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Item 2. Management’s Discussion and Analysis

2023-11-15 compared with 2023-08-14 · 324 added, 348 removed, 26 unchanged (96% of the section changed)

Management’s Discussion and Analysis of

Financial Condition and Results of Operations.

This information should be read in conjunction with

the financial statements and notes to the financial statements included with this Quarterly Report on Form 10-Q.

The discussion and analysis

that follows may contain statements that relate to future events or future performance.

In some cases, such forward-looking statements

can be identified by terminology such as “will,” “may,” “should,” “expect,” “plan,”

“anticipate,” “believe,” “estimate,” “predict,” “potential,” “intend,”

“project,” “seek” or the negative of these terms or other comparable terminology.

None of the Trust, the Sponsor,

the Trustee, or the Administrator assumes responsibility for the accuracy or completeness of any forward-looking statements.

expressly required by federal securities laws, none of the Trust, the Sponsor, the Trustee, or the Administrator is under a duty to update

any of the forward-looking statements to conform such statements to actual results or to a change in expectations or predictions.

Because forward-looking statements relate to the future,

they are subject to inherent uncertainties, risk and changes in circumstances that are difficult to predict and many of which are outside

of the Funds’ control.

The Funds’ forward-looking statements are not guarantees of future results and conditions and important

factors, risks and uncertainties in the markets for financial instruments that the Funds trade, in the markets for related physical commodities,

in the legal and regulatory regimes applicable to the Sponsor, the Funds, and the Funds’ service providers, and in the broader economy

may cause the Funds’ actual results to differ materially from those expressed in forward-looking statements.

VS Trust (the “Trust”) is a Delaware statutory

trust formed on October 24, 2019 and is currently organized into two separate series (each, a “Fund” and collectively, the

As of June 30, 2023, the following two series of the Trust have commenced investment operations:

-1x Short VIX Futures

ETF and 2x Long VIX Futures ETF.

Each of the Funds listed above issues common units of beneficial interest (“Shares”), which

represent units of fractional undivided beneficial interest in and ownership of only that Fund.

The Shares of each Fund are listed on

the Cboe BZX Exchange (“Cboe BZX”).

The Trust had no operations prior to March 28, 2022,

other than matters relating to its organization, the registration of each series under the Securities Act of 1933, as amended.

The Sponsor also serves as the Trust’s commodity

pool operator.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

information should be read in conjunction with the financial statements and notes to the financial statements included with this Quarterly

Report on Form 10-Q.

The discussion and analysis that follows may contain statements that relate to future events or future performance.

In some cases, such forward-looking statements can be identified by terminology such as “will,” “may,” “should,”

“expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,”

“potential,” “intend,” “project,” “seek” or the negative of these terms or other comparable

None of the Trust, the Sponsor, the Trustee, or the Administrator assumes responsibility for the accuracy or completeness

of any forward-looking statements.

Except as expressly required by federal securities laws, none of the Trust, the Sponsor, the Trustee,

or the Administrator is under a duty to update any of the forward-looking statements to conform such statements to actual results or

to a change in expectations or predictions.

forward-looking statements relate to the future, they are subject to inherent uncertainties, risk and changes in circumstances that are

difficult to predict and many of which are outside of the Funds’ control.

The Funds’ forward-looking statements are not guarantees

of future results and conditions and important factors, risks and uncertainties in the markets for financial instruments that the Funds

trade, in the markets for related physical commodities, in the legal and regulatory regimes applicable to the Sponsor, the Funds, and

the Funds’ service providers, and in the broader economy may cause the Funds’ actual results to differ materially from those

expressed in forward-looking statements.

Trust (the “Trust”) is a Delaware statutory trust formed on October 24, 2019 and is currently organized into two separate

series (each, a “Fund” and collectively, the “Funds”).

As of September 30, 2022, the following two series of

the Trust have commenced investment operations:

-1x Short VIX Futures ETF and 2x Long VIX Futures ETF.

Each of the Funds listed above

issues common units of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest

in and ownership of only that Fund.

The Shares of each Fund are listed on the Cboe BZX Exchange (“Cboe BZX”).

Trust had no operations prior to March 28, 2022, other than matters relating to its organization, the registration of each series under

the Securities Act of 1933, as amended.

Sponsor also serves as the Trust’s commodity pool operator.

Wilmington Trust Company serves as the Trustee of the Trust (the “Trustee”).

The Funds are commodity pools,

as defined under the Commodity Exchange Act (the “CEA”), and the applicable regulations of the Commodity Futures Trading Commission

(the “CFTC”) and are operated by the Sponsor, a commodity pool operator registered with the CFTC.

The Trust is not an investment

company registered under the Investment Company Act of 1940, as amended.

SVIX seeks daily investment results, before fees and

expenses, that correspond to the performance of the Short VIX Futures Index (the “Short Index”) for a single day, not for

any other period.

UVIX seeks daily investment results, before fees and expenses, that correspond to twice the performance of the Long

VIX Futures Index (the “Long Index”).

A “single day” is measured from the time a Fund calculates its net asset

value (“NAV”) to the time of the Fund’s next NAV calculation.

The NAV calculation time for a Fund typically is 4:00

The Funds are commodity pools, as defined under the Commodity Exchange Act (the “CEA”), and the applicable regulations of

the Commodity Futures Trading Commission (the “CFTC”) and are operated by the Sponsor, a commodity pool operator registered

with the CFTC.

The Trust is not an investment company registered under the Investment Company Act of 1940, as amended.

seeks daily investment results, before fees and expenses, that correspond to the performance of the Short VIX Futures Index (the

“Short Index”) for a single day, not for any other period.

UVIX seeks daily investment results, before fees and expenses,

that correspond to twice the performance of the Long VIX Futures Index (the “Long Index”).

A “single day”

is measured from the time a Fund calculates its net asset value (“NAV”) to the time of the Fund’s next NAV calculation.

The NAV calculation time for a Fund typically is 4:00 p.m.

(Eastern Time).

The Funds seek to achieve their investment objective

through the appropriate amount of exposure to the VIX futures contracts included in their respective index.

The Funds also have the ability

to engage in options transactions, swaps, forward contracts and other instruments in order to achieve their investment objective, in the

manner and to the extent described herein.

SVIX is not benchmarked to the inverse of, and UVIX is

not benchmarked to twice, the widely referenced VIX.

The Short Index and the inverse of the VIX are separate measurements and can be

expected to perform very differently.

The Long Index and twice the VIX also are separate measurements and can be expected to perform

very differently.

As such, SVIX can be expected to perform very differently from the inverse (-1x) of the performance of the VIX

over any period, and UVIX can be expected to perform very differently from twice (2x) of the performance of the VIX over any

Funds seek to achieve their investment objective through the appropriate amount of exposure to the VIX futures contracts included

in their respective index.

The Funds also have the ability to engage in options transactions, swaps, forward contracts and other instruments

in order to achieve their investment objective, in the manner and to the extent described herein.

is not benchmarked to the inverse of, and UVIX is not benchmarked to twice, the widely referenced VIX.

The Short Index and

the inverse of the VIX are separate measurements and can be expected to perform very differently.

The Long Index and twice the VIX

also are separate measurements and can be expected to perform very differently.

As such, SVIX can be expected to perform very differently

from the inverse (-1x) of the performance of the VIX over any period, and UVIX can be expected to perform very differently from

twice (2x) of the performance of the VIX over any period.

Funds continuously offer and redeem Shares in blocks of at least 10,000 Shares (each such block, a “Creation Unit”).

Authorized Participants (as defined herein) may purchase and redeem Shares from a Fund and then only in Creation Units.

Only Authorized Participants (as defined herein) may purchase and redeem Shares from a Fund and then only in Creation Units.

An Authorized

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Shares are offered on a continuous basis to Authorized Participants in Creation Units at NAV.

Authorized Participants may then offer to

the public, from time to time, Shares from any Creation Unit they create at a per-Share market price.

The form of Authorized Participant

Agreement and the related Authorized Participant Procedures Handbook set forth the terms and conditions under which an Authorized Participant

may purchase or redeem a Creation Unit.

Authorized Participants will not receive from a Fund, the Sponsor, or any of their affiliates,

any fee or other compensation in connection with their sale of Shares to the public.

An Authorized Participant may receive commissions

or fees from investors who purchase Shares through their commission or fee-based brokerage accounts.

The form of Authorized Participant Agreement and related

Authorized Participant Handbook set forth the terms and conditions under which an Authorized Participant may purchase or redeem a Creation

Authorized Participants do not receive from any Fund, the Sponsor, or any of their affiliates, any underwriting fees or compensation

in connection with their sale of Shares to the public.

Sponsor maintains a website at www.volatilityshares.com, through which monthly account statements and the Trust’s Quarterly

Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or

15(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), can be accessed free of charge, as soon as

reasonably practicable after such material is electronically filed with, or furnished to, the U.S.

Securities and Exchange

Commission (the “SEC”).

Additional information regarding the Trust may also be found on the SEC’s EDGAR database

at www.sec.gov.

Liquidity and Capital Resources

to collateralize derivatives positions in indices, commodities or currencies, a portion of the NAV of each Fund is held in cash and/or

Treasury securities, agency securities, or other high credit quality short term fixed-income or similar securities (such as shares

of money market funds, bank deposits, bank money market accounts, certain variable rate-demand notes and repurchase agreements collateralized

by government securities.

A portion of these investments may be posted as collateral in connection with swap agreements, futures, and/or

forward contracts.

Authorized Participants may then

offer to the public, from time to time, Shares from any Creation Unit they create at a per-Share market price.

The form of Authorized

Participant Agreement and the related Authorized Participant Procedures Handbook set forth the terms and conditions under which an Authorized

Participant may purchase or redeem a Creation Unit.

Authorized Participants will not receive from a Fund, the Sponsor, or any of their

affiliates, any fee or other compensation in connection with their sale of Shares to the public.

An Authorized Participant may receive

commissions or fees from investors who purchase Shares through their commission or fee-based brokerage accounts.

form of Authorized Participant Agreement and related Authorized Participant Handbook set forth the terms and conditions under which an

Authorized Participant may purchase or redeem a Creation Unit.

Authorized Participants do not receive from any Fund, the Sponsor, or

any of their affiliates, any underwriting fees or compensation in connection with their sale of Shares to the public.

The Sponsor maintains

a website at www.volatilityshares.com, through which monthly account statements and the Trust’s Quarterly Reports on Form 10-Q,

Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange

Act of 1934, as amended (the “1934 Act”), can be accessed free of charge, as soon as reasonably practicable after such material

is electronically filed with, or furnished to, the U.S.

Securities and Exchange Commission (the “SEC”).

Additional information

regarding the Trust may also be found on the SEC’s EDGAR database at www.sec.gov.

and Capital Resources

order to collateralize derivatives positions in indices, commodities or currencies, a portion of the NAV of each Fund is held in cash

Treasury securities, agency securities, or other high credit quality short term fixed-income or similar securities (such

as shares of money market funds, bank deposits, bank money market accounts, certain variable rate-demand notes and repurchase agreements

collateralized by government securities.

A portion of these investments may be posted as collateral in connection with swap agreements,

futures, and/or forward contracts.

The percentage that U.S.

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equity of each Fund varies from period to period as the market values of the underlying swaps, futures contracts and forward contracts

Interest Income for the three months ended June 30, 2023

and June 30, 2022 were as follows.

Three Months Ended

Income for the three months ended September 30, 2023 and September 30, 2022 were as follows:

September 30,

-1x Short VIX Futures ETF

2x Long VIX Futures ETF

Interest Income for the six months ended June 30, 2023 and

June 30, 2022 were as follows.

Six Months Ended

2x Long VIX Futures

Income for the nine months ended September 30, 2023 and September 30, 2022 were as follows:

September 30,

-1x Short VIX Futures ETF

2x Long VIX Futures ETF

A futures contract is a standardized contract traded on, or subject to the rules of, an exchange that calls for the

future delivery of a specified quantity and type of a particular underlying asset at a specified time and place or alternatively may call

for cash settlement.

Futures contracts are traded on a wide variety of underlying assets, including bonds, interest rates, agricultural

products, stock indexes, currencies, energy, metals, economic indicators and statistical measures.

The notional size and calendar term

futures contracts on a particular underlying asset are identical and are not subject to any negotiation, other than with respect to price

and the number of contracts traded between the buyer and seller.

A Fund generally deposits cash and/or securities with an FCM for its

open positions in futures contracts, which may, in turn, transfer such deposits to the clearinghouse to protect the clearing house against

non-payment by the Fund.

The clearing house becomes substituted for each counterparty to a futures contract, and, in effect, guarantees

In addition, the FCM may require a Fund to deposit collateral in excess of the clearing house’s margin requirements

for the FCM’s own protection.

Certain futures contracts, including stock index contracts, VIX futures contracts and certain commodity futures contracts settle in cash.

2x Long VIX Futures

Fund commenced operations on March 28, 2022.

futures contract is a standardized contract traded on, or subject to the rules of, an exchange that calls for the future delivery of

a specified quantity and type of a particular underlying asset at a specified time and place or alternatively may call for cash settlement.

Futures contracts are traded on a wide variety of underlying assets, including bonds, interest rates, agricultural products, stock indexes,

currencies, energy, metals, economic indicators and statistical measures.

The notional size and calendar term futures contracts on a

particular underlying asset are identical and are not subject to any negotiation, other than with respect to price and the number of

contracts traded between the buyer and seller.

A Fund generally deposits cash and/or securities with an FCM for its open positions in

futures contracts, which may, in turn, transfer such deposits to the clearinghouse to protect the clearing house against non-payment

The clearing house becomes substituted for each counterparty to a futures contract, and, in effect, guarantees performance.

In addition, the FCM may require a Fund to deposit collateral in excess of the clearing house’s margin requirements for the FCM’s

own protection.

futures contracts, including stock index contracts, VIX futures contracts and certain commodity futures contracts settle in cash.

The cash settlement amount reflects the difference between the contract purchase/sale price and the contract settlement price.

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after allowance for brokerage commissions and exchange fees, constitutes the profit or loss to the trader.

Futures contracts involve,

to varying degrees, elements of market risk and exposure to loss in excess of the amounts of variation margin, which are the amounts of

cash that a Fund agrees to pay to or receive from FCMs equal to the daily fluctuation in the value of a futures contract.

Additional risks

associated with the use of futures contracts are imperfect correlation between movements in the price of the futures contracts and the

level of the underlying benchmark and the possibility of an illiquid market for a futures contract.

With futures contracts, there is minimal

but some counterparty risk to a Fund since futures contracts are exchange traded and the exchange’s clearing house, as counterparty

to all exchange-traded futures contracts, effectively guarantees futures contracts against default.

Many futures exchanges and boards

of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day.

Once the daily limit has been

reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified

times during the trading day.

Futures contracts prices could move to the limit for several consecutive trading days with little or no

trading, thereby preventing prompt liquidation of futures positions and potentially subjecting a Fund to substantial losses.

is not possible or if a Fund determines not to close a futures position in anticipation of adverse price movements, the Fund may be required

to make daily cash payments of variation margin.

contracts involve, to varying degrees, elements of market risk and exposure to loss in excess of the amounts of variation margin, which

are the amounts of cash that a Fund agrees to pay to or receive from FCMs equal to the daily fluctuation in the value of a futures contract.

Additional risks associated with the use of futures contracts are imperfect correlation between movements in the price of the futures

contracts and the level of the underlying benchmark and the possibility of an illiquid market for a futures contract.

With futures contracts,

there is minimal but some counterparty risk to a Fund since futures contracts are exchange traded and the exchange’s clearing house,

as counterparty to all exchange-traded futures contracts, effectively guarantees futures contracts against default.

Many futures exchanges

and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day.

Once the daily

limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended

for specified times during the trading day.

Futures contracts prices could move to the limit for several consecutive trading

days with little or no trading, thereby preventing prompt liquidation of futures positions and potentially subjecting a Fund to substantial

If trading is not possible or if a Fund determines not to close a futures position in anticipation of adverse price movements,

the Fund may be required to make daily cash payments of variation margin.

Account Agreements

Each Fund has entered into a written agreement (each, a “Futures

Account Agreement”) with one or more FCMs governing the terms of futures transactions of a Fund cleared by such FCM.

its own agreement and other documentation used for establishing customer relationships.

As such, the terms of the Futures Account Agreement

and other documentation that a Fund has with a particular FCM may differ in material respects from that with another FCM.

Account Agreements do not require the FCM to enter into new transactions or maintain existing transactions with a Fund.

In general, each

FCM is permitted to terminate its agreement with a Fund at any time in its sole discretion.

In addition, an FCM generally will have the

discretion to set margin requirements and/or position limits that would be in addition to any margin requirements and/or position limits

required by applicable law, set by the exchange, or set by the clearing house that clears the futures contracts in which a Fund transacts.

As a result, a Fund’s ability to engage in futures transactions or maintain open positions in such contracts will be dependent on

the willingness of its FCMs to continue to accept or maintain such transactions on terms that are economically appropriate for a Fund’s

investment strategy.

When a Fund has an open futures contract position, it is subject to at least daily variation margin calls by an FCM

that could be substantial in the event of adverse price movements.

Because futures contracts may require only a small initial investment

in the form of a deposit or margin, they may involve a high degree of leverage.

A Fund with open positions is subject to maintenance or

variance margin on its open positions.

If a Fund has insufficient cash to meet daily variation margin requirements, it may need to sell

Financial Instruments at a time when such sales are disadvantageous.

Futures markets are highly volatile and the use of or exposure to

futures contracts may increase volatility of a Fund’s NAV.

Margin posted by a Fund to an FCM typically will be held by relevant

exchange’s clearing house (in the case of clearing house-required margin) or the FCM (in the case of “house” margin

requirements of the FCM).

In the event that market movements favorable to a Fund result in the Fund having posted more margin than is

required, the Fund typically would have a right to return of margin from the FCM.

Fund has entered into a written agreement (each, a “Futures Account Agreement”) with one or more FCMs governing the terms

of futures transactions of a Fund cleared by such FCM.

Each FCM has its own agreement and other documentation used for establishing

customer relationships.

As such, the terms of the Futures Account Agreement and other documentation that a Fund has with a particular

FCM may differ in material respects from that with another FCM.

Futures Account Agreements do not require the FCM to enter into new transactions or maintain existing transactions with a Fund.

each FCM is permitted to terminate its agreement with a Fund at any time in its sole discretion.

In addition, an FCM generally will have

the discretion to set margin requirements and/or position limits that would be in addition to any margin requirements and/or position

limits required by applicable law, set by the exchange, or set by the clearing house that clears the futures contracts in which a Fund

As a result, a Fund’s ability to engage in futures transactions or maintain open positions in such contracts will be

dependent on the willingness of its FCMs to continue to accept or maintain such transactions on terms that are economically appropriate

for a Fund’s investment strategy.

a Fund has an open futures contract position, it is subject to at least daily variation margin calls by an FCM that could be substantial

in the event of adverse price movements.

Because futures contracts may require only a small initial investment in the form of a deposit

or margin, they may involve a high degree of leverage.

A Fund with open positions is subject to maintenance or variance margin on its

open positions.

If a Fund has insufficient cash to meet daily variation margin requirements, it may need to sell Financial Instruments

at a time when such sales are disadvantageous.

Futures markets are highly volatile and the use of or exposure to futures contracts may

increase volatility of a Fund’s NAV.

posted by a Fund to an FCM typically will be held by relevant exchange’s clearing house (in the case of clearing house-required

margin) or the FCM (in the case of “house” margin requirements of the FCM).

In the event that market movements favorable

to a Fund result in the Fund having posted more margin than is required, the Fund typically would have a right to return of margin from

However, the timing of such return may be uncertain.

As a result, it is possible that a Fund may face liquidity constraints including potential delays in its ability to pay redemption proceeds,

where margin is not immediately returned by an FCM.

In the event that a Fund fails to comply with its obligations under a Futures Account Agreement (including, for example, failing to deliver

the margin required by an FCM on a timely basis), the Futures Account Agreement typically will provide the FCM with broad discretion to

take remedial action against the Fund.

As a result, it is possible that a Fund may face liquidity constraints

including potential delays in its ability to pay redemption proceeds, where margin is not immediately returned by an FCM.

the event that a Fund fails to comply with its obligations under a Futures Account Agreement (including, for example, failing to deliver

the margin required by an FCM on a timely basis), the Futures Account Agreement typically will provide the FCM with broad discretion

to take remedial action against the Fund.

Among other things, the FCM typically will have the right, upon the occurrence of such a failure

by a Fund, to terminate any or all futures contracts in the Fund’s account with that FCM, to sell the collateral posted as margin

by the Fund, to close out any open positions of the Fund in whole or in part, and to cancel any or all pending transactions with the Fund.

Futures Account Agreements typically provide that the Fund will remain liable for paying to the relevant FCM, on demand, the amount of

any deficiency in a Fund’s account with that FCM.

The Futures Account Agreement between the Fund and an FCM generally requires the

Fund to indemnify and hold harmless the FCM, its directors, officers, employees, agents and affiliates (collectively, “indemnified

persons”) from and against all claims, damages, losses and costs (including reasonable attorneys’ fees) incurred by the indemnified

persons, in connection with:

(1) any failure by the Fund to perform its obligations under the Futures Account Agreement and the FCM’s

exercise of its rights and remedies thereunder;

by the Fund, to close out any open positions of the Fund in whole or in part, and to cancel any or all pending transactions with the

Futures Account Agreements typically provide that the Fund will remain liable for paying to the relevant FCM, on demand, the amount

of any deficiency in a Fund’s account with that FCM.

Futures Account Agreement between the Fund and an FCM generally requires the Fund to indemnify and hold harmless the FCM, its directors,

officers, employees, agents and affiliates (collectively, “indemnified persons”) from and against all claims, damages, losses

and costs (including reasonable attorneys’ fees) incurred by the indemnified persons, in connection with:

(1) any failure

by the Fund to perform its obligations under the Futures Account Agreement and the FCM’s exercise of its rights and remedies thereunder;

(2) any failure by the Fund to comply with applicable law;

(3) any action reasonably taken

by the indemnified persons pursuant to the Futures Account Agreement to comply with applicable law;

and (4) any actions taken by the FCM

in reliance on instructions, notices and other communications that the FCM and its relevant personnel, as applicable, reasonably believes

to originate from a person authorized to act on behalf of the Fund.

To the extent that the Fund trades in futures contracts on U.S.

the assets deposited by the Fund with the FCMs (or another eligible financial institution, as applicable) as margin must be segregated

pursuant to the regulations of the CFTC.

Such segregated funds may be invested only in a limited range of instruments — principally

government obligations to margin futures and forward contract positions.

An option is a contract that gives the purchaser

of the option, in return for the premium paid, the right to buy an underlying reference instrument, such as a specified security index,

or other instrument, from the writer of the option (in the case of a call option), or to sell a specified reference instrument to the

writer of the option (in the case of a put option) at a designated price during the term of the option.

The premium paid by the buyer

of an option will reflect, among other things, the relationship of the exercise price to the market price and the volatility of the underlying

reference instrument, the remaining term of the option, supply, demand or interest rates.

An American style put or call option may be

exercised at any time during the option period while a European style put or call option may be exercised only upon expiration or during

a fixed period prior thereto.

Put and call options are traded on national securities exchanges and in the OTC market.

Options traded on

national securities exchanges are within the jurisdiction of the SEC or other appropriate national securities regulator, as are securities

traded on such exchanges.

As a result, many of the protections provided to traders on organized exchanges will be available with respect

to such transactions.

In particular, all option positions entered into on a national securities exchange in the United States are cleared

and guaranteed by the Options Clearing Corporation, thereby reducing the risk of counterparty default.

Furthermore, a liquid secondary

market in options traded on a national securities exchange may be more readily available than in the OTC market, potentially permitting

a Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements.

There is no assurance, however, that higher than anticipated trading activity or other unforeseen events might not temporarily render

the capabilities of the Options Clearing Corporation inadequate, and thereby result in the exchange instituting special procedures which

may interfere with the timely execution of a Fund’s orders to close out open options positions.

Swaps are contracts

that have traditionally been entered into primarily by institutional investors in OTC markets for a specified period ranging from a day

to many years.

(3) any action reasonably taken by the indemnified persons pursuant

to the Futures Account Agreement to comply with applicable law;

and (4) any actions taken by the FCM in reliance on instructions,

notices and other communications that the FCM and its relevant personnel, as applicable, reasonably believes to originate from a person

authorized to act on behalf of the Fund.

the extent that the Fund trades in futures contracts on U.S.

exchanges, the assets deposited by the Fund with the FCMs (or another

eligible financial institution, as applicable) as margin must be segregated pursuant to the regulations of the CFTC.

Such segregated

funds may be invested only in a limited range of instruments — principally U.S.

government obligations to margin

futures and forward contract positions.

option is a contract that gives the purchaser of the option, in return for the premium paid, the right to buy an underlying reference

instrument, such as a specified security index, or other instrument, from the writer of the option (in the case of a call option), or

to sell a specified reference instrument to the writer of the option (in the case of a put option) at a designated price during the term

of the option.

The premium paid by the buyer of an option will reflect, among other things, the relationship of the exercise price to

the market price and the volatility of the underlying reference instrument, the remaining term of the option, supply, demand or interest

An American style put or call option may be exercised at any time during the option period while a European style put or call

option may be exercised only upon expiration or during a fixed period prior thereto.

Put and call options are traded on national securities

exchanges and in the OTC market.

Options traded on national securities exchanges are within the jurisdiction of the SEC or other appropriate

national securities regulator, as are securities traded on such exchanges.

As a result, many of the protections provided to traders on

organized exchanges will be available with respect to such transactions.

In particular, all option positions entered into on a national

securities exchange in the United States are cleared and guaranteed by the Options Clearing Corporation, thereby reducing the risk

of counterparty default.

Furthermore, a liquid secondary market in options traded on a national securities exchange may be more readily

available than in the OTC market, potentially permitting a Fund to liquidate open positions at a profit prior to exercise or expiration,

or to limit losses in the event of adverse market movements.

There is no assurance, however, that higher than anticipated trading activity

or other unforeseen events might not temporarily render the capabilities of the Options Clearing Corporation inadequate, and thereby

result in the exchange instituting special procedures which may interfere with the timely execution of a Fund’s orders to close

out open options positions.

are contracts that have traditionally been entered into primarily by institutional investors in OTC markets for a specified period ranging

from a day to many years.

Certain types of swaps may be cleared, and certain types are, in fact, required to be cleared.

The types of swaps that

may be cleared are generally limited to only swaps where the most liquidity exists and a clearing organization is willing to clear the

trade on standardized terms.

Swaps with customized terms or those for which significant market liquidity does not exist are generally

not able to be cleared.

In a standard swap transaction, the parties agree to exchange the returns on, among other things, a particular predetermined security,

commodity, interest rate, or index for a fixed or floating rate of return (the “interest rate leg,” which will also include

the cost of borrowing for short swaps) in respect of a predetermined notional amount.

The notional amount of the swap reflects the extent

of a Fund’s total investment exposure under the swap.

In the case of futures contracts-based indexes, such as those used by a Fund,

the reference interest rate typically is zero, although a financing spread or fee is generally still applied.

Transaction or commission

costs 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

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.

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

types of swaps that may be cleared are generally limited to only swaps where the most liquidity exists and a clearing organization is

willing to clear the trade on standardized terms.

Swaps with customized terms or those for which significant market liquidity does not

exist are generally not able to be cleared.

a standard swap transaction, the parties agree to exchange the returns on, among other things, a particular predetermined security, commodity,

interest rate, or index for a fixed or floating rate of return (the “interest rate leg,” which will also include the cost

of borrowing for short swaps) in respect of a predetermined notional amount.

The notional amount of the swap reflects the extent of a

Fund’s total investment exposure under the swap.

the case of futures contracts-based indexes, such as those used by a Fund, the reference interest rate typically is zero, although a

financing spread or fee is generally still applied.

Transaction or commission costs 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.

entire face amount or principal of a swap), the net amount is the Fund’s current obligations (or rights) under the swap.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

Sheet Arrangements and Contractual Obligations

As of June 30, 2023, 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 no loan guarantee arrangements

or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification

provisions related to certain risks service providers undertake in performing services which are in the best interests of the Funds.

each Fund’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not

expected to have a material impact on a Fund’s financial position.

Management fee payments made to the Sponsor are calculated

as a fixed percentage of each Fund’s NAV.

As such, the Sponsor cannot anticipate the payment amounts that will be required under

these arrangements for future periods as NAVs are not known until a future date.

The agreement with the Sponsor may be terminated by either

party upon 30 days written notice to the other party.

Critical Accounting Policies

Preparation of the financial statements and related disclosures

in compliance with accounting principles generally accepted in the United States of America requires the application of appropriate accounting

rules and guidance, as well as the use of estimates.

The Trust’s and the Funds’ application of these policies involves judgments

and actual results may differ from the estimates used.

Each Fund has significant exposure to Financial Instruments.

The Funds hold a significant portion of their assets in futures, all of which are recorded on a trade date basis and at fair value in

the financial statements, with changes in fair value reported in the Statements of Operations.

The use of fair value to measure Financial Instruments,

with related unrealized gains or losses recognized in earnings in each period, is fundamental to the Trust’s and the Funds’

financial statements.

The fair value of a Financial Instrument is the amount that would be received to sell an asset or paid to transfer

a liability in an orderly transaction between market participants at the measurement date (the exit price).

For financial reporting purposes, the Funds value investments

based upon the closing price in their primary markets.

Accordingly, the investment valuations in these financial statements may differ

from those used in the calculation of certain Funds’ final creation/redemption NAV for the period ended June 30, 2023.

Short-term investments are valued at amortized cost which

approximates fair value for daily NAV purposes.

For financial reporting purposes, short-term investments are valued at their market price

using information provided by a third-party pricing service or market quotations.

Derivatives (e.g., futures contracts, options, swap agreements)

are generally valued using independent sources and/or agreements with counterparties or other procedures as determined by the Sponsor.

Futures contracts, are generally valued at the last settled price on the applicable exchange on which that future trades.

Futures contracts

valuations are typically categorized as Level I in the fair value hierarchy.

Swap agreement valuations are typically categorized as Level

II in the fair value hierarchy.

The Sponsor may in its sole discretion choose to determine a fair value price as the basis for determining

the market value of such position.

Such fair value prices would be generally determined based on available inputs about the current value

of the underlying financial instrument or commodity and would be based on principles that the Sponsor deems fair and equitable so long

as such principles are consistent with normal industry standards.

The Sponsor may fair value an asset of a Fund pursuant to the policies

the Sponsor has adopted, which are consistent with normal industry standards.

Depending on the source and relevant significance of valuation

inputs, these instruments may be classified as Level II or Level III in the fair value hierarchy.

Fair value pricing may require subjective determinations

about the value of an investment.

While each Fund’s policy is intended to result in a calculation of the Fund’s NAV that fairly

reflects investment values as of the time of pricing, the Funds cannot ensure that fair values determined by the Sponsor or persons acting

at their direction would accurately reflect the price that the Fund could obtain for an investment if it were to dispose of that investment

as of the time of pricing (for instance, in a forced or distressed sale).

The prices used by a Fund may differ from the value that

would be realized if the investments were sold and the differences could be material to the financial statements.

The Funds disclose the fair value of their investments

in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

Discounts on short-term securities purchased

are amortized and reflected as Interest Income in the Statements of Operations.

Realized gains (losses) and changes in unrealized gain (loss)

on open investments are determined on a specific identification basis and recognized in the Statements of Operations in the period in

which the contract is closed or the changes occur, respectively.

Each Fund pays its respective brokerage commissions, including

applicable exchange fees, NFA fees, give up fees, pit futures account fees and other transaction related fees and expenses charged in

connection with trading activities for each Fund’s investment in U.S.

of September 30, 2022, 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 no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements

entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers

undertake in performing services which are in the best interests of the Funds.

While each Fund’s exposure under such indemnification

provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on a Fund’s

financial position.

fee payments made to the Sponsor are calculated as a fixed percentage of each Fund’s NAV.

As such, the Sponsor cannot anticipate

the payment amounts that will be required under these arrangements for future periods as NAVs are not known until a future date.

agreement with the Sponsor may be terminated by either party upon 30 days written notice to the other party.

Accounting Policies

of the financial statements and related disclosures in compliance with accounting principles generally accepted in the United States

of America requires the application of appropriate accounting rules and guidance, as well as the use of estimates.

and the Funds’ application of these policies involves judgments and actual results may differ from the estimates used.

Fund has significant exposure to Financial Instruments.

The Funds hold a significant portion of their assets in futures, all of which

are recorded on a trade date basis and at fair value in the financial statements, with changes in fair value reported in the Statements

of Operations.

use of fair value to measure Financial Instruments, with related unrealized gains or losses recognized in earnings in each period, is

fundamental to the Trust’s and the Funds’ financial statements.

The fair value of a Financial Instrument is the amount that

would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement

date (the exit price).

financial reporting purposes, the Funds value investments based upon the closing price in their primary markets.

Accordingly, the investment

valuations in these financial statements may differ from those used in the calculation of certain Funds’ final creation/redemption

NAV for the period ended September 30, 2023.

investments are valued at amortized cost which approximates fair value for daily NAV purposes.

For financial reporting purposes, short-term

investments are valued at their market price using information provided by a third-party pricing service or market quotations.

(e.g., futures contracts, options, swap agreements) are generally valued using independent sources and/or agreements with counterparties

or other procedures as determined by the Sponsor.

Futures contracts, are generally valued at the last settled price on the applicable

exchange on which that future trades.

Futures contracts valuations are typically categorized as Level I in the fair value hierarchy.

Swap agreement valuations are typically categorized as Level II in the fair value hierarchy.

The Sponsor may in its sole discretion choose

to determine a fair value price as the basis for determining the market value of such position.

Such fair value prices would be generally

determined based on available inputs about the current value of the underlying financial instrument or commodity and would be based on

principles that the Sponsor deems fair and equitable so long as such principles are consistent with normal industry standards.

may fair value an asset of a Fund pursuant to the policies the Sponsor has adopted, which are consistent with normal industry standards.

Depending on the source and relevant significance of valuation inputs, these instruments may be classified as Level II or Level III in

the fair value hierarchy.

value pricing may require subjective determinations about the value of an investment.

While each Fund’s policy is intended to result

in a calculation of the Fund’s NAV that fairly reflects investment values as of the time of pricing, the Funds cannot ensure that

fair values determined by the Sponsor or persons acting at their direction would accurately reflect the price that the Fund could obtain

for an investment if it were to dispose of that investment as of the time of pricing (for instance, in a forced or distressed sale).

prices used by a Fund may differ from the value that would be realized if the investments were sold and the differences could be material

to the financial statements.

Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure

on short-term securities purchased are amortized and reflected as Interest Income in the Statements of Operations.

gains (losses) and changes in unrealized gain (loss) on open investments are determined on a specific identification basis and recognized

in the Statements of Operations in the period in which the contract is closed or the changes occur, respectively.

Fund pays its respective brokerage commissions, including applicable exchange fees, NFA fees, give up fees, pit futures account fees

and other transaction related fees and expenses charged in connection with trading activities for each Fund’s investment in U.S.

Commodity Futures Trading Commission regulated investments.

Brokerage commissions on futures contracts are recognized on a half-turn basis.

The Sponsor is currently paying brokerage commissions

in VIX futures contracts exceed variable create/redeem fees collected by more than 0.02% of the Fund’s average net assets annually.

Brokerage commissions on futures contracts are recognized on a half-turn

The Sponsor is currently paying brokerage commissions in VIX futures contracts exceed variable create/redeem fees collected by

more than 0.02% of the Fund’s average net assets annually.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis