? Introduction Semiliquid funds—including interval funds, tender-offer funds, and unlisted business development companies—give investors access to less-liquid public and private market assets and strategies while offering periodic, rather than daily, liquidity. Although these funds disclose their fees, they define, calculate, and apply those fees differently from one fund to the next, resulting in headline figures that are rarely comparable. Costs commonly extend beyond a management fee to include incentive fees 1 with hurdle rates and catch-up provisions, acquired fund fees, layered operating expenses, distribution and servicing charges, and borrowing costs on leverage. As a result, investors lack a consistent, comparable view of expected total investor-borne costs, which complicates analysis, comparison, selection, and ongoing monitoring of semiliquid funds. To address this, Morningstar publishes two standardized cost estimates for semiliquid funds. Each is a projection of the annual cost an investor bears, expressed as a percentage of a net asset value, calculated by applying a single, category-level set of gross return and borrowing assumptions to each fund's own structure. Applying a common category-level scenario to each fund’s fee terms helps separate differences in fee design from differences in performance history, leverage, or disclosure. This gives investors, advisors, and institutions a more consistent basis for comparing semiliquid funds. The Semiliquid Cost Estimates Morningstar publishes two figures, both expressed as an annual percentage of NAV: Semiliquid Total Cost Estimate captures all advisory and investment-related costs, including interest expense on borrowings. It is intended to reflect the full projected cost burden on investor returns. Semiliquid Adjusted Cost Estimate excludes interest expense so that funds with different leverage profiles can be compared on a like-for-like basis. Financing cost is a function of a fund's capital structure rather than of its advisory or operating fee schedule. Because both estimates are calculated under a common category-level scenario, the difference between two funds reflects their fee mechanics rather than a view on either manager or strategy. Morningstar July 23, 2026 Contents 1 Introduction 2 Cost Components and Definitions 3 Scenario Assumptions 4 Calculation 5 How to Interpret and Use the Estimates 6 Limitations and Considerations 7 Appendix Tanguy De Lauzon Senior Director of Quantitative Research Tanguy.deLauzon@morningstar.com Bryan Armour Director, ETF and Passive Strategies, US Bryan.Armour@morningstar.com Jack Shannon Principal, Equity Strategies, US Jack.Shannon@morningstar.com Sandeep Associate Director, Quantitative Research sandeep@morningstar.com Aditi Dhuliya Associate Quantitative Analyst aditi.dhuliya@morningstar.com Important Disclosure The conduct of Morningstar’s analysts is governed by Code of Ethics, Personal Security Trading Policy (or an equivalent of), and Investment Research Integrity Policy. For information regarding conflicts of interest, please visit: http://global.morningstar.com/equitydisclosures Semiliquid Fund Cost Estimates Methodology A standardized framework for comparing total and adjusted costs across funds, built on common Morningstar Category scenarios. 1. This document uses "incentive fee" to refer to performance-based incentive fees charged on income, capital gains, or total return when applicable conditions are met. Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 2 of 13 Methodology The methodology applies to 1940 Act interval funds, tender offer funds, and nontraded BDCs. Estimates are calculated at the share class level, so different share classes of the same fund may carry different estimates where their fee terms differ. Cost Components and Definitions The estimates standardize the following investor-borne cost components. Two—the incentive fee and interest expense—cannot be compared directly across funds as disclosed, so Morningstar standardizes them using common assumptions; the rest are taken from fund disclosures. Cost Component Data Definition Management Fee The annual fee paid to the manager. It may be charged on NAV or on managed assets (assets including leverage), depending on the fund. Other Expenses Additional costs necessary for the fund’s operation, such as administration, custody, audit, legal, and compliance expenses. Acquired Fund Fees and Expenses Indirect costs an investor bears when the fund invests in other funds. 2 Distribution and Servicing Fees Ongoing charges paid to intermediaries for marketing the fund and providing investor support. Performance- Based Incentive Fee A fee the manager collects on income, capital gains, or total return once returns exceed a stated hurdle rate, often subject to a catch-up provision. Because whether and how much of this fee is charged depends on returns that cannot be known in advance, Morningstar estimates it by applying the common category return assumption to the fund's own fee terms—hurdle, rate, and catch-up—rather than relying on prospectus figures, which often omit it or use different assumptions to calculate an estimate. Interest Expense The cost of interest on borrowings. Morningstar estimates it by applying a category-level borrowing rate to the fund's leverage, so financing cost is measured consistently across funds regardless of their actual financing terms. It is included in the Total Cost Estimate and excluded from the Adjusted Cost Estimate. Scenario Assumptions Rather than using each fund's own performance history, Morningstar evaluates every fund under a common, category-level scenario so that funds can be compared in a single, neutral environment. The scenario has two parts: g A return assumption: a category-level income return (for income categories such as private debt) or total return (for total-return categories such as private equity, venture capital). The income return assumption is defined by adding a category-specific spread to the reference 2. AFFE comparability may be limited across fund structures. Registered vehicles (for example, interval funds, tender offer funds, BDCs, and certain Exchange Act Reporting vehicles) and private funds are subject to different disclosure and consolidation practices. As a result, underlying fund expenses and affiliated-investment costs may be reported, aggregated, or excluded differently across managers, and these differences cannot be fully normalized. Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 3 of 13 rate—SOFR—whereas the capital gains and total-return assumptions are set directly as fixed category-level values. Because incentive fees depend on returns that cannot be known in advance, these standardized assumptions make funds' fees comparable. g A borrowing rate assumption: built from SOFR plus a category-specific spread, and applied to a fund's borrowed assets. The SOFR reference rate is refreshed quarterly; the spreads and return assumptions are reviewed and updated as needed at the discretion of Morningstar's Manager Research and Analytics teams. Current values by category are in Appendix A. Calculation The full formulas are in Appendix C; the logic is as follows. Morningstar first grosses up NAV to managed assets to reflect leverage, then applies the category return assumption to arrive at a gross return. It subtracts recurring costs—management fee, interest expense, AFFE, other expenses, and distribution and servicing fees—to reach a preincentive-fee return. Where a fund charges an incentive fee, Morningstar applies the fee to the return above the fund's hurdle, accounting for any catch-up provision. Summing advisor-related costs (management and incentive fees), investment-related costs (interest, AFFE, and other expenses), and distribution and servicing fees, and dividing by NAV, yields the Semiliquid Total Cost estimate, and Semiliquid Total Cost Estimate excluding the interest expense gives the Semiliquid Adjusted Cost Estimate. Because every component is expressed as a percentage of NAV, the notional NAV used in the intermediate steps cancels out and does not affect the results. How to Interpret and Use the Estimates Both figures are annual percentages of NAV, so they can be compared directly across funds and against a Morningstar Category. A higher estimate indicates a larger projected cost burden on investor returns under the standardized scenario; it does not, on its own, indicate a worse investment. Unlike a prospectus fee illustration, which assumes a fixed return often set below a fund's hurdle rate, these estimates apply a category-level return that reflects how these funds typically operate. As a result, an incentive fee is represented in the estimate when it would realistically be charged, even where it may not appear in a prospectus fee table. g Use the Total Cost Estimate to understand the full projected cost of holding a fund, inclusive of financing. g Use the Adjusted Cost Estimate when comparing funds that employ different amounts of leverage, since it removes interest expense, a function of capital structure rather than of the manager's fee schedule. Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 4 of 13 Limitations and Considerations The estimates are scenario-based projections, not statements of any fund's realized or future fees, and not performance forecasts. Because every fund is evaluated under the same category assumptions, the estimates reflect fee mechanics, not a view on a manager or strategy. Actual costs will differ, particularly for funds whose returns diverge from the category scenario. Certain fund-specific mechanics are standardized. Path-dependent features such as high-water marks, loss-recovery accounts, and clawbacks, and one-time items such as placement fees, are set to zero so that estimates do not depend on individual fund history. Catch-up provisions are modeled at 100%, consistent with market practice. Fee waivers and expense limitation agreements are generally excluded because they are often temporary, fund-specific arrangements that may be modified or removed over time. Estimates therefore reflect stated fee structures rather than temporary fee concessions. These choices improve comparability at the cost of fund-level precision. Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 5 of 13 Appendix A: Scenario Assumptions Scenario assumptions are applied by category. The reference rate is the SOFR, set at 3.66% as of April 30, 2026. The borrowing rate and income return are derived by adding the relevant category spread to the reference rate; total return is taken directly from the category assumption. Assumptions shown below are as of April 30, 2026, and will be reviewed and updated at the discretion of Morningstar's Manager Research and Analytics teams. Morningstar Category Borrowing Rate Spread Over Reference Rate Income Returns Spread Over the Reference Rate Base Return Assumptions Borrowing Rate Assumption Income Return Capital Gains Total Return Private Equity* 3.00% NA 0.00% 10.00% 10.00% 6.66% Venture Capital* 3.00% NA 0.00% 10.00% 10.00% 6.66% Private Debt—Direct Lending** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Private Debt—General** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Private Multi-Asset 3.00% NA 4.33% + 5.00% 9.33% 6.66% Equity Hedged* 3.00% NA 0.00% 10.00% 10.00% 6.66% Long-Short Equity* 3.00% NA 0.00% 10.00% 10.00% 6.66% Large Blend* 3.00% NA 0.00% 10.00% 10.00% 6.66% Large Growth* 3.00% NA 0.00% 10.00% 10.00% 6.66% Global Large-Stock Blend* 3.00% NA 0.00% 10.00% 10.00% 6.66% Energy Limited Partnership* 3.00% NA 0.00% 10.00% 10.00% 6.66% Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 6 of 13 Event-Driven* 3.00% NA 0.00% 10.00% 10.00% 6.66% Multistrategy* 3.00% NA 0.00% 10.00% 10.00% 6.66% Miscellaneous Allocation 3.00% NA 4.33% + 5.00% 9.33% 6.66% Direct Real Estate* 3.00% NA 4.00% 6.00% 10.00% 6.66% Direct Infrastructure* 3.00% NA 4.00% 6.00% 10.00% 6.66% Infrastructure* 3.00% NA 4.00% 6.00% 10.00% 6.66% Derivative Income** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Bank Loan** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Nontraditional Bond** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Multisector Bond** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% High-Yield Bond** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Emerging-Markets Bond** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Securitized Bond - Focused** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Securitized Bond - Diversified** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Miscellaneous Fixed Income** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Muni-National Long** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Muni-National Interm** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 7 of 13 * For Private Equity, Venture Capital, Equity Hedged, Long-Short Equity, Large Blend, Large Growth, Global Large-Stock Blend, Energy Limited Partnership, Event-Driven, Multistrategy: If a fund charges an income incentive fee rather than a total-return incentive fee, then income return is treated as equal to the total return.** For Private Debt—Direct Lending, Private Debt—General, Bank Loan, Nontraditional Bond, Multisector Bond, High Yield Bond, Emerging Markets Bond, Securitized Bond—Focused, Securitized Bond—Diversified, Miscellaneous Fixed Income, Muni-National Long, Muni-National Interm, Muni California Intermediate, High-Yield Muni, Intermediate Government, and Intermediate Core Bond: If a fund charges a total-return incentive fee rather than an income fee, total return is treated as equal to income return, and capital gains are set to the corresponding value.. + For Miscellaneous Allocation and Private Multi-Asset , the income return is taken as (SOFR+5%)/2 , that is, 4.33 %. Muni California Intermediate** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% High-Yield Muni** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Intermediate Government** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Intermediate Core Bond** 2.00% 5.00% 8.66% 0.00% 8.66% 5.66% Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 8 of 13 Appendix B: Data Input, Sources, and Treatment Rules The following inputs, together with the category scenario assumptions in Appendix A, are used to calculate the estimates. Field Description Source Management Fee (%) Fee for fund management as a percent of net assets. Prospectus Management Fee—Managed Assets (%) Fee charged on total assets, including leverage; when present, applied instead of the NAV-based fee. Prospectus Income Performance Fee (%) Percent of investment income above a hurdle paid to the manager. Prospectus Income Performance Fee Hurdle Rate (%) Minimum income return before the income incentive fee applies. Prospectus Income Performance Fee Hurdle Catch-Up Indicates if the fund has a provision allowing the manager to collect a higher percentage (usually 100%) of all income above the hurdle rate until it has collected an amount equal to the income performance fee multiplied by total income (all income collected by the fund regardless of hurdle rate). Prospectus Capital Gains Performance Fee (%) Percent of capital gains paid to the manager, separate from any income fee. Prospectus Total-Return Performance Fee (%) Percent of total return above a hurdle paid to the manager. Prospectus Total-Return Performance Fee Hurdle Rate (%) Minimum total return before the total-return incentive fee applies. Prospectus Total-Return Performance Hurdle Fee Catch-Up Indicates whether the fund has a provision allowing the manager to collect an elevated share (typically 100%) of all profits above the hurdle rate until it has collected an amount equal to the total-return- based incentive-fee rate multiplied by total return (all returns, regardless of the hurdle). Prospectus Other Expenses (%) Nonadvisory operating costs reported as a single line item. Other expenses are capped at 5% to mitigate the impact of anomalous values and disclosure inconsistencies. Prospectus Acquired Fund Expense (%) Fees of underlying funds held in the portfolio as a percent of NAV. Capped at 5%: Where a disclosed value exceeds 5%, it is set to 5% to normalize for cases where the figure includes embedded leverage or debt-related costs of the underlying fund. Prospectus Distribution and Servicing Fees (%) Represents the fees paid for the distribution of the fund and for its shareholder services, expressed as a percentage of NAV. Combined figure where itemized together; otherwise sum of the components. Prospectus Leverage (%) Borrowed money as a percent of NAV; converted from percentage of total assets where reported that way. Public filings Inception date Share class inception, used to derive fund-level other expenses. Public filings Acquired Fund Expense is not uniformly defined. The treatment of an underlying fund's incentive fees within Acquired Fund Expense varies— registered underlying funds generally include them, while private underlying funds may exclude them—so Acquired Fund Expense is not always comparable across funds. The estimate reflects Acquired Fund Expense as disclosed. Other Expenses is derived at the fund level as the minimum nonzero value among the share classes with the oldest inception date; if no inception dates are available, the minimum nonzero value across all share classes is used. This derived fund-level other expenses is capped at 5% of NAV. Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 9 of 13 Leverage is sourced from the fund's most recent public filing, which may be an annual report, semiannual report, or other regulatory filing. If the reported value is null, leverage is taken as 0. When reported as a percent of total assets R, converted to a percent of NAV as R / (1 − R). In compliance with 1940 Act limits, R is capped at 66.67% for unlisted BDCs and 33.33% for interval and tender offer funds. Distribution and servicing fees are taken from the combined prospectus value when available, as this best reflects investors' total distribution and servicing cost; if missing or zero, the model sums the separate distribution and servicing components to capture costs without double-counting. Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 10 of 13 Appendix C: Calculation Detail and Formulas This appendix provides the technical calculation framework behind the Semiliquid Total Cost Estimate and Semiliquid Adjusted Cost Estimate. Appendix D applies the same steps to worked examples. Rates are shown as percentages for readability but should be applied as decimals in the calculations. Notation Symbol Definition N Notional NAV L Leverage as a percentage of NAV R_total_assets Leverage reported as a percentage of total assets MA Managed assets, including leverage R Relevant Morningstar Category return assumption BR Morningstar Category borrowing - rate assumption M Management fee rate AFFE Acquired fund fees and expenses rate OE Other expenses rate DS Distribution and servicing fee rate P Preincentive - fee return amount y Preincentive - fee return as a percentage of NAV h Incentive - fee hurdle rate r Incentive - fee rate c Catch - up top level IF Incentive fee Step 1: Calculate Managed Assets Managed assets represent the fund's assets after incorporating leverage. Formula Purpose L = R_total_assets / (1 - R_total_assets) Converts leverage reported as a percentage of total assets to a percentage of NAV before the calculation is applied. MA = N x (1 + L) Grosses up NAV for leverage. Step 2: Calculate Gross Return Gross return is calculated by applying the relevant category return assumption to managed assets. For income-oriented categories, this may be the category income return. For total-return categories, this may be the category total-return assumption. Formula Purpose Gross Return = MA x R Calculates return before fund-level costs and incentive fees. Step 3: Calculate Recurring Costs Recurring costs include management fees, borrowing costs, acquired fund fees and expenses, other expenses, and distribution and servicing fees. The management fee base follows the fund's disclosed fee terms. Cost Item Formula Management fee, if charged on NAV Management Fee = N x M Management fee, if charged on managed assets Management Fee = MA x M Interest expense Interest Expense = N x L x BR Acquired fund fees and expenses AFFE Cost = N x AFFE Other expenses Other Expenses = N x OE Distribution and servicing fees Distribution and Servicing Fees = N x DS Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 11 of 13 Total recurring costs Recurring Costs = Management Fee + Interest Expense + AFFE Cost + Other Expenses + Distribution and Servicing Fees Step 4: Calculate Preincentive-Fee Return Preincentive-fee return is the return remaining after recurring costs but before any incentive fee. For income-based incentive fees, this represents preincentive net investment income. For total-return incentive fees, it represents preincentive-fee total return. Formula Purpose P = Gross Return - Recurring Costs Calculates the dollar amount available before incentive fees. y = P / N Expresses preincentive-fee return as a percentage of NAV. Step 5: Calculate Incentive Fees An incentive fee applies when the preincentive-fee return exceeds the fund's hurdle. The same framework applies to income-based and total-return incentive fees, depending on the fund's disclosed fee terms. Without a catch-up provision(catch-up flag=0) Formula Interpretation IF=r x Max{0, (P - h x N)} The manager receives the incentive - fee rate only on return above the hurdle. With a catch-up provision(catch-up flag =1) With a catch-up provision, the catch-up top level marks the yield at which the manager has received the full incentive-fee rate on total eligible return. Condition Incentive - F ee F ormula Catch-up top level c = h / (1 - r) If y <= h IF = 0 If h < y <= c IF = P - (h x N) If y > c IF = N x (c - h) + r x [P - (c x N)] Step 6: Aggregate Costs Costs are grouped such that the estimates can distinguish advisory costs from investment-related costs and from distribution or servicing costs. Net Return is calculated as gross return minus total costs, and Net Return % is simply the Net Return divided by the notional NAV. Cost G roup Formula Advisor costs Advisor Costs = Management Fee + IF Investment-related costs Investment Costs = Interest Expense + AFFE Cost + Other Expenses Total costs Total Costs = Advisor Costs + Investment Costs + Distribution and Servicing Fees Step 7: Calculate the Cost Estimates The Semiliquid Total Cost Estimate includes estimated interest expense. The Semiliquid Adjusted Cost Estimate excludes estimated interest expense to support comparisons across funds with different leverage profiles. Estimate Formula Semiliquid Total Cost Estimate Total Cost Estimate = Total Costs / N Semiliquid Adjusted Cost Estimate Adjusted Cost Estimate = (Total Costs - Interest Expense) / N Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 12 of 13 Appendix D: Examples Example 1: No Incentive Fee (Cliffwater Corporate Lending Fund, Class I) Private Debt—Direct Lending; management fee 1.00% on NAV; other expenses 0.27%; AFFE 0.25%; leverage 31.37% of NAV; borrowing rate 5.66%; income return 8.66%. Line I tem Value Step 1: Managed assets = 100,000 x (1 + 0.3137) $131,370 Step 2: Gross return = 131,370 x 8.66% $11,377 Step 3: Management fee = 100,000 x 1.00% $1,000 Step 3: Interest expense = 100,000 x 31.37% x 5.66% $1,775 Step 3: AFFE = 100,000 x 0.25% $250 Step 3: Other expenses = 100,000 x 0.27% $270 Step 5: Incentive fee $0 Step 6: Advisor costs = Management fee + Incentive fee $1,000 Step 6: Investment costs = Interest expense + AFFE + Other expenses $2,295 Step 7: Total Cost Estimate = (1,000 + 2,295) / 100,000 3.29% Step 7: Adjusted Cost Estimate = (1,000 + 2,295 - 1,775) / 100,000 1.52% Example 2: Income Incentive Fee With Catch-Up (CION Ares Diversified Credit Fund, Class I) Private Debt—Direct Lending; management fee 1.25% on managed assets; other expenses 0.60%; income incentive fee 15.0% with a 6.0% hurdle and a catch-up; leverage 20.627% of NAV; borrowing rate 5.66%; income return 8.66%. Line I tem Value Step 1: Managed assets = 100,000 x (1 + 0.20627) $120,627 Step 2: Gross income = 120,627 x 8.66% $10,446 Step 3: Management fee = 120,627 x 1.25% $1,508 Step 3: Interest expense = 100,000 x 20.627% x 5.66% $1,167 Step 3: Other expenses = 100,000 x 0.60% $600 Step 3: Total recurring costs = 1,508 + 1,167 + 0 + 600 $3,275 Step 4: Preincentive NII = 10,446 - 3,275 ; Pre Incentive NII Yield = Preincentive NII/100,000 $7,171, 7.17% Step 5: Catch-up top level = 6.00% / (1 - 15.00%) 7.06% Step 5: Incentive fee = 100,000 x (7.06% - 6.00%) + 15% x (7,171 - 7,060) $1,076 Step 6: Advisor costs = 1,508 + 1,076 $2,584 Step 6: Investment costs = 1,167 + 0 + 600 $1,767 Step 7: Total Cost Estimate = (2,584 + 1,767) / 100,000 4.35% Step 7: Adjusted Cost Estimate = (2,584 + 1,768 - 1,167) / 100,000 3.18% Semiliquid Fund Cost Estimates Methodology | See Important Disclosures at the end of this report. Page 13 of 13 ? 22 West Washington Street Chicago, IL 60602 USA ©2026 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses, and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete, or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses, or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. To license the research, call +1 312 696-6000.