Distribution Plan

Distribution Plan - a distribution plan is a plan executed by mutual fund companies. The purpose of the plan is too collect and assesses fees to shareholders of the funds, to offset expenses. The expenses could be for advertising costs or sales incentives (rewards for good behavior). The distribution plan will specify a certain percentage, usually less then .75 percent (sometimes less). This fee is deducted on an annual basis, from the assets of the shareholders securities. A distribution plan is only in place for mutual funds, which are managed funs, so fees have to be collected to pay for expenses incurred by managing the mutual funds.