Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis was prepared to supplement information contained in the accompanying financial statements and is intended to explain certain items regarding the Trust's financial condition as of December 31, 2025, and its results of operations for the fiscal years ended December 31, 2025 and December 31, 2024. It should be read in conjunction with the audited financial statements and related notes thereto contained in this report.

Cautionary Statement Regarding Forward-Looking Information

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "expect," "intend," "plan," "believe," "seek," "outlook" and "estimate" and other similar words. Forward-looking statements are based upon our current expectations and beliefs concerning future developments and their potential effects on us. Such forward-looking statements are not guarantees of future performance. Various factors may cause our actual results to differ materially from those expressed in our forward-looking statements. These factors include fluctuations in the price of the British Pound Sterling, as the value of the Shares relates directly to the value of the British Pounds Sterling held by the Trust and price fluctuations could materially adversely affect an investment in the Shares. Readers are urged to review the "Risk Factors" section in this report for a description of other risks and uncertainties that may affect an investment in the Shares.

Neither the Sponsor nor any other person assumes responsibility for the accuracy or completeness of forward-looking statements contained in this report. The forward-looking statements are made as of the date of this report, and will not be revised or updated to reflect actual results or changes in the Sponsor's expectations or predictions.

Movements in the Price of the British Pound Sterling

The investment objective of the Trust is for the Shares to reflect the price in USD of the British Pound Sterling plus accrued interest, if any, less the expenses of the Trust's operations. The Shares are intended to provide institutional and retail investors with a simple, cost-effective means of gaining investment benefits similar to those of holding British Pounds Sterling. Each outstanding Share represents a proportional interest in the British Pounds Sterling held by the Trust. The following chart provides recent trends on the price of the British Pound Sterling. The chart illustrates movements in the price of the British Pound Sterling in USD and is based on the Closing Spot Rate:

NAV per Share; Valuation of the British Pound Sterling

The following chart illustrates the movement in the price of the Shares based on (1) NAV per Share, (2) the "bid" and "ask" midpoint offered on NYSE Arca and (3) the Closing Spot Rate, expressed as a multiple of 100 British Pounds Sterling:

Liquidity and Capital Resources

The Trust does not have any material cash requirements as of the end of the latest fiscal period. The Sponsor is not aware of any known trends, demands, commitments, events or uncertainties that will result in, or are reasonably likely to result in, material changes to the Trust's liquidity and capital resources needs. The Trust's Depository, JPMorgan Chase Bank, N.A., London Branch, primarily maintains two deposit accounts for the Trust, a primary deposit account that may earn interest and a secondary deposit account that does not earn interest. Interest on the primary deposit account, if any, accrues daily and is paid monthly. The interest rate

in effect as of December 31, 2025 was an annual nominal rate of 2.46%. The following chart provides the daily rate paid by the Depository since December 31, 2020:

In exchange for a fee, the Sponsor bears 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 fee. Each month the Depository deposits into the secondary deposit account accrued but unpaid interest, if any, and the Trustee withdraws British Pounds Sterling from the secondary deposit account to pay the accrued Sponsor's fee for the previous month plus other Trust expenses, if any. When the interest deposited, if any, exceeds the sum of the Sponsor's fee for the prior month plus other Trust expenses, if any, the Trustee converts the excess into USD at the prevailing market rate and distributes the USD as promptly as practicable to Shareholders on a pro-rata basis (in accordance with the number of Shares that they own). Distributions paid during the current reporting period follow (annualized yield reflects the estimated annual yield an investor would receive if a monthly distribution stayed the same for the entire year going forward, and is calculated by annualizing the monthly distribution and dividing by the Trust NAV for the dates listed below):

Results of Operations

During the years ended December 31, 2025 and 2024, the Trust's net comprehensive income (loss) was, in part, impacted by market volatility resulting from global tariff gyrations, mounting U.S. economic uncertainty for 2025, evolving expectations around the Federal Reserve (the "Fed") monetary policy and heightened geopolitical concerns, some of which are considered to be unusual or infrequent events. Although the full and direct impact of these conditions on the Trust's net comprehensive income (loss) during the years ended December 31, 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) delivered strong gains in 2025, supported primarily by sustained U.S. dollar weakness. In the first quarter, the pound climbed steadily as shifting expectations around U.S. monetary policy and growing concerns over the U.S. fiscal outlook weighed on the dollar. This momentum extended into the second quarter, with unclear trade policy direction and deteriorating sentiment toward U.S. assets adding further pressure. The dollar regained some ground in the third quarter, paring earlier gains in the pound. While the greenback was buoyed by positive economic data surprises and progress on trade agreements, the broader headwinds that had defined the first half of the year persisted-most notably the Federal Reserve's return to rate cuts in September and the growing popularity of the USD debasement trade. In the fourth quarter, dollar movements were more muted, as the market had largely priced in the Fed's continued rate cuts in October and December.

The British Pound Sterling (GBP/USD) ended 2024 only slightly negative, largely due to sharp losses in the fourth quarter. While the pair saw strong gains in the third quarter, 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, a resilient UK economy and stubborn inflation kept a more hawkish tone on the Bank of England easing expectations, while the Fed kicked-off its easing cycle in September, with a large 0.50% cut. Higher rates boost the appeal of a country's currency, in this case, the sterling. However, a soaring greenback to end the year, driven by President Trump's victory, erased all earlier gains. Many of his campaigned policies were expected to raise inflation risk, potentially leading to higher rates in 2025. In addition, tariffs generally weigh on foreign currencies, further boosting the USD.

Additionally, the interest rate paid by the Depository has generally trended downward over the past year to the
current interest rate of 2.46%, as set forth in the FXB Rate Chart above. As long as the Sponsor's fee and the interest expense on currency deposits, if any, exceed interest income, the Trust will incur a net comprehensive loss.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Sponsor's management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period covered by this report.

In addition to the description below, please refer to Note 3 to the financial statements for further discussion of our accounting policies.

The functional currency of the Trust is the British Pound Sterling in accordance with ASC 830, Foreign Currency Translation.