The Fund’s investment adviser, Advisors Preferred, LLC (the “Adviser”), delegates execution of the Fund’s investment strategy to the subadviser, Flexible Plan Investments, Ltd. (“FPI” or the “Subadviser”). The Subadviser selects investments for the Fund and provides trade placement for fixed income instruments, including cash equivalents. The Adviser provides trade placement for non-fixed income instruments.

The Subadviser seeks to achieve the Fund’s investment objective by allocating assets, without restriction, among a wide variety of asset classes. The Subadviser’s asset allocation focuses primarily on the following categories:

The Subadviser may invest directly in securities representing an asset class or may invest in exchange-traded funds (“ETFs”), pooled investment vehicles and mutual funds that invest primarily in an asset class, or in futures or swaps linked to an asset class. When the Fund enters into a swap, the Fund makes payments to the swap counterparty based on either a fixed or variable rate, and the swap counterparty makes payments to the Fund based on the return of a refence asset. The Fund uses futures and swaps as a substitute hedge for the reference asset. The Fund invests in ETFs, pooled investment vehicles, and mutual funds that are not affiliated with the Adviser or Subadviser. Certain pooled investment vehicles are classified as commodity pools. The Fund invests in commodity pools that primarily in financial futures such as interest rate, equity and currency futures. However, these pools may have lesser exposure to commodity-related and volatility-related futures. To the extent the Fund invests in stocks of foreign corporations, the Fund’s investment in such stocks may be in the form of depositary receipts or other securities convertible into securities of foreign issuers, including American Depositary Receipts (“ADRs”).

The Fund may also invest to gain indirect exposure to prominent cryptocurrencies such as Bitcoin and Ether; as well as less prominent cryptocurrencies that the Subadviser believes are sufficiently well-developed to provide a viable investment. Less prominent cryptocurrencies are: (i) Dogecoin, (ii) SOL, (iii) LINK, (iv) XRP, and (v) ADA. The investment marketplace tends to use the descriptors cryptocurrency and digital asset interchangeably.

The Fund limits total cryptocurrency investments to 25% of total assets. However, the Fund may invest up to 25% in a single cryptocurrency and has no expected or target allocation to any one cryptocurrency. The Fund may invest in cryptocurrencies through futures, ETFs, exchange-traded products (“ETPs”); as well as through swaps and options on the preceding or a cryptocurrency or basket of cryptocurrencies. The ETFs and ETPs included in the 25% limit may be leveraged and/or inverse. Leveraged instruments such as futures or leveraged ETFs and EPTs are measured at their notional value or leveraged value. The Fund limits cryptocurrency futures to those that are cash-settled, exchange-traded, and regulated by the CFTC. The Subadviser employs a proprietary quantitative price momentum driven ranking strategy to select cryptocurrencies. In the context of the Subadviser’s overall strategy, cryptocurrencies are used primarily to diversify returns.

The Fund does not make direct investments in cryptocurrencies.

Cryptocurrencies Generally

Cryptocurrencies are digital assets that operate on a decentralized network using blockchain technology to facilitate secure and anonymous transactions. Cryptocurrencies represent a digital asset that functions as a medium of exchange (although not widely used in this manner at present) utilizing cryptographic protocols to secure transactional processes, control the creation of additional units, and verify the transfer of assets. This innovative technology underpinning cryptocurrencies allows for peer-to-peer transactions and provides a framework for digital scarcity. This technology is characterized by its use of blocks, which are structurally linked in a chain through cryptographic hashes. Each block contains a list of transactions that, once verified and added to the blockchain through a consensus process known as proof of work, become extremely difficult to reverse and tamper with. The integrity, transparency, and security of the transactional data are maintained autonomously within the a blockchain network, eliminating the necessity for central oversight and facilitating trust in a peer-to-peer system. Each cryptocurrency has a peer-to-peer blockchain network. The value of a cryptocurrency is not backed by any government, corporation, or other identified body. Instead, its value is determined in part by the supply and demand in markets created to facilitate trading of a cryptocurrency.

Prominent Cryptocurrencies

Bitcoin

Bitcoin is a digital asset that operates on a decentralized network using blockchain technology to facilitate secure and anonymous transactions. The ownership and operation of Bitcoin is determined by participants in an online, peer-to-peer network sometimes referred to as the “Bitcoin Network”. The Bitcoin Network connects computers that run “open source,” software that follows rules and procedures governing the Bitcoin Network. This is typically referred to as the Bitcoin Protocol. Bitcoin may be used to pay for goods and services, stored for future use, or converted to a government-issued currency. The adoption of Bitcoin for these purposes has been limited and Bitcoin presently is not widely accepted as a means of payment. The value of Bitcoin is not backed by any government, corporation, or other identified body. Instead, its value is determined in part by the supply and demand in markets created to facilitate trading of Bitcoin.

Ether

Ether is a digital asset. The ownership and operation of Ether is determined by participants in an online, peer-to-peer network sometimes referred to as the “Ethereum Network.” The Ethereum Network connects computers that run publicly accessible, or “open source,” software that follows the rules and procedures governing the Ethereum Network. This is commonly referred to as the Ethereum Protocol. Ownership and transaction records for Ether are protected through public-key cryptography. The supply of Ether is determined by the Ethereum Protocol. No single entity owns or operates the Ethereum Network. The Ethereum Network is collectively maintained by (i) a decentralized group of participants who run computer software that results in the recording and validation of transactions (commonly referred to as “validators”), (ii) developers who propose improvements to the Ethereum Protocol and the software that enforces the Protocol and (iii) users who choose which version of the Ethereum software to run. Unlike other digital assets such as Bitcoin, which are created solely through a progressive mining process, 72 million Ether were created in connection with the launch of the Ethereum Network. Following the launch of the Ethereum Network, Ether supply initially increased through a progressive mining process. Coinciding with the network launch, the Ethereum Foundation was designated as the sole organization dedicated to protocol development.

Less Prominent Cryptocurrencies

Dogecoin

Dogecoin (“DOGE”) is a digital asset that is created and transmitted through the operations of the peer-to-peer Dogecoin Network, a decentralized network of computers that operates on cryptographic protocols. No single entity owns or operates the Dogecoin Network, the infrastructure of which is collectively maintained by a decentralized user base. The Dogecoin Network allows users to exchange tokens of value, called DOGE, which are recorded on a public transaction ledger. DOGE is primarily intended as a parody, or memecoin, with no formal purpose or utility, but it can be used to pay for goods and services, including to send a transaction on the Dogecoin Network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading platforms or in individual end-user-to-end-user transactions under a barter system. The Dogecoin Network is designed to be a global real-time payment and settlement system. As a result, the Dogecoin Network and DOGE aim to improve the speed at which parties on the network may transfer value while also reducing the fees and delays associated with the traditional methods of interbank payments.

SOL

SOL is a digital asset that is created and transmitted through the operations of the peer-to-peer Solana Network, a decentralized network of computers that operates on cryptographic protocols. No single entity owns or operates the Solana Network, the infrastructure of which is collectively maintained by a decentralized user base. The Solana Network allows users to exchange tokens of value, called SOL, which are recorded on a public transaction ledger known as a blockchain. SOL can be used to pay for goods and services, including computational power on the Solana Network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading platforms or in individual end-user-to-end-user transactions under a barter system. Like the Ethereum Network, the Solana Network is one of a number of projects intended to expand blockchain use beyond just a peer-to-peer money system.

LINK

LINK is a digital asset. The Chainlink Network is an oracle network designed to connect smart contracts on any blockchain to real-world data, events and off-chain computation. It serves as infrastructure for synchronizing on-chain and off-chain information. LINK was created using the ERC-677 standard and relies on the Ethereum Network for key functionality such as storage, transfer and usage. The Chainlink Network also is available on blockchains including Polygon, BNB Chain, Arbitrum, Avalanche, Solana, Base, and Optimism. As a result, it is important to understand the characteristics of these blockchain networks in order to understand how LINK and the Chainlink Network operate. For example, the Ethereum Network is a decentralized network of computers that operates on cryptographic protocols. No single entity owns or operates the Ethereum Network; the network’s infrastructure is collectively maintained by a decentralized user base. Using smart contracts, users can create markets, store registries of debts or promises, represent the ownership of property, move funds in accordance with conditional instructions and create digital assets other than Ether on the Ethereum Network.

XRP

XRP is a digital asset that is created and transmitted through the operations of the peer-to-peer XRP Network, a decentralized network of computers that operates on cryptographic protocols. No single entity owns or operates the XRP Network, the infrastructure of which is collectively maintained by a decentralized user base. The XRP Network allows users to exchange tokens of value, called XRP, which are recorded on a public transaction ledger. XRP can be used to pay for goods and services, including to send a transaction on the XRP Network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading platforms or in individual end-user-to-end-user transactions under a barter system. The XRP Network is based on a shared public ledger, similar to the Bitcoin Network. However, the XRP Network differentiates itself from other digital asset networks in that its stated primary function is transactional utility, not store of value. As a result, the XRP Network and XRP aim to improve the speed at which parties on the network may transfer value while also reducing the fees and delays associated with the traditional methods of interbank payments.

ADA

ADA is a digital asset that is created and transmitted through the operations of the peer-to-peer Cardano Network, a decentralized network of computers that operates on cryptographic protocols. No single entity owns or operates the Cardano Network, the infrastructure of which is collectively maintained by a decentralized user base. The Cardano Network allows users to exchange tokens of value, called ADA, which are recorded on a public transaction ledger known as a blockchain. ADA can be used to pay for goods and services, including computational power on the Cardano Network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading platforms or in individual end-user-to-end-user transactions under a barter system. When operational, smart contract operations are executed on the Cardano Blockchain in exchange for payment of ADA. Like the Ethereum Network, the Cardano Network is one of a number of projects intended to expand blockchain use beyond just a peer-to-peer money system.

Several U.S. regulators, including the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (“FinCEN”), the Commodity Futures Trading Commission (“CFTC”), the U.S. Internal Revenue Service (“IRS”), and state regulators, including the New York Department of Financial Services (“NYDFS”), have made official pronouncements or issued guidance or rules regarding the treatment of cryptocurrencies and other digital assets. However, other U.S. and state agencies, such as the SEC, have not made official pronouncements or issued guidance or rules regarding the treatment of all cryptocurrencies. Similarly, the treatment of cryptocurrencies and other digital assets is often uncertain or contradictory in other countries.

The Subadviser’s proprietary evolution strategy considers four factors to rank asset classes and adjust the position size of securities and other investment vehicles to generate a portfolio allocation. The ranking factors for each asset class are:

The Subadviser anticipates investing primarily in equities during periods of strong equity performance, while investing in other asset classes when equities suffer. The Subadviser seeks to manage risk by using leveraged index funds and swap contracts to maintain a leveraged position. During periods of financial uncertainty or distress, the Subadviser allocates the majority of Fund assets to short term, fixed income investments. The Fund is aggressively managed by the Subadviser, which typically results in high portfolio turnover.

The Fund may invest up to 25% of its total assets in a wholly owned and controlled subsidiary (the “Subsidiary”). The Subsidiary is expected to provide the Fund with indirect exposure to certain instruments such as Bitcoin futures within the limitations of the federal tax requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “code”). The Subsidiary will invest primarily in gold, commodities, cryptocurrency-related instruments, or pooled investment vehicles. The Fund’s investments will be composed primarily of securities, even when viewing the Subsidiary on a consolidated basis. The Subsidiary, when viewed from a consolidated basis, is subject to the same investment restrictions as the Fund. The Fund invests without restriction as to issuer country or capitalization; or maturity or quality of debt instruments. On an aggregate basis with the Fund, the Subsidiary complies with the provisions of the 1940 Act in Sections 8 and 18 (regarding investment policies, capital structure and leverage); the Adviser and Sub-Adviser to the Subsidiary, are SEC-registered and each complies with the provisions of the 1940 Act in Section 15 (regarding investment advisory contracts) and the Subsidiary complies with the provisions of the 1940 Act in Section 17 (regarding affiliated transactions and custody) and employs the same custodian as the Fund.