Company: SVIX
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001013762-25-004207
Chunk: 316

Company: VS Trust
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1B
Chunk 316
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 trades
and the counterparties with which the Fund engages in transactions.

As noted, the CFTC rules may not apply to all
of the swap agreements and forward contracts entered into by the Funds. Investors, therefore, may not receive the protection of CFTC
regulation or the statutory scheme of the Commodity Exchange Act (the “CEA”) in connection with each Fund’s swap agreements
or forward contracts. The lack of regulation in these markets could expose investors to significant losses under certain circumstances,
including in the event of trading abuses or financial failure by participants.

Counterparty Credit Risk

The Funds will be subject to the credit risk of
the counterparties to the derivatives. In the case of cleared derivatives, the Funds will have credit risk to the clearing corporation
in a similar manner as 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.

F-38

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