Fund Objective

Ares Dynamic Credit Allocation Fund, Inc. (the “Fund”) is a closed-end management investment company. The Fund’s investment objective is to provide an attractive level of total return, primarily through current income and, secondarily, through capital appreciation. There can be no assurance that the Fund will be able to achieve its investment objective or structure its investment portfolio as anticipated.

By the Numbers

Daily Information

Closing Market Price $11.71
Closing NAV $13.63
Premium / Discount -14.99%
Average Daily Volume 79,971
Data as of May 30, 2023

Current Distribution

Distribution* based on 5/10/23 price 11.15%
Ex-Dividend 5/19/23
Payable 5/31/23

 

Inception Information

NYSE Ticker ARDC
NAV Symbol XADCX
Inception Date 11/27/2012
CUSIP 04014F102

Fees and Expenses

Annual Gross Expense Ratio** 4.15%

*Monthly dividend per share May 2023 distributions may be comprised of net investment income and short-term capital gains. The distribution rate alone is not indicative of Fund performance. To the extent that any portion of the current distributions were estimated to be sourced from something other than income, such as return of capital, the source would have been disclosed in a Section 19(a) Notice located under the “Investor Information” section of the Fund’s website. Please note that the distribution classifications are preliminary and certain distributions may be re-classified at year end. Please refer to year-end tax documents for the final classifications of the Fund’s distributions for a given year. Distribution rates represent the latest declared regular distribution, annualized, relative to the most recent market price and NAV. The Fund’s NAV is inclusive of operating expenses. Please see the Fund’s most recent Annual Report for description of the operating expenses.

**Represents the ratio of annualized expenses, inclusive of interest expense and amortization of debt issuance, to net assets for the semi-annual period ended December 31, 2022.

Investment Committee

Team Members

Mr. Arduini is a Partner and Portfolio Manager in the Ares Credit Group, where he focuses on alternative credit investments. Mr. Arduini serves as a Vice President and Portfolio Manager for the Ares Dynamic Credit Allocation Fund, Inc. (NYSE:ARDC). Mr. Arduini serves as a member of the Ares Credit Group's Pathfinder Core Investment Committee. Prior to joining Ares in 2011, Mr. Arduini was a Managing Director at Indicus Advisors LLP, where he focused on structured credit investment opportunities. Previously, Mr. Arduini was Director of Structured Credit in the Fixed Income Investment Group and a Manager in the Risk Management Group at TIAA-CREF. In addition, Mr. Arduini worked in the telecommunications and information technology industries in various systems, operations and management roles. Mr. Arduini holds a B.A. from Bucknell University in Mathematics and an M.S. from Stevens Institute of Technology in Mathematics. Mr. Arduini also holds an M.S. from Carnegie Mellon University in Computational Finance. Mr. Arduini is a CFA® charterholder and a member of the New York Society of Security Analysts.
Mr. Ashton is a Partner, Portfolio Manager and Co-Head of Alternative Credit in the Ares Credit Group. Mr. Ashton serves as a Vice President and Portfolio Manager for the Ares Dynamic Credit Allocation Fund, Inc. (NYSE:ARDC). Mr. Ashton serves as a member of the Ares Credit Group's Alternative Credit, Pathfinder and Pathfinder Core Investment Committees. Additionally, Mr. Ashton serves on the Ares Diversity, Equity and Inclusion Council. Prior to joining Ares in 2011, Mr. Ashton was a Partner at Indicus Advisors LLP, where he focused on launching the global structured credit business in May 2007. Previously, Mr. Ashton was a Portfolio Manager and Head of Structured Credit at TIAA-CREF, where he focused on managing a portfolio of structured credit investments and helped launch TIAA's institutional asset management business. Mr. Ashton's experience as an investor in alternative fixed income products spans virtually all securitized asset classes, including CLOs, consumer and commercial receivables, insurance and legal settlements, small business and trade receivables, whole business securitizations, timeshare and other mortgage-related receivables, and esoteric asset classes such as catastrophe risk and intellectual property. Mr. Ashton holds a B.A. from Brigham Young University in Economics and an M.B.A. from the University of Rochester William E. Simon School of Business in Finance and Accounting.
Mr. Brufsky is a Partner, Portfolio Manager and Chairman of Global Liquid Credit in the Ares Credit Group. Mr. Brufsky also serves as the Chief Executive Officer, President and is a Director of the Ares Dynamic Credit Allocation Fund, Inc. (NYSE:ARDC). Additionally, he serves as a member of the Ares Credit Group's Liquid Credit Investment Committee. Prior to joining Ares in 1998, Mr. Brufsky was a member of the Corporate Strategy and Research Group of Merrill Lynch & Co., where he focused on analyzing and marketing non-investment grade securities. Previously, Mr. Brufsky was a member of the Institutional Sales and Trading Group of the Global Fixed Income Division at Union Bank of Switzerland. Mr. Brufsky serves on the Board of Trustees of Choate Rosemary Hall, a private, co-educational, college-preparatory boarding school, and serves on the Dean's Advisory Boards for the College of Arts and Sciences and the College of Agriculture and Life Sciences of Cornell University. Mr. Brufsky also serves on the Board of the Luminescence Foundation, a charitable giving organization. Mr. Brufsky holds a B.S. from Cornell University in Applied Economics and Business Management and an M.B.A., with honors, from the University of Southern California's Marshall School of Business in Finance, where he was awarded the Glassick Scholarship for academic achievement.
Mr. Margolies is a Partner in the Ares Credit Group. Mr. Margolies serves as a member of the Ares Credit Group's Alternative Credit Investment Committee, the Ares Private Equity Group's Special Opportunities Investment Committee and is on the Board of Directors of the Ares Charitable Foundation. Prior to joining Ares in 2009, Mr. Margolies served as a Managing Director and Global Head of Leveraged Finance and Capital Commitments at Merrill Lynch & Co. and was a member of the Executive Committee for Merrill Lynch's Global Investment Banking Group. Previously, Mr. Margolies was Co-Head of the DB Capital Mezzanine Fund. Mr. Margolies serves on the Board of Directors for the International Organization for Women and Development and the Advisory Council for University of Michigan's Life Science Institute. Mr. Margolies holds a B.A. from the University of Michigan in International Economics and Finance and an M.B.A. from the University of Pennsylvania Wharton School of Business.
Ms. Milner is a Partner and U.S. Liquid Credit Portfolio Manager in the Ares Credit Group, where she is primarily responsible for managing Ares' U.S. bank loan credit strategies. Ms. Milner serves as a Vice President and one of four Portfolio Managers for the Ares Dynamic Credit Allocation Fund, Inc. (NYSE:ARDC). Ms. Milner serves as a member of the Ares Credit Group's U.S. Liquid Credit Investment Committee. Additionally, Ms. Milner serves on the Ares Diversity, Equity and Inclusion Council. Prior to joining Ares in 2004, Ms. Milner was an Associate in the Financial Restructuring Group at Houlihan Lokey Howard & Zukin, where she focused on providing advisory services in connection with restructurings, distressed mergers and acquisitions and private placements. Ms. Milner serves on the Board of Directors of STEAM:CODERS, a not-for-profit organization focused on underrepresented and underserved students through Science, Technology, Engineering, Art, and Math (STEAM), in preparation for academic and career opportunities. Ms. Milner holds a B.B.A., with distinction, from Emory University's Goizueta Business School in Finance and Accounting.
Mr. Sachs is a Partner in the Ares Strategy and Relationship Management Group, where he focuses on the Ares Credit Group's publicly traded funds, strategic growth opportunities for Ares and facilitating the sharing of credit knowledge across the Ares platform. He serves as a Director and Chairman of the Board of Ares Dynamic Credit Allocation Fund, Inc. (NYSE:ARDC) and is an interested trustee of CION Ares Diversified Credit Fund. Additionally, Mr. Sachs serves as a member of the Ares Credit Group's Alternative Credit Investment Committee, the Ares Private Equity Group's Energy Opportunities, Extended Value, and Asia Investment Committees, the Ares Real Estate Global and Real Estate Debt Investment Committees, and the Ares Equity Income Opportunity Strategy Portfolio Review Committee. Prior to joining Ares in 1997, Mr. Sachs was a Principal of Onyx Partners, Inc., where he focused on merchant banking and related capital raising activities in the private equity and mezzanine debt markets. Previously, he also worked with Taylor & Co., an investment manager providing investment advisory and consulting services to members of the Bass Family of Fort Worth, Texas, and Columbia Savings and Loan Association as Executive Vice President, where he was responsible for asset-liability management and running the investment management department. Mr. Sachs serves as the Non-Executive Chairman of Terex Corporation and is on the Board of Trustees and the McCormick Advisory Council at Northwestern University. He holds a B.S. from Northwestern University in Industrial Engineering and Management Science.

Investment Strategies and Policies

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”).

Note: For Illustrative Purposes Only. The investment allocations in any given market environment will be determined by the investment adviser based on all relevant factors and may not match the examples set forth

Investment Process

Ares Capital Management II LLC (the “Adviser”) serves as the Fund’s investment adviser. The Adviser is an affiliate of Ares Management LLC (“Ares”). The Adviser’s investment philosophy, portfolio construction and portfolio management involve an assessment of the overall macroeconomic environment, financial markets and company specific research and analysis. Its investment approach emphasizes capital preservation, low volatility and minimization of downside risk. In addition to engaging in extensive due diligence from the perspective of a long-term investor, the Adviser’s approach seeks to reduce risk as further described below.

Advantages of a Dynamic Credit Strategy

Under normal market conditions, at least 80% of the Fund’s Managed Assets (as defined below) will be invested in debt instruments, including (i) Senior Loans made primarily to companies whose debt is rated below investment grade, (ii) 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) debt and subordinated (or residual) securities issued by CLOs. The Fund expects that almost all of the senior loans and corporate bonds in which the Fund invests will be below investment grade. Corporate bonds rated below investment grade are often referred to as “high yield” securities. Senior Loans made to companies whose debt is rated below investment grade and high yield securities are often high risk and have speculative high risk and have speculative characteristics. Under normal market conditions,

the Fund will not invest more than (i) 45% of its Managed Assets in securities issued by entities commonly referred to as CLOs (“CLO Securities”) and other asset-backed securities, or (ii) more than 15% of its Managed Assets in subordinated (or residual) tranches of CLO Securities. The Fund can invest in investment grade, below investment grade and non rated CLO Securities. The underlying obligations collateralizing such CLO Securities will principally be Senior Loans, diversified by industry and borrower. “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.

Leverage

The Fund may use leverage through borrowings, including loans from certain financial institutions and/ or the issuance of debt securities, as well as through the issuance of shares of preferred stock. The Fund has a revolving funding facility with an institutional lender, pursuant to which the Fund may borrow funds to make additional investments, subject to available collateral. The use of leverage is a speculative technique that involves special risks. There can be no assurance that the Fund’s leveraging strategy will be successful.

Risks and Considerations

Investing in the Fund’s common shares involves certain risks and the Fund may not be able to achieve its intended results for a variety of reasons. Because the value of your investment in the Fund will fluctuate, there is a risk that you will lose money. Your investment will decline in value if, among other things, the value of the Fund’s investments decreases. The value of your common shares also will be affected by the Fund’s ability to successfully implement its investment strategy, as well as by market, economic and other conditions. As with any security, complete loss of investment is possible.

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