How can I edit Address Book distribution lists?
Only local groups (appearing in On My Mac) support distribution lists. This feature won't work if you're only using Exchange, a CardDAV server, or iCloud.

Here's a cnet article about this, with regard to iCloud: http://reviews.cnet.com/8301-13727_7-20126108-263/address-book-distribution-list-editor-disabled-by-icloud/