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Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-07 · 33 added, 21 removed, 65 unchanged (45% of the section changed)

46 unchanged sentences

Interest on the primary deposit account, if any, accrues daily and is paid monthly.

The interest rate in effect as of June 30, 2025 was an annual nominal rate of 2.86%.

The following chart provides the daily rate paid by the Depository since June 30, 2020:

The interest rate in effect as of September 30, 2025 was an annual nominal rate of 2.66%.

The following chart provides the daily rate paid by the Depository since September 30, 2020:

In exchange for a fee, the Sponsor bears most of the expenses incurred by the Trust.

9 unchanged sentences

These estimates and assumptions affect the Trust’s application of accounting policies.

In addition, please refer to Note 3 to the financial statements of the Trust for further discussion of the Trust’s accounting policies and Item 7 – Management’s Discussions and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2024.

There were no material estimates, which involve a significant level of estimation uncertainty and had or are reasonably likely to have had a material impact on the Trust's financial condition, used in the preparation of these financial statements.

Results of Operations

During the three and six months ended June 30, 2025 and 2024, the Trust's net comprehensive income (loss) was, in part, impacted by market volatility resulting from global tariff gyrations and mounting US recession concerns for 2025, and expectations around the Federal Reserve (the “Fed”) easing and heightened geopolitical concerns for 2024, which are considered to be unusual or infrequent events.

Although the full and direct impact of global tariffs, US recession concerns, Fed easing expectations and rising geopolitical tensions, on the Trust's net comprehensive income (loss) during the three and six months ended June 30, 2025 and 2024, cannot be known, it is believed that they have each independently impacted the Closing Spot Rate, the interest rate paid by the Depository, and the global economy and markets generally, including the number of Shares created and redeemed by the Trust.

The British Pound Sterling (GBP/USD) ended the second quarter of 2025 significantly higher, driven primarily by continued weakness in the U.S.

Despite a 25 basis-point rate cut by the Bank of England (BoE) during the quarter, the pound appreciated as investors moved away from the dollar amid persistent concerns over U.S.

economic policy and deteriorating sentiment toward American assets.

The dollar’s broad-based decline was the dominant force behind the pound’s strength, overshadowing domestic monetary policy decisions in the UK.

The British Pound Sterling (GBP/USD) was flat in the second quarter of 2024.

While most of the moves were driven by the US dollar, British inflation also held up better than expected, helping the pair stay somewhat lifted despite dollar gains.

As US inflation continued to print above target, the Fed stuck to its more cautious tone, causing the markets to repeatedly push out rate cut expectations.

Higher interest rates generally boost the appeal of the country’s currency.

The British Pound Sterling (GBP/USD) posted strong gains year-to-date through the second quarter of 2025, largely driven by sustained weakness in the U.S.

In the first quarter of 2025, the pound advanced steadily as investors reacted to shifting expectations around U.S.

During the three and nine months ended September 30, 2025 and 2024, the Trust's net comprehensive income (loss) was, in part, impacted by market volatility resulting from global tariff gyrations and mounting U.S.

economic uncertainty for 2025, and expectations around the Federal Reserve (the “Fed”) easing and heightened geopolitical concerns for both 2024 and 2025, which are considered to be unusual or infrequent events.

Although the full and direct impact of global tariffs, U.S.

economic concerns, Fed easing expectations and rising geopolitical tensions, on the Trust's net comprehensive income (loss) during the three and nine months ended September 30, 2025 and 2024, cannot be known, it is believed that they have each independently impacted the Closing Spot Rate, the interest rate paid by the Depository, and the global economy and markets generally, including the number of Shares created and redeemed by the Trust.

The British Pound Sterling (GBP/USD) came under some pressure in the third quarter of 2025.

While the largest headwind was regained USD strength, the pound was also influenced by the combination of renewed central bank policy uncertainty and stagflation risk domestically.

In the UK, fiscal sustainability concerns remained at the forefront ahead of the autumn budget deadline, as higher borrowing costs have strained public finances along with political pressures to retain higher spending levels.

While UK inflation remained sticky, limiting the depth and pace of the Bank of England’s easing cycle, growth also faded, and policy uncertainty around these trends weighed on the pound.

The British Pound Sterling (GBP/USD) rallied in the third quarter of 2024 with the fund posting its strongest quarterly gain since the fourth quarter of 2022.

The upward moves were mainly due to a falling U.S.

dollar though growing optimism on UK’s economy also provided support.

Improving retail sales growth and stubborn inflation fueled expectations that the Bank of England (BoE) would ease rates more gradually than other central banks, particularly the Fed, which kicked off its easing cycle in September.

The British Pound Sterling (GBP/USD) posted strong gains year-to-date through the third quarter of 2025, largely driven by sustained weakness in the U.S.

In the first quarter, the pound advanced steadily as investors reacted to shifting expectations around U.S.

monetary policy and growing concerns over the fiscal outlook in the U.S.

That trend continued into the second quarter of 2025, with the dollar facing additional pressure from unclear trade policies and deteriorating sentiment toward American assets.

Despite a 25 basis-point rate cut by the BoE during the second quarter, the pound continued to strengthen, reflecting that the primary driver of performance has been the broad-based decline in the U.S.

The British Pound Sterling (GBP/USD) ended the first half of 2024 flat with most of the moves driven by the US dollar.

The Fed’s higher-for-longer rhetoric and stickier-than-expected US inflation pushed out expectations for rate cuts.

US economic resilience also boosted demand for the dollar, pressuring the pair.

However, British inflation also held up better than expected, dimming rate cut bets for the Bank of England, and provided some support on the downside

This trend continued into the second quarter, with the dollar facing additional pressure from unclear trade policies and deteriorating sentiment toward American assets.

However, the dollar recovered a bit in the third quarter, erasing some of the earlier gains in the pound.

In the first quarter, while the greenback benefitted from positive economic data surprises and progress on trade agreements, headwinds from the first half of the year continued to blow – notably, the Fed returned to cutting rates in September and the USD debasement trade grew in popularity.

The British Pound Sterling (GBP/USD) ended the first three quarters of 2024 higher.

While the pair saw strong gains in the

third quarter of 2024, it fluctuated throughout the first half of the year, mainly on U.S.

dollar moves.

The Fed’s higher-for-longer

rhetoric and sticky U.S.

inflation pushed out expectations for rate cuts, boosting the dollar.

However, British inflation also held up

better than expected, dimming rate cut bets for the Bank of England, and provided some support on the downside.

In the third quarter

of 2024, a resilient UK economy and stubborn inflation kept a more hawkish tone on BoE easing expectations, while the Fed kicked off its easing cycle in September, which a large 0.50% cut.

Higher rates boost the appeal of a country’s currency, in this case, the

Additionally, the interest rate paid by the Depository has generally trended downward over the past year with the current interest rate of 2.66%, as set forth in the FXB Rate Chart above.

4 unchanged sentences

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 2. Management’s Discussion and Analysis