From: Reuters
Published March 19, 2008 03:35 PM

Fidelity funds reject genocide-linked proposal

By Muralikumar Anantharaman

BOSTON (Reuters) - Shareholders in two Fidelity Investments funds on Wednesday rejected a proposal to block investments in companies linked to genocide and human rights abuses.

But the activists who wrote the proposal, a first for any U.S. mutual fund, said they were encouraged by support for the measure from 27 percent of shareholders in Fidelity's Capital & Income Fund and 28 percent in its Select Health Care Portfolio.

"It's a huge breakthrough," said Eric Cohen, chairman of Boston-based Investors Against Genocide, which spearheaded the resolution.

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They had asked the boards of the funds to "screen out investments in companies that, in the judgment of the board, substantially contribute to genocide, patterns of extraordinary and egregious violations of human rights, or crimes against humanity."

The proxy proposal reflects growing pressure on companies and governments to cut investment ties with companies doing business in places like Sudan, whose authorities are accused of abetting genocide.

"Proposal No. 3 has not been approved," an official of Fidelity Investments, the world's largest mutual fund firm, told the shareholder meeting at its Boston office, referring to the human rights resolution.

Fidelity, which manages about $1.5 trillion in assets, urged shareholders to reject it. The Boston-based company has long maintained its investments are legal under U.S. laws and it is obligated to achieve the best returns for shareholders.

Human rights activists have been campaigning for the past two years to get Fidelity and other mutual fund firms to divest their Sudan-linked holdings in protest against human rights abuses in the Darfur region.

They have targeted Fidelity, Warren Buffett's Berkshire Hathaway Inc <BRKa.N> and other funds over their holdings of PetroChina <601857.SS> and other Asia-based oil companies because of their ties to Sudan.

Experts estimate 200,000 people have been killed and 2.5 million uprooted in the Sudanese region's conflict, which started in 2003 and pits mostly non-Arab rebel groups against the Khartoum government and Arab militias.

The activist campaigns have met with some success. Many U.S. colleges, universities and states have taken steps to divest their Sudan-linked holdings. Last year, Fidelity sold a big chunk of its PetroChina holdings, and Buffett sold his entire holding.

The U.S. Congress passed legislation last year to shield mutual funds and private pension funds from investor lawsuits if they divested shares of companies active in Sudan.

Cohen of Investors Against Genocide said the defeat of the human rights proposal was not a surprise but that he expected greater support in future votes as awareness on the issue grows.

He pinned Wednesday's defeat largely on support by institutional shareholders for Fidelity's position.

The proposal is likely to surface at other shareholder meetings this proxy season. It has been filed with 26 other Fidelity funds and dozens of other funds at money managers Vanguard Group, Franklin Resources <BEN.N> and Barclays Plc <BARC.L>, the activists say.

(Editing by Jason Szep and John Wallace)

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