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Item 1. Financial Statements

2025-10-15 compared with 2025-07-15 · 388 added, 267 removed, 77 unchanged (89% of the section changed)

Financial Statements (Unaudited)

Statement of Financial Condition (unaudited)

At May 31, 2025

Investments in European Union Carbon Emission Allowances (“EUAs”), at fair value (cost $ 0.00 at May 31, 2025)

Accrued Expenses

Statement of Financial Condition (unaudited) (a)

At August 31, 2025

Investments in European Union Carbon Emission Allowances (“EUAs”), at fair value (cost $ 2,518,608 )

Cash & Cash Equivalents

Interest Receivable

Total Liabilities

1 unchanged sentence

Net asset value per Share

(1) Authorized share capital is unlimited and the par value of

the Shares is $0.00.

(1) Authorized share capital is unlimited and the par value of the

Shares is $0.00.

See notes to the unaudited financial statements.

(b) The Fund had not commenced operations as of May 31, 2025

(a) No comparative financial statements have been provided as

the Trust did not have any operations as of November 30, 2024.

COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE TRUST

Schedule of Investments (unaudited) (a)

At August 31, 2025

August 31, 2025

% of Net Assets

Short-Term Investments (b)

Total Investment

Liabilities in Excess of Other Assets

See notes to the unaudited financial statements.

(a) No comparative financial statements have been provided as

the Trust did not hold any EUAs as of November 30, 2024.

(b) The annualized 7-day yield as of August 31, 2025 of the SSC

GOVERNMENT MM GVMXX is 4.23%.

COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE

Statement of Operations (unaudited)

For the period from April 29, 2025 (a) to May 31, 2025

three months ended

INVESTMENT INCOME

Total Investment Income

Interest Income

Total expenses

Net investment income/(loss)

Net realized and change in unrealized gain/(loss) on investment in EUAs

Net realized gain/(loss) from investment in EUAs sold to pay expenses

Net realized gain/(loss) from EUAs distributed for the redemption of shares

NET REALIZED AND UNREALIZED GAIN/(LOSS)

Net realized gain/(loss) from EUAs sold to pay expenses

Net realized gain/(loss) from Fx Transactions

Net change in unrealized gain/(loss) on investment in EUAs

Net realized and change in unrealized gain/(loss) on investment in EUAs

Net income/(loss)

Net income/(loss) per share

Weighted average number of shares (in 000’s)

Net realized and change in unrealized gain/(loss) on investment in EUAs and foreign currency

NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

Net decrease in net assets per share from operations

$ ( 0.00 )(c)

Weighted average number of shares outstanding

See notes to the unaudited financial statements.

(a) Effective date of registration statement

(b) The Fund had not commenced operations as of May 31, 2025

(b) The Fund commenced operations on June 17, 2025

COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE

Statement of Cash Flows (unaudited)

For the period from April 29, 2025 (a) to May 31, 2025

Statement of Cash Flows (unaudited) (c)

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities

EUAs purchased for Shares created

$ ( 2,537,489 )

Unrealized (gain)/loss on investment in EUAs

1 unchanged sentence

Increase/(decrease) in payables

Net realized (gain)/loss from EUAs sold to pay expenses

Net realized (gain)/loss from Foreign Exchange Transactions

Net cash provided by (used in) operating activities

$ ( 2,514,698 )

CASH FLOWS FROM FINANCING ACTIVITIES

EUAs purchased for Shares created

EUAs sold for Shares redeemed

Net cash provided by (used in) investing activities

Capital Contributed for Purchase of EUAs

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

6 unchanged sentences

(a) Effective date of registration statement

(b) The Fund had not commenced operations as of May 31, 2025

COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE TRUST

(b) The Fund commenced operations on June 17, 2025

the Trust did not hold any EUAs as of November 30, 2024.

COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE

Statement of Changes in Net Assets (unaudited)

For the period from April 29, 2025 (a) to May 31, 2025

Net Assets - Opening Balance

three months ended

Net investment loss

Net realized gain/(loss) from investment in EUAs sold to pay expenses

Net realized gain/(loss) from EUAs distributed for the redemption of shares

Net change in unrealized gain/(loss) on investment in EUAs

Net Assets - Closing Balance

Net realized gain/(loss) from EUAs and foreign currency sold

Net unrealized gain/(loss) from EUAs

Net decrease in net assets resulting from operations

Capital Share Transactions:

Net increase in net assets from capital share transactions

Increase in net assets

Net Assets - Beginning of Period

Net Assets - End of Period

Shares issued and redeemed

Shares issued

Shares redeemed

Net increase in Shares issued and outstanding

See notes to the unaudited financial statements.

(a) Effective date of registration statement

(b) The Fund had not commenced operations as of May 31, 2025

COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE TRUST

Notes to the Financial Statements (unaudited)

Advisors Physical European Carbon Allowance Trust (the “Trust”) was formed as a Delaware statutory trust on January 12, 2023.

Trust is governed by the Amended and Restated Declaration of Trust and Trust Agreement (the “Trust Agreement”) dated

November 27, 2023 between COtwo Advisors LLC (the “Sponsor”) and Wilmington Trust, National Association (the

The Trust had not commenced operations as of May 31, 2025.

The Trust had not commenced investment activities

or issued shares.

The offering of the Trust’s shares is registered with the SEC in accordance with the Securities Act of 1933.

(b) The Fund commenced operations on June 17, 2025

COTWO ADVISORS PHYSICAL EUROPEAN CARBON

ALLOWANCE TRUST

Notes to the Financial Statements

COtwo Advisors

Physical European Carbon Allowance Trust (the “Trust”) was formed as a Delaware statutory trust on January 12, 2023.

The Trust is governed

by the Amended and Restated Declaration of Trust and Trust Agreement (the “Trust Agreement”) dated November 27, 2023 between

COtwo Advisors LLC (the “Sponsor”) and Wilmington Trust, National Association (the “Trustee”).

On April 29, 2025,

the Trust was declared effective by the U.S.

Securities and Exchange Commission.

The Trust began investment operations of investing in

EUAs on June 17, 2025, and was listed for secondary market trading on NYSE Arca on June 20, 2025.

The offering of the Trust’s shares

is registered with the SEC in accordance with the Securities Act of 1933.

The Trust currently offers one class of shares.

The Trust has a fiscal year ending November 30.The investment objective of the Trust

is for the Shares to reflect the performance of the price of EU Carbon Emission Allowances for stationary installations

(“EUAs”), less the expenses of the Trust’s operations.

The Trust’s assets will consist of EUAs, which are

issued via the European Union Emission Trading System (“ETS”) and permit the holder to emit one ton of carbon dioxide

equivalent or other greenhouse gas.

The Trust will occasionally hold cash for short periods to pay Trust expenses.

Sponsor is the sponsor of the Trust.

The Trust has

a fiscal year ending November 30.The investment objective of the Trust is for the Shares to reflect the performance of the price of EU

Carbon Emission Allowances for stationary installations (“EUAs”), less the expenses of the Trust’s operations.

assets will consist of EUAs, which are issued via the European Union Emission Trading System (“ETS”) and permit the holder

to emit one ton of carbon dioxide equivalent or other greenhouse gas.

The Trust will occasionally hold cash for short periods to pay Trust

COtwo Advisors

LLC is the sponsor of the Trust.

(1) will select the Trust’s trustee, administrator, transfer agent, cash custodian,

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and (5) will perform such other services as the Sponsor believes that the Trust may require.

capitalized terms shall have the meaning as set forth in the registration statement.

Statement of Financial Condition and Schedule of Investment at May 31, 2025 and the Statements of Operations, Cash Flows and Changes

in Net Assets for the reporting period ended May 31, 2025 have been prepared on behalf of the Trust without audit.

In the opinion of

management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the

financial position, results of operations and cash flows as of and for the three and six months ended May 31, 2025 and for all periods

presented have been made.

The results of operations for the three and six months ended May 31, 2025 are not necessarily indicative of

the operating results for the full fiscal year.

State Street Bank

and Trust Company (the "Administrator") has been selected by the Sponsor to serve as Administrator, Transfer Agent, and Custodian

to the Trust.

The Statement

of Financial Condition and Schedule of Investments at August 31, 2025 and the Statements of Operations, Cash Flows and Changes in Net

Assets for the reporting period ended August 31, 2025 have been prepared on behalf of the Trust without audit.

In the opinion of management

of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position,

results of operations and cash flows as of and for the periods April 29, 2025 to August 31, 2025 and the three months ended August 31,

2025 have been made.

The results of operations for the periods April 29, 2025 to August 31, 2025 and the three months ended August 31,

2025 are not necessarily indicative of the operating results for the full fiscal year.

SIGNIFICANT ACCOUNTING POLICIES

Sponsor has determined that the Trust falls within the scope of Financial Accounting Standards Board (“FASB”) Accounting

Standards Codification (“ASC”) 946, Financial Services — Investment Companies, and has concluded that for

reporting purposes, the Trust is classified as an Investment Company.

The Trust is not registered as an investment company under the

Investment Company Act of 1940 and is not required to register under such act.

The preparation of financial statements in accordance

with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) requires those responsible

for preparing financial statement to make estimates and assumptions that affect the reported amounts and disclosures.

Actual results

could differ from those estimates.

following is a summary of significant accounting policies followed by the Trust.

The Sponsor has

determined that the Trust falls within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification

(“ASC”) 946, Financial Services — Investment Companies, and has concluded that for reporting purposes, the Trust is

classified as an Investment Company.

The Trust is not registered as an investment company under the Investment Company Act of 1940 and

is not required to register under such act.

The preparation of financial statements in accordance with accounting principles generally

accepted in the United States of America (“U.S.

GAAP”) requires those responsible for preparing financial statements to make

estimates and assumptions that affect the reported amounts and disclosures.

Actual results could differ from those estimates.

The following is a summary of significant

accounting policies followed by the Trust.

2.1.Emerging growth company

Trust is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS

Act”), and is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to

other public companies that are not “emerging growth companies” including, but not limited to, not being required to

comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and reduced disclosure obligations

that are not otherwise applicable to the Trust.

In addition, Section 107 of the JOBS Act also provides that an “emerging

growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of

1933, as amended (the “Securities Act”), for complying with new or revised accounting standards.

In other words, an

“emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise

apply to private companies.

However, the Trust is choosing to “opt out” of such extended transition period, and as a

result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required

for non-emerging growth companies.

Section 107 of the JOBS Act provides that the decision to opt out of the extended transition

period for complying with new or revised accounting standards is irrevocable.

The Trust is an

“emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and

is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies

that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation

requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and reduced disclosure obligations that are not otherwise applicable to

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of

the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”),

for complying with new or revised accounting standards.

In other words, an “emerging growth company” can delay the adoption

of certain accounting standards until those standards would otherwise apply to private companies.

However, the Trust is choosing to “opt

out” of such extended transition period, and as a result, will comply with new or revised accounting standards on the relevant dates

on which adoption of such standards is required for non-emerging growth companies.

Section 107 of the JOBS Act provides that the decision

to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Notes to the Financial Statements

(continued) (unaudited)

Valuation of EUAs

Trust follows the provisions of ASC 820, Fair Value Measurements (“ASC 820”).

ASC 820 provides guidance for determining

fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value.

defines 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 at the measurement date.

EUAs will be held in the Trust’s account at the European Union Registry (the “Union Registry”).

The cost basis of EUAs

received in connection with a creation order is recorded by the Trust at the fair value of EUAs at 4:00 p.m., New York time, on the creation

date for financial reporting purposes.

The Trust follows

the provisions of ASC 820, Fair Value Measurements (“ASC 820”).

ASC 820 provides guidance for determining fair value and requires

increased disclosure regarding the inputs to valuation techniques used to measure fair value.

ASC 820 defines 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 at the measurement

All EUAs will be

held in the Trust’s account at the European Union Registry (the “Union Registry”).

The cost basis of EUAs received in

connection with a creation order is recorded by the Trust at the fair value of EUAs at 4:00 p.m., New York time, on the creation date

for financial reporting purposes.

The cost basis recorded by the Trust may differ from proceeds collected by the Authorized Participant

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single day futures contract on EUAs (the “Daily EUA Future”) exclusively traded on the ICE Endex Markets B.V.

Endex is regulated in the Netherlands by the Dutch Authority for the Financial Markets.

The Daily EUA Future is a deliverable contract

that settles each day at the close of trading.

Each person with a position open at cessation of trading is obliged to make or take physical

delivery of EUAs upon the expiration of the contract at the end of each trading day.

The settlement price is fixed each business day

and is published by the exchange at approximately 12:15 E.T.

820 establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value.

The three levels of inputs are

1 – Unadjusted quoted prices in active markets for

identical assets or liabilities that the Trust has the ability to access.

inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly.

inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments and similar data.

– Unobservable

inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Trust’s own

assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the

best information available.

Sponsor had determined the Trust’s investment in EUAs are Level 2 assets within the ASC 820 hierarchy.

The following table summarizes

the Trust’s investments at fair value:

ICE Endex is regulated

in the Netherlands by the Dutch Authority for the Financial Markets.

The Daily EUA Future is a deliverable contract that settles each

day at the close of trading.

Each person with a position open at cessation of trading is obliged to make or take physical delivery of

EUAs upon the expiration of the contract at the end of each trading day.

The settlement price is fixed each business day and is published

by the exchange at approximately 12:15 E.T.

ASC 820 establishes

a hierarchy that prioritizes inputs to valuation techniques used to measure fair value.

The three levels of inputs are as follows:

Unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access.

Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly.

These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments and similar

Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Trust’s

own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based

on the best information available.

The Sponsor had

determined the Trust’s investment in EUAs are Level 2 assets within the ASC 820 hierarchy.

The following table summarizes the Trust’s

investments at fair value:

(Amounts in 000’s of US$)

Investment in EUAs

were no transfers between Level 1 and other Levels for the period ended May 31, 2025.

Calculation of Net Asset Value (“NAV”)

each business day, as soon as practicable after 4:00 p.m.

(Eastern Time), the net asset value of the Trust is obtained by subtracting

all accrued fees, expenses and other liabilities of the Trust from the fair value of the EUAs and other assets held by the Trust.

Trustee computes the net asset value per Share by dividing the net asset value of the Trust by the number of Shares outstanding on the

date the computation is made.

Trust’s only ordinary recurring fee is expected to be the fee paid to the Sponsor, which will accrue daily at an annualized rate

equal to 0.79 % of the average daily net asset value of the Trust, paid monthly in arrears.

Creations and Redemptions of Shares

Trust issues and redeems in one or more blocks of 50,000 Shares (a block of 50,000 Shares is called a “Basket”) only to

Authorized Participants.

The creation and redemption of Baskets will only be made in exchange for the delivery to the Trust or the

distribution by the Trust of the amount of cash or EUAs represented by the Baskets being created or redeemed, the amount of which

will be based on the amounts of cash and EUAs represented by 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.

to create and redeem Baskets may be placed only by Authorized Participants.

August 31, 2025

Short-Term Investments

There were no transfers between

Level 1 and other Levels for the period ended August 31, 2025.

Calculation of Net Asset Value

On each business

day, as soon as practicable after 4:00 p.m.

(Eastern Time), the net asset value of the Trust is obtained by subtracting all accrued fees,

expenses and other liabilities of the Trust from the fair value of the EUAs and other assets held by the Trust.

The Trustee computes the

net asset value per Share by dividing the net asset value of the Trust by the number of Shares outstanding on the date the computation

Notes to the Financial Statements

(continued) (unaudited)

The Trust’s only ordinary recurring

fee is the fee paid to the Sponsor, which is equal to 0.79 % per annum of the daily net asset value of the Trust, paid monthly in arrears.

Creations and Redemptions of

The Trust issues

and redeems in one or more blocks of 50,000 Shares (a block of 50,000 Shares is called a “Basket”) only to Authorized Participants.

The creation and redemption of Baskets will only be made in exchange for the delivery to the Trust or the distribution by the Trust of

the amount of cash or EUAs represented by the Baskets being created or redeemed, the amount of which will be based on the amounts of cash

and EUAs represented by 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.

Orders to create

and redeem Baskets may be placed only by Authorized Participants.

An Authorized Participant must:

(1) be a registered

broker-dealer and a member in good standing with the Financial Industry Regulatory Authority (“FINRA”);

participant in DTC;

and (3) have entered 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 of the cash or EUAs required for

such creations and redemptions.

A transaction fee of $ 100 will be assessed on all creation and redemption orders.

Multiple Baskets

may be created on the same day.

Authorized Participants who make deposits with the Trust in exchange for Baskets will receive no

fees, commissions or other form of compensation or inducement of any kind from either the Sponsor or the Trust, and no such person

has any obligation or responsibility to the Sponsor or the Trust to affect any sale or resale of Shares.

(1) be a registered broker-dealer and

a member in good standing with the Financial Industry Regulatory Authority (“FINRA”);

(2) be a participant in DTC;

have entered 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 of the cash or EUAs required for such creations and redemptions.

A transaction

fee of $ 100 will be assessed on all creation and redemption orders.

Multiple Baskets may be created on the same day.

Authorized Participants

who make deposits with the Trust in exchange for Baskets will receive no fees, commissions or other form of compensation or inducement

of any kind from either the Sponsor or the Trust, and no such person has any obligation or responsibility to the Sponsor or the Trust

to affect any sale or resale of Shares.

Three Months Ended

(Amounts are in 000’s)

1 unchanged sentence

Net Change in Number of Shares Created and Redeemed

Three Months Ended

(Amounts in 000’s of US$)

1 unchanged sentence

Net change in Value of Shares Created and Redeemed

Notes to the Financial Statements

(continued) (unaudited)

Organization Costs

costs of the Trust’s organization and the initial offering of the Shares were borne directly by the Sponsor.

The Trust is not obligated

to reimburse the Sponsor

Trust is classified as a “grantor trust” for United States federal income tax purposes.

As a result, the Trust itself is

not subject to United States federal income tax.

Instead, the Trust’s income and expenses “flow through” to the shareholders,

and the Administrator reports the Trust’s income, gains, losses, and deductions to the Internal Revenue Service on that basis.

The Sponsor has analysed applicable tax laws and regulations and their application to the Trust, and does not believe that there are

any uncertain tax positions that require recognition of a tax liability as of May 31, 2025.

Trust is required to determine whether its tax positions are more likely than not to be sustained on examination by the applicable

taxing authority, based on the technical merits of the position.

Tax positions not deemed to meet a more likely than not threshold

would be recorded as a tax expense in the current year.

As of May 31, 2025 the Trust has determined that no provision for income

taxes is required and no liability for unrecognized tax benefits has been recorded.

The Trust does not expect that its assessment

related to unrecognized tax benefits will materially change over the next 12 months.

However, the Trust’s conclusions may be

subject to review and adjustment at a later date based on factors including, but not limited to, the nexus of income among various

tax jurisdictions;

The costs of the Trust’s organization

and the initial offering of the Shares were borne directly by the Sponsor.

The Trust is not obligated to reimburse the Sponsor .

The Trust is classified

as a “grantor trust” for United States federal income tax purposes.

As a result, the Trust itself is not subject to United

States federal income tax.

Instead, the Trust’s income and expenses “flow through” to the shareholders, and the Administrator

reports the Trust’s income, gains, losses, and deductions to the Internal Revenue Service on that basis.

The Sponsor has analysed

applicable tax laws and regulations and their application to the Trust, and does not believe that there are any uncertain tax positions

that require recognition of a tax liability as of August 31, 2025.

The Trust is required

to determine whether its tax positions are more likely than not to be sustained on examination by the applicable taxing authority, based

on the technical merits of the position.

Tax positions not deemed to meet a more likely than not threshold would be recorded as a tax

expense in the current year.

As of August 31, 2025 the Trust has determined that no provision for income taxes is required and no liability

for unrecognized tax benefits has been recorded.

The Trust does not expect that its assessment related to unrecognized tax benefits will

materially change over the next 12 months.

However, the Trust’s conclusions may be subject to review and adjustment at a later date

based on factors including, but not limited to, the nexus of income among various tax jurisdictions;

compliance with U.S.

1 unchanged sentence

state, and tax laws of jurisdictions in which the Trust operates in;

changes in the administrative practices and precedents of the relevant authorities.

The Trust is required to analyze all open tax

Open tax years are those years that are open for examination by the relevant income taxing authority.

As of May 31, 2025, all

tax years since inception remain open for examination.

There were no examinations in progress at period end.

and changes in the administrative practices and precedents of the

relevant authorities.

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 August 31, 2025, all tax years since inception remain open for examination.

no examinations in progress at period end.

Transactions and Revenue Recognition

Trust records its investment transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation

or depreciation on investment in EUAs.

The Trust records

its investment transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or

depreciation on investment in EUAs.

Realized gains and losses are calculated using the specific identification method.

1 unchanged sentence

and losses are recognized in connection with transactions including settling obligations for the Sponsor's Fee in EUAs.

PROP OSED OFFE RING

Trust is offering an indeterminate amount of securities of the Trust.

The Trust will calculate and pay registration fees, if any, in

accordance with Rule 456(d) of the Securities Act.

In accordance with Rules 456(d) and 457(u) under the Securities Act, the Trust is

deferring payment of these registration fees and will pay these registration fees on an annual net basis no later than 90 days after

the end of each fiscal year.

of the Trust are expected to be listed and traded on the NYSE Arca, Inc.

(“NYSE Arca”) after they are initially purchased

by Authorized Participants.

The initial Authorized Participant will make a minimum initial purchase of at least one Basket of 50,000

Shares at a per Share price equal to the value of 10,000 EUAs on the initial offering date.

The Trust will not commence trading unless

and until its initial Authorized Participant effects the initial purchase.

Following the initial purchase by the initial Authorized Participant,

shares of the Trust will be offered to Authorized Participants in Baskets at the Trust’s NAV.

Market prices for the Shares may

be different from their NAV.

PARTIES — SPONSOR, TRUSTEE, CUSTODIAN AND MARKETING FEES

fee is paid to the Sponsor as compensation for services performed under the Trust Agreement.

In exchange for the Sponsor fee, the

Sponsor has agreed to assume all routine operational, administrative and other ordinary expenses of the Trust, including, but not

limited to, the monthly fee, out-of-pocket expenses and expenses reimbursable in connection with such service provider’s

respective agreement payable to each of the Trust’s trustee, administrator, cash custodian, transfer agent and marketing

Interest income

is recognized on an accrual basis and includes, where applicable, the amortization of premium or discount, and is reflected as Interest

Income in the Statements of Operations.

The Trust expects

to periodically sell EUAs to maintain approximately 1 % of its assets in cash for use in connection with creation transactions or to pay

Foreign Currency Translations

Investments and

other assets and liabilities denominated in foreign currencies are translated into U.S.

dollars at the exchange rates prevailing at the

close of business on the valuation date.

Purchases and sales of investments, and income and expenses, are translated at the rates of exchange

prevailing on the respective dates of such transactions.

Realized gains or losses on foreign currency transactions can represent gains

or losses between trade and settlement dates on securities transactions, gains or losses arising from the disposition of foreign currency,

and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the

dollar equivalent of the amounts actually received or paid.

Unrealized gains and losses on foreign currency translations arise from

changes in the value of assets and liabilities, other than investments in securities, resulting from changes in exchange rates.

amounts are summarized and disclosed in the unaudited Statement of Operations.

Notes to the Financial Statements (continued) (unaudited)

Investment in EUAs

Changes in EUAs

held and their respective values for the periods June 17, 2025 to August 31, 2025 and April 29, 2025 to August 31, 2025:

Opening Balance, June 17, 2025

EUAs Purchased

Realized Gain/(Loss) from EUAs sold to pay expenses

Change in Unrealized Appreciation/(Depreciation)

Ending Balance, August 31, 2025

Opening Balance, April 29, 2025

EUAs Purchased

Realized Gain/(Loss) from EUAs sold to pay expenses

Change in Unrealized Appreciation/(Depreciation)

Ending Balance, August 31, 2025

RELATED PARTIES — SPONSOR, TRUSTEE, CUSTODIAN AND MARKETING

A fee is paid to the Sponsor as compensation for

services performed under the Trust Agreement.

In exchange for the Sponsor fee, the Sponsor has agreed to assume all routine operational,

administrative and other ordinary expenses of the Trust, including, but not limited to, the monthly fee, out-of-pocket expenses and expenses

reimbursable in connection with such service provider’s respective agreement payable to each of the Trust’s trustee, administrator,

cash custodian, transfer agent and marketing agent;

the marketing support fees and expenses;

5 unchanged sentences

and routine legal expenses.

The Sponsor’s fee,

paid monthly in arrears, is equal to 0.79 % per annum of the daily net asset value of the Trust.

Sponsor, from time to time, may temporarily waive all or a portion of the Sponsor’s fee at its discretion for a stated period of

Presently, the Sponsor does not intend to waive any part of its fee.

of May 31, 2025, there were no amounts payable to related parties.

accordance with Statement of Position No.

94-6, Disclosure of Certain Significant Risks and Uncertainties, the Trust’s sole

business activity is the investment in EUAs.

The price of EUAs is affected by numerous factors beyond the Trust’s control,

including the following:

(a) global or regional political, economic, environmental or financial events and situations (including

pandemics, such as COVID-19);

(b) investors’ expectations with respect to the future rates of inflation and movements in world

equity, financial, environmental, commodity and property markets;

(including manufacturing facilities, oil refineries, power stations and, aviation) may impact the demand for EUAs;

(d) the relevant

rules of cap and trade programs outside the European Union (including how allowances are made available to operators or market

participants, such as free allocations or auctions) and links put in place between mandatory cap and trade programs and voluntary

schemes (enabling carbon allowances of one mandatory program or voluntary scheme to be used for the purposes of another mandatory

program or voluntary scheme) may impact the supply of EUAs;

Sponsor’s fee, paid monthly in arrears, is equal to 0.79 % per annum of the daily net asset value of the Trust.

As of August 31, 2025, there was $ 1,666 payable

to the Sponsor.

Notes to the Financial Statements

(continued) (unaudited)

In accordance with Statement of Position No.

Disclosure of Certain Significant Risks and Uncertainties, the Trust’s sole business activity is the investment in EUAs.

of EUAs is affected by numerous factors beyond the Trust’s control, including the following:

(a) global or regional political, economic,

environmental or financial events and situations (including pandemics, such as COVID-19);

(b) investors’ expectations with respect

to the future rates of inflation and movements in world equity, financial, environmental, commodity and property markets;

and emissions of energy-intensive sectors (including manufacturing facilities, oil refineries, power stations and, aviation) may impact

the demand for EUAs;

(d) the relevant rules of cap and trade programs outside the European Union (including how allowances are made available

to operators or market participants, such as free allocations or auctions) and links put in place between mandatory cap and trade programs

and voluntary schemes (enabling carbon allowances of one mandatory program or voluntary scheme to be used for the purposes of another

mandatory program or voluntary scheme) may impact the supply of EUAs;

(e) the rate of progress in the innovation, introduction and expansion

of technologies and techniques in the reduction of emissions of greenhouse gases (or the capture and storage thereof);

by governments of different policies to encourage or require the reduction of emissions of greenhouse gases;

(g) lobbyist, political

or governmental goals or policies with respect to climate change and the imposition of environmental plans or climate goals;

cost and implications of non-compliance with the European Union Emissions Trading System (including both monetary and non-monetary

penalties on operators subject to the European Union Emissions Trading System for failure to surrender sufficient EUAs);

investment and trading activities of hedge funds, commodity funds and other speculators;

(j) interest rates and currency exchange

rates, particularly the strength of and confidence in the Euro;

and (k) the ability of the greenhouse gas emitting companies to pass

on the cost of emissions credits to consumers.

investment in the Trust is not intended as a complete investment plan.

Because the Trust only holds EUAs or cash, an investment in the

Trust may be more volatile than an investment in a more broadly diversified portfolio.

Accordingly, the NAV may be more volatile than

another investment vehicle with a more broadly diversified portfolio and may fluctuate substantially over time.

An investment in the

Trust may be deemed speculative;

therefore, investors should review closely the objective and strategy, the investment and operating

restrictions and the redemption provisions of the Trust and familiarize themselves with the risks associated with an investment in the

(f) the use by

governments of different policies to encourage or require the reduction of emissions of greenhouse gases;

(g) lobbyist, political or governmental

goals or policies with respect to climate change and the imposition of environmental plans or climate goals;

(h) the cost and implications

of non-compliance with the European Union Emissions Trading System (including both monetary and non-monetary penalties on operators subject

to the European Union Emissions Trading System for failure to surrender sufficient EUAs);

(i) investment and trading activities of hedge

funds, commodity funds and other speculators;

(j) interest rates and currency exchange rates, particularly the strength of and confidence

and (k) the ability of the greenhouse gas emitting companies to pass on the cost of emissions credits to consumers.

An investment in the Trust is not intended as

a complete investment plan.

Because the Trust only holds EUAs or cash, an investment in the Trust may be more volatile than an investment

in a more broadly diversified portfolio.

Accordingly, the NAV may be more volatile than another investment vehicle with a more broadly

diversified portfolio and may fluctuate substantially over time.

An investment in the Trust may be deemed speculative;

therefore, investors

should review closely the objective and strategy, the investment and operating restrictions and the redemption provisions of the Trust

and familiarize themselves with the risks associated with an investment in the Trust.

INDEMNIFICATION FOOTNOTE

Trust’s members, managers, directors, officers, employees, affiliates (as such term is defined under the Securities Act) and subsidiaries)

(collectively, the “Trust Parties”) shall be indemnified from the Trust and held harmless against any loss, liability or

expense incurred without (1) gross negligence, bad faith or willful misconduct on the part of such indemnified party arising out of or

in connection with the performance of its obligations under the Trust Agreement and under each other agreement entered into by the Trust

Parties in furtherance of the administration of the Trust (including, without limiting the scope of the foregoing, the administration

agreement, the transfer agency agreement, the cash custody agreement, the marketing agent agreement and any Authorized Participant Agreement)

or any actions taken in accordance with the provisions of the Trust Agreement or such other agreement or (2) reckless disregard on the

part of such indemnified party of its obligations and duties under the Trust Agreement or such other agreement.

Such indemnity shall

include payment from the Trust of the reasonable costs and expenses incurred by such indemnified party in investigating or defending

itself against any claim or liability in their capacity as Trust Parties.

Any amounts payable to an indemnified party may be payable

in advance or shall be secured by a lien on the Trust’s assets.

The Trust Parties may, in their discretion, undertake any action

which it may deem necessary or desirable in respect of the Trust Agreement and the interests of the shareholders and, in such event,

the reasonable legal expenses and costs of any such actions shall be expenses and costs of the Trust and the Trust Parties shall be entitled

to be reimbursed therefor by the Trust.

The Trust’s members, managers, directors,

officers, employees, affiliates (as such term is defined under the Securities Act) and subsidiaries) (collectively, the “Trust Parties”)

shall be indemnified from the Trust and held harmless against any loss, liability or expense incurred without (1) gross negligence, bad

faith or willful misconduct on the part of such indemnified party arising out of or in connection with the performance of its obligations

under the Trust Agreement and under each other agreement entered into by the Trust Parties in furtherance of the administration of the

Trust (including, without limiting the scope of the foregoing, the administration agreement, the transfer agency agreement, the cash custody

agreement, the marketing agent agreement and any Authorized Participant Agreement) or any actions taken in accordance with the provisions

of the Trust Agreement or such other agreement or (2) reckless disregard on the part of such indemnified party of its obligations and

duties under the Trust Agreement or such other agreement.

Such indemnity shall include payment from the Trust of the reasonable costs

and expenses incurred by such indemnified party in investigating or defending itself against any claim or liability in their capacity

as Trust Parties.

Any amounts payable to an indemnified party may be payable in advance or shall be secured by a lien on the Trust’s

The Trust Parties may, in their discretion, undertake any action which it may deem necessary or desirable in respect of the Trust

Agreement and the interests of the shareholders and, in such event, the reasonable legal expenses and costs of any such actions shall

be expenses and costs of the Trust and the Trust Parties shall be entitled to be reimbursed therefor by the Trust.

Notes to the Financial Statements

(continued) (unaudited)

SEGMENT REPORTING

Sponsor acts as the Trust’s Chief Operating Decision Maker (“CODM’) and is responsible for assessing performance and

allocating resources with respect to the Trust.

The CODM has concluded that the Trust operates as a single operating segment since the

Trust has a single investment strategy as disclosed in its prospectus, against which the CODM assesses performance.

The financial information

provided to and reviewed by the CODM is presented within the Trust’s financial statements.

The Sponsor acts as the Trust’s Chief Operating

Decision Maker (“CODM’) and is responsible for assessing performance and allocating resources with respect to the Trust.

CODM has concluded that the Trust operates as a single operating segment since the Trust has a single investment strategy as disclosed

in its prospectus, against which the CODM assesses performance.

The financial information provided to and reviewed by the CODM is presented

within the Trust’s financial statements.

FINANCIAL HIGHLIGHTS

For the three months ended August 31, 2025*

Per Share Performance (for a Share Outstanding Throughout the Period)

Net Asset Value per Share, beginning of period

Net investment loss (1)

Net realized and unrealized gain/(loss) from investment in EUAs (4)

Net change in net assets resulting from operations

Net Asset Value per Share, end of period

Market Value per Share, beginning of period

Market Value per Share, end of period

Total Return, at Net Asset Value (2)

Total Return, at Market Value

Average Net Assets

$ 2,391,188 (a)

Ratio to average net assets

Net investment loss (3)

* The Fund commenced operations on June 17, 2025

(1) Calculated using the average shares outstanding method.

(2) Percentage not annualized.

(3) Percentage annualized.

(4) Due to the timing of shareholder transactions the per unit

amounts presented may not coincide with the aggregate presentation on the Statement of Operations.

(a) Average Net Assets for the period June 17, 2025 (first day

of trading) to August 31, 2025

Notes to the Financial Statements

(continued) (unaudited)

For the period from April 29, 2025 to August 31, 2025 *

Per Share Performance (for a Share Outstanding Throughout the Period)

Net Asset Value per Share, beginning of period

Net investment loss (1)

Net realized and unrealized gain/(loss) from investment in EUAs (4)

Net change in net assets resulting from operations

Net Asset Value per Share, end of period

Market Value per Share, beginning of period

Market Value per Share, end of period

Total Return, at Net Asset Value (2)

Total Return, at Market Value

Average Net Assets

$ 2,391,188 (a)

Ratio to average net assets

Net investment loss (3)

* The Fund commenced operations on June 17, 2025

(1) Calculated using the average shares outstanding method.

(2) Percentage not annualized.

(3) Percentage annualized.

(4) Due to the timing of shareholder transactions the per unit

amounts presented may not coincide with the aggregate presentation on the Statement of Operations.

(a) Average Net Assets for the period June 17, 2025 (first day

of trading) to August 31, 2025

SUBSEQUENT EVENTS

has evaluated the events and transactions that have occurred through the date the financial statement was issued and noted no items requiring

adjustment of the financial statement or additional disclosures, except for the following:

April 29, 2025, the Trust was declared effective by the U.S.

Securities and Exchange Commission.

The Trust began investment operations

of investing in EUAs on June 17, 2025, and was listed for secondary market trading on NYSE Arca on June 20, 2025.

Management has evaluated the events and transactions

that have occurred through the date the financial statement was issued and noted no items requiring adjustment of the financial statement

or additional disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements