COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE TRUST

Previous wording

For the period December 1, 2025 to February 28, 2026, no Shares were issued in exchange for EUAs and no Shares were redeemed in exchange for EUAs. The Trust’s NAV per Share began the period at $19.20 and ended the period at $16.21.

Current wording

For the period March 1, 2026 to May 31, 2026, no Shares were issued in exchange for EUAs and no Shares were redeemed in exchange for EUAs. The Trust’s NAV per Share began the period at $16.21 and ended the period at $18.40.

Previous wording

The change in net assets from operations for the period December 1, 2025 to February 28, 2026 was $(2.99) per share, which was due to (i) payment of the Sponsor’s Management Fee of $3,720, (ii) interest income earned on short-term investments of $171, and (iii) a net change in unrealized depreciation on investment in EUAs of ($295,252). Other than the Sponsor’s Management Fee the Trust had no expenses during the period December 1, 2025 to February 28, 2026.

Current wording

The change in net assets from operations for the period December 1, 2025 to May 31, 2026 was $(0.80) per share, which was due to (i) payment of the Sponsor’s Management Fee of $7,031, (ii) interest income earned on short-term investments of $308, and (iii) a net change in unrealized depreciation on investment in EUAs of ($73,331). Other than the Sponsor’s Management Fee the Trust had no expenses during the period December 1, 2025 to May 31, 2026.

Previous wording

During the period of December 1, 2025 through February 28, 2026 the market for European Union Allowances (EUA) traded in a range of $78.69 (February 16, 2026) to $104.60 (January 15, 2026) with the closing price on February 27, 2026 of $79.96. There were a variety of influences on the price in the EUA market. Some of those factors influencing EUA prices during the period were: (i) the ongoing tightening of allowance supply driven by the emissions cap reduction schedule and Market Stability Reserve withdrawals; (ii) record speculative long positioning by investment funds, which amplified price swings in both directions; (iii) the relative mildness of winter temperatures across Northern Europe through January 2026, which moderated near-term power demand and reduced compliance buying pressure; (iv) ongoing uncertainty regarding economic conditions and industrial activity within the EU; (v) macroeconomic and currency dynamics resulting from trade policy discussions between the United States and the European Union; (vi) continued evolution of the Ukraine-Russia conflict and its impact on natural gas supply and pricing; and (vii) the emergence of politically-driven regulatory risk surrounding the upcoming ETS revision, which intensified materially following the Antwerp Summit. Going forward, the Sponsor expects the primary drivers of EUA price levels to continue to be: (i) overall weather patterns and their impact on European power demand; (ii) aggregate EU industrial activity; (iii) the outcome of the EU ETS legislative revision process, expected to be formally initiated in Q3 2026; (iv) the ongoing Ukraine-Russia conflict and its effect on energy prices and EU industrial cost structures; and (v) the continued pace of institutional investor positioning in EUAs and the extent to which speculative long positions are maintained, reduced, or reversed in response to political developments. It should be noted In mid-January 2026, following public commentary suggesting possible structural modifications or adjustments to the EU ETS framework, EUA prices experienced significant short-term fluctuations. On January 15, 2026, EUAs traded at an intraday high of approximately $107.57 per EUA, and by February 16, 2026, had declined to an intraday low of approximately $78.49 per EUA, representing a price swing of approximately 27% within a one-month period. Such movements reflect heightened sensitivity of the EUA markets to regulatory signaling and policy uncertainty. Market participants are currently focused on the outcome of the EU’s regularly scheduled comprehensive review of the EU ETS framework, which is expected to conclude in the third quarter of 2026. Until greater clarity is provided regarding the scope and timing of any potential amendments to the program, we expect elevated price volatility in EUAs to persist. Continued uncertainty surrounding the EU ETS framework may impact trading volumes, pricing stability, and market liquidity.

Current wording

During the period of March 1, 2026 through May 31, 2026 the market for European Union Allowances (EUA) traded in a range of $72.34 (March 19, 2026) to $92.75 (May 29, 2026) with the closing price on May 29, 2026 of $92.75. There were a variety of influences on the price in the EUA market. Some of those factors influencing EUA prices during the period were: (i) the ongoing tightening of allowance supply driven by the emissions cap reduction schedule and Market Stability Reserve withdrawals; (ii) record speculative long positioning by investment funds, which amplified price swings in both directions; (iii) the relative mildness of winter and spring temperatures across Northern Europe, which moderated near-term power demand and reduced compliance buying pressure; (iv) ongoing uncertainty regarding economic conditions and industrial activity within the EU; (v) macroeconomic and currency dynamics resulting from trade policy discussions between the United States and the European Union; (vi) continued evolution of the Ukraine-Russia conflict and its impact on natural gas supply and pricing with the additional impact of hostilities in the Middle East compounding these pressures; and (vii) the ongoing implications of politically-driven regulatory risk surrounding the upcoming ETS revision, which intensified materially following the Antwerp Summit. Going forward, the Sponsor expects the primary drivers of EUA price levels to continue to be: (i) overall weather patterns and their impact on European power demand; (ii) aggregate EU industrial activity; (iii) the outcome of the EU ETS legislative revision process, expected to take place during Q3 2026; (iv) the ongoing Ukraine-Russia conflict and its effect on energy prices and EU industrial cost structures; (v) the continued pace of institutional investor positioning in EUAs and the extent to which speculative long positions are maintained, reduced, or reversed in response to political developments; and (vi) the length of the Middle East conflict and the overall supply of oil. Following ongoing public commentary suggesting possible structural modifications or adjustments to the EU ETS framework, EUA prices experienced significant fluctuations and now react swiftly to any headline indicating policy movements. Market participants are currently focused on the outcome of the EU’s regularly scheduled comprehensive review of the EU ETS framework, which is expected to conclude at the end of the third quarter of 2026. Until greater clarity is provided regarding the scope and timing of any potential amendments to the program, we expect elevated price volatility in EUAs to persist. Continued uncertainty surrounding the EU ETS framework may impact trading volumes, pricing stability, and market liquidity.

Previous wording

Generally speaking, for the first two months of the quarter the market price of the Shares tracked closely to the NAV per Share. On February 11, an industrial competitiveness conference was held in Antwerp where public comments were made about the future structure of the EU ETS. Following these comments, a period of uncertainty and increased volatility caused the market price to decouple from the NAV with the market price trading at a premium to the NAV. Management believes this is the result of the limited number of shares outstanding and the small public float. Over time, as more Shares are issued, we expect the frequency and magnitude of the trading premiums and discounts to NAV to decline.

Current wording

The ongoing volatility created by policy uncertainty contributed to a notable shift in how the Trust’s Shares traded relative to NAV over the period, moving from a premium to a discount. On February 11, 2026, an industrial competitiveness conference held in Antwerp prompted public comments regarding the future structure of the EU ETS, which contributed to a subsequent decline in EUA prices and, in turn, the Trust’s NAV. Because of the limited number of Shares outstanding and the small public float, the market price of the Shares adjusted to this decline only gradually. As a result, the Shares initially traded at a premium to NAV, as the market price lagged the decline in NAV, and then, as the market price caught up over the following weeks while NAV recovered, the same limited liquidity carried the Shares to a discount to NAV by the end of the period. Management believes these trading dynamics are primarily the result of the limited number of Shares outstanding and the small public float. Over time, as more Shares are issued, we expect the frequency and magnitude of the trading premiums and discounts to NAV to decline.

Previous wording

At February 28, 2026, the number of EUAs owned by the Trust and held at the Union Registry was 19,700, with a market value of $1,605,267 based on the Daily EUA Futures price determined by the ICE Endex on February 28, 2026.

Current wording

At May 31, 2026, the number of EUAs owned by the Trust and held at the Union Registry was 19,700, with a market value of $1,827,188 based on the Daily EUA Futures price determined by the ICE Endex on May 31, 2026.

Previous wording

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs. In exchange for a fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period covered by this report was the Sponsor’s Management Fee. The Trust intends to satisfy this obligation through the transfer of cash (generated, if necessary, through the sale of EUAs) in the necessary amount. At February 28, 2026, the Trust held $16,816 in cash & cash equivalents.

Current wording

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs. In exchange for a fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period covered by this report was the Sponsor’s Management Fee. The Trust intends to satisfy this obligation through the transfer of cash (generated, if necessary, through the sale of EUAs) in the necessary amount. At May 31, 2026, the Trust held $13,754 in cash & cash equivalents.

Previous wording

The parties cannot anticipate the amount of payments that will be required under these arrangements for future periods as the NAV and trading levels to meet investment objectives for the Trust will not be known until a future date.

Current wording

The parties cannot anticipate the amount of future payments that will be required under these arrangements for future periods as the NAV and trading levels to meet investment objectives for the Trust will not be known until a future date.