Company: SVIX
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001213900-25-109885
Chunk: 52

Company: VS Trust
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 52
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 the Funds would for futures contracts. In the case of OTC derivatives, the Funds will be subject to the credit
risk of the counterparty to the transaction - typically a single bank or financial institution. As a result, a Fund is subject to increased
credit risk with respect to the amount it expects to receive from counterparties to OTC derivatives entered into as part of that Fund’s
principal investment strategy. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties,
a Fund could suffer significant losses on these contracts and the value of an investor’s investment in a Fund may decline.

The Funds have sought to mitigate these risks by
generally requiring that the counterparties for each Fund agree to post collateral for the benefit of the Fund, marked to market daily,
subject to certain minimum thresholds. However, there are no limitations on the percentage of assets each Fund may invest in swap agreements
or forward contracts with a particular counterparty. To the extent any such collateral is insufficient or there are delays in accessing
the collateral, the Funds will be exposed to counterparty risk as described above, including possible delays in recovering amounts as
a result of bankruptcy proceedings. The Funds typically enter into transactions only with major global financial institutions.

OTC derivatives of the type that may be utilized
by the Funds are generally less liquid than futures contracts because they are not traded on an exchange, do not have uniform terms and
conditions, and are generally entered into based upon the creditworthiness of the parties and the availability of credit support, such
as collateral, and in general, are not transferable without the consent of the counterparty. These agreements contain various conditions,
events of default, termination events, covenants and representations. The triggering of certain events or the default on certain terms
of the agreement could allow a party to terminate a transaction under the agreement and request immediate payment in an amount equal to
the net positions owed to the party under the agreement. For example, if the level of the Fund’s benchmark has a dramatic intraday
move that would cause a material decline in the Fund’s NAV, the terms of the swap may permit the counterparty to immediately close
out the transaction with the Fund. In that event, it may not be possible for the Fund to enter into another swap or to invest in other
Financial Instruments necessary to achieve the desired exposure consistent with the Fund’s objective. This, in turn, may prevent
the Fund from achieving its investment objective, particularly if the level of the Fund’s