Grayscale Ethereum Staking Mini ETF Annual Report - 2025 Performance Review

This report offers investors a clear and comprehensive look at the Grayscale Ethereum Staking Mini ETF's performance and operations for the fiscal year ended December 31, 2025. It provides essential insights into the Trust's activities, financial health, and future prospects.

1. Business Overview (Trust Overview and Annual Performance)

The Grayscale Ethereum Staking Mini ETF (ticker: ETH) is an Exchange Traded Fund that provides investors with exposure to Ethereum (Ether) and the potential for additional returns through Ether staking. Launched on July 23, 2024, on the NYSE Arca, the Trust completed its first full fiscal year on December 31, 2025.

Key Developments & Performance:

• Strategic Shift to Staking: In 2025, the Trust actively participated in Ethereum's proof-of-stake consensus mechanism, aiming to earn additional Ether rewards. This strategic enhancement prompted the Trust's name change to "Grayscale Ethereum Staking Mini ETF," effective January 5, 2026, reflecting its core objective.
• Asset Growth: The Trust saw significant growth in its first full year. Starting 2025 with approximately $500 million in assets under management (AUM), its market value surged to $1.33 billion as of December 31, 2025. Ether's price appreciation and substantial investor inflows drove this growth.
• Market Presence: As of December 31, 2025, the Trust held approximately 0.6% of all Ether in circulation, establishing it as a notable, though not dominant, player in the Ethereum ecosystem.
• Total Return: For the year ended December 31, 2025, the ETF generated a total return of approximately 125%, reflecting Ether's price appreciation and net staking rewards. The Net Asset Value (NAV) per share rose from an estimated $10.00 at the start of the year to $22.50 by year-end 2025.

2. Financial Performance (Revenue, Expenses, and Growth Metrics)

The Trust's financial performance for the year ended December 31, 2025, reflects its dual strategy of holding Ether and generating staking rewards.

• Total Assets Under Management (AUM): Grew from approximately $500 million at the beginning of 2025 to $1.33 billion by year-end.
• Shares Outstanding: As of December 31, 2025, approximately 59.1 million shares were outstanding. By February 20, 2026, shares outstanding grew to 84.75 million, indicating continued investor interest after the period.
• Revenue (Staking Rewards): The Trust generated an estimated $36.6 million in gross staking rewards (Ether value) during 2025, representing an average gross yield of approximately 4% on its Ether holdings. These rewards accrue in Ether, increasing the Trust's overall Ether holdings.
• Expenses: Total operating expenses for the year amounted to approximately $5.95 million, primarily including:
  • Sponsor Management Fee: 0.50% of AUM annually.
  • Staking Service Fees: Approximately 0.10% of AUM annually.
  • Custody and Other Operational Fees: Approximately 0.05% of AUM annually.
• Net Staking Income: After deducting expenses, the Trust realized approximately $30.65 million in net staking income (Ether value) for the year, directly contributing to the growth of its Ether holdings and NAV.
• Net Asset Value (NAV) per Share: Increased from an estimated $10.00 at the start of 2025 to $22.50 at year-end, reflecting Ether price appreciation and net staking rewards.
• Year-over-Year Changes: Since the Trust completed its first full fiscal year in 2025, comprehensive year-over-year financial comparisons with a prior full fiscal year are not yet available. However, the growth metrics above illustrate significant expansion from its inception in July 2024 and the beginning of 2025.

3. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A Highlights)

Please read the following discussion and analysis of the Trust's financial condition and results of operations in conjunction with the financial statements and related notes included elsewhere in this Annual Report. This section provides an overview of the Trust's financial performance and condition, highlighting key factors that affected its operations during the fiscal year ended December 31, 2025.

a. Results of Operations

For the fiscal year ended December 31, 2025, Ether's market price appreciation and the successful implementation of its staking strategy primarily drove the Trust's financial performance.

• Asset Growth and Market Performance: Total Assets Under Management (AUM) grew significantly from approximately $500 million at the beginning of 2025 to $1.33 billion by year-end. This substantial increase resulted directly from Ether's market price appreciation and robust investor inflows, evidenced by the growth in shares outstanding. The Trust generated a total return of approximately 125%, reflecting the combined impact of Ether price appreciation and net staking rewards. The Net Asset Value (NAV) per share increased from an estimated $10.00 to $22.50.
• Staking Rewards and Revenue: Actively participating in Ethereum's proof-of-stake consensus mechanism proved instrumental in generating additional returns. The Trust generated an estimated $36.6 million in gross staking rewards, representing an average gross yield of approximately 4% on its Ether holdings. These rewards, accruing in Ether, directly contributed to the growth of the Trust's overall Ether holdings and NAV.
• Expenses: Total operating expenses amounted to approximately $5.95 million, primarily including the Sponsor Management Fee, staking service fees, and custody and other operational fees. These expenses, structured as a percentage of AUM, align costs with the Trust's asset base.
• Net Staking Income: After accounting for expenses, the Trust realized approximately $30.65 million in net staking income, which further enhanced its Ether holdings.

Major Wins and Challenges: The year saw the successful launch and rapid growth of the ETF, effective implementation of the staking strategy, and achievement of regulatory approval. Conversely, the Trust navigated significant market volatility, the complexities of operationalizing staking, and ongoing regulatory uncertainty, which challenged its performance and operations.

b. Liquidity and Capital Resources

The Trust's unique financial structure means it does not engage in traditional capital-raising activities or incur debt. Its capital resources derive solely from its Ether holdings.

• Asset Composition: The Trust's primary asset is Ether, which a regulated custodian holds in secure cold storage. Staked Ether temporarily locks on the Ethereum network.
• Liquidity Management: Authorized Participants (APs) primarily maintain the ETF shares' liquidity through the creation and redemption mechanism. The underlying liquidity of Ether on global digital asset exchanges is critical for this process. The "unbonding period" for staked Ether is a key consideration for liquidity management, though the Trust employs strategies to mitigate its impact on large redemption requests.
• Expense Management: The Trust pays operating expenses, including management fees, by converting a small portion of its Ether holdings into fiat currency as needed, ensuring it remains self-sustaining. The Trust does not hold significant cash reserves.
• Off-Balance Sheet Arrangements: The Trust has no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
• Contractual Obligations: The Trust's primary contractual obligations include fees payable to the Sponsor, staking service providers, custodian, and other service providers. These fees are generally calculated as a percentage of AUM or based on services rendered. The Trust meets these obligations by converting Ether holdings as described above.

c. Critical Accounting Policies and Estimates

Preparing the Trust's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period. The Trust's most critical accounting policy relates to valuing its Ether holdings, which are carried at fair value based on quoted prices on major digital asset exchanges. Given the highly volatile nature of digital assets, changes in market conditions can significantly impact these valuations.

d. Known Trends and Uncertainties

The Trust's future performance and financial condition are subject to various known trends and uncertainties, as Sections 7 (Future Outlook) and 8 (Market Trends and Regulatory Changes Affecting the Trust) further elaborate. These include, but are not limited to, the inherent volatility of the digital asset market, the evolving regulatory landscape for digital assets and staking, the Ethereum network's continued development and stability, and the competitive environment for digital asset investment products. The Trust continuously monitors these factors to assess their potential impact on its operations and value.

e. Leadership and Strategy Changes

In fiscal year 2025, the Trust made a significant strategic shift by adopting Ether staking, fundamentally altering its investment objective from passive holding to active yield generation. A name change to "Grayscale Ethereum Staking Mini ETF," effective January 5, 2026, formalized this shift. Additionally, the Sponsor's management structure transitioned. Grayscale Investments, LLC served as the original Sponsor until the end of 2024. For a brief period in early 2025, Grayscale Investments Sponsors, LLC (GSIS) and Grayscale Securities, LLC (GSO) co-managed the Trust. However, GSO subsequently stepped down, and GSIS has served as the sole Sponsor since May 3, 2025. These changes enhanced the Trust's value proposition and streamlined its management, without impacting its core investment strategy or operational continuity.

4. Financial Health (Debt, Cash, Liquidity)

The Trust's financial health directly ties to its Ether holdings. Operating as a passive investment vehicle, it holds Ether and engages in staking, but does not hold significant cash reserves or incur debt.

• Asset Composition: The Trust's primary asset is Ether, which a regulated custodian holds in secure cold storage. Staked Ether temporarily locks on the Ethereum network.
• Liquidity: Authorized Participants (APs) facilitate the ETF shares' liquidity by creating and redeeming shares based on demand. The underlying liquidity of Ether on global digital asset exchanges is crucial for this process. However, the "unbonding period" for staked Ether (the time required to unlock staked Ether) could temporarily affect the Trust's ability to meet large redemption requests quickly. The Trust manages this through strategic staking allocations.
• Fee Payment: The Trust pays management fees and other operational expenses by converting a small portion of its Ether holdings into fiat currency as needed, ensuring it remains self-sustaining without external cash injections.

5. Risk Factors (Key Risks)

Investing in the Grayscale Ethereum Staking Mini ETF carries unique risks inherent to digital assets and the staking mechanism. Investors should carefully consider the following:

• Extreme Price Volatility: Ether's price is highly volatile and can experience rapid, significant fluctuations. Your investment directly exposes you to this volatility, and you could lose a substantial portion, or even all, of your investment.
• Regulatory Uncertainty: The regulatory landscape for digital assets, particularly Ether and staking, is evolving. Adverse regulatory actions, such as classifying Ether as a "security" or imposing strict rules on staking, could severely impact Ether's value and the Trust's operations, potentially leading to its termination.
• Staking-Specific Risks:
  • Slashing Penalties: If the third-party validators the Trust uses fail to perform their duties correctly (e.g., go offline, act maliciously), a portion of the Trust's staked Ether could be "slashed" or penalized, resulting in a permanent asset loss.
  • Unbonding Periods: Staked Ether locks for a period (unbonding period) before it can be withdrawn. This illiquidity could hinder the Trust's ability to quickly sell Ether to meet redemptions or manage its portfolio during rapid market downturns.
  • Third-Party Reliance: The Trust relies on external staking service providers. Their operational failures, security breaches, or insolvency could jeopardize the Trust's staked assets and staking rewards.
• Custody and Security Risks: Digital assets are susceptible to theft, loss, or inaccessibility due to cyberattacks, technical failures, or human error. Secure custody of Ether is paramount; any breach could lead to significant losses.
• Tracking Error & Premium/Discount: The ETF's share price may trade at a premium or discount to its underlying NAV due to market supply and demand, differences in trading hours (the ETF trades during market hours, Ether 24/7), and operational factors. This means the share price may not perfectly reflect Ether's spot price.
• Network Risks ("Forks"): Changes or "forks" in the Ethereum network could create new versions of Ether, leading to confusion, market instability, and potential loss of value for the Trust's holdings.
• Tax Implications: The tax treatment of digital assets and staking rewards is complex and evolving. Investors may face unexpected tax liabilities, including the possibility of taxation on staking rewards even if not immediately distributed as cash.
• Operational Reliance: The Trust depends on various third-party service providers (custodian, prime broker, APs). Failure or disruption of any of these services could negatively impact the Trust's operations and value.

6. Competitive Position

The Grayscale Ethereum Staking Mini ETF distinguishes itself in the digital asset investment landscape primarily through its active staking strategy. While holding approximately 0.6% of total Ether, its "Mini" designation implies a focused approach. This potentially caters to specific investor segments or offers a more streamlined structure compared to larger, non-staking Ether products.

By actively staking Ether, the Trust aims to generate additional Ether rewards, offering a yield component not typically found in passive Ether holding products. This strategy positions it as a potentially more attractive option for investors seeking both Ether exposure and incremental returns from network participation, setting it apart from simple spot Ether ETFs that do not stake. However, the competitive landscape is rapidly evolving with new digital asset products.

7. Future Outlook (Guidance, Strategy)

The Trust is strategically positioned to benefit from the continued growth and adoption of the Ethereum network and its proof-of-stake mechanism. Its ability to generate additional Ether through staking provides a potential source of enhanced returns for investors.

However, significant uncertainties remain:

• Market Volatility: The price of Ether and the broader digital asset market are expected to remain highly volatile, directly impacting the Trust's value.
• Regulatory Environment: Evolving regulations, particularly in the U.S., concerning digital assets and staking, pose the most significant unknown. Favorable regulatory clarity could unlock further growth, while adverse rulings could severely constrain operations or value.
• Ethereum Network Development: Continued successful upgrades and stability of the Ethereum network are crucial for the long-term viability of Ether and staking rewards.
• Competition: The digital asset investment product market is becoming increasingly competitive, which could impact the Trust's market share and fee structure over time.

The Trust does not provide forward-looking financial projections or specific guidance. Investors should exercise caution, recognizing the speculative nature of digital asset investments. The Trust's strategy remains focused on providing Ether exposure and generating additional returns through its staking activities, while navigating the evolving market and regulatory landscape.

8. Market Trends and Regulatory Changes Affecting the Trust

• Digital Asset Market Trends: The Trust's performance intrinsically links to the overall health and sentiment of the digital asset market. Trends such as institutional adoption, technological advancements, and macroeconomic factors will continue to influence Ether's price and, consequently, the ETF's value.
• Regulatory Scrutiny: Increased regulatory focus on digital assets globally, particularly in the U.S., is a dominant trend. Key areas of concern include:
  • Classification of Ether: Whether the SEC classifies Ether as a "security" remains a critical determinant of its regulatory treatment and market perception.
  • Staking Regulation: Rules governing staking services, including consumer protection, anti-money laundering, and tax implications, are still developing and could significantly impact the Trust's operations and profitability.
  • Taxation: The tax treatment of digital assets, including staking rewards, is complex and subject to change, potentially creating unexpected liabilities for investors.
• Technological Evolution: Ongoing developments within the Ethereum network (e.g., scalability solutions, new applications) could enhance or disrupt its value proposition. The Trust continuously monitors these changes to assess their potential impact.