In a move that is more the exception than the rule, the $2.3 billion Fremont Funds of San Francisco has terminated the 12b-1 plan on three of its 11 no-load funds. The change is reflective of Fremont's evolving distribution strategy.

Fund advisors have used 12b-1 fees since 1980 to offset the costs of distributing and advertising each fund. They are also used to pay ongoing commissions to financial intermediaries who have sold and continually service fund accounts for investors.

In an Oct. 1 fund filing, Fremont announced that as of Sept. 14, the $51 million Fremont International Growth Fund, $41 million Fremont U.S. Small Cap Fund, and $19 million Fremont Real Estate Securities Fund had eliminated their 25-basis point 12b-1 fees. These were the only Fremont Funds that had ever charged a 12b-1 fee.

The initiative comes as Fremont has settled comfortably into the distribution niche it has worked to build and focus on over the past few years, said Allyn Hughes, Fremont's VP of marketing.

"We realized that our target audience is the fee-only financial planner," Hughes said. These planners do not choose to receive regular commission payments, such as 12b-1 trailer commissions, he added.

Consequently, planners were telling Fremont, that these three funds were routinely being eliminated from consideration because they carried the 12b-1 fee, Hughes said. So Fremont willingly chose to remove that barrier, he added.

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