NASDAQ: VAVX

The Trust’s net asset value (“NAV”)
was $2,517,562 at December 31, 2025, the Trust’s fiscal year end. Outstanding Shares of the Trust were 100,000 at December 31, 2025.

The Trust is not actively managed and will not
take any actions to take advantage, or mitigate the impacts, of volatility in the price of AVAX.

The activities of the Trust include (i) selling
Shares in blocks of 25,000 Shares (“Baskets”) to financial firms that are registered broker-dealers (“Authorized Participants”
or “APs”) in exchange for cash or AVAX (depending on whether the creation is cash or in-kind); (ii) distributing cash or AVAX
to Authorized Participants redeeming Baskets; (iii) purchasing or receiving the amount of AVAX represented by the Basket being created;
(iv) selling AVAX (as needed) to distribute cash to Authorized Participants redeeming Shares or to pay the Sponsor’s Fee and Trust
expenses not assumed by the Sponsor, if any and (v) using a third party to stake a portion of the Trust’s AVAX.

The Trust sells and redeems its Shares only in
Baskets that are based on the amount of AVAX represented by the Basket being created, the amount of AVAX being equal to the combined NAV
of the number of Shares included in the Basket (net of the accrued but unpaid remuneration due the Sponsor (“Sponsor Fee”)
and any accrued but unpaid expenses or liabilities not assumed by the Sponsor). The Trust conducts subscriptions and redemptions in cash
or in-kind.

The Sponsor of the Trust maintains a website
at https://www.vaneck.com. The information on the Trust’s website is not, and shall not be deemed to be, part of this report or
incorporated into any other filings we make with the SEC. Additional information regarding the Trust may also be found on the Securities
and Exchange Commission (the “SEC”)’s EDGAR database at www.sec.gov.

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Trust Objective

The Trust’s investment objective is to reflect
the performance of the price of AVAX, and rewards from staking a portion of the Trust’s AVAX, to the extent the Sponsor in its sole
discretion determines that the Trust may do so without undue legal or regulatory risk, such as, without limitation, by jeopardizing the
Trust’s ability to qualify as a grantor trust for U.S. federal income tax purposes, less the expenses of the Trust’s operations.

The Trust is a passive investment vehicle that
does not seek to pursue any investment strategy beyond reflecting the performance of the price of AVAX and any rewards from staking a
portion of the Trust’s AVAX. As a result, the Trust will not attempt to speculatively sell AVAX at times when its price is high
or speculatively acquire AVAX at low prices in the expectation of future price increases, nor will the Trust attempt to avoid losses or
hedge exposure arising from the risk of changes in the price of AVAX. The Trust will not utilize leverage, derivatives, or any similar
arrangements in seeking to meet its investment objective.

Listing

The Shares are listed for trading on The Nasdaq
Stock Market LLC (the “Exchange”) under the ticker symbol “VAVX.”

AVAX and the AVAX Network

The AVAX token is the native
token of the Avalanche network and serves as the base currency for transactions, smart contract interactions and deployment. The AVAX
token can be staked to help secure the network and earn staking rewards. AVAX has a capped supply of 720 million and is used as fee payment,
for staking in Avalanche’s consensus process and providing a basic unit of account between subnets created on the network. AVAX
holders may participate in staking on the Avalanche Network by becoming transaction validators, if they stake a minimum number of coins,
or by delegating their coins to an already existing validator.

Avalanche is a Layer 1 blockchain
and smart contract platform for decentralized applications and custom blockchains. The Avalanche network is an open-source protocol that
enables users to deploy smart contracts to support their blockchain projects. The Avalanche Network was created by Kevin Sekniqi, Maofan
“Ted” Yin and Emin Gün Sirer and was further developed by researchers from Cornell University prior to its launch by
Ava Labs US in September 2020. The Avalanche network is one of the main competitors of Ethereum and aims to beat the leading smart contract
platform by offering higher transaction throughput without compromising scalability or security. Avalanche is powered by the Avalanche
consensus protocol, which its proponents believe is a unique “proof-of-stake” algorithm comprised of three blockchains, X-Chain
(Exchange Chain), C-Chain (Contract) and P-Chain (Platform), which allow the network to create and trade assets such as AVAX, coordinate
transaction validators and facilitate the creation of smart contracts. Each chain serves a different purpose and runs different consensus
mechanisms based on their use-cases. The X-Chain is used to create and exchange native AVAX tokens and other assets. The C-Chain is used
to host EVM compatible smart contracts. The P-Chain is used to coordinate network validators, track active subnets and allow the creation
of new subnets. Ava Labs is the main entity that develops and maintains the codebase of the Avalanche network and suite of tools and applications.

AVAX is a digital asset that
is created and transmitted through the operations of the peer-to-peer Avalanche Network, a decentralized network of computers that operates
on cryptographic protocols. No single entity is known to own or operate the Avalanche Network, the infrastructure of which is collectively
maintained by what is understood to be a global user base. Participation in the Avalanche network is permissionless; for instance, anyone
with the required number of AVAX can participate in validation activities that maintain the blockchain and secure the network, and no
permission from any gatekeeping intermediary is required. although some entities, like Ava Labs and the Avalanche Foundation exert influence
through a variety of means; the presence of client diversity is lower than on certain other public blockchains; and acting as a validator
on the Avalanche Network is subject to certain minimum requirements, such as hardware requirements and financial costs, which may result
in greater barriers to entry to be a validator on the Avalanche Network than on certain other public blockchains where the minimum requirements
may be lower. The Avalanche Network allows people to exchange tokens of value, called AVAX, which are recorded on a public transaction
ledger known as a blockchain. AVAX can be used to pay for goods and services, including computational power on the Avalanche Network,
or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on Digital Asset Trading Platforms or in individual
end-user-to-end-user transactions under a barter system.

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Furthermore, the Avalanche Network
was designed to allow users to write and implement smart contracts-that is, general-purpose code that executes on every computer in the
network and can instruct the transmission of information and value based on a sophisticated set of logical conditions. Using smart contracts,
users can create markets, store registries of debts or promises, represent the ownership of property, move funds in accordance with conditional
instructions and create digital assets other than AVAX on the Avalanche Network. Smart contract operations are executed on the Avalanche
Blockchain in exchange for payment of AVAX. The Avalanche Network is one of a number of projects intended to expand blockchain use beyond
just a peer-to-peer money system.

The Avalanche Network uses a
proof-of-stake consensus mechanism called Avalanche consensus, which utilizes repeated and random sampling to achieve consensus. Unlike
proof-of-work, in which miners expend computational resources to compete to validate transactions and are rewarded coins in proportion
to the computational resources expended, in proof-of-stake, all validators receive rewards at constant rates set by the Avalanche Network
and the parameters for which are determined by periodic vote of AVAX holders. The main participants staking on Avalanche are validators,
delegators and staking pools. Validators operate specialized hardware and use a software called a validator client that allows the validator
to connect to and interact with the Avalanche Network. Validators stake AVAX directly on the Avalanche Network securing the blockchain
and earning rewards. Delegators hold AVAX, which they can stake to a validator of their choosing, but do not run validator nodes. Delegators
can stake their AVAX with a validator and earn a portion of the reward. Additionally, delegators can stake their AVAX in a stake pool,
a service run by a provider to enable easy access to staking with added benefits such as tokens representing staked AVAX commonly referred
to as liquid staked tokens, which can be used in DeFi and DApps without the delegator having to unlock or wait. Stake pool providers can
allocate the AVAX to be staked across different validators of their choice. Proof-of-stake is viewed as more energy efficient and scalable
than proof-of-work and is sometimes referred to as “virtual mining”.

The Avalanche protocol was first
conceived by Kevin Skniqi, Daniel Laine, Stephen Buttolph, and Emin Gün Sirer in a 2020 whitepaper. Development of the Avalanche
Network is overseen by the Avalanche Foundation and Ava Labs, Inc. (“Ava Labs”), a Delaware corporation, which administered
the original network launch and token distribution.

Although Ava Labs and the Avalanche
Foundation continue to exert influence over the direction of the development of Avalanche, the Avalanche Network, like the Ethereum network,
is understood to be decentralized in that it is open source, permissionless, and neither owned nor operated by them and does not require
governmental authorities or financial institution intermediaries to create, transmit or determine the value of AVAX.

Competition

The Trust and the Sponsor face competition with
respect to the creation of competing products, such as exchange-traded products offering exposure to the spot AVAX market or other digital
assets. There can be no assurance that the Trust grows to or maintains an economically viable size. While there are no predetermined criteria
for determining whether the Trust has reached an economically viable size, the Sponsor will monitors the Trust’s assets and liabilities,
average daily trading volume of the Shares, and other factors on an ongoing basis. If the Trust is unable to reach or maintain an economically
viable size, trading in Shares may occur at wider spreads than other competitor products, which could adversely affect the Shareholders.

Additionally, Shareholders may be subject to a
higher expense ratio than expected if the Trust incurred any operating expenses that are not borne by the Sponsor. There is no guarantee
that the Sponsor will obtain or maintain a commercial advantage relative to competitors offering similar products. Whether or not the
Trust is successful in achieving its intended scale may be impacted by a range of factors, such as the Trust’s timing in entering
the market and its fee structure relative to those of competitive products.

The MarketVector Avalanche Benchmark Rate

MarketVector is the index sponsor and index administrator for the MarketVectorTM Avalanche Benchmark Rate (“MarketVector Avalanche Benchmark Rate”
or “Index”.) MarketVector is a wholly-owned subsidiary of VanEck. MarketVector Indexes GmbH is the calculation
agent for the MarketVector Avalanche Benchmark Rate and an affiliate of VanEck.

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The MarketVector Avalanche Benchmark Rate is a
U.S. dollar-denominated composite reference rate for the price of AVAX. The Index is calculated daily between 00:00 and 24:00 (CET) and
the Index values are disseminated to data vendors. The Index is disseminated in U.S. dollars and the closing and intraday value is calculated
over 23-minute intervals pursuant to a methodology referred to as an equal-weighted average of the volume-weighted median price.

The MarketVector Avalanche Benchmark Rate is designed
to be a robust price for AVAX in U.S. dollars. There is no component other than AVAX in the Index. The underlying trading platforms are
sourced from the industry-leading BITA Exchange Ranking report, which is issued by BITA GmbH. BITA GmbH (“BITA”) is a Germany-based
fintech company that provides enterprise-grade indexes, data and infrastructure to institutions operating in the passive and quantitative
investment spaces. Active in the digital asset industry since 2018, BITA GmbH provides crypto calculation, index administration, and infrastructure
solutions to financial institutions globally. BITA reviews various trading exchanges and analyzes such exchanges to determine whether
the exchanges should be approved as a data source (approved exchanges are referred to by BITA as “whitelisted”). BITA’s
methodology for evaluating exchanges utilizes a combination of qualitative and quantitative metrics to analyze a comprehensive data set,
covering five categories of evaluation. The categories of evaluation include regulatory stability, liquidity, data quality, technology
and usability. BITA evaluates each category of each exchange with respect to each different digital asset, with different weights assigned
to each category to arrive at a “total score” for each exchange. BITA then ascribes a rating to each exchange and determines
the minimum total score for an exchange to be included in each pricing index. Each qualifying exchange is then ranked by BITA according
to their “total score” to determine their BITA ranking, which determines the weighting of such exchange in the MarketVector
Avalanche Benchmark Rate. The BITA Exchange Ranking report provides a framework for assessing risk of each trading platform and brings
transparency and accountability to a rapidly evolving market and industry. Based on the BITA Exchange Ranking report, MarketVector initially
selects the top five trading platforms by rank for inclusion in the MarketVector Avalanche Benchmark
Rate. If an eligible trading platform is downgraded by two or more notches in a semi-annual review and is no longer in the top five by
rank, it is replaced by the highest ranked non-component trading platform. Adjustments to exchange coverage are announced four business
days prior to the first business day of each of June and December at 23:00 CET. The MarketVector Avalanche Benchmark Rate is rebalanced
at 16:00:00 ET on the last trading day of each of May and November. The constituent trading platforms of the MarketVector Avalanche Benchmark
Rate are Coinbase, Crypto.com, Gemini, Kraken, and OKX.

Net Asset Value Determinations

The Trust’s NAV is calculated based on the
Trust’s net asset holdings as reconciled to the AVAX Custodians’ accounts on a market approach, determined on a daily basis
in accordance with the MarketVector Avalanche Benchmark Rate price at 4:00 pm Eastern time. The Trust’s NAV per Share is calculated
by taking the current market value of its total assets, subtracting any liabilities, and then dividing that total by the total number
of outstanding Shares.

The Trust’s NAV per Share is calculated
by:

●taking the current market value of its total assets;

●subtracting any liabilities; and

●dividing that total by the total number of outstanding Shares.

●the Trust Agreement
gives the Sponsor the exclusive authority to determine the Trust’s NAV and the Trust’s NAV per Share, which it has delegated
to the Administrator.

The Administrator calculates the NAV of the Trust
once each Exchange trading day. The NAV for a normal trading day is released after 4:00 p.m. Eastern time. Trading during the core trading
session on the Exchange typically closes at 4:00 p.m. Eastern time. However, NAVs are not officially struck until later in the day (often
by 5:30 p.m. Eastern time and generally no later than 8:00 p.m. Eastern time). The pause between 4:00 p.m. Eastern time and 5:30 p.m.
Eastern time (or later) provides an opportunity to detect, flag, investigate, and correct unusual pricing should it occur.

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The Sponsor monitors for significant events related
to crypto assets that may impact the value of AVAX and determines in good faith, and in accordance with its valuation policies and procedures,
whether to fair value the Trust’s AVAX on a given day based (e.g., if the MarketVector Avalanche
Benchmark Rate is not available the Sponsor). In certain circumstances, the Sponsor determines whether to fair value the Trust’s
AVAX on a given day on whether certain pre-determined criteria have been met. For example, if the MarketVector
Avalanche Benchmark Rate deviates by more than a pre-determined amount from an alternate benchmark available to the Sponsor, then the
Sponsor may determine to utilize the alternate benchmark. The Sponsor may also fair value the Trust’s AVAX using observed market
transactions from one or more exchanges. The Sponsor may also fair value the Trust’s AVAX using a combination of inputs in certain
situations (e.g., using observed market transactions, OTC quotations from brokers, etc.).

Accordingly, the NAV of the Trust may reflect
the fair value of AVAX rather than the AVAX market prices on certain exchanges at 4:00 p.m. Eastern time. Fair value pricing involves
subjective judgments and it is possible that a fair value determination for AVAX or other assets is materially different than the value
that could be realized upon the sale of such AVAX or assets. In addition, fair value pricing could result in a difference between the
prices used to calculate the Trust’s NAV and the prices used by the MarketVector Avalanche Benchmark Rate.

Intraday Indicative Value

The Sponsor, in conjunction with the Administrator,
works in good faith to determine the fair value and implement the correct calculation of the Trust’s NAV. The NAV for the Trust
is calculated by the Administrator once a day and is disseminated daily to all market participants at the same time. Quotation and last-sale
information regarding the Shares is disseminated through the facilities of the Consolidated Tape Association (“CTA”). In addition,
in order to provide updated information relating to the Trust for use by Shareholders and market professionals, ICE Data Indices, LLC
calculates and disseminates throughout the core trading session on each trading day an updated intraday indicative value (“IIV”).
The IIV is calculated by taking creation unit holdings and updating that value throughout the trading day to reflect changes in the price
of AVAX; this value is then divided by the numbers of shares per creation unit in order to calculate an IIV on a “per share”
basis.

The IIV disseminated during the Exchange core
trading session hours should not be viewed as an actual real time update of the NAV, because NAV per Share is calculated only once at
the end of each trading day based upon the relevant end of day values of the Trust’s investments. The Trust will provide the IIV
per Share updated every fifteen (15) seconds, as calculated by the Exchange or a third-party financial data provider during the Exchange’s
regular trading hours (9:30 a.m. to 4:00 p.m. E.T.). The IIV is disseminated on a per Share basis every fifteen (15) seconds during regular
Exchange core trading session hours of 9:30 a.m. Eastern time to 4:00 p.m. Eastern time. ICE Data Indices, LLC will disseminate the IIV
value through the facilities of CTA/CQ High Speed Lines. In addition, the indicative fund value is published on the Exchange’s website
and is available through on-line information services such as Bloomberg and Reuters. The IIV may differ from the NAV due to the differences
in the time window of trades used to calculate each price (the NAV uses a sixty (60)-minute window, whereas the IIV draws prices from
the last trade on each exchange in an effort to produce a relevant, real-time price). The Sponsor does not believe this will cause confusion
in the marketplace, as Authorized Participants are the only Shareholders who interact with the NAV and the Sponsor will communicate its
NAV calculation methodology clearly.

There are many instances in the market today where
the IIV and the NAV of an ETF are subtly different, whether due to the calculation methodology, market hours overlap or other factors.
The Sponsor has seen limited or no negative impact on trading, liquidity, or other factors for exchange-traded funds in this situation.
The Sponsor believes that the IIV will closely track the globally integrated AVAX price as reflected on the contributing real AVAX trading
platforms.

Dissemination of the IIV provides additional information
that is not otherwise available to the public and is useful to Shareholders and market professionals in connection with the trading of
the Trust’s Shares on the Exchange. Shareholders and market professionals are able throughout the trading day to compare the market
price of the Trust and the IIV. If the market price of the Trust’s Shares diverges significantly from the IIV, market professionals
have an incentive to execute arbitrage trades. For example, if the Trust appears to be trading at a discount compared to the IIV, a market
professional could buy the Trust’s Shares on the Exchange and sell short futures contracts. Such arbitrage trades can tighten the
tracking between the market price of the Trust and the IIV and thus can be beneficial to all market participants.

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Secondary Market Trading

The Trust creates and redeems Shares from time
to time, but only in one or more Baskets. The creation and redemption of Baskets are only made in exchange for delivery to the Trust or
the distribution by the Trust of the amount of AVAX (or corresponding amount of cash) equal to the number of Shares included in the Baskets
being created or redeemed determined on the day the order to create or redeem Baskets is properly received.

As discussed above, Authorized Participants are
the only persons that may place orders to create and redeem Baskets. Authorized Participants must be registered broker-dealers or other
securities market participants, such as banks and other financial institutions that are not required to register as broker-dealers to
engage in securities transactions. An Authorized Participant is under no obligation to create or redeem Baskets, and an Authorized Participant
is under no obligation to offer to the public Shares of any Baskets it does create.

Authorized Participants that do offer to the public
Shares from the Baskets they create will do so at per-Share offering prices that are expected to reflect, among other factors, the trading
price of the Shares on the Exchange, the NAV of the Trust at the time the Authorized Participant purchased the Baskets, the NAV of the
Shares at the time of the offer of the Shares to the public, the supply of and demand for Shares at the time of sale, and the liquidity
of AVAX or other portfolio investments. Baskets are generally redeemed when the price per Share is at a discount to the NAV per Share.
Shares initially comprising the same Basket but offered by Authorized Participants to the public at different times may have different
offering prices. An order for one or more Baskets may be placed by an Authorized Participant on behalf of multiple clients. Authorized
Participants who make deposits with the Trust in exchange for Baskets receive no fees, commissions or other forms of compensation or inducement
of any kind from either the Trust or the Sponsor and no such person has any obligation or responsibility to the Sponsor or the Trust to
effect any sale or resale of Shares. Shares trade in the secondary market on the Exchange.

Shares trade in the secondary market on the Exchange.
Shares may trade in the secondary market at prices that are lower or higher relative to their NAV per Share. The amount of the discount
or premium in the trading price relative to the NAV per Share may be influenced by various factors, including the number of Shareholders
who seek to purchase or sell Shares in the secondary market and the liquidity of AVAX.

The Sponsor

The Sponsor arranged for the creation of the Trust
and is responsible for the ongoing registration of the Shares for their public offering in the United States and the listing of Shares
on the Exchange. The Sponsor has developed a marketing plan for the Trust, prepares marketing materials regarding the Shares of the Trust,
and exercises the marketing plan of the Trust on an ongoing basis. The Sponsor appoints and may remove the Trust’s other service
providers, including the Trustee, Administrator, Transfer Agent, AVAX Custodians, Staking Services Provider, and Marketing Agent (as defined
below), as well as any additional, replacement, or successor service providers. The Sponsor has agreed to pay all ordinary operating expenses
(except for litigation expenses and other extraordinary expenses) out of the Sponsor’s unified fee.

The Cash Custodian

Under the cash custodian agreement (the “Cash
Custody Agreement”), State Street Bank and Trust Company acts as custodian for the Trust’s cash (in such capacity, the “Cash
Custodian”). The Cash Custodian is responsible for, among other things, maintaining a separate deposit account or accounts for cash
in the name of the Trust and determining the amount of AVAX and/or cash required for the issuance or redemption, as the case may be, of
Shares in creation unit aggregations of the Trust after the end of each trading day.

Under the Cash Custody Agreement between State
Street and the Trust, State Street may act as custodian for the Trust’s non-AVAX assets, if any, and as custodian for the Trust’s
cash (in such capacity, the “Cash Custodian”). The Cash Custodian has agreed to, among other things, open and maintain a separate
deposit account or accounts of the Trust, to determine the amount of AVAX and/or cash required for an issuance or redemption of shares
in a Basket and to release and deliver non-AVAX assets and pay out cash.

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The Cash Custodian credits to the deposit account(s)
all cash received by the Cash Custodian from or for the account of the Trust. Upon an instruction to purchase Shares for the account of
the Trust, the Cash Custodian pays out cash of the Trust to purchase Shares. Upon an instruction to redeem Shares for the account of the
Trust, the Cash Custodian shall transfer the Shares so as to sell or redeem the Shares and receive proceeds of such sale or redemption.

The Staking Services Provider

Coinbase Crypto Services, LLC, an affiliate of
the Second AVAX Custodian, is expected to serve as the Staking Services Provider for the Trust from the date the Shares are initially
listed on the Exchange. Pursuant to the Staking Services Addendum to the Custody Agreement (the “Staking Services Agreement”),
dated as of December 10, 2025, between Coinbase, Inc. and the Trust, the Staking Services Provider will stake and use in validation on
the underlying blockchain network the Trust’s AVAX made available to the Staking Services Provider (“Staked Assets”)
and transfer any rewards or distributions in respect of Staked Assets to Coinbase for the benefit of the Trust, less applicable fees (the
“Staking Services”). The Staking Services Provider will regularly credit staking rewards on a recurring basis established
by Staking Services Provider, after deducting any (i) applicable payments to the Staking Services Provider as compensation for its services
under the Staking Services Agreement (the “Staking Provider Consideration”); (ii) the Custodian Staking Facilitation Fee.
The Staking Provider Consideration is currently four percent (4.0%). Custodian Staking Facilitation Fee is currently zero (0.0%). The
Trust will pay the Staking Services Provider a percentage of staking rewards for the Staking Services. Staking rewards received by the
applicable AVAX Custodian, net of fees, will be automatically credited to the Trust (as earned) and reflected in its daily NAV, with a
4:00 p.m. Eastern time cut-off.

Either party may terminate the Staking Services
Agreement upon 180 days’ advance written notice to the other party, or within such timeframe, upon written notice, as may be required
by applicable law.

Once the Trust’s AVAX is staked and completes
its pre-selected “lock-up” period, any staking rewards will be posted to the staking ledger at the AVAX Custodians. The date
that such rewards are deposited to the AVAX Accounts will be considered the trade date for the recognition of the staking rewards. The
received rewards are retained by the Trust and may be delegated for staking. The staking rewards will be recognized as income to the Trust’s
daily records as earned. In accordance with GAAP, the Trust will report such income in the financial statements based upon trade date
in the quarterly and annual reports.

The First AVAX Custodian

Anchorage Digital Bank N.A. serves as the Trust’s
First AVAX Custodian and is a National Trust Bank regulated by the Office of the Comptroller of the Currency. The First AVAX Custodian
is authorized to serve as the Trust’s custodian under the Trust Agreement and pursuant to the terms and provisions of the Custody
Agreement. The First AVAX Custodian has its principal office at 101 S. Reid Street, Suite 307 #329, Sioux Falls, South Dakota 57103.

The First AVAX Custodian makes available to the
Trust the First AVAX Account and access to an omnibus custodial account held at depository institutions in the First AVAX Custodian’s
name for the benefit of its customers at which a cash balance may be maintained. The First AVAX Custodian’s services in respect
of the First AVAX Account (i) allow AVAX to be deposited from a public blockchain address to the Trust’s First AVAX Account and
(ii) allow AVAX to be withdrawn from the First AVAX Account to a public blockchain address as instructed by the Trust. The Custody Agreement
requires the First AVAX Custodian to hold the Trust’s AVAX in cold storage. The First AVAX Custodian will use segregated cold storage
AVAX addresses for the Trust. The addresses on the Avalanche Blockchain at which the Trust’s AVAX in the First AVAX Account are
held by the First AVAX Custodian are separate from the AVAX addresses that the First AVAX Custodian uses for its other customers and are
directly verifiable via the Avalanche Blockchain. The First AVAX Custodian will safeguard the private keys to the AVAX associated with
the Trust’s First AVAX Account. The First AVAX Custodian will at all times record and identify in its books and records that such
AVAXs constitute the property of the Trust. The First AVAX Custodian will not withdraw the Trust’s AVAX from the Trust’s First
AVAX Account with the First AVAX Custodian, or loan, hypothecate, pledge or otherwise encumber the Trust’s AVAX, without the Trust’s
instruction, nor will the Sponsor or any other entity or service provider. The Trust will not lease or loan AVAX held in the Trust’s
First AVAX Account with the First AVAX Custodian and will not give instructions to that effect.

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In respect of the Fiat Accounts, the First AVAX
Custodian holds the Trust’s cash held in its account at the First AVAX Custodian in one or more Customer Omnibus Accounts.”
Customer Omnibus Account” means, with respect to fiat currency held for customers of the First AVAX Custodian in Fiat Accounts (including
the Trust’s cash balance in its Fiat Accounts), omnibus bank accounts (each an “Omnibus Account”) at FDIC-insured, regulated
depository institutions selected by Anchorage (each, a “Fiat Institution”). The First AVAX Custodian makes no representation
about the availability of pass through FDIC deposit insurance in connection with the Omnibus Account at such Fiat Institutions.

The First AVAX Custodian retains the right to
decide, in its sole discretion, which branch of the forked network to support, and disclaims responsibility to support the other branch
if it decides not to, though it may, in the First AVAX Custodian’s discretion, choose (but is not required) to make the unsupported
asset available to the Trust. The First AVAX Custodian may suspend their operations to make determinations about which branch of the forked
network to support.

The Sponsor may, in its sole discretion, add or
terminate other AVAX custodians. The Sponsor may, in its sole discretion, change the custodian for the Trust’s AVAX holdings, but
it will have no obligation to do so or to seek any particular terms for the Trust from other such custodians. To the extent that the Sponsor
adds or terminates other AVAX custodians, or changes the custodian for the Trust’s AVAX holdings, notification are made to Shareholders
via a prospectus supplement and/or a current report filed with the SEC.

The Second AVAX Custodian

The Second AVAX Custodian for the Trust’s
AVAX holdings is Coinbase Custody Trust Company, LLC, and the Trust has entered into the Second AVAX Custody Agreement with the Second
AVAX Custodian. The Sponsor may, in its sole discretion, add or terminate AVAX custodians. The Sponsor may, in its sole discretion, change
the custodian for the Trust’s AVAX holdings, but it will have no obligation whatsoever to do so or to seek any particular terms
for the Trust from other such custodians.

The Second AVAX Custodian will keep custody of
all of the Trust’s AVAX in segregated accounts in the Second AVAX Vault Balance. Trust assets held in the Second AVAX Vault Balance
are held in segregated wallets and are not commingled with the assets of the Second AVAX Custodian’s other customers.

The Second AVAX Custodian will keep all of the
private keys associated with the Trust’s AVAX held at the Second AVAX Custodian in the Second AVAX Vault Balance in cold storage.
Cold storage is a safeguarding method by which the private key(s) corresponding to AVAX is (are) generated and stored in an offline manner.
Private keys are generated in offline computers or devices that are not connected to the internet so that they are more resistant to being
hacked. By contrast, in hot storage, the private keys are held online, where they are more accessible, leading to more efficient transfers,
though they are potentially more vulnerable to being hacked.

Cold storage of private keys may involve keeping
such keys on a non-networked computer or electronic device or storing the public key and private keys on a storage device or printed medium
and deleting the keys from all computers. The Second AVAX Custodian may receive deposits of AVAX but may not send AVAX without use of
the corresponding private keys. Such private keys are stored in cold storage facilities within the United States and Europe, exact locations
of which are not disclosed for security reasons. A limited number of employees at the Second AVAX Custodian are involved in private key
management operations, and the Second AVAX Custodian has represented that no single individual has access to full private keys. The Second
AVAX Custodian’s internal audit team performs periodic internal audits over custody operations, and the Second AVAX Custodian has
represented that Systems and Organizational Control (“SOC”) attestations covering private key management controls are also
performed on the Second AVAX Custodian by an external provider.

Coinbase Global maintains a commercial crime insurance
policy of up to $320 million, which is intended to cover the loss of client assets held by Coinbase Insureds, including from employee
collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent transfer. The insurance
maintained by Coinbase Global is shared among all of Coinbase’s customers, is not specific to the Trust or to customers holding
AVAX with the Second AVAX Custodian and may not be available or sufficient to protect the Trust from all possible losses or sources of
losses.

8

In the event of a fork, the Second AVAX Custody
Agreement provides that the Second AVAX Custodian may temporarily suspend services, and may, in their sole discretion, determine whether
or not to support (or cease supporting) either branch of the forked protocol entirely, provided that the Second AVAX Custodian shall use
commercially reasonable efforts to avoid ceasing to support both branches of such forked protocol and will support, at a minimum, the
original digital asset. The Second AVAX Custody Agreement provides that, other than as set forth therein, and provided that the Second
AVAX Custodian shall make commercially reasonable efforts to assist the Trust to retrieve and/or obtain any assets related to a fork,
airdrop or similar event the Second AVAX Custodian shall have no liability, obligation or responsibility whatsoever arising out of or
relating to the operation of the underlying software protocols relating to the Avalanche Network or an unsupported branch of a forked
protocol and, accordingly, The Trust acknowledges and assumes the risk of the same. The Second AVAX Custody Agreement further provides
that, unless specifically communicated by the Second AVAX Custodian and its affiliates through a written public statement on the Coinbase
website, the Second AVAX Custodian does not support airdrops, metacoins, colored coins, side chains, or other derivative, enhanced or
forked protocols, tokens or coins, which supplement or interact with AVAX. The Sponsor has committed to cause the Trust to permanently
and irrevocably abandon any Incidental Rights and IR Virtual Currency (each of which is defined below) to which the Trust may become entitled
in the future. The Trust has no right to receive any Incidental Right or IR Virtual Currency. Furthermore, the Second AVAX Custodian has
no authority, pursuant to the Second AVAX Custody Agreement or otherwise, to exercise, obtain or hold, as the case may be, any such abandoned
Incidental Right or IR Virtual Currency on behalf of the Trust or to transfer any such abandoned Incidental Right or IR Virtual Currency
to the Trust if the Trust terminates its custodial arrangement with the Second AVAX Custodian. For more information on the Trust’s
and Sponsor’s policies on forked or airdropped assets. Neither the Second AVAX Custodian nor any other Coinbase entity is permitted
to withdraw the Trust’s AVAX from the Trust’s Second AVAX Vault Balance, or loan, hypothecate, pledge or otherwise encumber
the Trust’s AVAX, without the consent of the Trust.

The Trustee

CSC Delaware Trust Company, a Delaware trust company,
acts as the trustee of the Trust for the purpose of creating a Delaware statutory trust in accordance with the Delaware Statutory Trust
Act (“DSTA”). The Trustee is appointed to serve as the trustee of the Trust in the State of Delaware for the sole purpose
of satisfying the requirement of Section 3807(a) of the DSTA that the Trust have at least one trustee with a principal place of business
in the State of Delaware.

General Duty of Care of Trustee

The Trustee is a fiduciary under the Trust Agreement;
provided, however, that the fiduciary duties and responsibilities and liabilities of the Trustee are limited by, and are only those specifically
set forth in, the Trust Agreement.

Resignation, Discharge or Removal of Trustee;
Successor Trustees

The Trustee may resign upon at least sixty (60)
days’ prior written notice to the Sponsor; provided, however, that such resignation shall not be effective until such time as a
successor Trustee has accepted such appointment. The Sponsor may remove the Trustee at any time upon sixty (60) days’ prior written
notice to the Trustee; provided, however, that such removal shall not be effective until such time as a successor Trustee has accepted
such appointment.

Upon the resignation or removal of the Trustee,
the Sponsor shall appoint a successor Trustee. If no successor Trustee shall have been appointed and shall have accepted such appointment
within sixty (60) days after the giving of such notice of resignation or removal, the Trustee may petition any court of competent jurisdiction
for the appointment of a successor Trustee. Any successor Trustee appointed pursuant to the Trust Agreement shall be eligible to act in
such capacity in accordance with this Trust Agreement and, following compliance with the Trust Agreement, shall become fully vested with
the rights, powers, duties and obligations of its predecessor under the Trust Agreement, with like effect as if originally named as Trustee.
Any such successor Trustee shall notify the Trustee of its appointment by providing a written instrument to the Trustee. At such time
the Trustee shall be discharged of its duties herein. Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which such Trustee shall be a party,
or any corporation to which substantially all the corporate trust business of the Trustee may be transferred, shall, subject to the preceding
sentence, be the Trustee under the Trust Agreement without further act.

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The Administrator

State Street Bank and Trust Company (“State
Street”) serves as the Trust’s administrator (the “Administrator”). State Street’s principal address is
One Congress Street, Boston, MA 02111. Under the Trust Administration and Accounting Agreement, the Administrator provides necessary administrative,
tax, and accounting services and financial reporting for the maintenance and operations of the Trust, including valuing the Trust’s
AVAX and calculating the net asset value per Share of the Trust and the net asset value of the Trust and supplying pricing information
to the Sponsor for the Trust’s website. In addition, the Administrator makes available the office space, equipment, personnel and
facilities required to provide such services.

The Transfer Agent

State Street Bank serves as the transfer agent
for the Trust. The Transfer Agent: (1) issues and redeems Shares of the Trust; (2) responds to correspondence by Shareholders and others
relating to its duties; (3) maintains Shareholder accounts; and (4) makes periodic reports to the Trust. The Trust’s Transfer Agent
facilitates the settlement of Shares in response to the placement of creation orders and redemption orders from Authorized Participants.

The Marketing Agent

Van Eck Securities Corporation (the “Marketing
Agent”), a wholly owned subsidiary of VanEck, is responsible for reviewing and approving the marketing materials prepared by the
Trust for compliance with applicable SEC and Financial Industry Regulatory Authority (“FINRA”) advertising laws, rules, and
regulations.

The Trust’s Fees and Expenses

The Trust pays the Sponsor a unified fee (the
“Sponsor Fee”) of 0.20% of average daily net assets that accrues daily and pays monthly. The Sponsor Fee is paid by the Trust
to the Sponsor as compensation for services performed under the Trust Agreement. The Administrator makes its determination regarding the
Sponsor Fee in respect of each day by reference to the Trust’s NAV as of that day. The Sponsor Fee accrues in U.S. dollars daily
and is payable monthly in arrears in AVAX on, or by, the tenth (10th) business day of the next month in respect of the prior month. Each
month, the Administrator calculates the Sponsor Fee for each day of the month, resulting in a cumulative total in U.S. dollars, which
the Administrator then calculates the AVAX equivalent of by reference to the Index as of the date of calculation, and the Sponsor shall
then withdraw the corresponding amount of AVAX from the Trust’s AVAX Accounts in payment of the Sponsor Fee.

The Sponsor has agreed to pay all ordinary operating
expenses (except for extraordinary expenses, including but not limited to, non-recurring expenses and costs of services performed by the
Sponsor or a service provider on behalf of the Trust to protect the Trust or the interests of Shareholders, such as any applicable Staking
Provider Consideration or Custodian Staking Facilitation Fee, and in connection with any indemnification of agents, service providers,
or counterparties of the Trust and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection
with litigation, regulatory enforcement or investigation matters) out of the Sponsor Fee. For extraordinary expenses not covered in the
previous sentence, the Sponsor shall pay these expenses as they become due and seek contemporaneous reimbursement from the Trust in the
form of AVAX at the time of payment. For extraordinary expenses denominated in dollars, the Sponsor shall convert the expense amounts
into AVAX at the Index price on the date the Sponsor seeks such reimbursement from the Trust, and shall withdraw the corresponding amounts
of AVAX from the Trust as reimbursement for paying such extraordinary expenses of the Trust. For extraordinary expenses denominated in
AVAX, if any, the Sponsor shall withdraw the corresponding amounts of AVAX from the Trust as reimbursement for paying such extraordinary
expenses. Neither the Trust nor the Shareholders shall be responsible for any fees and expenses, including any Avalanche Network fees,
incurred by the Sponsor to withdraw AVAX from the Trust’s AVAX Accounts in connection with payment of the Sponsor Fee or Trust expenses
not assumed by the Sponsor, or to convert such AVAX, once withdrawn, into cash (if applicable).

The Sponsor will sell AVAX which may be facilitated
by one or more Liquidity Providers and/or the AVAX Custodians or an affiliate thereof, in connection with the termination of the Trust
and the liquidation of the Trust’s AVAX holdings, which the Sponsor shall do at a price which it is able to obtain through commercially
reasonable efforts, and arrange

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for the distribution of the cash proceeds to the
Trust’s Shareholders and creditors (if any). The amount of AVAX held by the Trust may vary from time to time depending on the level
of the Trust’s expenses and liabilities and the market price of AVAX. Furthermore, the Sponsor may, in its sole discretion, agree
to rebate all or a portion of the Sponsor Fee attributable to Shares held by certain investors, or share a portion of the Sponsor Fee
with such investors, subject to certain minimum Shareholding and lock up requirements as determined by the Sponsor to foster stability
in the Trust’s asset levels. Any such rebate or sharing of the Sponsor Fee will be subject to negotiation and agreement between
the Sponsor and the investor on a case-by-case basis. The Sponsor is under no obligation to provide any rebates of, or share, the Sponsor
Fee. Neither the Trust nor the Trustee will be a party to any Sponsor Fee rebate or sharing arrangements negotiated by the Sponsor. Any
Sponsor Fee rebate, or any sharing of the Sponsor Fee, will be paid from the funds of the Sponsor (including the Sponsor Fee) and not
from the assets of the Trust. In addition, the Sponsor may, at its sole discretion and from time to time, waive all or a portion of the
Sponsor Fee for stated periods of time. The Sponsor is under no obligation to waive any portion of its fees and any such waiver shall
create no obligation to waive any such fees during any period not covered by the waiver. In the future, if the Sponsor decides to waive
all or a portion of the Sponsor Fee, Shareholders will be notified in a prospectus supplement, in the Trust’s periodic Exchange
Act reports and/or on the Trust’s website.

During the period commencing on January 26, 2026
(the day the Shares are initially listed on the Exchange) and ending on February 28, 2026, the Sponsor agreed to waive the entire Sponsor
Fee for the first $500 million of the Trust’s assets.

Creation and Redemption of Shares

The Trust creates and redeems Shares from time
to time, but only in one or more Baskets. Baskets are only made in exchange for delivery to the Trust of the amount of AVAX represented
by the Baskets being created or an amount of cash sufficient to purchase such amount of AVAX, the amount of which is equal to the combined
NAV of the number of Shares included in the Baskets being created determined as of 4:00 p.m. Eastern time on the day the order to create
Baskets is properly received. Baskets are only redeemed in exchange for delivery to the Trust of the amount of Shares represented by the
Basket. The Authorized Participants will deliver cash or AVAX to create Shares and will receive cash or AVAX when redeeming Shares. For
a redemption in cash, the Sponsor shall arrange for the AVAX represented by the Basket to be sold to a Liquidity Provider selected by
the Sponsor and the cash proceeds distributed from the Trust’s account at the Cash Custodian to the Authorized Participant. The
Liquidity Providers as of the date of this Report, that have agreed to serve as a Liquidity Provider and have consented to be named in
the Trust’s registration statement are Cumberland New York LLC, JSCT, LLC, Nonco LLC, Virtu Financial Singapore Pte Ltd., and Wincent
Investment Fund PCC Limited. Additional Liquidity Providers may be added at any time, subject to the Sponsor’s sole discretion.
For an “in-kind” subscription, Authorized Participants will deliver, or arrange for the delivery by the Authorized Participant’s
designee of, AVAX to the Trust’s accounts with the AVAX Custodians in exchange for Shares when they purchase Shares. For an “in-kind”
redemption transaction with the Trust, when Authorized Participants redeem Shares, the Trust, through the AVAX Custodians, will deliver
AVAX to such Authorized Participants, or a designee thereof, in exchange for their Shares.

Authorized Participants

Authorized Participants are the only persons that
may place orders to create and redeem Baskets. Authorized Participants must be (1) registered broker-dealers or other securities market
participants, such as banks and other financial institutions, that are not required to register as broker-dealers to engage in securities
transactions described below and (2) DTC Participants. Registered broker-dealers are subject to various requirements of the federal securities
laws and rules, including financial responsibility rules such as the customer protection rule, the net capital rule and recordkeeping
requirements. On May 15, 2025, the SEC’s Division of Trading and Markets and FINRA’s Office of General Counsel withdrew their
2019 joint statement regarding broker-dealer custody of crypto asset securities, which was widely perceived as prohibiting broker-dealers
from offering custodial services for crypto assets that are not securities. Additionally, on the same day, the SEC released a set of Frequently
Asked Questions (FAQs) clarifying its views on broker-dealers’ crypto asset activities. The FAQs stated that (i) SEC Rule 15c3-3
applies only to crypto asset securities, and (ii) broker-dealers are permitted to facilitate in-kind creations and redemptions in connection
with spot crypto exchange-traded products.

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To become an Authorized Participant, a person
must enter into an Authorized Participant Agreement with the Sponsor. The Authorized Participant Agreement provides the procedures for
the creation and redemption of Baskets and for the delivery, or facilitation of the delivery, of the AVAX required for such creation and
redemptions. The Authorized Participant Agreement and the related procedures attached thereto may be amended by the Trust or the Sponsor
(as the case may be), without the consent of any Shareholder or Authorized Participant. Authorized Participants pay the Transfer Agent
a fee for each order they place to create or redeem one or more Baskets. The transaction fee may be reduced, increased or otherwise changed
by the Sponsor. Authorized Participants who make deposits (directly in the case of cash creations and, indirectly in the case of AVAX
deposits) with the Trust in exchange for Baskets receive no fees, commissions or other form of compensation or inducement of any kind
from either the Trust or the Sponsor, and no such person has any obligation or responsibility to the Sponsor or the Trust to effect any
sale or resale of Shares.

Each Authorized Participant is required to be
registered as a broker-dealer under the Exchange Act and a member in good standing with FINRA, or exempt from being or otherwise not required
to be licensed as a broker-dealer or a member of FINRA, and qualified to act as a broker or dealer in the states or other jurisdictions
where the nature of its business so requires. Certain Authorized Participants may also be regulated under federal and state banking laws
and regulations. Each Authorized Participant has its own set of rules and procedures, internal controls, and information barriers as it
determines is appropriate in light of its own regulatory regime.

The Trust engages in AVAX transactions for converting
cash into AVAX (in association with purchase orders) and AVAX into cash (in association with redemption orders). The Trust conducts its
AVAX purchase and sale transactions by trading directly with third parties selected by the Sponsor (each, a “Liquidity Provider”),
who are not registered broker-dealers, pursuant to written agreements between such Liquidity Providers and the Trust. Liquidity Providers
may be added at any time, subject to the discretion of the Sponsor. Alternatively, Liquidity Providers may choose to terminate their participation
as Liquidity Providers to the Trust at any time. The Trust is not aware of any other affiliation or material relationship between Liquidity
Provider and the Authorized Participants or other service providers of the Trust in executing a transaction in AVAX with the Trust. Each
Liquidity Provider represents to the Trust that it is acting for itself and not for another person, and is not acting as agent or at the
direction of any Authorized Participant. Upon receipt of an order from an Authorized Participant to create or redeem Baskets, the Trust
may obtain quotes for a price to purchase or sell AVAX from one or more Liquidity Providers. A Liquidity Provider may respond to the Trust’s
request with an offer of a quote at which it is willing to sell the specified quantity of AVAX, or a portion thereof, in the case of a
creation, or a quote at which it is willing to buy the specified quantity of AVAX, or a portion thereof, in the case of a redemption,
as indicated in such offer. The Trust then determines, in its sole discretion, which Liquidity Provider that provided a quote to use.
Once an offer is accepted it becomes a trade that is binding on both the Trust and the Liquidity Provider. Each Liquidity Provider is
required to comply with U.S. federal and/or state laws including licensing and registration requirements or similar laws in non-U.S. jurisdictions
and maintain practices and policies designed to comply with AML and KYC regulations. The Liquidity Providers as of the date of this Report,
that have agreed to serve as a Liquidity Provider and have consented to be named in the Trust’s registration statement are Cumberland
New York LLC, JSCT, LLC, Nonco LLC, Virtu Financial Singapore Pte Ltd., and Wincent Investment Fund PCC Limited. Current or future Liquidity
Providers may be affiliates of, or have material relationships with, the Trust’s current or future Authorized Participants.

The following description of the procedures for
the creation and redemption of Baskets is only a summary and a Shareholder should refer to the relevant provisions of the Trust Agreement
and the form of Authorized Participant Agreement for more detail. The Trust Agreement and form of Authorized Participant Agreement are
incorporated by reference in this Report.

Authorized Participants will place orders through
the Transfer Agent. The Transfer Agent will coordinate with the Sponsor, who will in turn coordinate with the Trust’s AVAX Custodians
in order to facilitate settlement of the Shares and AVAX as described in more detail in the Creation Procedures and Redemption Procedures
sections below.

The trading prices of many digital assets, including
AVAX, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility may persist and the value of
the Shares may significantly decline in the future without recovery. The digital asset markets may still be experiencing a bubble or may
experience a bubble again in the future. Extreme volatility in the future, including further declines in the trading prices of AVAX, could
have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value. The

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Trust is not actively managed and will not take
any actions to take advantage, or mitigate the impacts, of volatility in the price of AVAX.

In addition, the use of cash creations and redemptions
has transaction costs of buying and selling AVAX. These costs include the bid-ask spread along with the operational costs from the labor
and overhead involved in calculating, executing, monitoring, and accounting for transactions in the AVAX markets and related cash movements.
The Trust’s Authorized Participant Agreement provides that transaction costs and slippage related to Basket creation and redemption
are the responsibility of the Authorized Participant. Under ordinary circumstances, the Trust does not anticipate that there would be
fees or costs related to purchases and sales of AVAX. To the extent there are unusual or unanticipated fees or costs associated with AVAX
purchases and sales in connection with creation and redemption activity, the Sponsor would seek to pass these costs to the Liquidity Providers
or the Authorized Participants. If unable to do so, the Sponsor would treat these as extraordinary expenses and could decide to seek reimbursement
from the Trust to the extent the fees or expenses were paid by the Sponsor on the Trust’s behalf.

Creation Procedures

On any business day, an Authorized Participant
may place an order with the Transfer Agent to create one or more Baskets. Currently, creation orders are only accepted in cash or in-kind.
For purposes of processing creation and redemption orders, a “business day” means any day other than a day when the Exchange
is closed for regular trading (“Business Day”). Purchase orders must be placed by the order cut-off time for a purchase order
on a Business Day (the “Creation Order Cut-Off Time”). The Creation Order Cut-Off Time is 3:59:59 p.m. Eastern time on a trade
date or as otherwise communicated by the Sponsor. The day on which an order is received by the Transfer Agent is considered the purchase
order date.

Prior to the delivery of Baskets for a purchase
order, the Authorized Participant must also have wired to the Transfer Agent the nonrefundable transaction fee due for the creation order
to offset the transfer and other transaction costs associated with the issuance of the Basket. Authorized Participants may not withdraw
a creation request. The manner by which creations are made is dictated by the terms of the Authorized Participant Agreement. By placing
a creation order, an Authorized Participant agrees to facilitate the deposit of cash with the Cash Custodian or AVAX, with the AVAX Custodians.
If an Authorized Participant fails to consummate the foregoing, the order will be cancelled.

For a cash creation, the total deposit of cash
required to create each Basket is an amount of cash that is in the same proportion to the total assets of the Trust, net of accrued expenses
and other liabilities, on the date the order to purchase is properly received, as the number of Shares to be created under the purchase
order is in proportion to the total number of Shares outstanding on the date the order is received. On the trade date for a purchase order
(the “Creation Trade Date”), following receipt of the purchase order from the Authorized Participant, the Trust shall, in
its sole discretion, select a Liquidity Provider and execute a trade to purchase AVAX from that Liquidity Provider in the amount of the
Basket Deposit (the calculation of which is explained below), with the purchased AVAX to be delivered by the Liquidity Provider on the
Creation Settlement Date in exchange for a cash price to be delivered by the Trust on Creation Settlement Date. The Liquidity Provider,
not the Authorized Participant, shall be responsible for delivering AVAX to the Trust. The Authorized Participant shall be responsible
for delivering cash to the Trust.

For an in-kind creation, following an Authorized
Participant’s placement of a purchase order, the Trust’s AVAX Custodian accounts must be credited with the required AVAX by
1:00 p.m. Eastern time on the Creation Settlement Date, or in the case of cash deposits, the Trust’s Cash Custodian account must
be credited with the required cash by 1:00 p.m. Eastern time on the Creation Settlement Date, as applicable. If the Authorized Participant
or its designee fails to consummate the foregoing, the order shall be cancelled. Upon receipt of the AVAX deposit amount in the Trust’s
AVAX Custodian accounts, in the case of in-kind creations, or the cash deposit amount in the Trust’s Cash Custodian account, in
the case of cash creations, the Trust will notify the Transfer Agent to release the shares to the Authorized Participant, by directing
DTC to credit the number of Shares created to the applicable DTC account.

No Shares will be issued unless and until the
AVAX Custodians (in the case of in-kind deposits) or Cash Custodian (in the case of cash deposits) have informed the Transfer Agent that
the AVAX or cash (as applicable) has been received. Disruption of services at the AVAX Custodians would have the potential to delay settlement
of the AVAX related to Share creations. To the extent a Liquidity Provider, is not able to deliver AVAX associated with a cash purchase
order as of a specified time on the settlement date, the Authorized Participant will have the option to cancel the order, or the

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Sponsor may select an alternative execution method
for the AVAX purchase. To the extent that AVAX transfers in connection with a creation order are delayed due to congestion or other issues
with the Avalanche Network, such AVAX will not be held in cold storage in until such transfers can occur.

AVAX held in the Trust’s AVAX Custodian
accounts is the property of the Trust and is not leased, or loaned under any circumstances.

Determination of Required Deposits

The Basket Cash Component changes from day to
day. To determine the Basket Cash Component, the Administrator starts by determining the number of AVAX held by the Trust as of the opening
of business on that trade date, and subtracts the amount of AVAX constituting estimated accrued but unpaid fees and expenses of the Trust
as of the opening of business on that trade date. For the purposes of the computation of the Basket Deposit, the AVAX quantity is displayed
to the hundred millionth. Second, this figure, in AVAX, is divided by the quotient of the number of Shares outstanding at the opening
of business on the trade date divided by 25,000. This produces the Basket Deposit, which is the number of AVAX attributable to each Basket
as of the opening of business on the trade date. Third, the resulting AVAX amount is then valued, in cash, at the Index calculated on
the trade date, or in accordance with the other valuation policies described in the Registration Statement if the Index is not available.
This produces the Basket Cash Component. The Basket Deposit, and the Basket Cash Component, so determined is communicated via electronic
mail message to all Authorized Participants, and made available on the Sponsor’s website for the Shares. The Exchange also publishes
the Basket Deposit determined by the Administrator as indicated above.

In the case of a cash creation only, by the end
of day Eastern time (or such other time as the parties may agree) on the trade date for a purchase order, the Administrator will calculate
and transmit the Required Cash Creation Total, consisting of (1) the Basket Cash Component, (2) Cash Amount, and (3) any Purchase Slippage,
to the Authorized Participant, which the Authorized Participant shall be responsible for delivering in cash on the settlement date for
a purchase order (which shall be the Business Day immediately following the trade date unless the Trust, Sponsor, Authorized Participant
agree to a different date) (the “Creation Settlement Date”) to the Trust’s account at the Cash Custodian is cleared,
immediately available funds by 1:00 p.m. Eastern time. The Trust acknowledges that, if the actual cash purchase price of AVAX from the
Liquidity Provider is below the Basket Cash Component, the Authorized Participant shall be entitled to retain the difference and the Required
Cash Creation Total shall be reduced accordingly.

In the case of an in-kind creation only, by the
end of day Eastern Standard Time (or such other time as the parties may agree) on Creation Trade Date, the Administrator will calculate
and transmit the Creation Basket Deposit, to the Authorized Participant, which the Authorized Participant shall be responsible for delivering
in AVAX on Creation Settlement Date to the Trust’s Custody Accounts.

Delivery of Required Deposits

For a cash creation, on the Creation Settlement
Date, the Authorized Participant who places a purchase order must follow the procedures outlined in the “Creation Procedures”
section of this Report. In the case of a cash creation only, the Trust shall instruct the Cash Custodian to transfer the cash proceeds
to the Trust’s Fiat Accounts. The Liquidity Provider delivers AVAX to the Trust’s cold storage vault account in exchange for
the cash purchase price, a delivery facilitated by the AVAX Custodians under the Custody Agreements. Upon settlement by the AVAX Custodians
of the AVAX purchase from the Liquidity Provider and the deposit of AVAX in the Trust’s cold storage vault account, the Trust shall
instruct the Transfer Agent to release the Shares to the Authorized Participant, and the Transfer Agent shall direct DTC to credit the
number of Shares ordered to the applicable DTC account, by 1:00 p.m. Eastern time on the Creation Settlement Date and the Creation Order
shall be settled. If the AVAX purchase transaction between the Trust and the Liquidity Provider fails to settle, the Authorized Participant
shall have the option to cancel the Creation Order, in which case the Trust will return the Required Cash Creation Total less the Cash
Amount to the Authorized Participant and the Shares will not be issued, or the Sponsor may use an alternative execution method for the
Trust to purchase AVAX, in which case the Authorized Participant agrees and acknowledges it is responsible for any Purchase Slippage and
Cash Amount relating to such alternative execution method. The expense and risk of delivery and ownership of cash until such cash has
been received in immediately available, cleared federal funds by the Cash Custodian on behalf of the Trust will be borne solely by the
Authorized Participant.

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For an in-kind creation, on the Creation Settlement
Date, the Authorized Participant or its designee shall deposit the amount of AVAX specified in the Creation Basket Deposit in the Trust’s
accounts at the AVAX Custodians by 1:00 p.m. Eastern time. Upon settlement by the AVAX Custodians, the Trust shall instruct the Transfer
Agent to release the Shares to the Authorized Participant, and the Transfer Agent shall direct DTC to credit the number of Shares ordered
to the applicable DTC account, by close of business on the Creation Settlement Date and the Creation Order shall be settled. If the AVAX
deposit transaction between the Trust and the Authorized Participant or its designee fails to settle, the Authorized Participant shall
have the option to cancel the Creation Order, in which case the Trust will return the Creation Basket Deposit to the Authorized Participant
and the Shares will not be issued, or the Sponsor may use an alternative execution method for the Trust to purchase AVAX, in which case
the Authorized Participant agrees and acknowledges it is responsible for providing any Basket Cash Component, plus any Purchase Slippage
and Cash Amount, relating to such alternative execution method. The expense and risk of delivery and ownership of AVAX until such AVAX
has been credited to the Trust’s Custody Accounts by the AVAX Custodians on behalf of the Trust will be borne solely by the Authorized
Participant.

Rejection of Purchase Orders

The Sponsor or its designee has the absolute right,
but does not have any obligation, to reject any purchase order or Basket Deposit if the Sponsor determines that:

●the purchase order or Basket Deposit is not in proper form;

●it would not be in the best interest of the Shareholders of the Trust;

●the acceptance of the purchase order or the Basket Deposit would have adverse tax consequences to the
Trust or its Shareholders;

●the acceptance or receipt of the purchase order or the Basket Deposit would, in the opinion of counsel
to the Sponsor, be unlawful; or

●circumstances outside the control of the Trust, the Sponsor, the Marketing Agent, or the AVAX Custodians
or Cash Custodian make it, for all practical purposes impracticable or not feasible to process Baskets (including if the Sponsor determines
that the investments available to the Trust at that time will not enable it to meet its investment objective).

None of the Sponsor, the Transfer Agent, the AVAX
Custodians or the Cash Custodian will be liable for the rejection of any purchase order or Basket Deposit.

Redemption Procedures

The procedures by which an Authorized Participant
can redeem one or more Baskets mirror the procedures for the creation of Baskets with an additional safeguard on AVAX or cash being removed
from the Trust’s AVAX Custodian or Cash Custodian account. Currently, redemption orders are processed in cash or AVAX. On any business
day, an Authorized Participant may place an order with the Transfer Agent to redeem one or more Baskets. Redemption orders must be placed
by the order cut-off time for an order on a Business Day (the “Redemption Order Cut-Off Time”). The Redemption Order Cut-Off
Time is 3:59:59 p.m. Eastern time on a trade date or as otherwise communicated by the Sponsor. A redemption order will be effective on
the date it is received by the Transfer Agent (“Redemption Order Date”).

For a cash redemption, on the trade date for a
Redemption Order (the “Redemption Trade Date”), following receipt of the Redemption Order from the Authorized Participant,
the Trust shall instruct the AVAX Custodians to move the AVAX in the amount of the Basket Deposit out of the Trust’s accounts at
the AVAX Custodians. On the Redemption Trade Date, the Trust in its sole discretion, shall select a Liquidity Provider and execute a trade
to sell the AVAX in exchange for cash to be delivered on the settlement date for a Redemption Order (which shall be the Business Day immediately
following the Redemption Trade Date unless the Trust, Sponsor, and Authorized Participant agree to a different date) (the “Redemption
Settlement Date”). The Liquidity Providers as of the date of this Report, that have

15

agreed to serve as a Liquidity Provider and have
consented to be named in the Trust’s registration statement are Cumberland New York LLC, JSCT, LLC, Nonco LLC, Virtu Financial Singapore
Pte Ltd., and Wincent Investment Fund PCC Limited. Additional Liquidity Providers may be added at any time, subject to the Sponsor’s
sole discretion. The Redemption Settlement Date shall be the immediately following Business Day after the Redemption Trade Date, unless
the parties otherwise agree in writing. The Liquidity Provider, not the Authorized Participant, shall be responsible for purchasing AVAX
from the Trust. By placing a Redemption Order, an Authorized Participant agrees to facilitate the delivery of the Basket of Shares.

For an in-kind redemption, on the Redemption Trade
Date, the Trust shall instruct the AVAX Custodians to deliver AVAX to the Authorized Participant or its designee on the Redemption Settlement
Date. The Redemption Settlement Date, in the case of an in-kind redemption order, shall be the immediately following Business Day after
the Redemption Trade Date, unless the parties otherwise agree in writing. The Authorized Participant, or its designee, shall be responsible
for receiving AVAX from the Trust in the case of an in-kind redemption order.

Once the Transfer Agent notifies the AVAX Custodians
or Cash Custodian (as applicable), the Sponsor and the Administrator that the Shares have been received in the Trust’s DTC account,
the Administrator shall instruct the AVAX Custodians or Cash Custodian (as applicable) to transfer the redemption AVAX or cash amount
from the Trust’s AVAX Custodian or Cash Custodian account to the Authorized Participant.

AVAX held in each of the Trust’s AVAX Custodian
accounts is the property of the Trust and is not leased or loaned under any circumstances.

Determination of Redemption Distribution

By 8:00 p.m. Eastern time (or such other time
as the parties may agree) on the Redemption Trade Date, in the case of a cash Redemption Order, the Administrator will calculate the Required
Cash Redemption Total that the Trust is responsible for delivering in cash on Redemption Settlement Date to the Authorized Participant’s
designated bank account. The Required Cash Redemption Total consists of (1) Basket Cash Component, minus (2) the Cash Amount, and minus
(3) any Redemption Slippage. The Trust acknowledges that, if the actual cash sale price realized from selling AVAX to the Liquidity Provider
is above the Basket Cash Component, the Authorized Participant shall be entitled to retain the difference and the Required Cash Redemption
Total shall be increased accordingly.

By 8:00 p.m. Eastern Standard Time (or such other
time as the parties may agree) on Redemption Trade Date, in the case of an in-kind Redemption Order, the Administrator will calculate
the Creation Basket Deposit that the Trust is responsible for delivering in AVAX on Redemption Settlement Date to the Authorized Participant’s
or its designee’s accounts at the AVAX Custodians.

Delivery of Redemption Distribution

On the Redemption Settlement Date, in the case
of a cash Redemption Order, the Liquidity Provider delivers cash to the Trust’s Fiat Accounts in exchange for AVAX, as facilitated
by the AVAX Custodians. Upon settlement of the AVAX sale by the Trust to the Liquidity Provider and the receipt of the Liquidity Provider’s
cash in the Trust’s Fiat Accounts, the Trust shall instruct the AVAX Custodians to transfer the cash to the Trust’s Cash Custodian
account. The Trust shall then instruct the Transfer Agent to deliver the Authorized Participant’s Shares in the Basket Deposit back
to the Trust, in exchange for which the Trust shall instruct the Cash Custodian to transfer the Required Cash Redemption Total to the
Authorized Participant’s designated bank account and the Redemption Order shall be settled. If the AVAX sale transaction between
the Trust and the Liquidity Provider fails to settle, the Authorized Participant shall have the option to cancel the Redemption Order,
in which case the Trust will retain its AVAX and the Authorized Participant will retain the associated Shares and will not receive any
cash, or the Sponsor may use an alternative execution method for the Trust to sell AVAX, in which case the Authorized Participant agrees
and acknowledges it is responsible for any Redemption Slippage and Cash Amount relating to such alternative execution method. If the Trust’s
DTC account has not been credited with all of the Baskets to be redeemed by such time, the redemption distribution will also be delayed.

On the Redemption Settlement Date, in the case
of an in-kind Redemption Order, the Trust shall instruct the Transfer Agent to deliver the Authorized Participant’s Shares in the
Creation Basket Deposit back to the Trust, in exchange for

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which the Trust shall instruct the AVAX Custodians
to transfer the AVAX in the Creation Basket Deposit to the Authorized Participant’s or its designee’s accounts at the AVAX
Custodians and the Redemption Order shall be settled. The Trust shall have no obligation to instruct the AVAX Custodians to transfer AVAX
to the Authorized Participant or its designee unless and until the Trust’s DTC account has been credited with all of the Shares
relating to the Creation Baskets to be redeemed. If the AVAX transfer between the Trust’s AVAX Custodian Accounts and the Authorized
Participant’s or its designee’s AVAX Custodian accounts fails to settle, the Authorized Participant shall have the option
to cancel the Redemption Order, in which case the Trust will retain its AVAX and the Authorized Participant will retain the associated
Shares and will not receive any AVAX, or the Sponsor may use an alternative execution method for the Trust to sell AVAX, in which case
the Authorized Participant will receive cash, and the Authorized Participant agrees and acknowledges it is responsible for any Redemption
Slippage and Cash Amount relating to such alternative execution method. Notwithstanding the forgoing, the Sponsor may extend the period
for delivery of redemption proceeds in connection with stressed liquidity conditions resulting from the Trust’s staking program.

Suspension or Rejection of Redemption Orders

The Sponsor may, in its discretion, suspend the
right of redemption, or postpone the redemption settlement date (1) for any period during which the Exchange is closed other than customary
weekend or holiday closings, or trading on the Exchange is suspended or restricted, (2) for any period during which an emergency exists
as a result of which delivery, disposal or evaluation of AVAX is not reasonably practicable, or (3) for such other period as the Sponsor
determines to be necessary for the protection of the Shareholders. For example, the Sponsor may determine that it is necessary to suspend
redemptions to allow for the orderly liquidation of the Trust’s assets. If the Sponsor has difficulty liquidating the Trust’s
positions, e.g., because of a market disruption event, it may be appropriate to suspend redemptions until such time as such circumstances
are rectified. If any of these events occurs at a time when an Authorized Participant intends to redeem Shares, and the price of AVAX
decreases before such Authorized Participant is able to complete such redemption order, such Authorized Participant may sustain a loss
with respect to the amount that it would have been able to obtain in exchange for the AVAX received from the Trust upon the redemption
of its Shares, had the redemption taken place when such Authorized Participant originally intended it to occur. As a consequence, Authorized
Participants may reduce their trading in Shares during periods of suspension, decreasing the number of potential buyers of Shares in the
secondary market and, therefore, decreasing the price a Shareholder may receive upon sale. None of the Sponsor, the person authorized
to take redemption orders in the manner provided in the Authorized Participant Agreement, the Cash Custodian or the AVAX Custodians will
be liable to any person or in any way for any loss or damages that may result from any such suspension or postponement. To the extent
that the Sponsor suspends the right of redemption, the Trust will notify Shareholders in a prospectus supplement and a current report
on Form 8-K or in its annual or quarterly reports.

Redemption orders must be made in whole Baskets.
The Sponsor acting by itself or through the person authorized to take redemption orders in the manner provided in the Authorized Participant
Agreement may, in its sole discretion, reject any redemption order (1) the Sponsor determines not to be in proper form, (2) the fulfillment
of which its counsel advises may be illegal under applicable laws and regulations, or (3) if circumstances outside the control of the
Sponsor, the person authorized to take redemption orders in the manner provided in the Authorized Participant Agreement or the AVAX Custodian
make it for all practical purposes not feasible for the Shares to be delivered under the redemption order. The Sponsor may also reject
a redemption order if the number of Shares being redeemed would reduce the remaining outstanding Shares to 25,000 Shares (i.e., 1 Basket)
or less.

The Marketing Agent shall notify the Authorized
Participant of a rejection or suspension of any redemption order. The Marketing Agent is under no duty, however, to give notification
of any specific defects or irregularities nor shall the Marketing Agent or the Trust incur any liability for the failure to give any such
notification. The Trust and the Marketing Agent may not revoke a previously accepted redemption order.

Creation and Redemption Transaction Fee

To compensate the Transfer Agent for expenses
incurred in connection with the creation and redemption of Baskets, an Authorized Participant is required to pay a transaction fee to
the Transfer Agent to create or redeem Baskets, which does not vary in accordance with number of Baskets in such order. The transaction
fee may be reduced, increased or otherwise changed by the Sponsor. The Sponsor will notify DTC of any change in the transaction fee and
will not implement any increase in the fee for the redemption of baskets until thirty (30) days after the date of notice.

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Tax Responsibility

Authorized Participants are responsible for any
transfer tax, sales or use tax, stamp tax, recording tax, value added tax or similar tax or governmental charge applicable to the creation
or redemption of Baskets, regardless of whether or not such tax or charge is imposed directly on the Authorized Participant. Each Authorized
Participant has agreed to indemnify the Sponsor and the Trust if they are required by law to pay any such tax, together with any applicable
penalties, additions to tax and interest thereon.

Certain United States Federal Income Tax
Consequences

The following is a discussion of the material
U.S. federal income tax consequences that generally will apply to the purchase, ownership, and disposition of Shares by a U.S. Shareholder
(as defined below). The discussion below is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury
Regulations promulgated thereunder and judicial and administrative interpretations of the Code, all as in effect on the date of this Report
and all of which are subject to change either prospectively or retroactively. The tax treatment of Shareholders may vary depending upon
their own particular circumstances. Certain Shareholders (including but not limited to banks, financial institutions, insurance companies,
regulated investment companies, real estate investment trusts, tax-exempt organizations, tax-exempt or tax-advantaged retirement plans
or accounts, non-U.S. persons, brokers or dealers, traders, entities that are partnerships or S-corporations for U.S. federal income tax
purposes, persons holding Shares as a position in a “hedging,” “straddle,” “conversion,” “constructive
sale” or other integrated transaction for U.S. federal income tax purposes, persons whose “functional currency” is not
the U.S. dollar, persons subject to the federal alternative minimum tax, persons required for U.S. federal income tax purposes to accelerate
the recognition of any item of gross income with respect to the Shares as a result of such income being recognized on an applicable financial
statement, or other investors with special circumstances) may be subject to special rules not discussed below. In addition, the following
discussion applies only to investors who will hold Shares as “capital assets” (generally, property held for investment). Moreover,
the discussion below does not address the effect of any state, local or foreign tax law consequences (or any consequences under any U.S.
federal tax law other than U.S. federal income tax law) that may apply to an investment in Shares. Purchasers of Shares are urged to consult
their own tax advisers with respect to all U.S. federal, state, local and foreign tax law considerations potentially applicable to their
investment in Shares.

For purposes of this discussion,
a “U.S. Shareholder” is a Shareholder that is:

●an individual who is treated as a citizen or resident of the United States for U.S. federal income tax
purposes;

●a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized
in or under the laws of the United States, any state thereof or the District of Columbia;

●an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless
of its source; or

●a trust, if a court within the United States is able to exercise primary supervision over the administration
of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.

If a partnership or other entity or arrangement
treated as a partnership for U.S. federal income tax purposes holds Shares, the tax treatment of a partner generally depends upon the
status of the partner and the activities of the partnership. If you are a partner of a partnership holding Shares, the discussion below
may not be applicable and we urge you to consult your own tax adviser for the U.S. federal income tax implications of the purchase, ownership
and disposition of such Shares.

Taxation of the Trust

The Sponsor and the Trustee will treat the Trust
as a “grantor trust” for U.S. federal income tax purposes. As a grantor trust, the Trust can undertake only certain types
of activities. For example, generally, the Trust cannot vary its investment portfolio to take advantage of market fluctuations. The Trust
intends to operated so that it will qualify to be treated as a grantor trust for U.S. federal income tax purposes. Neither the Sponsor
nor the Trustee will request a ruling from the IRS with respect to the classification of the Trust for U.S. federal income tax purposes
or with respect to any other matter.

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If the IRS were to successfully assert that the
Trust is not classified as a “grantor trust,” the Trust would likely be classified as either a partnership for U.S. federal
income tax purposes, which may affect the timing and other tax consequences to the Shareholders, or as a publicly traded partnership that
would be taxable as a corporation for U.S. federal income tax purposes, in which case the Trust would be taxed in the same manner as a
corporation on its taxable income and distributions to Shareholders out of the earnings and profits of the Trust would be taxed to Shareholders
as ordinary dividend income. Except as otherwise indicated, the remainder of this discussion assumes that the Trust is classified as a
grantor trust for U.S. federal income tax purposes.

The Trust has taken the position that staking
activities, to the extent treated as conducted by the Trust by reason of its relationship with Staking Services Provider, are consistent
with its qualification as a grantor trust. If the IRS were to successfully challenge this position, the Trust would not qualify as a
grantor trust for U.S. federal income tax purposes.*

Taxation of U.S. Shareholders

Each Shareholder will be treated, for U.S. federal
income tax purposes, as if it directly owned a pro rata share of the underlying assets held in the Trust. A Shareholder also will be treated
as if it directly received its respective pro rata share of the Trust’s income, if any, and as if it directly incurred its respective
pro rata share of the Trust’s expenses. In the case of a Shareholder that purchases Shares for cash, its initial tax basis in its
pro rata share of the assets held in the Trust at the time it acquires its Shares will be equal to its cost of acquiring the Shares. In
the case of a Shareholder that acquires its Shares as part of the creation of a Basket, the delivery of AVAX to the Trust in exchange
for a pro rata share of the underlying AVAX represented by the Shares will not be a taxable event to the Shareholder, and the Shareholder’s
tax basis and holding period for the Shareholder’s pro rata share of the AVAX held in the Trust will be the same as its tax basis
and holding period for the AVAX delivered in exchange therefor. For purposes of this discussion, and unless stated otherwise, it is assumed
that all of a Shareholder’s Shares are acquired on the same date and at the same price per Share. Shareholders that hold multiple
lots of Shares, or that are contemplating acquiring multiple lots of Shares, should consult their own tax advisers as to the determination
of the tax basis and holding period for the underlying AVAX related to such Shares.

Current IRS guidance on the treatment of convertible
virtual currencies classifies AVAX as “property” that is not currency for U.S. federal income tax purposes and clarifies that
AVAX can be held as a capital asset, but it does not address several other aspects of the U.S. federal income tax treatment of AVAX. Because
AVAX is a new technological innovation, the U.S. federal income tax treatment of AVAX or transactions relating to investments in AVAX
may evolve and change from those discussed below, possibly with retroactive effect. In this regard, the IRS has indicated that it has
made it a priority to issue additional guidance related to the taxation of virtual currency transactions, such as transactions involving
AVAX. While it has started to issue such additional guidance, whether any future guidance will adversely affect the U.S. federal income
tax treatment of an investment in AVAX or in transactions relating to investments in AVAX is unknown. Moreover, future developments that
may arise with respect to digital currencies may increase the uncertainty with respect to the treatment of digital currencies for U.S.
federal income tax purposes. This discussion assumes that any AVAX the Trust may hold is properly treated for U.S. federal income tax
purposes as property that may be held as a capital asset and is not currency for purposes of the provisions of the Code relating to foreign
currency gain and loss.

Although the Trust generally does not intend to
sell AVAX, it may use AVAX to pay certain expenses of the Trust, which under current IRS guidance will be treated as a sale of such AVAX,
and/or it may periodically sell AVAX in an amount sufficient to pay those expenses using fiat currency. If the Trust sells AVAX (for example
to generate cash to pay fees or expenses) or is treated as selling AVAX (for example by using AVAX to pay fees or expenses), a Shareholder
will recognize gain or loss in an amount equal to the difference between (a) the Shareholder’s pro rata share of the amount realized
by the Trust upon the sale and (b) the Shareholder’s tax basis for its pro rata share of the AVAX that was sold. A Shareholder’s
tax basis for its share of any AVAX sold by the Trust should generally be determined by multiplying the Shareholder’s total basis
for its share of all of the AVAX held in the Trust immediately prior to the sale, by a fraction the numerator of which is the amount of
AVAX sold, and the denominator of which is the total amount of the AVAX held in the Trust immediately prior to the sale. After any such
sale, a Shareholder’s tax

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basis for its pro rata share of the AVAX remaining
in the Trust should be equal to its tax basis for its share of the total amount of the AVAX held in the Trust immediately prior to the
sale, less the portion of such basis allocable to its share of the AVAX that was sold or treated as sold.

Upon a Shareholder’s sale of some or all
of its Shares (other than a redemption), the Shareholder will be treated as having sold the portion or all, respectively, of its pro rata
share of the AVAX held in the Trust at the time of the sale that is attributable to the Shares sold. Accordingly, the Shareholder generally
will recognize gain or loss on the sale in an amount equal to the difference between (a) the amount realized pursuant to the sale of the
Shares and (b) the Shareholder’s tax basis for the portion of its pro rata share of the AVAX held in the Trust at the time of sale
that is attributable to the Shares sold, as determined in the manner described in the preceding paragraph. Based on current IRS guidance,
such gain or loss (as well as any gain or loss realized by a Shareholder on account of the Trust selling AVAX) will generally be long-term
or short-term capital gain or loss, depending upon whether the Shareholder has a holding period of greater than one year in its pro rata
share of the AVAX that was sold. The Trust plans to treat a redemption of a some or all of a Shareholder’s Shares, in exchange for
cash, in the same manner as a sale of some or all of a Shareholder’s Shares (as described above) for that amount of cash, though
no assurance can be provided that the IRS will not take a different position.

Gains or losses from the sale of AVAX to fund cash redemptions expected
to be treated as incurred by the Shareholder that is being redeemed, and the amount of such gain or loss generally will equal the difference
between (a) the amount realized pursuant to the sale of the AVAX and (b) the Shareholder’s tax basis for the portion of its pro
rata share of the AVAX held in the Trust that is sold to fund the redemption, as determined in the manner described in the paragraph that
is two paragraphs above this one. A redemption of some or all of a Shareholder’s Shares in exchange for the cash received from such
sale is not expected to be treated as a separate taxable event to the Shareholder.

An in-kind redemption of some or all of a Shareholder’s Shares
in exchange for the underlying AVAX represented by the Shares redeemed generally will not be a taxable event to the Shareholder. The Shareholder’s
tax basis for the AVAX received in the in-kind redemption generally will be the same as the Shareholder’s tax basis for the portion
of its pro rata share of the AVAX held in the Trust immediately prior to the in-kind redemption that is attributable to the Shares redeemed.
The Shareholder’s holding period with respect to the AVAX received should include the period during which the Shareholder held the
Shares redeemed in-kind. A subsequent sale of the AVAX received by the Shareholder will be a taxable event, unless a nonrecognition provision
of the Code applies to such sale.

After any sale or redemption of less than all
of a Shareholder’s Shares, the Shareholder’s tax basis for its pro rata share of the AVAX held in the Trust immediately after
such sale or redemption generally will be equal to its tax basis in its share of the total amount of the AVAX held in the Trust immediately
prior to the sale or redemption, less the portion of such basis which is taken into account in determining the amount of gain or loss
recognized by the Shareholder upon such sale or cash redemption or, in the case of an in-kind redemption, that is treated as the basis
of the AVAX received by the Shareholder in the redemption.

Any AVAX acquired by the Trust as staking rewards for Staking Activities
would be treated as giving rise to ordinary taxable income. Additionally, such AVAX will have a separate tax basis and holding period.
It is likely that a Shareholder will have a tax basis for its share of any AVAX acquired by the Trust as staking rewards equal to the
amount of income that it recognizes and the Shareholder’s holding period for such AVAX will begin as of the time it recognizes such
income.

If a hard fork occurs in the
Avalanche Blockchain, the Trust could hold both the original AVAX and the alternative new asset. The IRS has held that a hard fork resulting
in the creation of new units of cryptocurrency is a taxable event giving rise to ordinary income. Moreover, the Trust Agreement requires
that, if such a transaction occurs, the Trust will as soon as possible, and subject to the Custody Agreement, direct AVAX Custodian to
distribute the alternative new asset in kind to the Sponsor, as agent for the Shareholders, and the Sponsor will arrange to sell the new
alternative asset and for the proceeds to be distributed to the Shareholders. The receipt, distribution and/or sale of the new alternative
asset may cause Shareholders to incur a U.S. federal income tax liability. While the IRS has not addressed all situation in which airdrops
occur, it is clear from the reasoning of the IRS’s guidance that it generally would treat an airdrop as a taxable event giving rise
to ordinary income and it is anticipated that any gain or loss from disposition of any assets received in the airdrop would generally
be treated as giving rise to capital gain or loss that generally

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would be short-term capital
gain or loss, unless the holding period of those assets were treated as being greater than one year as the time they are sold. However,
the Sponsor has committed to cause the Trust to irrevocably abandon any Incidental Rights and IR Virtual Currency to which the Trust may
become entitled in the future. There can be no assurance that these abandonments would be treated as effective for U.S. federal income
tax purposes, or that the Sponsor will continue to cause the Trust to irrevocably abandon any Incidental Rights and IR Virtual Currency
if there are future regulatory developments that would make it feasible for the Trust to retain those assets.

3.8% Medicare Tax on Net Investment Income

Certain U.S. Shareholders who are individuals
are required to pay a 3.8% Medicare tax on the lesser of the excess of their modified adjusted gross income over a threshold amount ($250,000
for married persons filing jointly and $200,000 for single taxpayers) or their “net investment income,” which generally includes
capital gains from the disposition of property and may include income from staking rewards. This tax is in addition to any capital gains
taxes due on such investment income. A similar tax applies to estates and trusts. U.S. Shareholders should consult their own tax advisers
regarding the effect, if any, this tax may have on their investment in the Shares.

Brokerage Fees and Trust Expenses

Any brokerage or other transaction fee incurred
by a Shareholder in purchasing Shares will be treated as part of the Shareholder’s tax basis in the underlying assets of the Trust.
Similarly, any brokerage fee incurred by a Shareholder in selling Shares will reduce the amount realized by the Shareholder with respect
to the sale.

Shareholders will be required to recognize the
full amount of gain or loss upon a sale or deemed sale of AVAX by the Trust (as discussed above), even though some or all of the proceeds
of such sale are used by the Trustee to pay Trust expenses. Shareholders may deduct their respective pro rata shares of each expense incurred
by the Trust to the same extent as if they directly incurred the expense. Shareholders who are individuals, estates or trusts, however,
may be required to treat some or all of the expenses of the Trust as miscellaneous itemized deductions, which are nondeductible.

Similar rules apply to certain miscellaneous itemized
deductions of estates and trusts. In addition, deductions may be subject to phase outs and other limitations under applicable provisions
of the Code.

Investment by Certain Retirement Plans

Individual retirement accounts (“IRAs”)
and participant-directed accounts under tax-qualified retirement plans are limited in the types of investments they may make under the
Code. Potential purchasers of Shares that are IRAs or participant-directed accounts under a Code section 401(a) plan should consult with
their own tax advisors as to the tax consequences of a purchase of Shares.

United States Information Reporting and Backup
Withholding

The Trustee will file certain information returns
with the IRS, and provide certain tax-related information to Shareholders, in connection with the Trust. To the extent required by applicable
regulations, each Shareholder will be provided with information regarding its allocable portion of the Trust’s annual income, expenses,
gains and losses (if any). A U.S. Shareholder generally may be subject to United States backup withholding tax in certain circumstances
unless it provides its taxpayer identification number and complies with certain certification procedures. Shareholders may be required
to meet certain information reporting or certification requirements imposed by the Foreign Account Tax Compliance Act, in order to avoid
certain information reporting and withholding tax requirements.

The amount of any backup withholding will be allowed
as a credit against a Shareholder’s U.S. federal income tax liability and may entitle the Shareholder to a refund, provided that
the required information is furnished to the IRS in a timely manner.

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Individual U.S. Shareholders will generally be
required to report on their federal income tax return the receipt, acquisition, sale, or exchange of any financial interest in virtual
currency, which includes a Shareholder’s interest in AVAX held by the Trust.

Taxation in Jurisdictions Other Than the
United States

Purchasers of Shares that are based in or acting
out of a jurisdiction other than the United States are advised to consult their own tax advisers as to the tax consequences under the
laws of such jurisdiction (or any other jurisdiction other than the United States in which they are subject to taxation) of their purchase,
holding, sale and redemption of or any other dealing in Shares and, in particular, as to whether any value added tax, other consumption
tax, or transfer tax is payable in relation to such purchase, holding, sale, redemption or other dealing.

The foregoing
is only a general summary of the material U.S. federal income tax consequences associated with the purchase, ownership and disposition
of Shares by a U.S. Shareholder. EACH PROSPECTIVE SHAREHOLDER IS URGED TO CONSULT ITS OWN TAX ADVISER concerning the U.S. federal, state,
local, and non-U.S. tax considerations BEFORE DECIDING WHETHER TO INVEST IN THE SHARES OF THE TRUST.

ERISA and Related Considerations

The Employee Retirement Income Security Act of
1974 (“ERISA”) and/or Section 4975 of the Code impose certain requirements on: (i) employee benefit plans and certain other
plans and arrangements, including individual retirement accounts and annuities, Keogh plans and certain collective investment funds or
insurance company general or separate accounts in which such plans or arrangements are invested, that are subject to Title I of ERISA
and/or Section 4975 of the Code (collectively, “Plans”); and (ii) persons who are fiduciaries with respect to the investment
of assets treated as “plan assets” within the meaning of U.S. Department of Labor (the “DOL”) regulation 29 C.F.R.
§ 2510.3-101, as modified by Section 3(42) of ERISA, of a Plan. Investments by Plans are subject to the fiduciary requirements and
the applicability of prohibited transaction restrictions under ERISA and the Code.

“Governmental plans” within the meaning
of Section 3(32) of ERISA, certain “church plans” within the meaning of Section 3(33) of ERISA and “non-U.S. plans”
described in Section 4(b)(4) of ERISA, while not subject to the fiduciary responsibility and prohibited transaction provisions of Title
I of ERISA or Section 4975 of the Code, may be subject to any federal, state, local, non-U.S., or other law or regulation that is substantially
similar to the foregoing provisions of ERISA and the Code. Fiduciaries of any such plans are advised to consult with their counsel prior
to an investment in the Shares.

In contemplating an investment of a portion of
Plan assets in the Shares, the Plan fiduciary responsible for making such investment should carefully consider, taking into account the
facts and circumstances of the Plan, the “Risk Factors” discussed above and whether such investment is consistent with its
fiduciary responsibilities. The Plan fiduciary should consider, among other issues, whether: (1) the fiduciary has the authority to make
the investment under the appropriate governing plan instrument; (2) the investment would constitute a direct or indirect non-exempt prohibited
transaction with a “party in interest” or “disqualified person” within the meaning of ERISA and Section 4975 of
the Code respectively; (3) the investment is in accordance with the Plan’s funding objectives; and (4) such investment is appropriate
for the Plan under the general fiduciary standards of investment prudence and diversification, taking into account the overall investment
policy of the Plan, the composition of the Plan’s investment portfolio and the Plan’s need for sufficient liquidity to pay
benefits when due. When evaluating the prudence of an investment in the Shares, the Plan fiduciary should consider the DOL’s regulation
on investment duties, which can be found at 29 C.F.R. § 2550.404a-1.

It is intended that: (a) none of the Sponsor,
the Trustee, the First AVAX Custodian, the Second AVAX Custodian, the Cash Custodian or any of their respective affiliates (the “Transaction
Parties”) has through this report and related materials provided any investment advice within the meaning of Section 3(21) of ERISA
to the Plan in connection with the decision to purchase or acquire such Shares; and (b) the information provided in this report and related
materials will not make a Transaction Party a fiduciary to the Plan.

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