Company: PDCC
Filing Date: 2025-09-03
Form Type: N-CSRS
Source: 0001398344-25-017467
Chunk: 22

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-09-03
Form: N-CSRS
Chunk 22
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are generally floating rate instruments, the Company’s investments in senior secured loans through investments in junior equity
and debt tranches of CLOs are sensitive to interest rate levels and volatility. For example, because the senior secured loans constituting
the underlying collateral of CLOs typically pay a floating rate of interest, a reduction in interest rates would generally result in a
reduction in the residual payments made to the Company as a CLO equity holder (as well as the cash flow the Company receives on the Company’s
CLO debt investments and other floating rate investments). Further, in the event of a significant rising interest rate environment and/or
economic downturn, loan defaults may increase and result in credit losses that may adversely affect the Company’s cash flow, fair
value of the Company’s assets and operating results. Because CLOs generally issue debt on a floating rate basis, an increase in
the relevant benchmark index will increase the financing costs of CLOs. Furthermore, certain senior secured loans that constitute the
collateral of the CLOs in which the Company invests may continue to pay interest at a floating rate based on Secured Overnight Financing
Rate (“SOFR”) or may convert to a fixed rate of interest.

| Pearl Diver Credit Company Inc. | Notes to Financial Statements |

June 30, 2025 (Unaudited)

Counterparty Risk

The Company may be exposed to counterparty risk, which
could make it difficult for the Company or the issuers in which the Company invests to collect on obligations, thereby resulting in potentially
significant losses.

Derivative Instruments

GAAP requires enhanced disclosure about the Company’s
derivative and hedging activities, including how such activities are accounted for and their effects on the Company’s financial
position, performance, and cash flows. The Company may invest in a broad array of financial instruments and securities, the value of which
is “derived” from the performance of an underlying asset or a “benchmark” such as a security index, an interest
rate, or a currency. The Company currently qualifies as a “limited derivatives user” under Rule 18f-4 of the 1940 Act and
limits its derivatives exposure to 10% of its net assets.

Offsetting Arrangements

Certain derivative contracts are executed under either
standardized netting agreements or, for exchange-traded derivatives, the relevant contracts for a particular exchange which contain enforceable
netting provisions. A derivative netting arrangement creates an enforceable right of set-off that