iShares Ethereum Trust ETF Annual Report - Your Year in Review

This report provides a clear, concise overview of the iShares Ethereum Trust ETF's performance over the past year. We will explore how the Trust operates, analyze its financial growth, and discuss key factors that could influence its future. Our goal is to deliver essential insights in plain language, helping you understand your investment.

1. Business Overview: What is the Trust and How Did It Perform This Year?

The iShares Ethereum Trust ETF (referred to as "the Trust") offers investors a straightforward way to gain exposure to Ethereum (ether) without the complexities of directly owning the cryptocurrency. BlackRock, a global investment leader, manages this specialized fund, which securely holds ether on your behalf. When you purchase a share of the ETF, you acquire a proportional stake in the ether held by the Trust. Its primary objective is to mirror ether's price movements, providing direct exposure to the cryptocurrency's performance.

The period from December 31, 2024, to December 31, 2025, marked a year of significant growth for the Trust:

• Total Value (Net Asset Value - NAV): The Trust's total assets dramatically increased from approximately $3.57 billion at the end of 2024 to a remarkable $10.30 billion by the close of 2025. This represents an almost threefold increase in just one year.
• Investor Participation: Investor interest and inflows drove a substantial increase in the number of shares available, growing from about 141.48 million shares to 458.72 million shares during the same period.
• Ether Holdings: The Trust's ether holdings, valued at market price, significantly increased, reflecting both new investments and ether's rising value.
• Total Return for 2025: The massive growth in NAV strongly indicates a very positive return for the year. This growth primarily stemmed from ether's price appreciation and substantial investor inflows. For context, the Trust's initial partial period return (May 21, 2024, to December 31, 2024) was 0.96%.

This impressive growth highlights a successful year for the Trust, driven by a robust ether market and strong investor confidence.

2. Financial Performance and Health

Unlike traditional companies that generate revenue from sales, an ETF like the iShares Ethereum Trust measures its financial health by its asset growth and how effectively it tracks its underlying asset.

2.1. Trust's Own Financial Results (Income and Expenses): The Trust's financial statements primarily reflect its operational costs and the fees it earns. Its main revenue source is the management fee, which it charges to shareholders and deducts directly from the Trust's assets. This fee constitutes the Trust's primary income.

The Trust's expenses typically include custody fees for securing ether, administrative fees, professional fees (legal, audit), and other operational costs.

The Trust reported $161.3 million in realized gains from in-kind redemptions in 2025. These gains, while significant, represent an accounting outcome tied to the creation and redemption process, rather than traditional operating profit. Such gains (or losses) occur when the Trust disposes of ether to fulfill redemption requests, and the market value of that ether differs from its original cost. For partial periods in 2024, the Trust also experienced significant realized gains and losses, underscoring ether's volatile nature and the continuous rebalancing through these creation/redemption activities.

2.2. Trust's Financial Position (Balance Sheet Highlights): As of December 31, 2025, the Trust's primary assets included its substantial ether holdings, valued at $10.30 billion, and a smaller amount of cash held by its custodian. Its liabilities typically remain minimal, mainly consisting of accrued expenses (such as management fees and operational costs) awaiting payment. The Trust's net assets, which represent the total value attributable to shareholders, directly correspond to its Net Asset Value (NAV).

2.3. Liquidity and Capital Resources: The Trust maintains its liquidity and ensures its share price closely tracks ether's value through a unique "creation and redemption" process. Large financial firms, known as "Authorized Participants" (APs), can create new ETF shares by depositing ether with the Trust or redeem shares for ether. This mechanism helps keep the ETF's market price aligned with its Net Asset Value (NAV).

2.4. Custody and Security: Specialized custodians, including Coinbase Custody Trust Company and Anchorage Digital Bank, securely hold the Trust's ether assets. The Bank of New York Mellon manages cash holdings. This multi-custodian approach aims to enhance security.

2.5. No Debt: Typical for this type of investment vehicle, the Trust carries no debt, further contributing to its sound financial structure.

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

This section presents management's perspective on the Trust's financial condition and operational results for the year ended December 31, 2025.

Results of Operations: The Trust experienced significant growth in 2025, primarily driven by ether's market price appreciation and substantial investor inflows. The nearly threefold increase in Net Asset Value (NAV) from $3.57 billion to $10.30 billion reflects both the underlying asset's strong performance and robust demand for the Trust's shares. The rise in shares outstanding from 141.48 million to 458.72 million further highlights this investor interest.

The Trust's operational results directly align with its passive investment strategy, which aims to track ether's performance. Its primary revenue stream comes from the management fee, offset by various operating expenses, including custody, administrative, and professional fees. The Trust's overall financial health, as measured by its NAV, demonstrated exceptional growth.

The reported $161.3 million in realized gains from in-kind redemptions in 2025 underscores the active creation and redemption mechanism. These gains (or losses) result from ether's price volatility and the timing of redemptions relative to the Trust's cost basis for the redeemed ether.

Financial Condition and Liquidity: The Trust maintains a strong financial condition, characterized by substantial ether holdings and minimal liabilities. As a passively managed investment vehicle, it avoids speculative trading and carries no debt, which contributes to its stability.

The continuous creation and redemption mechanism with Authorized Participants primarily manages liquidity. This process ensures the Trust's share price remains closely aligned with its Net Asset Value (NAV) and offers an efficient way for investors to gain or exit ether exposure. The significant increase in shares outstanding and the volume of creation/redemption activities (evidenced by realized gains) indicate a highly liquid and active market for the Trust's shares. A reputable custodian holds cash to cover operational expenses.

Key Wins and Operational Highlights: The past year brought several significant achievements for the Trust, including massive asset growth and a successful launch and operation throughout its first full year. This established the Trust as a significant player in the ether investment landscape. BlackRock's Board of Directors and its Risk Committee demonstrated strong, ongoing oversight of the Trust's risk management, particularly concerning cybersecurity. Regular reports and comprehensive security reviews attest to their commitment to investor protection.

Key Trends and Uncertainties: The Trust's performance and financial condition are inherently linked to the highly volatile ether market and the broader digital asset ecosystem. Investor sentiment, technological developments within the Ethereum network, and macroeconomic factors significantly influence ether's price.

A paramount uncertainty remains the evolving regulatory landscape for digital assets. Adverse legislative or regulatory developments in key jurisdictions could materially impact ether's value, the Trust's operations, or its ability to continue offering shares. Management continues to monitor these developments closely, as highlighted by the robust oversight from BlackRock's Board and Risk Committee, particularly concerning cybersecurity and compliance. The Trust's successful launch and operation in its first full year, coupled with massive asset growth, demonstrate its ability to navigate these initial market conditions.

4. Navigating the Risks

Understanding potential downsides is crucial. Here are the main risks that could impact your investment in the iShares Ethereum Trust ETF:

• Extreme Price Volatility of Ether: Ether's price is highly unpredictable and can experience dramatic swings, potentially leading to significant losses, including a total loss of your investment.
• Loss or Theft of Ether: If the Trust's private keys (digital access codes) are lost, stolen, or compromised, the ether they control could be permanently lost, as transactions are irreversible.
• New and Evolving Market: The digital asset market remains nascent and constantly changes. Your investment's value depends on ether's continued acceptance and utility.
• Ethereum Network Changes: Updates or changes to the Ethereum network itself, if not widely supported, could negatively affect ether's value.
• Tracking Error: The ETF's share price might not always perfectly match the underlying ether price, especially if the creation/redemption process faces difficulties or if Authorized Participants withdraw.
• Custody Risks: The Trust relies on third-party custodians to secure its ether. Security breaches or failures at these custodians could result in asset loss.
• Irreversible Transactions: Ether transactions are generally irreversible. Errors or theft mean lost funds are typically unrecoverable.
• Regulatory Uncertainty: This is a major factor. Governments and regulators are still developing frameworks for digital assets. New laws or rules could ban, restrict, or impose onerous conditions on ether, its use, or the Trust's operations, potentially impacting its value, liquidity, or even leading to its closure. This includes potential new taxes or registration requirements.

5. Future Outlook, Competitive Position, and Governance

5.1. Competitive Positioning: While the report does not directly compare the Trust to other products, its status as a BlackRock offering provides significant advantages. BlackRock's reputation, vast resources, and operational scale typically instill investor confidence and can lead to competitive fees and efficient market operations.

5.2. Future Outlook: The Trust's future is intrinsically linked to the broader Ethereum ecosystem, the evolving digital asset market, and the clarity of the regulatory environment. As a passive investment vehicle, its performance will largely mirror that of ether. The report includes a standard "Cautionary Note Regarding Forward-Looking Statements," reminding investors that future results can differ from expectations due to market, regulatory, and technological changes.

5.3. Regulatory Trends: The digital asset market faces ongoing "regulatory uncertainty" in the U.S. Any adverse legislative or regulatory developments could significantly harm the value of ether or the Trust's shares. This remains a critical trend to monitor.

5.4. Leadership and Governance: The Trust updated its governing document, the "Third Amended and Restated Trust Agreement," on July 8, 2025, a standard process for legal and operational clarity. BlackRock's Board and Risk Committee continue to provide robust oversight, particularly in cybersecurity, ensuring an ongoing commitment to protecting the Trust's assets.

This summary aims to give you a clear picture of the iShares Ethereum Trust ETF's performance and prospects, empowering you to make informed investment decisions.