Invesco Galaxy Solana ETF - First Annual Report Summary

Discover the Invesco Galaxy Solana ETF (QSOL), a groundbreaking investment product designed to bring Solana (SOL) to your portfolio. This summary breaks down QSOL's first annual report, offering a clear, plain-language look at its launch, strategy, and initial performance during its first few weeks of operation.

1. Business Overview and Initial Performance

The Invesco Galaxy Solana ETF (QSOL) offers investors a new way to gain exposure to Solana (SOL), a prominent cryptocurrency. Its main goal is to track SOL's spot price. But QSOL takes a unique approach: it plans to "stake" a significant portion of its SOL holdings. Staking means participating in the Solana network's validation process to earn additional SOL rewards. The ETF aims to reinvest these rewards, potentially allowing it to outperform a direct, non-staked SOL holding, even after covering its operational costs. As a passively managed fund, QSOL holds and stakes SOL rather than actively trading it.

Initial Performance (December 15 - December 31, 2025): QSOL began trading on the Cboe BZX Exchange on December 15, 2025. This meant its operational period for the fiscal year ending December 31, 2025, lasted just over two weeks. Therefore, a full year of performance data is not yet available. The ETF launched with an initial share price of $25.00. During this brief period, the ETF's performance primarily reflected Solana (SOL)'s own price movements.

2. Financial Overview: Key Metrics and Expenses

Because QSOL recently launched, it does not yet have a full year of traditional financial data, such as revenue or profit. Instead, we focus on key ETF metrics:

• Initial Funding: Invesco Ltd. initially seeded the ETF with 4,000 shares for $100,000 on October 16, 2025, establishing an initial share price of $25.00.
• Shares Outstanding: As of January 31, 2026, the ETF had 180,000 shares outstanding.
• Expense Ratio: The expense ratio is a critical factor for any ETF, especially one that uses a staking strategy. This fee covers the ETF's operational costs. The ETF aims for its staking rewards to potentially offset or exceed these operational expenses, which could positively impact its Net Asset Value (NAV) compared to simply holding SOL.
• Staking Rewards: The ETF expects to earn staking rewards and reinvests them into the fund. This increases its SOL holdings and, consequently, its NAV. The actual yield will fluctuate with network conditions.

3. Management's Discussion and Analysis of Financial Condition and Results of Operations

Here, management discusses QSOL's financial condition and operational results for its initial period, December 15 to December 31, 2025. Given this very brief timeframe, a comprehensive analysis of long-term trends is not yet possible.

Results of Operations: For the fiscal period ending December 31, 2025, QSOL's operational results primarily reflected Solana (SOL)'s market performance. Since the ETF began trading on December 15, 2025, its performance during these initial two weeks largely mirrored its underlying asset's price movements. The ETF successfully launched and started implementing its core strategy of staking a significant portion of its SOL holdings. The fund's NAV per share reflected the change in SOL's spot price, adjusted for initial operational expenses from this short period.

Financial Condition, Liquidity, and Capital Resources: QSOL's financial health directly depends on its Solana holdings' value. As of December 31, 2025, the Trust's primary asset was SOL, held in secure cold storage. To manage liquidity and meet potential redemption requests, we maintain a portion of the Trust's SOL in an unstaked "Liquidity Sleeve." This is a critical component of the fund's operational liquidity. Additionally, the ETF has access to a short-term credit facility, providing an extra layer of liquidity, especially during periods of high redemption activity or market volatility. The Trust does not hold significant traditional cash balances because its operational model centers on its crypto assets. We segregate all SOL assets from the custodian's own assets, enhancing investor protection.

Major Developments and Initial Challenges: During this early period, QSOL saw several significant developments:

• Successful Launch: The ETF successfully navigated the regulatory approval process and began trading on the Cboe BZX Exchange on December 15, 2025. This marked a significant achievement for a new crypto-backed product.
• Staking Strategy Implementation: The ETF confirmed its ability to implement its core strategy: staking a substantial portion of its SOL holdings to earn additional rewards. This is fundamental to its value proposition.
• Secure Custody Partnership: QSOL partnered with Coinbase Custody Trust Company, LLC, ensuring Coinbase Custody Trust Company, LLC holds the Trust's SOL assets in highly secure "cold storage."

Initial challenges included:

• Limited Track Record: As a new fund, QSOL lacks historical performance data, making long-term assessment challenging.
• Low Initial Liquidity: With a limited number of shares outstanding at launch, the ETF may experience lower trading liquidity compared to more established funds.
• Cryptocurrency Volatility: Immediately upon launch, QSOL faced the inherent and often extreme price volatility of the broader cryptocurrency market, directly impacting its initial NAV.

Critical Accounting Policies and Estimates: We prepare the Trust's financial statements in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP). Key accounting policies for an ETF like QSOL typically involve valuing its cryptocurrency assets; we generally measure them at fair value based on quoted prices on the primary exchange. We also critically recognize staking rewards (reinvested into the fund) and accrue operational expenses.

Off-Balance Sheet Arrangements and Contractual Obligations: The ETF has no significant off-balance sheet arrangements that would materially affect its financial condition or operational results. Furthermore, the Trust has no long-term contractual obligations beyond its standard operational agreements with service providers (e.g., custodian, administrator, marketing agent), which are typically short-term or cancellable.

4. Financial Health, Liquidity, and Asset Management

QSOL's financial health is directly tied to the value and security of its underlying Solana holdings.

• Asset Composition: Solana (SOL) is the ETF's primary asset. It does not hold significant traditional cash balances, as its operational model focuses on crypto assets.
• Liquidity Management: To manage daily redemptions and operational needs, we keep a portion of the ETF's SOL unstaked, forming a "Liquidity Sleeve." This is a critical operational component.
• Credit Facility: The ETF has access to a short-term credit line, providing an additional buffer for liquidity needs, especially during periods of high redemption activity.
• Asset Segregation: A crucial safety measure: we keep all SOL held by the Trust separate from the custodian's (Coinbase Custody) own assets, which provides an important layer of investor protection.

5. Key Risks for Investors

Investing in QSOL carries significant risks, primarily due to its direct exposure to Solana and the inherent complexities of cryptocurrencies. Key risks include:

• Solana Price Volatility: Your investment's value will fluctuate directly with SOL's highly volatile price. Cryptocurrencies are known for dramatic and rapid price swings.
• No Government or Corporate Backing: Unlike traditional currencies or company stocks, no government, central bank, or corporate entity backs SOL. Its value is purely market-driven and depends on the Solana network's health and adoption.
• New Technology Risks (Proof-of-History): Solana's unique "Proof-of-History" (PoH) consensus mechanism is a relatively new technology. Risks include potential bugs, network outages, security vulnerabilities, or insufficient adoption, which could impair the network's reliability and SOL's value.
• Staking-Specific Risks:
  • Slashing Risk: If a validator node (which the ETF uses for staking) acts maliciously or performs poorly, you could lose a portion of the staked SOL through "slashing" or forfeiture.
  • Unbonding Period Risk: Staked SOL typically has an "unbonding period" during which you cannot immediately sell or redeem it. This could impact liquidity during rapid market downturns.
  • Validator Concentration Risk: Relying on a limited number of validators could introduce centralization risks.
• Hard Forks and Airdrops: If a Solana hard fork or an airdrop of new tokens occurs, QSOL shareholders will NOT receive any benefits from these events. The ETF explicitly disclaims rights to such new assets, meaning you could miss out on potential value.
• Custody and Security Risks: While we use "cold storage," holding digital assets always carries a residual risk of hacks, theft, or loss. You also face counterparty risk with Coinbase Custody.
• Regulatory Uncertainty: The regulatory landscape for cryptocurrencies continues to evolve globally. Regulatory bodies' decisions regarding cryptocurrency classification (e.g., as securities or commodities), taxation, and operational requirements for crypto-backed financial products could profoundly impact SOL's value and QSOL's operations.
• Tracking Error Risk: As an ETF, QSOL may not perfectly track SOL's spot price due to operational expenses, market liquidity, and the timing of staking rewards and redemptions.

6. Competitive Landscape

QSOL carves out a unique position in the cryptocurrency investment landscape, particularly through its staking strategy.

• Differentiated Offering: While investors can purchase SOL directly, QSOL aims to offer the added benefit of staking rewards without requiring investors to manage staking's technical complexities themselves. This could appeal to those seeking passive yield from their SOL exposure within a familiar ETF structure.
• Comparison to Direct Holdings: Investors must weigh the ETF's ability to potentially outperform direct SOL holdings (due to staking rewards) against its expense ratio. They should compare QSOL's net yield versus the potential yield and costs of direct staking.
• Broader Crypto Market: Solana itself competes with other major blockchain platforms like Ethereum. Solana is known for its high transaction speed and scalability, which are key differentiators in the decentralized application (DApp) and DeFi space.
• Emerging ETF Market: QSOL is part of a growing trend of spot crypto ETFs. Its staking feature distinguishes it from simpler spot-only ETFs for other cryptocurrencies, positioning it as a potentially more yield-focused option.

7. Management and Strategy

As a newly launched ETF, we report no leadership or strategy changes.

• Sponsor: Invesco Capital Management LLC, a well-established financial firm, sponsors and manages the ETF. It provides oversight and administrative services.
• Consistent Strategy: The core strategy remains as initially outlined: passively track Solana (SOL)'s spot price and enhance returns by staking a significant portion of its SOL holdings. We designed this strategy to be consistent and transparent, focusing on long-term exposure and yield generation from the underlying asset.

8. Future Outlook

QSOL's future outlook is closely tied to the Solana ecosystem's trajectory and the broader cryptocurrency market.

• Solana Ecosystem Growth: If Solana continues to expand its utility, attract more developers, and see increased adoption for decentralized applications (DApps), NFTs, gaming, and enterprise solutions, its value (and thus QSOL's) could appreciate.
• Staking Yield Contribution: The ETF's ability to generate and reinvest staking rewards is a key component of its long-term strategy. This aims to provide a potentially enhanced return compared to a non-staking SOL investment.
• Market Volatility: Investors should anticipate continued price volatility inherent in the crypto market.
• Regulatory Environment: The evolving regulatory landscape will significantly shape the future of crypto ETFs and the broader digital asset space.

9. Market Trends and Regulatory Landscape

QSOL operates within a dynamic and rapidly evolving market, influenced by both technological trends and regulatory developments.

• Positive Market Trends: Increasing institutional adoption of cryptocurrencies, the growth of decentralized finance (DeFi), and the expanding utility of blockchain technology (e.g., for smart contracts, Web3 infrastructure) could serve as significant tailwinds for Solana and, by extension, QSOL.
• Regulatory Scrutiny: The cryptocurrency market faces ongoing and intensifying regulatory scrutiny worldwide. Regulatory bodies' decisions regarding cryptocurrency classification (e.g., as securities or commodities), taxation, and operational requirements for crypto-backed financial products could profoundly impact SOL's value and QSOL's operations.
• Potential for Further ETF Approvals: The approval of spot Bitcoin ETFs, and now this Solana ETF, suggests a potential trend towards more regulated crypto investment products. This could increase market legitimacy but also bring new compliance challenges.