Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

This information should be read in conjunction with the financial statements and notes included in Item 8 of Part II of this Report. The discussion and analysis which follows may contain trend analysis and other forward-looking statements. See "Cautionary Statement Concerning Forward-Looking Information" above.

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the Trust and the Sponsor undertake no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.

Overview/Introduction

The Invesco Galaxy Ethereum ETF (the "Trust") is a Delaware statutory trust that was formed on September 27, 2023. The Trust continuously issues Shares. The Trust operates pursuant to its Trust Agreement, dated as of June 21, 2024. The Shares began trading on the Exchange under the ticker symbol "QETH" on July 23, 2024. The Trust offers Shares only to Authorized Participants in one or more blocks of 5,000 Shares based on the quantity of ether attributable to each Share of the Trust.

Investment Objective

The investment objective of the Trust is for the Shares to reflect the performance of the spot price of ether as measured using the Lukka Prime Ethereum Reference Rate (the "Benchmark"), less the Trust's expenses and other liabilities. 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 ether.

Determination of Net Asset Value

The Administrator calculates, and the Sponsor publishes, the Trust's Net Asset Value ("NAV") once each business day. To calculate the NAV, the Administrator totals the current market value of ether in the Trust and any other assets, and subtracts any liabilities including accrued but unpaid expenses. The Trust's NAV is an amount denominated in U.S. dollars.

The Administrator also determines the NAV per Share, which equals the NAV of the Trust divided by the number of outstanding Shares. The NAV of the Trust and the NAV per Share are published by the Sponsor on each day that the Exchange is open for regular trading and are posted on the Trust's website, www.invesco.com/QETH.

Valuation of Ether

In seeking to achieve its investment objective, the Trust will hold ether. The Trust will value its Shares each Business Day as of 4:00 p.m. ET. The Trust applies FASB ASC Topic 820, Fair Value Measurement, in the valuation of ether held by the Trust and for financial statement purposes. The value of ether held by the Trust is determined based on the FMV price for ether, reflecting the execution price of ether on its principal market as determined each day by the Benchmark Provider. The FMV price for ether reflects the price that would be received for ether in a current sale, which assumes an orderly transaction between market participants on the measurement date of ether on its "principal market," generally, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. The Trust determines its principal market (or in the absence of a principal market the most advantageous market) on a periodic basis to determine which market is its principal market for the purpose of calculating fair value for the creation of quarterly and annual financial statements. Issuer-specific events, market trends, bid/asked quotes of brokers and information providers and other data may be reviewed in the course of making a good faith determination of a security's fair value. The Benchmark is designed to provide an estimated fair market value price for ether, based on the execution price of ether on its principal market. In this regard, the Benchmark Provider seeks to identify a "principal market" for ether each day by evaluating eligible ether trading platforms across a variety of different criteria, including the trading platforms' oversight and governance frameworks, microstructure efficiency, trading volume, data transparency and data integrity.

Liquidity and Capital Resources

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 will pay the Sponsor a unified fee of 0.25% per annum (the "Sponsor Fee") as compensation for services performed under the Trust Agreement. The Trust's only ordinary recurring expense is the Sponsor Fee.

The Sponsor Fee will be accrued daily and paid monthly in arrears in U.S. dollars, and will be calculated by the Administrator. The Administrator will calculate the Sponsor Fee on a daily basis by applying the 0.25% annualized rate to the Trust's total net assets. To cover the Sponsor Fee, and extraordinary expenses not assumed by the Sponsor, the Sponsor or its delegate will cause the Trust (or its delegate) to instruct the Execution Agent to convert ether held by the Trust into U.S. dollars. The NAV of the Trust and the number

of ether represented by a Share will decline each time the Trust accrues the Sponsor Fee or any Trust expenses not assumed by the Sponsor. The Trust is not responsible for paying any costs associated with the transfer of ether to or from the Trust in connection with paying the Sponsor Fee or in connection with creation and redemption transactions.

Except as noted below, the Sponsor has agreed to pay all of the Trust's ordinary expenses out of the Sponsor's unified fee, including, but not limited to, the Trustee's fees, the fees of BNYM (for its services as the Administrator, Transfer Agent, and Cash Custodian), the fees of the Ethereum Custodian, the fees of the Execution Agent, Exchange listing fees, Securities and Exchange Commission ("SEC") registration fees, printing and mailing costs, legal costs and audit fees. The Sponsor's payment of such Trust expenses is not subject to a cap. The Sponsor also paid the costs of the Trust's organization.

The Trust may incur certain extraordinary expenses that are not assumed by the Sponsor. These include, but are not limited to, taxes and governmental charges, any applicable brokerage commissions, financing fees, Ethereum network fees and similar transaction fees, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the interests of Shareholders (including, for example, in connection with any fork of the Ethereum blockchain), any indemnification of the Sponsor, Cash Custodian, Ethereum Custodian, Administrator or other agents, service providers or counterparties of the Trust and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters.

The Trust from time to time will be required to sell ether in such quantities as necessary to permit payment of the Sponsor Fee and any Trust expenses and liabilities not assumed by the Sponsor. The Sponsor has engaged the Execution Agent to sell ether on the Trust's behalf in such circumstances. At the direction of the Trust, the Execution Agent will seek to sell ether at approximately the price at which it is valued by the Trust and in the smallest amounts required to permit such payments as they become due, with the intention of minimizing the Trust's holdings of assets other than ether. Accordingly, the amount of ether to be sold may vary from time to time depending on the level of the Trust's expenses and liabilities and the market price of ether.

The Trust has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Trust's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to Shareholders.

Cash Flows

A primary cash flow activity of the Trust is to raise capital from Authorized Participants through the issuance of Shares. This cash is used to invest in ether.

As of the date of this Report, each of ABN AMRO Clearing Chicago LLC, BNY Mellon Capital Markets, LLC, Citadel Securities LLC, Goldman Sachs & Co., Jane Street Capital LLC, Jefferies LLC, Macquarie Capital (USA) Inc. and Virtu Americas LLC has executed a Participant Agreement and are the only Authorized Participants.

Operating Activities

Net cash flow provided by (used in) operating activities was $(4.1) million and $(19.5) million for the year ended December 31, 2025 and the period June 17, 2024 to December 31, 2024, respectively. During the year ended December 31, 2025, $38.9 million was paid to purchase ether and $34.8 million was received from sales of ether for redemptions. During the period June 17, 2024 to December 31, 2024, $30.2 million was paid to purchase ether and $10.7 million was received from sales of ether for redemptions.

Financing Activities

The Trust's net cash flow provided by (used in) financing activities was $4.1 million and $19.5 million during the year ended December 31, 2025 and the period June 17, 2024 to December 31, 2024, respectively. This included $38.9 million and $30.3 million from Shares purchased by Authorized Participants and $34.8 million and $10.8 million from Shares redeemed by Authorized Participants during the year ended December 31, 2025 and the period June 17, 2024 to December 31, 2024, respectively.

Results of Operations

FOR THE YEAR ENDED DECEMBER 31, 2025 AND THE PERIOD JULY 23, 2024 TO DECEMBER 31, 2024

The following graph illustrates the percentage changes in (i) the market price of the Shares (as reflected by the line "Market"), (ii) the Trust's NAV (as reflected by the line "NAV"), and (iii) the closing levels of the Benchmark (as reflected by the line "Lukka Prime Ethereum Reference Rate (USD)"). There can be no assurances that the price of the Shares or the Trust's NAV will exceed the Benchmark levels.

No representation is being made that the Benchmark will or is likely to achieve closing levels consistent with or similar to those set forth herein.

COMPARISON OF MARKET, NAV AND LUKKA PRIME ETHEREUM REFERENCE RATE (USD)

FOR THE YEAR ENDED DECEMBER 31, 2025 AND FOR THE PERIOD JULY 23, 2024 TO DECEMBER 31, 2024

NEITHER THE PAST PERFORMANCE OF THE TRUST NOR THE PRIOR BENCHMARK LEVELS AND CHANGES,

POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE TRUST'S FUTURE PERFORMANCE.

NEITHER THE PAST PERFORMANCE OF THE TRUST NOR THE PRIOR BENCHMARK LEVELS AND CHANGES,

POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE TRUST'S FUTURE PERFORMANCE.

Trust Share Price Performance

For the year ended December 31, 2025, the Exchange market value of each Share decreased from $33.39 per Share to $29.59 per Share. The Share price low and high for the year ended December 31, 2025 and related change from the Share price on December 31, 2024 was as follows: Shares traded at a low of $14.60 per Share (-56.27%) on April 8, 2025, and a high of $48.23 per Share (+44.44%) on August 22, 2025. Therefore, the total return for the Trust on a market value basis was -11.38%.

Ether ended 2025 with a full-year loss despite a strong mid-year recovery. The token suffered steep declines of more than 45% in the first quarter, driven by deteriorating macroeconomic conditions, a broad selloff across risk assets, and the ByBit hack, which further weakened crypto market sentiment. Momentum shifted meaningfully in the second and third quarters, as ether staged a strong rebound supported by growing institutional demand, renewed ETP inflows, and improving risk appetite following the resumption of Federal Reserve rate easing. Confidence in the Ethereum ecosystem also strengthened after the successful Pectra upgrade in the second quarter, which improved network efficiency and bolstered investor conviction in ether's long-term roadmap. On the policy front, the U.S. regulatory environment became a tailwind-especially in July-when passage of the GENIUS Act provided clarity and legitimacy for stablecoins, a category for which Ethereum remains the leading blockchain platform. However, ether was unable to sustain these gains into year-end. The fourth quarter brought a sharp reversal as a broad risk-off environment took hold. Hawkish Federal Reserve messaging ahead of the December rate cut, the U.S. government shutdown, widespread forced liquidations of leveraged positions, and a series of technical breakdowns at key support levels all contributed to renewed selling pressure. By November, market sentiment had deteriorated significantly, leaving ether unable to move back into positive territory into the close of 2025.

For the period July 23, 2024 (commencement of trading) to December 31, 2024, the Exchange market value of each Share decreased from $34.60 per Share to $33.39 per Share. The Share price low and high for the period ended December 31, 2024 and related change from the Share price on July 23, 2024 was as follows: Shares traded at a low of $22.21 per Share (-35.82%) on September 6, 2024, and a high of $40.56 per Share (+17.21%) on December 6, 2024. The total return for the Trust on a market value basis was -3.50%.

For the period July 23, 2024, through December 31, 2024, ether was initially pressured by broader risk aversion and generally lackluster ETP demand. The U.S. equity market selloff to end July, reignited hard landing concerns in the U.S., the Chinese economic overhang, and rising geopolitical tensions in the Middle East all played a role. However, the start of the Federal Reserve's interest rate easing cycle in September was a positive performance catalyst. Another influencing factor was expectations for a second Trump term, especially prior to Vice President Harris joining the race in August, as he was viewed as more pro-crypto. However, ether made a strong comeback in the fourth quarter following President Trump's re-election as President of the United States. In addition to saying that he would be a "crypto president", he also touted major plans for the crypto industry that, if implemented, could lead to significant regulatory progress, increased institutional adoption, and formal legitimization of the asset class in traditional finance, all of which would support prices. For ether specifically, the prospect of a crypto-friendly stance in the new administration sparked optimism that more innovation and capital could return to the United States.

Trust Share Net Asset Performance

For the year ended December 31, 2025, the NAV of each Share decreased from $33.37 per Share to $29.61 per Share. Falling price for ether during the year ended December 31, 2025 contributed to an overall 11.03% decrease in the level of the Benchmark. Therefore, the total return for the Trust on a NAV basis was -11.27%.

Net income (loss) for the year ended December 31, 2025 was $(1.8) million, primarily resulting from net realized gain (loss) of $(1.4) million, net change in unrealized gain (loss) of $(0.3) million and net operating expenses of $0.1 million.

For the period July 23, 2024 (commencement of trading) to December 31, 2024, the NAV of each Share decreased from $34.60 per Share to $33.37 per Share. Falling price for ether during the period ended December 31, 2024 contributed to an overall 3.45% decrease in the level of the Benchmark. The total return for the Trust on a NAV basis was -3.55%.

Net income (loss) for the period ended December 31, 2024 was $4.1 million, primarily resulting from net realized gain (loss) of $0.4 million and net change in unrealized gain (loss) of $3.7 million.

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.

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.

Please refer to Item 8 of Part II Note 2 - Summary of Significant Accounting Policiesto the financial statements for further discussion of the Trust's accounting policies.