What is a Letter of Intent (LOI) in mutual fund purchases?

• A. A signed agreement allowing an investor to buy shares at a lower sales charge based on the intended investment, valid if terms are completed within 13 months, and may be backdated 90 days.
• B. A separate legal document of investment objectives that lasts indefinitely.
• C. A promise to purchase at the next price drop.
• D. A binding contract that guarantees a specific return.

Answer: (A)

A Letter of Intent in mutual fund purchases is a document where the investor states plans to invest a certain amount within a set period so they can qualify for breakpoint discounts on front-end sales charges. The terms are typically valid for about 13 months, and purchases made within that period can be backdated up to 90 days to count toward reaching the breakpoint. It’s not about guarantees or price drops, and it’s not a description of investment objectives. The purpose is to let the investor receive a reduced sales charge based on the anticipated total investment, even before the full amount is actually invested.