By Sree Vidya Bhaktavatsalam
Sept. 5 (Bloomberg) -- Fidelity Investments, Vanguard Group and American Funds came under increased pressure from activists to sell their holdings in PetroChina Co., the oil company whose parent does business with war-ridden Sudan.
The Save Darfur Coalition, an activist group based in Washington, also called on Franklin Resources Inc. and JPMorgan Chase & Co.'s mutual-fund unit to divest their stakes in the Beijing-based company. Together, the five investment firms are the biggest mutual-fund investors in PetroChina.
PetroChina is controlled by government-owned China National Petroleum Corp., which since 1996 has been developing oil fields in Sudan, where 200,000 people have died and 2 million made homeless in the civil war in the western Darfur region. Campaigners are pressing universities, pension funds and investment firms to pull money out of companies that do business with the Sudanese government.
``PetroChina is the worst of the worst offenders'' through its parent, China National Petroleum, Zahara Heckscher, the coalition's manager of the divestment campaign, said in a conference call today. ``Despite dozens of letters,'' the investment companies haven't responded, Heckscher said. ``We do not take investments in genocide lightly.''
150,000 Petitions
In addition, Investors Against Genocide, formed by members that successfully lobbied to get Fidelity Investments to reduce stakes in PetroChina, delivered 150,000 petitions to Fidelity's headquarters today, pressing the company to sell its remaining holdings. The documents were accepted by two Fidelity employees who were waiting outside the building on 89 Devonshire Street in Boston.
``Genocide-free investing is a minimum standard to which all mainstream investment firms should be held accountable,'' Eric Cohen, the chairman of Investors Against Genocide, said today.
Mao Zefeng, PetroChina's spokesman, didn't return a call made after office hours in Hong Kong.
Fidelity, the biggest mutual-fund company, sold PetroChina stakes in May held by its U.S. mutual funds. It still owned shares valued at $604 million mostly through its non-U.S. divisions as of Aug. 1, according to Save Darfur Coalition.
The shares held in PetroChina are through Fidelity International Ltd., a separate company that has common ownership, Anne Crowley, a Fidelity spokeswoman, said today in an interview.
``Of the Fidelity funds available to U.S. investors, only two hold the security,'' Crowley said. ``We don't tell our fund managers when to buy or sell a stock. The company seeks to achieve investment objectives and comply with existing laws.''
American Funds
American Funds, owned by Los Angeles-based Capital Research and Management Co., operates the $184 billion Growth Fund of America, the largest U.S. mutual fund. Funds managed by the company owned 1.6 percent of the company's Class H shares, which are issued in Hong Kong to investors other than the Chinese government, Bloomberg data show. Its stake was valued by the Save Darfur Coalition at $917 million as of Aug. 1.
``We abhor the genocide in Darfur,'' American Funds said in a statement posted on its Web site. ``After careful consideration, we have decided at this point not to divest these particular businesses.''
PetroChina's stock has risen an annual average of 56 percent in the past five years, compared with 24 percent for the benchmark Hang Seng Index.
Vanguard Group, the second-biggest U.S. mutual-fund company and based in Valley Forge, Pennsylvania, held 0.6 percent of the Class H shares. The stake is valued at about $181 million.
Vanguard Benchmarks
Of the three Vanguard funds with investments in PetroChina, two are index funds, Vanguard spokeswoman Rebecca Cohen said. The third, Vanguard Energy Fund, is managed by Wellington Capital Management in Boston.
``We are obligated to reflect underlying benchmarks'' in the index funds, Cohen said. On the actively managed fund, ``our obligation to shareholders is best served by having the adviser manage the fund to produce the highest investment returns.''
Franklin, based in San Mateo, California, owned 5.14 percent of the Hong Kong-issued shares, making it the second- largest shareholder of the Class H shares, with its stake worth about $1.65 billion. JPMorgan Chase's mutual-fund subsidiaries hold $1.55 billion in PetroChina shares, or a 4.9 percent stake.
``The conditions in the Darfur region are deplorable and we support efforts toward positive change there,'' Franklin spokeswoman Lisa Gallegos said in an e-mailed statement. ``In our experience investing in emerging markets, we have seen that fostering economic and business development through investment in troubled regions can often help in achieving reform.''
Kristen Batteria, a spokeswoman for JPMorgan Chase in New York, declined to comment.
Buffett Stake
Warren Buffett's Berkshire Hathaway Inc. is the largest shareholder in PetroChina's Class H shares with a 10.96 percent holding, Bloomberg data show. The Omaha, Nebraska-based company sold 16.9 million shares July 30 for $27 million. At the end of last year, Berkshire Hathaway's stake was valued at $3.3 billion.
Berkshire shareholders voted on May 5 by a 53-to-1 margin against an investor proposal calling on the firm to divest its PetroChina stake.
To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net ;