Company: SVIX
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001213900-25-109885
Chunk: 66

Company: VS Trust
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 66
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party. 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 counterparties in swaps. Such collateral serves as protection for the counterparty in the event of a failure by the Fund
and is in addition to any mark-to-market collateral that (i.e., the Fund may post initial margin to the counterparty even where
the counterparty would owe money to the Fund if the swap were to be terminated). The amount of initial margin posted by the Fund may vary
depending on the risk profile of the swap. The collateral, whether for mark-to-market or for initial margin, generally consists of cash
and/or securities.

Collateral posted by a Fund to a counterparty in
connection with uncleared derivatives transactions is generally held for the benefit of the counterparty in a segregated tri-party account
at a third-party custodian to protect the counterparty against non-payment by the Fund. In the event of a default by a Fund where the
counterparty is owed money in the uncleared swap transaction, such counterparty will seek withdrawal of this collateral from the segregated
account.

Collateral posted by the counterparty
to a Fund is typically held for the benefit of the Fund in a segregated tri-party account at a third-party custodian. In the event of
a default by the counterparty where the Fund is owed money in the uncleared swap transaction, the Fund will seek withdrawal of this collateral
from the segregated account. The Fund may incur certain costs exercising its right with respect to the collateral.

Notwithstanding the use of collateral arrangements,
to the extent any collateral provided to a Fund is insufficient or there are delays in accessing the collateral, a Fund will be exposed
to counterparty risk as described above, including possible delays in recovering amounts as a result of bankruptcy proceedings.

-7-

Off-Balance Sheet Arrangements and Contractual Obligations

As of September 30, 2025, the Funds have not used,
nor do they expect to use in the future, special purpose entities to facilitate off-balance sheet financing arrangements and have