Company: SVIX
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001013762-25-004207
Chunk: 1350

Company: VS Trust
Filing Date: 2025-03-28
Form: 10-K
Item: Item 9B
Chunk 1350
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. Because of this, it is unlikely that the Funds will be perfectly exposed (i.e., --1x, -2x, as
applicable) to its benchmark at the end of each day, and the likelihood of being materially under- or over-exposed is higher on days
when the benchmark levels are volatile near the close of the trading day.

Each Fund seeks to rebalance its portfolio on
a daily basis. The time and manner in which a Fund rebalances its portfolio may vary from day to day depending upon market conditions
and other circumstances at the discretion of the Sponsor. Unlike other funds that do not rebalance their portfolios as frequently, each
Fund may be subject to increased trading costs associated with daily portfolio rebalancing in order to maintain appropriate exposure
to the underlying benchmarks.

Counterparty Risk

Each Fund may use derivatives such as swap agreements
and forward contracts (collectively referred to herein as “derivatives”) in the manner described herein as a means to achieve
their respective investment objectives. The use of derivatives by a Fund exposes the Fund to counterparty risks.

Regulatory Treatment

Derivatives are generally traded in OTC markets
and have only recently become subject to comprehensive regulation in the United States. Cash-settled forwards are generally regulated
as “swaps”, whereas physically settled forwards are generally not subject to regulation (in the case of commodities other
than currencies) or subject to the federal securities laws (in the case of securities). Title VII of the Dodd-Frank Act (“Title
VII”) created a regulatory regime for derivatives, with the CFTC responsible for the regulation of swaps and the SEC responsible
for the regulation of “security-based swaps.” The SEC requirements have largely yet to be made effective, but the CFTC requirements
are largely in place. The CFTC requirements have included rules for some of the types of transactions in which the Funds will engage,
including mandatory clearing and exchange trading, reporting, and margin for OTC swaps. Title VII also created new categories of regulated
market participants, such as “swap dealers,” “security-based swap dealers,” “major swap participants,”
and “major security-based swap participants” who are, or will be, subject to significant new capital, registration, recordkeeping,
reporting, disclosure, business conduct and other regulatory requirements. The regulatory requirements under Title VII continue to be
developed and there may be further modifications that could materially and adversely impact the Funds, the markets in which a Fund trades
and the