To qualify for the maximum 8.5% sales charge, a fund must offer which two features, and how may LOI be used?

• A. Breakpoints and Rights of Accumulation; LOI may be backdated up to 90 days and must be completed within 13 months.
• B. Only Breakpoints are required; LOI is never backdated.
• C. Rights of Accumulation alone qualify; no LOI permitted.
• D. Breakpoints and LOI are optional; Rights of Accumulation is not needed.

Answer: (A)

The thing being tested is how discounts on a front-end sales charge are earned. To reach the maximum 8.5% load, a fund must offer both breakpoints and rights of accumulation. Breakpoints provide a reduced front-end load as the total amount invested in the fund family climbs. Rights of accumulation let an investor combine their existing holdings with new purchases within the same fund family to reach those breakpoint thresholds. The Letter of Intent lets the investor commit to investing an additional amount within 13 months to qualify for the breakpoint, and it may be backdated up to 90 days to count recent purchases toward that breakpoint. If the investor completes the LOI, the lower charge applies once the breakpoint is reached; if not, the higher charge would apply to the purchases.