Fidelity Solana Fund 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This information should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of Part I of this Form 10‑Q. The discussion and analysis that follows may contain statements that relate to future events or future performance. In some cases, such forward‑looking statements can be identified by terminology such as “may,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses made by the Sponsor on the basis of its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. Whether or not actual results and developments will conform to the Sponsor’s expectations and predictions, however, is subject to a number of risks and uncertainties, including the special considerations discussed below, general economic, market and business conditions, changes in laws or regulations, including those concerning taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. Although the Sponsor does not make forward-looking statements unless it believes it has a reasonable basis for doing so, the Sponsor cannot guarantee their accuracy. Except as required by applicable disclosure laws, neither the Trust nor the Sponsor is under a duty to update any of the forward-looking statements to conform such statements to actual results or to a change in the Sponsor’s expectations or predictions. Overview of the Trust Fidelity Solana Fund (the “Trust”) is an exchange-traded product that issues shares of beneficial interest (the “Shares”) that trade on the NYSE Arca, Inc. (the “Exchange”). The Trust’s investment objective is to seek to track the performance of SOL, as measured by the performance of the Fidelity Solana Reference Rate (the “Index”), adjusted for the Trust’s expenses and other liabilities, plus an amount based on the staking rewards associated with SOL. As a result of the Trust’s receipt of staking-based amounts, the Trust is expected to outperform the Index before consideration of the Trust’s expenses and other liabilities. The Index is constructed using SOL price feeds from eligible SOL spot markets and a volume-weighted median price (“VWMP”) methodology, calculated every 15 seconds based on VWMP spot market data over rolling sixty-minute increments. The Index is designed to reflect the performance of SOL in U.S. dollars. In seeking to achieve its investment objective, the Trust holds SOL and values its Shares daily based on the same methodology used to calculate the Index. The Trust is sponsored by FD Funds Management LLC (the “Sponsor”), a wholly owned subsidiary of FMR LLC. The Trust may custody its SOL at Anchorage Digital Bank NA, BitGo Bank & Trust N.A. (formerly BitGo Trust Company, Inc.) and Coinbase Custody Trust Company, LLC (each a “Custodian” and collectively the “Custodians”), each of which provides custody services for digital assets . The Trust is passively managed and does not pursue active management investment strategies, utilize leverage, or invest in derivatives in seeking to meet its investment objective. The Sponsor believes that the Shares are designed to provide investors with a cost-effective and convenient way to invest in SOL without purchasing, holding and trading SOL directly. The Trust sells and redeems Shares only with Authorized Participants in exchange for SOL or cash and only in blocks of 25,000 Shares (a “Basket”). Pursuant to the Trust’s investment objective, the Sponsor utilizes the services of the Custodians to stake, or cause to be staked, all of the Trust’s SOL with one or more trusted node operators (which may include the Custodians or their affiliates) (each, a “Node Operator”), except for SOL reserved by the Sponsor in its sole discretion to facilitate foreseeable redemption transactions, pay Trust expenses, protect the Trust and its assets, and comply with the Sponsor’s adopted liquidity risk management program (the “Liquidity Program”) that provides a variety of mechanisms to monitor and manage the liquidity of the Trust’s assets. Accordingly, while under normal circumstances the Trust may stake up to 100% of the Trust’s SOL, there is no minimum percentage the Trust is required to stake. The Trust receives a portion of the staking rewards generated by a Node Operator. The Shareholders of the Trust take no part in the management or control, and have no voice in, the Trust’s operations or business. Except in limited circumstances, Shareholders have no voting rights under the Trust Agreement. 13 Valuation of SOL and Computation of Net Asset Value (“NAV”) For purposes of calculating the Trust's net asset value (“Trust’s NAV”) per Share, the Trust’s holdings of SOL are valued using the same methodology as used to calculate the Index. The Trust’s NAV per Share is calculated by: • taking the fair market value of its total assets based on the volume-weighted median price of SOL used for the calculation of the Index; • subtracting any liabilities; and • dividing that total by the total number of outstanding Shares. The Administrator calculates the Trust’s NAV once each Exchange trading day. The Trust’s NAV for a normal trading day is released after 4:00 p.m. Eastern time (“EST”). Trading during the core trading session on the Exchange typically closes at 4:00 p.m. EST. However, the Trust’s NAVs are not officially struck until after 4:00 p.m. EST. The pause after 4:00 p.m. EST provides an opportunity for the Sponsor to algorithmically detect, flag, investigate, and correct unusual pricing should it occur. The Sponsor has established a Valuation and Liquidity Committee to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process and the activities of the Valuation and Liquidity Committee. If the Valuation and Liquidity Committee determines in good faith that the Index does not reflect an accurate SOL price, then the Valuation and Liquidity Committee instructs the Administrator to employ an alternative method to determine the fair value of the Trust’s assets. In determining an alternative fair value method, the Valuation and Liquidity Committee generally considers such criteria as observable market-based inputs, including market quotations and last sale information from third-party pricing services and/or trading platforms on which SOL are traded. The Valuation and Liquidity Committee’s selection of third-party pricing services used considers the qualifications, experience, and history of the pricing services and whether their valuation methodologies and procedures are reasonably designed to produce prices that reflect fair value under the prevailing market conditions. In addition, in order to provide updated information relating to the Trust for use by Shareholders and market professionals, a third-party financial data provider will calculate and disseminate throughout the core trading session on each trading day an updated intraday indicative value (“IIV”). The IIV is calculated based on the Trust’s SOL holdings and any other assets expected to comprise that day’s Trust’s NAV calculation. The third-party financial data provider will use the Blockstream Crypto Data Feed Streaming Level 1 as the pricing source for the spot SOL. The Blockstream Crypto Data Feed Streaming Level 1 calculates an average of current SOL price levels of the SOL trading platforms that are available on its feed. The Trust will provide an IIV per Share updated every 15 seconds, as calculated by the Exchange or a third-party financial data provider during the Exchange’s regular trading hours of 9:30 a.m. to 4:00 p.m. EST (“Regular Trading Hours”). The IIV disseminated during Regular Trading Hours should not be viewed as an actual real-time update of the Trust’s NAV, which will be calculated only once at the end of each trading day as described herein. Critical Accounting Policies and Estimates Principal Market and Fair Value Determination The Trust’s periodic financial statements are prepared in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”). ASC Topic 820 requires the fair value measurement of SOL to assume that transactions take place in the principal market or, in the absence of a principal market, the most advantageous market, for SOL that the Trust has access to. The Trust may buy and sell SOL through brokered, dealer, over-the-counter, exchange or other markets. The Sponsor determines in its sole discretion the valuation sources and policies used to prepare the Trust’s financial statements in accordance with GAAP. The Trust engaged a third-party pricing service to obtain an exchange-traded price from a principal market for SOL, which was determined and designated based on its consideration of several exchange characteristics, including oversight, and the volume and frequency of trades. The exchange-traded price from the principal market on the periodic financial statements is as of 11:59:59 p.m. EST on the Trust’s financial statement measurement date. 14 Results of Operations Prior to September 24, 2025, the Trust had no operations other than matters relating to the sale and issuance of one share of the Trust to the Seed Capital Investor, an affiliate of the Sponsor, for an aggregate purchase price of $25 on September 10, 2025. On September 24, 2025, the seed share was redeemed for cash and the Seed Capital Investor purchased 200,000 Shares at a per-Share price of $25 (the “Seed Baskets”). On September 24, 2025, the Trust purchased 23,402 SOL with the proceeds of the Seed Baskets. On November 17, 2025, the Trust’s registration statement became effective and the Trust commenced operations. On November 18, 2025, Shares of the Trust commenced trading on the Exchange. The Quarter Ended June 30, 2026 The Trust’s net assets increased from $97.4 million as of March 31, 2026, to $127.1 million as of June 30, 2026. The change in the Trust’s net assets was partially offset from a decrease in the price of SOL, which decreased 9.60% from $83.37 as of March 31, 2026 to $75.37 as of June 30, 2026. The increase in net assets was driven by an increase in outstanding Shares, which rose from 9,900,000 as of March 31, 2026 to 14,325,000 as of June 30, 2026. The increase in outstanding Shares was primarily as a result of 4,525,000 Shares (181 Baskets) being issued partially offset by 100,000 Shares (4 Baskets) being redeemed. The NAV per Share decreased 9.86% from $9.84 as of March 31, 2026 to $8.87 as of June 30, 2026. The Trust’s NAV per Share decreased 11.37% from $9.76 as of March 31, 2026 to $8.65 as of June 30, 2026. The Trust ’s NAV per Share of $11.61 at May 11, 2026, was the highest during the three months ended June 30, 2026, compared with a low of $7.35 at June 5, 2026. During the three months ended June 30, 2026, the quantity of SOL owned by the Trust and held by the SOL custodian increased from 1,168,872 as of March 31, 2026, to 1,687,589 as of June 30, 2026. The increase in quantity is the result of the net increase from capital share transactions. The net decrease in net assets resulting from operations for the three months ended June 30, 2026, was $12.6 million, resulted primarily from a net unrealized depreciation on investment in SOL of $12.7 million and a net realized loss of $1.2 million from the sale of the investment in SOL for income distribution of Shares, partially offset by net investment income of $1.3 million. The Six Months Ended June 30, 2026 The Trust’s net assets increased from approximately $113.9 million as of December 31, 2025, to $127.1 million as of June 30, 2026. The change in the Trust’s net assets was driven by an increase in outstanding Shares, which rose from 7,775,000 as of December 31, 2025 to 14,325,000 as of June 30, 2026 as a result of 7,950,000 Shares (318 Baskets) being created and 1,400,000 Shares (56 Baskets) being redeemed, partially offeset by a decrease in the price of SOL, which fell 39.57% from $124.73 as of December 31, 2025 to $75.37 as of June 30, 2026. The NAV per Share decreased 39.50% from $14.66 as of December 31, 2025 to $8.87 as of June 30, 2026. The Trust’s NAV per Share decreased 40.63% from $14.57 as of December 31, 2025 to $8.65 as of June 30, 2026. The Trust’s NAV per Share of $17.35 at January 14, 2026, was the highest during the six months ended June 30, 2026, compared with a low of $7.35 at June 5, 2026. The quantity of SOL owned by the Trust and held by the SOL custodian increased from 913,562 as of December 31, 2025, to 1,687,589 as of June 30, 2026. The increase in quantity is the result of the net increase from capital share transactions. The net decrease in net assets resulting from operations for the six months ended June 30, 2026, was $63.6 million, primarily resulting from a net unrealized depreciation on investment in SOL of $58.9 million and a net realized loss of approximately $5.3 million from the sale of the investment in SOL for the redemption of Shares. 15 Cash Resources and Liquidity The Trust does not hold a cash balance except in connection with the issuance and redemption of Baskets or to pay expenses not assumed by the Sponsor. To the extent the Trust does not have available cash to facilitate redemptions or pay expenses not assumed by the Sponsor, the Trust will sell SOL. When selling SOL on behalf of the Trust, the Sponsor endeavors to minimize the Trust’s holdings of assets other than SOL. As a consequence, the Sponsor expects that the Trust will have an immaterial amount of cash flow from its operations and that its cash balance will be insignificant at the end of each reporting period. The Trust’s only sources of cash are proceeds from the sale of Baskets and SOL. The Trust intends to make cash distributions at least quarterly in order to rely on the safe harbor conditions established by IRS Revenue Procedure 2025‑31 applicable to grantor trusts that stake digital assets. The Trust’s staking program involves the temporary loss of the ability to transfer or otherwise dispose of the Trust’s SOL. As part of the “bonding” and “unbonding” processes of staking, any staked portion of SOL will be inaccessible for a period of time, which is generally approximately 2 days but in some circumstances may take longer as determined by a range of factors. While the Trust does not have long-term capital resource requirements or obligations, there can be no guarantee that the process for the Custodians to unstake or “exit” the Trust’s staked SOL positions will result in the Trust regaining complete control of its SOL in time to satisfy its short-term obligations to facilitate foreseeable Shareholder redemption requests and pay Trust expenses. The Trust maintains a liquidity risk management program (the “Liquidity Program”) that provides a variety of mechanisms to monitor and manage the liquidity of the Trust's assets. The Liquidity Program is available in full at the Trust’s website at www.fidelity.com. Under the Liquidity Program, the Trust maintains a portion of its investments as readily available to facilitate foreseeable redemption requests, pay Trust expenses, or protect the Trust and its assets. Assets that are readily available to meet redemption requests include cash and cash equivalents, and any investment or portion of an investment reasonably expected to be able to be liquidated, sold, transferred, or assigned within the Trust's established redemption distribution period without the conversion or disposition significantly changing the market value of the investment. The Trust may, in its discretion and subject to the Liquidity Program, suspend the right of creation or redemption or postpone the redemption or purchase settlement date for (1) any period during which an emergency exists as a result of which the fulfillment of a purchase order or the redemption distribution is not reasonably practicable, or (2) such other period as the Sponsor determines to be necessary for the protection of Shareholders. The Trust may exchange its staked SOL for an amount of unstaked SOL. In such transactions, the SOL trading counterparty facilitating such trade will generally deliver an amount unstaked SOL that is less than the amount of staked SOL the Trust has delivered in exchange, with such spread representing the SOL trading counterparty’s compensation. While such spreads are generally expected to be de minimis in relation to the Trust’s overall assets, any such spread charged by a SOL trading counterparty will reduce the amount of SOL represented by a Share and the value of Shares. As part of the Liquidity Program, the Trust may establish various liquidity sources, which it may use to finance temporarily the redemption requests of Shareholders or for other short-term liquidity requirements. These liquidity sources may include borrowing arrangements made via uncommitted and committed lines of credit. As of the date of this Quarterly Report, the Trust has not entered into any line of credit or other borrowing arrangement, nor suspended the rights of creations or redemptions or postponed redemption or purchase settlement dates nor exchanged its staked SOL for an amount of unstaked SOL. In exchange for the Sponsor Fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. In addition to the Sponsor Fee, the Trust bears Staking Fees. The Sponsor contractually waived the Sponsor Fee and Staking Fee until May 18, 2026. On May 19, 2026, the Sponsor Fee and Staking Fee began accruing. 16 Off Balance Sheet Arrangements and Contractual Obligations The Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off balance sheet financing arrangements and has no loan guarantee arrangements or off balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services for the Trust. While the Trust’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on a Trust’s financial position. Sponsor Fee payments made to the Sponsor are calculated as a fixed percentage of 0.25% of the Trust’s SOL Holdings. As such, the Sponsor cannot anticipate the payment amounts that will be required under these arrangements for future periods as the Trust’s net assets are not known until a future date. In addition to the Sponsor Fee, the Trust bears the Staking Fees, which the Sponsor, custodians, and node operators each receive from the proceeds of the node operators' staking activities that the Trust receives from the Solana network. The total amount of the Staking Fee equals 15% of all staking rewards received by the Trust. As the Sponsor cannot anticipate the amount of staking rewards that will be received by the Trust in future periods, the amount of the Staking Fee or the portion of the Staking Fee any party is entitled to will not be known until a future date. Selected Operating Data June 30, 2026 Price of SOL on principal market (1) $ 75.37 Index price (2) $ 73.52 June 30, 2026 NAV per Share (3) $ 8.87 Adjustment to NAV per Share $ (0.22 ) Trust’s NAV per Share (4) $ 8.65 (1) The Trust performed an assessment of the principal market at 11:59:59 p.m., EST, on June 30, 2026. (2) Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The SOL spot markets included in the Index as of the last business day of the period were Bitstamp, Coinbase, Crypto.com, Gemini, Kraken, and LMAX Digital. (3) The NAV per Share was calculated using the fair value of SOL based on the principal market price at 11:59:59 p.m., EST, on June 30, 2026. (4) The Trust’s NAV per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The Trust’s NAV per Share is calculated using a non-GAAP methodology. Refer to the “Overview of the Trust” and “Valuation of SOL and Computation of Net Asset Value” sections of Item 2 herein for a description of the Index methodology and calculation of the Trust’s NAV per Share. As of 4:00 p.m., EST, on the last business day of the period ended June 30, 2026, the Trust’s total value of SOL based on the Index Price (non-GAAP methodology) was $124,071,553, a difference of $3,122,040 to the GAAP value, which was $127,193,593, and the total market value of the Trust’s SOL based on the price of SOL at 4:00 p.m., EST, in the principal market (non-GAAP methodology) was $124,240,312, a difference of $2,953,281 to the GAAP value, which was $127,193,593. December 31, 2025 Price of SOL on principal market (1) $ 124.73 Index price (2) $ 124.00 December 31, 2025 NAV per Share (3) $ 14.66 Adjustment to NAV per Share $ (0.09 ) Trust’s NAV per Share (4) $ 14.57 (1) The Trust performed an assessment of the principal market at 11:59:59 p.m., EST, on December 31, 2025. (2) Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The SOL spot markets included in the Index as of the last business day of the period were Bitstamp, Coinbase, Crypto.com, Gemini, Kraken, and LMAX Digital. (3) The NAV per Share was calculated using the fair value of SOL based on the principal market price at 11:59:59 p.m., EST, on December 31, 2025. (4) The Trust’s NAV per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The Trust’s NAV per Share is calculated using a non-GAAP methodology. Refer to the “Overview of the Trust” and “Valuation of SOL and Computation of Net Asset Value” sections of Item 2 herein for a description of the Index methodology and calculation of the Trust’s NAV per Share. As of 4:00 p.m., EST, on the last business day of the period ended December 31, 2025, the Trust’s total value of SOL based on the Index Price (non-GAAP methodology) was $113,281,719, a difference of $666,900 to the GAAP value, which was $113,948,619, and the total market value of the Trust’s SOL based on the price of SOL at 4:00 p.m., EST, in the principal market (non-GAAP methodology) was $113,245,177, a difference of $703,442 to the GAAP value, which was $113,948,619. 17 Monthly Staking Information for the Six Months Ended June 30, 2026 January 31, 2026 February 28, 2026 March 31, 2026 April 30, 2026 May 31, 2026 June 30, 2026 Staked % (1) 72.50 % 72.59 % 72.00 % 72.57 % 72.41 % 99.64 % Gross staking reward rate (2) 4.49 % 5.02 % 5.27 % 4.97 % 4.39 % 6.22 % Net staking reward rate (3) 4.49 % 5.02 % 5.27 % 4.97 % 4.12 % 5.27 % (1) The trailing 30-day average of the percentage of the Trust’s assets that are staked. (2) The annualized trailing 30-day average gross staking reward rate of the Trust derived from staking activity. (3) The annualized trailing 30-day average net staking reward rate of the Fund derived from staking activity, after staking fees. Monthly Staking Information for the Period Ended December 31, 2025 December 31, 2025 Staked % (1) 72.00 % Gross staking reward rate (2) 4.51 % Net staking reward rate (3) 4.51 % (1) The trailing 30-day average of the percentage of the Trust’s assets that are staked. (2) The annualized trailing 30-day average gross staking reward rate of the Trust derived from staking activity. (3) The annualized trailing 30-day average net staking reward rate of the Fund derived from staking activity, after staking fees. The Sponsor has contractually agreed to waive the fee on staking rewards generated by the Trust, through May 18, 2026 on the first $1.0 billion in assets in the Trust. 18 Analysis of Price Movements Investors should understand the relationship between the Index Price (non-GAAP measurement of the price of SOL), the Trust’s NAV per Share (non-GAAP measurement of the price of SOL affected by non-SOL net assets, such as the Sponsor Fee), the Trust’s market price per share, and SOL’s principal market price. Investors should also be aware that past movements are not indicators of future movements. Movements may be influenced by various factors, including, but not limited to, government regulation, security breaches experienced by service providers, as well as political and economic uncertainties around the world. The following chart illustrates the movement in the Index Price, the principal market price, and the Trust’s NAV per Share during the six months ended June 30, 2026. During the six months ended June 30, 2026, the Index Price has ranged from a low of $61.92 on June 6, 2026 to a high of $147.38 on January 14, 2026. The Sponsor has not observed a material difference between the Index Price and average prices from the constituent SOL spot markets individually or as a group. During the six months ended June 30, 2026, the 11:59:59 p.m. EST market price of SOL, as reported on the Trust’s principal market, ranged from $62.81 on June 5, 2026, to $144.85 on January 13, 2026. 19 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 the Trust’s NAV per Share. The amount of the discount or premium in the trading price relative to the Trust’s 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 SOL. The following chart sets out the historical closing prices for the Shares as reported by the Exchange and the Trust’s NAV per Share during the six months ended June 30, 2026.