Published by Ignites.
By Peter Ortiz January 28, 2013
An investment advocate group is targeting 13 Franklin Templeton funds and parent Franklin Resources, claiming that of all fund firms, it owns the most shares of a Chinese oil company tied to genocide in Sudan.
The firm is the latest fund manager to be targeted by anti-genocide campaigners, following similar action faced by JPMorgan Chase and ING.
Investors Against Genocide has put forward a shareholder proposal seeking support from investors to force Franklin to divest from Chinese oil company PetroChina at the fund firm’s annual meeting on March 13. Franklin Resources filed a proxy late last week recommending that investors reject the proposal.
The proposal argues that as of Dec. 31 Franklin owned 7% of shares of PetroChina. The company’s parent, China National Petroleum Company, has provided funding to the Sudanese government, which in turn uses that funding to commit genocide in Darfur, Investors Against Genocide alleges.
Investors Against Genocide scored a huge win in 2011 against JPMorgan Chase and the industry, opening a new front of attack for the group to go after funds’ parent companies, including Franklin Resources.
In 2011 JPMorgan Chase tried to quash an anti-genocide proposal when it sought assurances from the Securities and Exchange Commission that it would not recommend enforcement action if the firm omitted the proposal from its proxy. The SEC rejected JPMorgan Chase’s request.
The advocacy group has a long history of targeting individual funds. But the SEC ruling was significant because unlike individual funds, corporations hold annual proxy meetings, giving advocates more frequent chances to get its resolutions on proxy ballots and to reach shareholders.
“This is the first time we are on the ballot of Franklin Resources, and it’s an outgrowth of the success we had with the SEC in defending our submission of the genocide-free investing proposal at JPMorgan,” says Eric Cohen, chairman of the advocacy group.
About 9% of shareholders supported the JPMorgan Chase anti-genocide proposal in a vote last May, an increase from the 7.7% it received in 2011. Investors Against Genocide plans to get another proposal on the firm’s ballot again this year.
In its Franklin proposal, Investors Against Genocide mentions that shareholders in the ING Emerging Countries fund voted 59.3% in favor of a similar proposal last year, with 10.9% opposed and the rest abstaining.
Related Content
- July 2, 2012 ING Fund Approves Anti-Genocide Plank
- May 17, 2012 ING Loses Fight to Exclude Anti-Genocide Proposal
- March 30, 2012 Anti-Genocide Activists Target JPMorgan Holders
The ING proxy was notable because it was the first time a mutual fund had not urged shareholders to oppose similar proposals, according to Cohen.
A Franklin spokesman pointed to a statement on the firm’s website about PetroChina, which states, “[Our] investment professionals will continue to actively engage company managements when they have any concerns with company management or their activities, and PetroChina is no exception to this approach of engagement.”
On Franklin’s recommendation to vote against the proposal, it writes, “We believe that fostering economic and business development through investment can often help in achieving reforms.”
The firm also notes its fiduciary duty to act in the best interest of stockholders, fund shareholders and investment advisors in how it invests and that it is complying with the law.
But the shareholder proposal criticizes Franklin, stating it provides “no evidence of effective engagement.”
“Management can easily obtain independent assessments to identify companies connected to genocide,” the proposal reads. “Other large financial firms such as T. Rowe Price and TIAA-Cref have avoided investments connected to genocide by divesting problem companies such as PetroChina.”
Of the 13 funds with the shareholder proposal, Templeton Emerging Markets and Templeton Global Income are two closed-end funds, and will have their shareholder meeting March 1. Of those two funds, only Emerging Markets owns PetroChina shares.
While the Templeton Emerging Markets fund “owns a relatively large stake in [PetroChina’s] equity, it makes up a pretty small percentage of the fund’s overall assets (about 1.25%),” according to Steven Pikelny, a closed-end fund analyst with Morningstar.
The Templeton Emerging Markets fund returned an annualized 6.9% over a trailing three-year period, slightly better than average for its diversified emerging-market equity category, Pikelny says. And over the past year the fund returned 15.4%, trailing the average of 18.6%, he says.
