COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE TRUST

Previous wording

There is no assurance that cap and trade regimes will continue to exist. Cap and trade may not prove to be an effective method of reduction in GHG emissions. As a result or due to other factors, cap and trade regimes may be terminated or may not be renewed upon their expiration. The EU ETS is organized into a number of phases, each which a predetermined duration. Currently, the EU ETS is in Phase IV. There can be no assurance that the EU ETS will enter into a new phase as scheduled.

Current wording

There is no assurance that cap and trade regimes will continue to exist. Cap and trade may not prove to be an effective method of reduction in GHG emissions. As a result or due to other factors, cap and trade regimes may be terminated or may not be renewed upon their expiration. The EU ETS is organized into a number of phases, each of which has a predetermined duration. Currently, the EU ETS is in Phase IV. There can be no assurance that the EU ETS will enter into a new phase as scheduled.

Previous 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.

Current wording

For the period June 1, 2026 to August 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 $18.40 and ended the period at $18.94.

Previous wording

The change in net assets from operations for the period March 1, 2026 to May 31, 2026 was $2.19 per share, which was due to (i) payment of the Sponsor’s Management Fee of $3,311, (ii) interest income earned on short-term investments of $137, and (iii) a net change in unrealized appreciation on investment in EUAs of $221,921. Other than the Sponsor’s Management Fee the Trust had no expenses during the period March 1, 2026 to May 31, 2026.

Current wording

The change in net assets from operations for the period June 1, 2026 to August 31, 2026 was $0.54 per share, which was due to (i) payment of the Sponsor’s Management Fee of $3,623, (ii) interest income earned on short-term investments of $149, (iii) a net change in unrealized appreciation on investment in EUAs of $56,981, (iv) a net realized gain of $391 from EUAs sold to pay expenses, and (v) a net realized loss of $9 from foreign exchange transactions. Other than the Sponsor’s Management Fee the Trust had no expenses during the period June 1, 2026 to August 31, 2026.

Previous wording

For the period December 1, 2025 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 $19.20 and ended the period at $18.40.

Current wording

For the period December 1, 2025 to August 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 $19.20 and ended the period at $18.94.

Previous 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.

Current wording

The change in net assets from operations for the period December 1, 2025 to August 31, 2026 was $(0.26) per share, which was due to (i) payment of the Sponsor’s Management Fee of $10,654, (ii) interest income earned on short-term investments of $457, (iii) a net change in unrealized depreciation on investment in EUAs of $(16,350), (iv) a net realized gain of $391 from EUAs sold to pay expenses, and (v) a net realized loss of $9 from foreign exchange transactions. Other than the Sponsor’s Management Fee the Trust had no expenses during the period December 1, 2025 to August 31, 2026.

Previous 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.

Current wording

During the period of June 1, 2026 through August 31, 2026 the market for European Union Allowances (EUA) traded in a range of $86.67 (June 9, 2026) to $98.91 (July 22, 2026) with the closing price on August 31, 2026 of $95.70. 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) speculative positioning by investment funds, which amplified price swings in both directions; (iii) ongoing uncertainty regarding economic conditions and industrial activity within the EU; (iv) macroeconomic and currency dynamics resulting from trade policy discussions between the United States and the European Union; (v) 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 (vi) 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. On July 17, 2026 the European Commission published its proposal to reform the EU ETS for the post-2030 period. Although the proposal may change materially before targeted implementation of Q1 2027, the release served to calm the market and begin the repricing process. Until greater clarity is provided regarding the final scope and timing of any potential proposals 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

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.

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. Prior to the July 17 release, the shares traded at a significant discount to NAV; following the release that discount materially tightened. 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

In the period December 1, 2025 to May 31, 2026, no Shares were created, no Shares were redeemed, and no EUAs were sold to maintain a cash position in line with fund policy. For accounting purposes, CTWO reflects creations and redemptions on the date of receipt of a notification of a creation but does not issue Shares until the requisite amount of EUAs are received. Upon a redemption, CTWO delivers EUAs upon receipt of Shares.

Current wording

In the period December 1, 2025 to August 31, 2026, no Shares were created and no Shares were redeemed. During the period, the Trust sold 100 EUAs to pay Trust expenses, generating net proceeds of $8,894 and a net realized gain of $391. For accounting purposes, CTWO reflects creations and redemptions on the date of receipt of a notification of a creation but does not issue Shares until the requisite amount of EUAs are received. Upon a redemption, CTWO delivers EUAs upon receipt of Shares.

Previous 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.

Current wording

At August 31, 2026, the number of EUAs owned by the Trust and held at the Union Registry was 19,600, with a market value of $1,875,657 based on the Daily EUA Futures price determined by the ICE Endex on August 31, 2026.

Previous wording

The Administrator calculates the NAV of the Trust once each NYSE Arca trading day. The NAV for a particular day is released after the markets close, which is typically 4PM ET. The Administrator uses the settlement price for the Daily EUA Futures as established by the ICE Endex. The ICE Endex determines and releases this value daily shortly after the close of the Calculation Period, generally by at 5:15pm C.E.T. The Administrator also converts the value of Euro denominated assets into USD equivalent using published foreign currency exchange prices by an independent pricing vendor. Third parties supplying quotations or market data may include, without limitations, dealers in the relevant markets, end-users of the relevant product, information vendors, brokers and other sources of market information.

Current wording

The Administrator calculates the NAV of the Trust once each NYSE Arca trading day. The NAV for a particular day is released after the markets close, which is typically 4:00 pm E.T. The Administrator uses the settlement price for the Daily EUA Futures as established by the ICE Endex. The ICE Endex determines and releases this value daily shortly after the close of the Calculation Period, generally by at 5:15pm C.E.T. The Administrator also converts the value of Euro denominated assets into USD equivalent using published foreign currency exchange prices by an independent pricing vendor. Third parties supplying quotations or market data may include, without limitations, dealers in the relevant markets, end-users of the relevant product, information vendors, brokers and other sources of market information.

Previous wording

In addition, in order to provide updated information relating to the Trust for use by investors and market professionals, an updated indicative fund value (“IFV”) is made available through on-line information services throughout the core trading session hours of 9:30 am E.T. to 4:00p.m. E.T. on each trading day. The IFV is calculated by using the prior day’s closing NAV per share of the Trust as a base and updating that value throughout the trading day to reflect changes in the most recently reported mid-point of the bid/ask spread of the Daily EUA Future traded on the ICE Endex. The IFV disseminated during the NYSE Arca core trading session hours should not be viewed as an actual real time update of the NAV, because the NAV is calculated using a different manner and it is calculated only once at the end of each trading day based upon the relevant end of day values of the Trust’s investments.

Current wording

In addition, in order to provide updated information relating to the Trust for use by investors and market professionals, an updated indicative fund value (“IFV”) is made available through on-line information services throughout the core trading session hours of 9:30am E.T. to 4:00pm E.T. on each trading day. The IFV is calculated by using the prior day’s closing NAV per share of the Trust as a base and updating that value throughout the trading day to reflect changes in the most recently reported mid-point of the bid/ask spread of the Daily EUA Future traded on the ICE Endex. The IFV disseminated during the NYSE Arca core trading session hours should not be viewed as an actual real time update of the NAV, because the NAV is calculated using a different manner and it is calculated only once at the end of each trading day based upon the relevant end of day values of the Trust’s investments.

Previous wording

It should also be noted that although the IFV is disseminated throughout the core trading session, the customary trading hours for EUAs, the Trust’s primary asset, are 2am to 12 pm ET. This means that there is a gap in time at the end of each day during which the Trust’s shares are traded on the NYSE Arca, but real-time trading prices for EUAs are not available. During such gaps in time the IFV will be calculated based on the last reported mid-point of the bid-ask spread of the Daily EUA Future in the immediately preceding trading session until the day’s settlement price is reported, in which case the day’s settlement price will be used.

Current wording

It should also be noted that although the IFV is disseminated throughout the core trading session, the customary trading hours for EUAs, the Trust’s primary asset, are 2:00am to 12:00pm E.T. This means that there is a gap in time at the end of each day during which the Trust’s shares are traded on the NYSE Arca, but real-time trading prices for EUAs are not available. During such gaps in time the IFV will be calculated based on the last reported mid-point of the bid-ask spread of the Daily EUA Future in the immediately preceding trading session until the day’s settlement price is reported, in which case the day’s settlement price will be used.

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 May 31, 2026, the Trust held $13,754 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 August 31, 2026, the Trust held $19,250 in cash & cash equivalents.