Fidelity Ethereum Fund

Notes to the Financial Statements

Note 1: Organization

Fidelity Ethereum Fund (the “Trust”) is a Delaware Statutory Trust that was formed on October 31, 2023, pursuant to the Delaware Statutory Trust Act. The Trust issues common units of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest in and ownership of the Trust. The Trust’s investment objective is to seek to track the performance of ether, the native token of the Ethereum blockchain, as measured by the performance of the Fidelity Ethereum Reference Rate (the “Index”), adjusted for the Trust’s expenses and other liabilities, plus an amount based on the staking rewards associated with ether. The Index is designed to reflect the performance of ether in United States (“US”) dollars. The Trust is sponsored by FD Funds Management LLC (the “Sponsor”), a wholly-owned subsidiary of FMR LLC. CSC Delaware Trust Company is the trustee of the Trust (the “Trustee”). The Trust operates pursuant to a Trust Agreement, as amended and/or restated from time to time (the “Trust Agreement”). On July 23, 2024, the Trust commenced operations and Shares commenced trading on Cboe BZX Exchange, Inc. (the “Exchange”).

Pursuant to its investment objective, the Sponsor utilizes the services of the custodians to stake, or cause to be staked, all of the Trust’s ether with one or more node operators, except for ether 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 its Liquidity Program. The Trust is passively managed. The Shareholders of the Trust do not have control or involvement in the management of the Trust.

Note 2: Significant Accounting Policies

The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.

Basis of Presentation

The financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and are stated in US dollars. The Trust qualifies as an investment company for accounting purposes pursuant to the accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies (“ASC 946”). Staking is considered an investing activity that does not preclude the Trust from qualifying as an investment company for accounting purposes. The Trust uses fair value as its method of accounting for its investment in ether in accordance with its classification as an investment company for accounting purposes. The Trust is not a registered investment company under the Investment Company Act of 1940. The Trust operates as a single operating segment. The Trust's profit or loss, assets, and performance are regularly monitored and assessed as a whole by the Sponsor of the Trust, using the information presented in the financial statements and financial highlights. In the opinion of the Trust, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of financial statements for the periods presented. These financial statements and the notes thereto should be read in conjunction with the Trust’s financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (“SEC”).

Use of Estimates

The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual amounts may ultimately differ from those estimates and the differences could be material.

Ether Assets

Ether is an Ethereum-based token, which is a type of digital asset based on an open-source cryptographic protocol existing on an Ethereum network. The Ethereum network supports ether and other Ethereum-based tokens. Digital assets are defined broadly as digital records that are made using cryptography for verification and security purposes, on a distributed ledger and may be characterized by their ability to be used as a medium of exchange, a representation to provide or access goods or services, or as a financing vehicle, such as a security. The Trust identifies ether as an “other investment” in accordance with ASC 946.

Investment Valuation

Due to the Trust’s classification as an investment company, investments in ether are recorded on the financial statements at their estimated fair value in accordance with ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 requires the determination of the Trust’s principal market or, in the absence of a principal market, the most advantageous market (principal market) and the assumption that ether is sold in its principal market. The Trust determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants using the principal market on the measurement date and, therefore, the principal market used must be accessible to the Trust on that date. The Trust determines its principal market price for GAAP reporting and utilizes an exchange-traded price from that principal market as of 11:59:59 p.m., Eastern time (“EST”), on the financial statement measurement date. The unadjusted exchange-traded price from the principal market utilized for ether is utilized for staked ether as restrictions on staked ether are a characteristic of the Trust’s Ether Holdings rather than a characteristic of ether itself.

GAAP establishes the following fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The inputs are categorized in one of the following levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Trust is able to access at the measurement date.

Level 2 – Inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly. These inputs may include (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in markets that are not active, (c) inputs other than quoted prices that are observable for the asset or liability, or (d) inputs derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Inputs that are unobservable (including the Trust’s own data and assumptions based on the best information available) and significant to the entire fair value measurement.

To the extent that investments are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Investments traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 of the fair value hierarchy.

The availability of valuation techniques and observable inputs can vary across investments and is affected by various factors, including the nature of the investment, whether the investment is new or unestablished in the marketplace, market liquidity and other investment specific characteristics. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, determining fair value requires more judgment. Because of the uncertainty inherent in valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Therefore, the degree of judgment exercised by management in determining fair value is greatest for investments categorized in Level 3.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

Investment Transactions and Related Investment Income

The Trust records investment transactions in ether on a trade date basis. For financial reporting purposes, the Trust’s investment holdings and Paid-In-Capital include trades executed through the end of the last business day of the period. The Trust’s purchases are recorded at cost, including transaction fees, and are subsequently fair valued in accordance with the Trust’s fair valuation policy. Changes in fair value are reflected as the net change in unrealized appreciation (depreciation) on investment in ether. Realized gains and losses are determined on the basis of identified cost and reflected as net realized gain (loss) on investment in ether sold for redemptions, net realized gain (loss) on investment in ether distributed for redemptions and net realized gain (loss) on investment in ether transferred to pay the Sponsor fee.

Staking

The Trust retains control and ownership of staked ether and no other entity obtains the right to direct the use of the ether during the period it is staked. Staked ether is not derecognized and the Trust accounts for its staked ether in the same manner as its non-staked ether.

The Trust has the right to request to exit a staked position at any time without penalty, however, staked ether is subject to Ethereum network protocol restrictions moderating when the Trust can unstake and withdraw its staked ether and staked ether will be inaccessible for a period of time. The time it takes for the Trust to receive unstaked, freely transferable ether will depend on network conditions and the status of validator demand. Once the exiting process is complete, the Trust will have complete control over the ether.

Staking Rewards

The Trust’s staking rewards are recognized as revenue through the application of principles in ASC Topic 606, Revenue from Contracts with Customers. Staking reward revenue is recognized as income from staking rewards when the amount of the staking rewards to which the Trust is entitled for validations a node operator has completed is a) known and calculable and b) nonrefundable. At the time staking rewards are made known to the Trust, the performance obligation, which is a node operator's transaction validation services under a smart contract with the Ethereum network, has been satisfied. Staking rewards in the form of ether are considered non-cash consideration and measured at fair value based on the Index Price of ether used for the calculation of the Trust's NAV on the date the staking reward revenue is recognized. Node operators are the principals to the validation activities which generate the reward. The Trust acts as the agent to the validation activities and recognizes income from staking rewards net of the consideration allocated to other entities in the form of a Staking Fee.

Cash

Cash consists of a demand deposit held with a financial institution. At times, deposits may be in excess of federally insured limits. The Trust has not experienced any losses and does not believe it is exposed to any significant credit risk on such deposits.

Income Taxes

The Trust intends to be classified as a “grantor trust” for US federal income tax purposes. As a result, the Trust itself should not be subject to US federal income tax. Instead, the Trust’s income and expenses should “flow through” to the Shareholders, and the Trustee will report to Shareholders and the Internal Revenue Service on that basis.

The Sponsor evaluates tax positions taken or expected to be taken in the course of its tax treatment, and its tax reporting to its shareholders, of these positions to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet that threshold would be recorded as an expense in the current year. The Trust is required to analyze all open tax years. Open tax years are those years that are open for examination by the relevant income taxing authority. As of September 30, 2026, the 2025 and 2024 tax years remain open for examination. There were no examinations in progress at period end.

Expenses

Expenses are recorded as incurred. Expense estimates are accrued in the period to which they relate. Expenses included in the accompanying financial statements reflect the expenses of the Trust and do not include any expenses paid by the Sponsor or related entities outside of the Trust.

Note 3: Related Party Agreements and Transactions

Administrator

Fidelity Service Company, Inc., an affiliate of the Sponsor, serves as the Trust’s administrator (the “Administrator”). Under the Administration 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 ether and calculating the net asset value (“NAV”) per Share of the Trust (“Trust’s NAV”) and supplying pricing information to the Sponsor for the relevant website. In addition, the Administrator makes available the office space, equipment, personnel and facilities required to provide such services. All fees and expenses incurred by the Trust related to services performed by the Administrator are borne by the Sponsor.

Custodian

Fidelity Digital Assets, N.A., an affiliate of the Sponsor, serves as one of the Trust’s ether custodians (the “Custodian”). Under the Custodial Services Agreement, the Custodian is responsible for safekeeping a portion of the ether owned by the Trust. The Custodian was selected by the Sponsor. The Sponsor is responsible for opening an account with the Custodian that holds the Trust’s ether, as well as facilitating the transfer or sale of ether required for the operation of the Trust. All fees and expenses incurred by the Trust related to services performed by the Custodian are borne by the Sponsor.

Distributor

Fidelity Distributors Company LLC, an affiliate of the Sponsor, (“FDC” or the “Distributor”) is responsible for reviewing and approving the marketing materials prepared by the Sponsor for compliance with applicable SEC and the Financial Industry Regulatory Authority, Inc. (“FINRA”) advertising laws, rules, and regulations pursuant to a marketing agreement with the Trust. FDC is a broker-dealer registered under the Securities Exchange Act of 1934 (the “1934 Act”) and a member of FINRA. All fees and expenses incurred by the Trust related to services performed by the Distributor are borne by the Sponsor.

Index Services

Fidelity Product Services LLC, an affiliate of the Sponsor, (the “Index Provider”) is responsible for the methodology and oversight of the Index. All fees and expenses incurred by the Trust related to services performed by the Index Provider are borne by the Sponsor.

Sponsor Fee

The Trust contractually agrees to pay the Sponsor a unified fee of 0.25% of the Trust’s Ether Holdings (the “Sponsor Fee”). The Trust’s “Ether Holdings” is the quantity of the Trust’s ether plus any cash or other assets held by the Trust represented in ether as calculated using the Index price, less its liabilities (which include estimated accrued but unpaid fees and expenses) represented in ether as calculated using the Index price. The Sponsor Fee is paid by the Trust to the Sponsor as compensation for services performed under the Trust Agreement. The Sponsor is obligated to assume and pay all fees and other expenses incurred by the Trust in the ordinary course of its affairs, excluding taxes and the Staking Fees, but including: (i) the fees of the Trust’s third-party service providers including, but not limited to, the Distributor, the Administrator, any custodian, the Transfer Agent, the Index Provider and the Trustee, (ii) the fees and expenses related to the listing, quotation or trading of the Shares on the Exchange (including customary legal, marketing and audit fees and expenses), (iii) legal fees and expenses incurred in the ordinary course, (iv) audit fees, (v) regulatory fees, including, if applicable, any fees relating to the registration of the Trust and Shares, including any ongoing filings related to the offering of Shares, under the Securities Act of 1933 (the “1933 Act”) or the 1934 Act, (vi) printing and mailing costs, (vii) costs of maintaining the Trust’s website and (viii) applicable license fees (each, a “Sponsor-paid Expense” and collectively, the “Sponsor-paid Expenses”), provided that any expense that qualifies as an Extraordinary Expense will not be deemed to be a Sponsor-paid Expense. There is no cap on the amount of Sponsor-paid Expenses. The Sponsor has also assumed all fees and expenses related to the organization and offering of the Trust and the Shares.

The Trust may incur certain extraordinary, nonrecurring expenses that are not Sponsor-paid Expenses, including, but not limited to, brokerage and transaction costs associated with the sale or transfer of ether, taxes and governmental charges, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust, the Trust’s assets, or the interests of Shareholders, any indemnification of the custodians or other agents, service providers or counterparties of the Trust, extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters (collectively, “Extraordinary Expenses”). To the extent on-chain transaction fees are incurred in connection with transfers or sales of ether to pay Extraordinary Expenses, the Trust will bear such fees.

The Administrator calculates the Sponsor Fee in respect of each day based on the prior day’s Ether Holdings. The Sponsor Fee accrues daily in ether and is payable monthly in ether or cash. To the extent the Trust does not have cash readily available, the Sponsor will cause the transfer or sale of ether in such quantity as may be necessary to permit the payment of Trust expenses and liabilities not assumed by the Sponsor. The amount of ether transferred or sold may vary from time to time depending on the actual sales price of ether relative to the Trust’s expenses and liabilities.

Staking Fees

The node operators, the custodians and the Sponsor are each entitled to receive a portion of the staking rewards generated by the node operators’ staking activities (the “Staking Fees”), allocated from the staking rewards that the Trust receives from the Ethereum network. The Trust allocates to the Sponsor, as partial consideration for the Sponsor arranging for the staking of the Trust’s ether, a staking fee equal to 15% of the amount of staking rewards received by the Trust from the Ethereum network; the Trust retains the remaining 85%. The staking fee allocated to the Sponsor is subsequently shared amongst the Sponsor, custodian(s), node operator(s) or other third-parties engaged by the Sponsor or the Trust to stake the Trust’s ether.

As of September 30, 2026, the Trust had not incurred Staking Fees.

Note 4: Staking Program

Effective August 28, 2026, the Trust began the activation process for staking ether and at the time, the Ethereum validator entry queue was approximately 37 days before validator activation could occur. The Sponsor utilizes the services of the custodians to stake, or cause to be staked, all of the Trust’s ether with one or more node operators, except for ether 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 its Liquidity Program. Accordingly, while under normal circumstances the Trust may stake up to 100% of the Trust’s ether, there is no minimum percentage the Trust is required to stake. The Sponsor generally considers normal circumstances to be periods when the Ethereum network is operating without material disruption, redemption activity is within expected ranges, and there are no extraordinary events requiring the Sponsor to reserve additional ether for liquidity management purposes. The node operators utilize the hardware, software and services necessary to enable the establishment of validator nodes and stake the Trust’s ether on the Ethereum network. As a result of the Sponsor utilizing staking activity services of the custodians, the Trust expects to receive certain staking rewards of ether. The node operators exercise no discretion as to the amount of the Trust’s ether to be staked or timing of the staking activities (other than as is incidental in establishing or deactivating validator nodes). The custodians maintain exclusive possession and control of the private keys associated with any staked ether at all times. Staking activity comes with a risk of loss of ether, including in the form of “slashing” penalties. Additionally, as part of the “activating” and “exiting” processes of ether staking, any staked ether is inaccessible for a period of time, resulting in certain liquidity risks that the Sponsor manages. As of September 30, 2026,284,400 ether was in the process of being staked with a fair value of $766.1 million. As of September 30, 2026, the activation process for staked ether was not completed and the Trust has not recognized staking rewards.

Note 5: Fair Value Measurement

The Trust’s assets recorded at fair value have been categorized based upon a fair value hierarchy as described in the Trust’s significant accounting policies in Note 2. The following table presents information about the Trust’s assets measured at fair value as of September 30, 2026 and December 31, 2025:

Geographic location for all investments is detailed in the accompanying Schedules of Investment.

Note 6: Capital

The Trust is an exchange-traded product. The Trust continuously offers Baskets consisting of Shares to Authorized Participants. The number of outstanding Shares is expected to increase and decrease from time to time as a result of the issuance and redemption of Baskets. The issuance and redemption of Baskets require the delivery to the Trust or the distribution by the Trust of the amount of ether or cash represented by the Trust’s NAV of the Baskets being issued or redeemed. The total amount of ether or cash required for the issuance or redemption of Baskets will be based on the combined net assets represented by the number of Baskets being issued or redeemed.

Shares represent fractional undivided beneficial interests in and ownership of the Trust. Shares issued by the Trust are registered in a book entry system and held in the name of Cede & Co. at the facilities of the Depository Trust Company (“DTC”), and one or more global certificates issued by the Trust to DTC evidence the Shares. Shareholders may hold their Shares through DTC if they are direct participants in DTC (“DTC Participants”) or indirectly through entities (such as broker-dealers) that are DTC Participants.

Note 7: Commitments and Contingencies

In the normal course of business, the Trust enters into certain contracts that provide a variety of indemnities, including contracts with the Sponsor and affiliates of the Sponsor, and its officers, directors, employees, subsidiaries and affiliates, as well as others relating to services provided to the Trust. The Trust’s maximum exposure under these and its other indemnities is unknown. However, no liabilities have arisen under these indemnities in the past and, while there can be no assurances in this regard, there is no expectation that any will occur in the future. Therefore, the Sponsor does not consider it necessary to record a liability in this regard. The risk of material loss from such claims is considered remote.

Note 8: Concentration Risk

Unlike other funds that may invest in diversified assets, the Trust’s investment strategy is concentrated in a single asset within a single asset class. This concentration maximizes the degree of the Trust’s exposure to a variety of market risks associated with ether and digital assets. By concentrating its investment strategy solely in ether, any losses suffered as a result of a decrease in the value of ether can be expected to reduce the value of an interest in the Trust and will not be offset by other gains if the Trust were to invest in underlying assets that were diversified.

The Trust relies on the resources of a limited number of node operators to facilitate the Sponsor's staking activities through the custodians. Disruptions in the execution of staking activities by one or more of these service providers could adversely impact the Trust's operations. Inadequate hardware and software utilized by a node operator may result in missed staking rewards, penalization or slashing of staked ether, a forced exit from performing validator duties, or a loss of ether.

Note 9: Financial Highlights

The Trust is presenting the following financial highlights related to investment performance and operations of a Share outstanding for the nine months ended September 30, 2026 and 2025. The total return, at net asset value is based on the change in NAV of a Share during the period and the total return, at market value is based on the change in market value of a Share on the Exchange during the period. An individual investor’s return and ratios may vary based on the timing of capital transactions.

(1)

Based on average shares outstanding during the period.

(2)

Percentages are not annualized.

(3)

Percentages are annualized.

Note 10: Subsequent Events

In preparation of the financial statements, management has evaluated events and transactions subsequent to September 30, 2026, through the date the financial statements were issued. On October 4, 2026, the Trust's ether completed the activating process and began receiving staking rewards. Management determined that there were no other subsequent events or transactions that would require adjustments to or disclosure in the Trust's financial statements.