Under the Staking Arrangements, the Trust is permitted to accept only Native Staking Consideration received in the form of AVAX, and is not permitted to accept any Other Staking Consideration in the form of other digital assets. Neither the Trust, nor the Sponsor on behalf of the Trust, has the ability under the Staking Arrangements to take advantage of any variations in the market to improve the investments of shareholders, including with respect to variations based on the value of AVAX or the amount of Native Staking Consideration received as staking rewards. As a whole, the Staking Arrangements permit the Trust to retain ownership of its AVAX at all times for U.S. federal income tax purposes while simultaneously protecting and conserving the Trust Estate by mitigating the risk that another party or group could control a majority of the Avalanche Network and engage in transactions that could reduce the Trust Estate’s value. A Staking Provider must meet certain requirements in order to be selected to participate in the Provider- Facilitated Staking model contemplated by the Staking Arrangements. For example, each Staking Provider is required to be unrelated to both the Trust and the Sponsor. Moreover, a Staking Provider is also required to regularly enter into staking arrangements with unrelated persons involving activities similar to the Staking Arrangements. Under the Staking Arrangements, the Staking Provider would bear all of its own expenses (including those on account of its validation activities). The Staking Provider is the node operator and is obligated to operate the validator through which the Trust’s AVAX is staked to ensure that validation occurs. The Trust’s AVAX is staked from the Trust’s wallets administered by the Custodian, and the Staking Provider performs any related validation activities. The Trust retains control of its staked AVAX because the Avalanche Network does not permit the Staking Provider to transfer staked AVAX to any wallet other than as designated by the Sponsor. Because the Trust’s staked AVAX cannot, pursuant to the Avalanche Network protocol, be transferred other than as directed by the Sponsor, the Trust’s AVAX is not deemed commingled with the AVAX of any other AVAX holder in connection with Staking, such as the Staking Provider or others who stake to the Staking Provider, even if the Staking Provider is in receipt of other AVAX holders’ validation rights. In particular, the Staking Provider is not able to transfer unstaked AVAX or Staking Consideration to another address on the Avalanche Network. The Trust does not itself undertake any validation activities, and the Sponsor is not required to perform any services. Moreover, the Sponsor is not required to make any decisions or take any actions, other than (i) selecting the Staking Provider(s) and entering into the corresponding Staking Arrangement(s), and (ii) determining, from time to time, what portion of the Trust’s AVAX to stake and un-stake, and informing the Staking Provider(s) of those determinations. Under the Avalanche Network's native proof-of- stake protocol, validators and delegators may stake AVAX for a minimum of two weeks and a maximum of one year, during which the staked AVAX is locked and cannot be transferred. The Staking Arrangements require that the Trust's AVAX be staked for the minimum duration that is both (i) permitted by the Avalanche Network's native proof-of-stake protocol and (ii) supported by Staking Providers at the volume levels required by the Trust Agreement (the “Minimum Duration”) (and, for the avoidance of doubt, re-staked thereafter for the then-current Minimum Duration, unless an exception contemplated by the Trust Agreement applies). The Sponsor anticipates that it will engage in staking with respect to all of the Trust’s AVAX at all times, except (i) as necessary to pay the Sponsor’s Fee and the Sponsor’s Staking Fee, (ii) as necessary to pay any additional Trust expenses, (iii) as necessary to satisfy existing and reasonably foreseen potential redemption requests (assuming the Trust is then permitted to operate an ongoing redemption program) as determined by the Sponsor, (iv) as necessary to reduce the AVAX obtained by the Trust as Native Staking Consideration to cash for distribution at regular intervals, (v) as necessary to reduce the AVAX obtained by the Trust as Native Staking Consideration to cash in connection with the Trust’s liquidation, (vi) as necessary to take protective actions in respect of vulnerabilities in the source code or cryptography underlying the Avalanche Network and/or its proof-of-stake protocol, its staking smart contracts or its validator client software, (vii) if the Custodian discontinues its arrangements with the Trust and such discontinuance affects the Trust’s AVAX, for so long as is reasonably necessary to re-establish those arrangements or to establish similar arrangements with other parties, (viii) if the Custodian discontinues its arrangements with the Staking Provider and such discontinuance affects the Trust’s AVAX, for so long as is reasonably necessary to re-establish those arrangements or to establish similar arrangements with other parties, (ix) in the event of a change in applicable law or regulation, (x) as necessary to maintain a Liquidity Sleeve (as defined herein), (xi) as necessary pursuant to a “contingent liquidity arrangement” within the meaning of Section 6.02(12) of IRS Revenue Procedure 2025-31 or (xii) in accordance with any other exception that is expressly contemplated by an opinion, ruling or tax guidance that satisfies the Staking Condition. All AVAX received by the Trust in connection with the creation of new Shares, or as Native Staking Consideration,
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