Company: SVIX
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-044385
Chunk: 88

Company: VS Trust
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 2
Chunk 88
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 are reflected in the benchmark level at which the transaction is entered into. The gross returns to be
exchanged are calculated with respect to the notional amount and the benchmark returns to which the swap is linked. Swaps are usually
closed out on a net basis, i.e., the two payment streams are netted out in a cash settlement on the payment date specified in the
agreement, with the parties receiving or paying, as the case may be, only the net amount of the two payments. Thus, while the notional
amount reflects a Fund’s total investment exposure under the swap (i.e., the entire face amount or principal of a swap),
the net amount is the Fund’s current obligations (or rights) under the swap. That is the amount to be paid or received under the
agreement based on the relative values of the positions held by each party to the agreement on any given termination date.

Swaps may also expose a Fund to liquidity risk.
Although a Fund may have the ability to terminate a swap at any time, doing so may subject the Fund to certain early termination charges.
In addition, there may not be a liquid market within which to dispose of an outstanding swap even if a permitted disposal might avoid
an early termination charge. Uncleared swaps generally are not assignable except by agreement between the parties to the swap, and generally
no party or purchaser has any obligation to permit such assignments.

Swaps involve, to varying degrees, elements of
market risk and exposure to loss in excess of the amount which would be reflected on a Fund’s Statement of Financial Condition.
In addition to market risk and other risks, the use of swaps also comes with counterparty credit risk — i.e., the inability
of a counterparty to a swap to perform its obligations. A Fund that invests in swaps bears the risk of loss of the net amount, if any,
expected to be received under a swap agreement in the event of the default or bankruptcy of a swap counterparty. A Fund enters or intends
to enter into swaps only with major, global financial institutions. However, there are no limitations on the percentage of its assets
a Fund may invest in swaps with a particular counterparty.

A Fund that invests in swaps may use various techniques
to minimize counterparty credit risk. A Fund that invests in swaps generally enters into arrangements with its counterparties whereby
both sides exchange collateral on a mark-to-market basis. In addition, the Fund may post “initial margin” or “independent
amount” to