It looks like wp_list_categories($args) will output directly when you call it, which is why the output comes out in a weird place. and ideally what you need is to capture the output and return it, but luckily wp_list_categories allows you to do this with the ‘echo’ parameter. Try:
$args['echo'] = FALSE;
return wp_list_categories($args);
Note the extra ‘return’
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