Company: SVIX
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001013762-25-004207
Chunk: 846

Company: VS Trust
Filing Date: 2025-03-28
Form: 10-K
Item: Item 6
Chunk 846
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 Fund is exposed to credit risk that the counterparty to the contract will not meet its obligations.

The counterparty for futures contracts traded
on United States and most foreign futures exchanges as well as certain swaps is the clearing house associated with the particular exchange.
In general, clearing houses are backed by their corporate members who may be required to share in the financial burden resulting from
the nonperformance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearing house
is not backed by the clearing members (i.e., some foreign exchanges, which may become applicable in the future), it may be backed by
a consortium of banks or other financial institutions.

Certain swap and forward agreements are contracted
for directly with counterparties. There can be no assurance that any counterparty, clearing member or clearing house will meet its obligations
to a Fund.

21

Swap agreements do not generally involve the delivery
of underlying assets either at the outset of a transaction or upon settlement. Accordingly, if the counterparty to an OTC swap agreement
defaults, the Fund’s risk of loss typically consists of the net amount of payments that the Fund is contractually entitled to receive,
if any. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy,
there could be delays and costs associated with the recovery of collateral posted in segregated tri-party accounts at the Fund’s
custodian bank.

Forward agreements do not involve the delivery
of assets at the onset of a transaction, but may be settled physically in the underlying asset if such contracts are held to expiration,
particularly in the case of currency forwards. Thus, prior to settlement, if the counterparty to a forward contract defaults, a Fund’s
risk of loss will generally consist of the net amount of payments that the Fund is contractually entitled to receive, if any. However,
if physically settled forwards are held until expiration (presently, there is no plan to do this), at the time of settlement, a Fund
may be at risk for the full notional value of the forward contracts depending on the type of settlement procedures used.

The Sponsor attempts to minimize certain of these
market and credit risks by normally:

    ●
    executing and clearing trades with creditworthy counterparties,
    as determined by the Sponsor;

    ●
    limiting the outstanding amounts due from counterparties
    to the Funds;

    ●
    requiring that the counterparty posts collateral in
    amounts approximately equal to that