman Islands), 10.57%, 04/25/2031 | 2,568 | 1,007 | ||||||
| Signal Peak CLO VIII, Ltd., (Cayman Islands), 17.76%, 04/20/2033 | 4,000 | 2,848 | ||||||
| Wellfleet CLO, Ltd. 2018-3, (Cayman Islands), 10.46%, 01/20/2032 | 3,000 | 827 | ||||||
| Wellman Park CLO, Ltd., (Cayman Islands), 11.48%, 07/15/2034 | 7,500 | 1,850 | ||||||
| West CLO, Ltd. 2013-1, (Cayman Islands), 11/07/2025 | 500 | — | ||||||
| 40,618 | ||||||||
| Total Collateralized Loan Obligations (Cost: $178,637) | 149,416 | |||||||
| Total Investments
- 153.1% (Cost: $527,341) | $ | 481,728 | ||||||
| Liabilities in Excess of Other Assets - (53.1%) | (167,151 | ) | ||||||
| Net Assets - 100.0% | $ | 314,577 | ||||||
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 London Interbank Offered Rate ("LIBOR"), the Secured Overnight Financing Rate ("SOFR"), 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) | Senior Loans, Collateralized Loan Obligations and Corporate Bonds exempt from registration under Rule 144A, which as of March 31, 2023 represented 132.6% of the Fund's net assets or 86.6% of the Fund's total assets, are subject to legal restrictions on sales. |
| (d) | Variable rate coupon rate shown as of March 31, 2023. |
| (e) | 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. |
| (f) | Investments whose values were determined using significant unobservable inputs (Level 3) (See Note 3 of the Notes to Schedule of Investments). |
| (g) | As of March 31, 2023, the Fund has 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 Schedule of Investments for further information on revolving loan commitments. |
| Unfunded Security | Total Revolving commitments | Less: drawn commitments | Total undrawn commitments | ||||||||||||
| Ivanti Software, Inc. | $ | 250 | $ | 14 | $ | 236 | |||||||||
| (h) | Includes a Payment-In-Kind (“PIK”) provision. |
| As of March 31, 2023, the aggregate cost of securities for Federal income tax purposes was $527,460. | |
| Unrealized appreciation and depreciation on investments for Federal income tax purposes are as follows: |
| Gross unrealized appreciation | $ | 3,038 | |||
| Gross unrealized depreciation | (48,772 | ) | |||
| Net unrealized depreciation | $ | (45,734 | ) |
Ares Dynamic Credit Allocation Fund, Inc. Schedule of Investments (continued) March 31, 2023 (Unaudited) |
(in thousands, except shares, percentages and as otherwise noted)
| 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. | |
| Notes to Schedule of Investments | |
| March 31, 2023 (Unaudited) | |
| (in thousands, except per share data, percentages and as otherwise noted) | |
(1) Organization
Ares Dynamic Credit Allocation Fund, Inc. (NYSE: ARDC) ("ARDC" or "Fund") is a corporation incorporated under the laws of the State of Maryland and registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "Investment Company Act"), as a closed-end, diversified, management investment company, and intends to qualify each year to be treated as a Regulated Investment Company ("RIC"), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Fund commenced operations on November 27, 2012.
The Fund’s investment objective is to seek an attractive risk adjusted level of total return, primarily through current income and, secondarily, through capital appreciation. The Fund seeks to achieve its investment objective by investing 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 issued by entities commonly referred to as collateralized loan obligations ("CLOs") and other asset-backed securities. The Fund’s investments in CLOs may include investments in subordinated tranches of CLO securities. The Adviser will dynamically allocate the Fund’s portfolio 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. Under normal market conditions, the Fund will not invest more than (i) 45% of its Managed Assets in CLOs and other asset-backed securities, or (ii) 15% of its Managed Assets in subordinated (or residual) tranches of CLO securities. "Managed Assets" means the total assets of the Fund (including any assets attributable to any preferred shares that may be issued or to indebtedness) minus the Fund’s liabilities other than liabilities relating to indebtedness.
The Fund is externally managed by Ares Capital Management II LLC (the "Adviser") pursuant to an investment and advisory and management agreement. The Adviser was registered as an investment adviser with the SEC under the Investment Advisers Act of 1940 (the “Advisers Act”) on June 9, 2011 and serves as the investment adviser to the Fund. The Adviser oversees the management of the Fund's activities and is responsible for making investment decisions for the Fund's portfolio. Ares Operations LLC, a subsidiary of Ares Management Corporation (“Ares Management”), provides certain administrative and other services necessary for the Fund to operate.
(2) Significant Accounting Policies
Basis of Presentation
The accompanying schedule of investments have been prepared on an accrual basis of accounting in conformity with U.S. generally accepted accounting principles ("GAAP"), and includes the accounts of the Fund. The Fund is an investment company following accounting and reporting guidance in Accounting Standards Codification ("ASC") Topic 946, Financial Services — Investment Companies.
Cash and Cash Equivalents
Cash and cash equivalents include funds from time to time deposited with financial institutions. Cash and cash equivalents are carried at cost, which approximates fair value.
Concentration of Credit Risk
The Fund places its cash and cash equivalents with financial institutions and, at times, cash held in money market accounts may exceed the Federal Deposit Insurance Corporation insured limit.
Investment Transactions
Investment transactions are accounted for on the trade date and all investments in securities are recorded at their fair value. See Note 3 for more information on the Fund's valuation process. Realized gains and losses are reported on the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized.
| Ares Dynamic Credit Allocation Fund, Inc. | |
| Notes to Schedule of Investments (continued) | |
| March 31, 2023 (Unaudited) | |
| (in thousands, except per share data, percentages and as otherwise noted) | |
Interest Income Recognition
Interest income is recorded on an accrual basis and includes the accretion of discounts, amortization of premiums and payment-in-kind ("PIK") interest. Discounts from and premiums to par value on investments purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. To the extent loans contain PIK provisions, PIK interest, computed at the contractual rate specified in each applicable agreement, is accrued and recorded as interest income and added to the principal balance of the loan. PIK interest income added to the principal balance is generally collected upon repayment of the outstanding principal. The amortized cost of investments represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest.
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon the Fund’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid or there is no longer any reasonable doubt that such principal or interest will be collected in full and, in the Fund's judgment, are likely to remain current. The Fund may make exceptions to this policy if the loan has sufficient collateral value (i.e., typically measured as enterprise value of the portfolio company) or is in the process of collection.
CLO equity investments recognize investment income by utilizing an effective interest methodology based upon an effective yield to maturity utilizing projected cash flows, as required by ASC Topic 325-40, Beneficial Interest in Securitized Financial Assets.
Foreign Currency Transactions
Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the date of valuation; and (ii) purchases and sales of investments and income and expense items denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on transaction dates.
The Fund does not isolate that portion of the results of operations resulting from the changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates of securities transactions, and the difference between the amounts of income and expense items recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from the changes in fair values of assets and liabilities, other than investments in securities at period end, resulting from changes in exchange rates.
Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.
Commitments and Contingencies
In the normal course of business, the Fund's investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the Fund's custodian. These activities may expose the Fund to risk in the event that such parties are unable to fulfill contractual obligations. Management does not anticipate any material losses from counterparties with whom it conducts business. Consistent with standard business practice, the Fund enters into contracts that contain a variety of indemnifications, and is engaged from time to time in various legal actions. The maximum exposure of the Fund under these arrangements and activities is unknown. However, the Fund expects the risk of material loss to be remote.
| Ares Dynamic Credit Allocation Fund, Inc. | |
| Notes to Schedule of Investments (continued) | |
| March 31, 2023 (Unaudited) | |
| (in thousands, except per share data, percentages and as otherwise noted) | |
Commitments to extend credit include loan proceeds the Fund is obligated to advance, such as delayed draws or revolving credit arrangements. Commitments generally have fixed expiration dates or other termination clauses. Unrealized gains or losses associated with unfunded commitments are recorded in the financial statements and reflected as an adjustment to the fair value of the related security in the Schedule of Investments. The par amount of the unfunded commitments is not recognized by the Fund until it becomes funded.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires the Adviser to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates and such differences may be material.
(3) Fair Value of Financial Instruments
Effective October 1, 2022, pursuant to Rule 2a-5 under the 1940 Act, the Fund’s board of directors selected the Fund’s Adviser as the Fund’s valuation designee to perform the fair value determinations held by the Fund without readily available market quotations.
The Fund follows the provisions of ASC 820-10, Fair Value Measurements and Disclosures ("ASC 820-10"), which among other matters, requires enhanced disclosures about investments that are measured and reported at fair value. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Fund to assume that the portfolio investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820-10, the Fund has considered its principal market as the market in which the Fund exits its portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:
• Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
• Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable either directly or indirectly.
• Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
In addition to using the above inputs in investment valuations, the Fund continues to employ a valuation policy that is consistent with the provisions of ASC 820-10 (See Note 2 for more information). Consistent with the Fund's valuation policy, the Fund’s Adviser evaluates the source of inputs, including any markets in which the Fund’s investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. The valuation policy considers the fact that because there may not be a readily available market value for the investments in the Fund’s portfolio, therefore, the fair value of the investments may be determined using unobservable inputs.
The investments classified as Level 1 or Level 2 are typically valued based on quoted market prices, forward foreign exchange rates, dealer quotations or alternative pricing sources supported by observable inputs. The Adviser obtains prices from independent pricing services which generally utilize broker quotes and may use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Adviser is responsible for all inputs and assumptions related to the pricing of securities. The Adviser has internal controls in place that support its reliance on information received from third-party pricing sources. As part of its internal controls, the Adviser obtains, reviews, and tests information to corroborate prices received from third-party pricing sources. For any security, if market or dealer quotations are not readily available, or if the Adviser determines that a quotation of a security does not represent a fair value, then the security is valued at a fair value as determined in good faith by the Adviser, as the valuation designee, subject to the oversight of the Board and will be classified as Level 3. In such instances, the Adviser will use valuation techniques consistent with the market or income approach to measure fair value and will give consideration to all factors which might reasonably affect the fair value.
| Ares Dynamic Credit Allocation Fund, Inc. | |
| Notes to Schedule of Investments (continued) | |
| March 31, 2023 (Unaudited) | |
| (in thousands, except per share data, percentages and as otherwise noted) | |
Senior loans and corporate debt: The fair value of Senior Loans and Corporate Bonds is estimated based on quoted market prices, forward foreign exchange rates, dealer quotations or alternative pricing sources supported by observable inputs and are generally classified within Level 2 or 3. The Adviser obtains prices from independent pricing services which generally utilize broker quotes and may use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. If the pricing services are only able to obtain a single broker quote or utilize a pricing model the securities will be classified as Level 3. If the pricing services are unable to provide prices, the Adviser will attempt to obtain one or more broker quotes directly from a dealer and price such securities at the last bid price obtained; such securities are classified as Level 3.
Collateralized loan obligations: The fair value of CLOs is estimated based on various valuation models from third-party pricing services. The provided prices are checked using internally developed models. The valuation models generally utilize discounted cash flows and take into consideration prepayment and loss assumptions, based on historical experience and projected performance, economic factors, the characteristics and condition of the underlying collateral, comparable yields for similar securities and recent trading activity. These securities are classified as Level 3.
Common stock and warrants: The fair value of common stock and warrants are estimated using either broker quotes or an analysis of the enterprise value ("EV") of the portfolio company. Enterprise value means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The primary method for determining EV uses a multiple analysis whereby appropriate multiples are applied to the portfolio company's EBITDA (generally defined as net income before net interest expense, income tax expense, depreciation and amortization). EBITDA multiples are typically determined based upon review of market comparable transactions and publicly traded comparable companies, if any. The Fund may also employ other valuation multiples to determine EV, such as revenues. The second method for determining EV uses a discounted cash flow analysis whereby future expected cash flows of the portfolio company are discounted to determine a present value using estimated discount rates (typically a weighted average cost of capital based on costs of debt and equity consistent with current market conditions). The EV analysis is performed to determine the value of equity investments, the value of debt investments in portfolio companies where the Fund has control or could gain control through an option or warrant security, and to determine if there is credit impairment for debt investments. If debt investments are credit impaired, an EV analysis may be used to value such debt investments; however, in addition to the methods outlined above, other methods such as a liquidation or wind down analysis may be utilized to estimate enterprise value.
The following is a summary of inputs used as of March 31, 2023 in valuing the Fund's investments carried at fair value:
| Level 1 - Quoted Prices ($) | Level 2 - Other Significant Observable Inputs ($) | Level 3 - Significant
Unobservable Inputs ($) | Total ($) | |||||||||||||
| Senior Loans | — | 94,591 | 15,846 | 110,437 | ||||||||||||
| Corporate Bonds | — | 221,875 | — | 221,875 | ||||||||||||
| Collateralized Loan Obligations | — | — | 149,416 | 149,416 | ||||||||||||
| Total Investments | — | 316,466 | 165,262 | 481,728 | ||||||||||||
The following is a reconciliation of the Fund’s investments in which significant unobservable inputs (Level 3) were used in determining fair value for the period ended March 31, 2023:
| Senior Loans ($) | Collateralized Loan Obligations ($) | Total ($) | ||||||||||||||
| Balance as of December 31, 2022 | 13,579 | 148,479 | 162,058 | |||||||||||||
| Purchases | 3,522 | 1,308 | 4,830 | |||||||||||||
| Sales and principal redemptions | (8 | ) | (859 | ) | (867 | ) | ||||||||||
| Net realized and unrealized gains/(losses) | 142 | 470 | 612 | |||||||||||||
| Accrued discounts/(premiums) | — | 18 | 18 | |||||||||||||
| Transfers in to Level 3 | 1,472 | — | 1,472 | |||||||||||||
| Transfers out of Level 3 | (2,861 | ) | — | (2,861 | ) | |||||||||||
| Balance as of March 31, 2023 | 15,846 | 149,416 | 165,262 | |||||||||||||
| Net change in unrealized gains/(losses) from investments held at March 31, 2023 | 2,259 | 938 | 3,197 | |||||||||||||
Investments were transferred into and out of Level 3 during the period ended March 31, 2023 due to changes in the quantity and quality of information obtained to support the fair value of each investment as assessed by the Adviser.
| Ares Dynamic Credit Allocation Fund, Inc. | |
| Notes to Schedule of Investments (continued) | |
| March 31, 2023 (Unaudited) | |
| (in thousands, except per share data, percentages and as otherwise noted) | |
The following table summarizes the quantitative inputs and assumptions used for investments in securities at fair value categorized as Level 3 in the fair value hierarchy as of March 31, 2023.
| Unobservable Input | ||||||||||||
| Type | Fair Value ($) | Valuation Technique | Input | Range | Weighted Average(a) | |||||||
| Senior Loans | 12,113 | Broker Quotes and/or 3rd Party Pricing Services | N/A | N/A | N/A | |||||||
| Senior Loans | 3,733 | Yield Analysis | Market Yield | 11.44%-17.43% | 11.96% | |||||||
| Collateralized Loan Obligations | 148,108 | Broker Quotes and/or 3rd Party Pricing Services | N/A | N/A | N/A | |||||||
| Collateralized Loan Obligations | 1,308 | Transaction Cost | N/A | N/A | N/A | |||||||
| Total Level 3 Investments | 165,262 | |||||||||||
(a) Weighted averages are calculated based on fair value of investments.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may fluctuate from period to period. Additionally, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Fund may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Fund was required to liquidate a portfolio investment in a forced or liquidation sale, it could realize significantly less than the value at which the Fund has recorded it.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.