By Muralikumar Anantharaman

BOSTON, May 14 (Reuters) - Shareholders of six more Fidelity Investments funds rejected on Wednesday a proposal to halt investments in companies linked to genocide, bringing to 12 the number of funds to block the idea floated by activists.

The rejection of the proxy proposal at the world's biggest mutual fund company demonstrates the difficulty that activists face in linking investments to social and moral issues even as pressure grows on companies and governments to cut investment ties with companies doing business in places such as Sudan.

The non-binding proposal had asked the boards of 32 Fidelity funds in all 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 proposal garnered support ranging from 20 percent to 31 percent from the six funds.

"Proposal No. 3 has not been approved," a Fidelity official told shareholder meetings at its Boston office, referring to the human rights resolution.

Six other Fidelity funds already rejected the proposal in the past two months, making it the first U.S. mutual fund group to hold votes on such as measure.

Fidelity, which manages about $1.5 trillion in assets in 450 funds, had urged shareholders to reject it. The company has long maintained its investments are legal under U.S. laws and it is obligated to achieve the best returns for shareholders.

Company officials said at the meetings on Wednesday that investors who did not agree with its stand on the issue were free to exit the funds. They said the danger in adopting the proposal was that similar ones around a whole host of issues could crop up.

Eric Cohen, chairman of Boston-based Investors Against Genocide, which spearheaded the resolution, said the proposal was defeated "primarily because Fidelity is actively opposing it and because institutional investors voted with management."

Cohen urged Fidelity's board of trustees at the meeting to remain neutral on the proposal and not recommend its rejection to shareholders. A representative of the independent trustees said the trustees would consider the request.

Human rights activists have been campaigning for the past two years to get Fidelity and other mutual fund firms to divest 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 had some success. Many U.S. universities and states have taken steps to divest Sudan-linked holdings. Last year, a Fidelity fund sold a big chunk of its PetroChina holdings, while 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.

The proposal may surface at other shareholder meetings this year. It has also been filed with money managers such as Vanguard Group, Franklin Resources Inc <BEN.N> and Barclays Plc <BARC.L>, activists say. (Editing by Braden Reddall)

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