1. ORGANIZATION

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”). 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. 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.

The Sponsor is the sponsor of the Trust. The Sponsor: (1) will select the Trust’s trustee, administrator, transfer agent, cash custodian, marketing agent and any other Trust service providers; (2) will negotiate various agreements and fees for the Trust; (3) will develop a marketing plan for the Trust on an ongoing basis and prepare marketing materials regarding the Shares; (4) will maintain the Trust’s web site; and (5) will perform such other services as the Sponsor believes that the Trust may require.

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

The 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.