Following in the tradition of activists who successfully pressured companies to divest their investments in South Africa to protest apartheid, a new generation is pressuring companies -- specifically mutual funds -- to divest their holdings of companies that do business in Sudan, according to an article in Saturday's Wall Street Journal. Militias, supported by the Sudanese government, are engaging in genocide.

While US law prevents US companies from investing in Sudan -- a policy that has been in place for the past 10 years -- nothing prevents U.S. mutual funds, pension funds and other companies from holding shares and debt instruments of companies that do business in Sudan.

Activists hope to put enough pressure on the Sudanese government through divestment to force it to take action against the militias to stop the genocide. California and several other state legislatures have already passed laws requiring pension funds to divest; state legislators in Texas and Colorado will shortly be considering similar measures. have introduced measures that would require state pension funds to divest.

In addition, a number of universities, including Harvard and Yale, have already divested. Some companies, including the German electronics firm Siemens, are planning to leave Sudan this year in response to the pressure; others, such as Warren Buffett's holding company, Berkshire Hathaway, may consider divestment at their annual meetings.

Fidelity Investments is the target of one such effort, championed by actress Mia Farrow. A number of Fidelity Funds hold shares in PetroChina, a chinese oil company -- majority owned by the Chinese government -- with operations in Sudan. So far, Fidelity has resisted the pressure to divest. Oil is big business in Sudan.

According to the Journal, there are several newly launched Sudan-free mutual funds and exchange trade funds. If you're interested in finding out whether your funds invest in companies doing business in the Sudan, check out these links:

www.sudandivestment.org
www.investedinterests.com

For people who are supposed to be in the numbers biz, fund companies seem to be struggling with basic math. The Saturday edition of the Wall Street Journal reports that a number of prominent brokerage firms with fund arms -- including Wachovia, USB AG and Lehman Brothers -- have made significant errors in calculating refunds due to customers as a result of over charges in 2001 and 2002.

And who do you think the errors were in favor of? Not you, that's for sure. The fund companies, of course. So this is the scoop: first they try to steal from their own customers by overcharging commissions, then when they are ordered to make restitution, they can't even get the numbers right to refund the correct amount of money. Geez.

Exactly what is going on here? Are we supposed to believe that fund execs and accountants are so inept that they can't add and subtract? Or, is this a kind of accidently on purpose type of thing, where they were hoping that no one was paying attention?

Well, they got away with a lot of crap before when no one was minding the store, so maybe they were just testing the waters to see if they could get away with it again. Who knows. But whatever the case, this is just disgusting. Mercer Bullard, a law professor and fund shareholder advocate, puts it this way: "The NASD should come down on them with a sledgehammer." (The NASD is the self-regulating body for the securities industry).

The NASD is likely to bring enforcement action against those who can't get their math right later this year, according to that WSJ article. Potential charges against these firms could include negligence, failing to provide accurate information to regulators and violations of record-keeping rules.

If you're wondering what these crazy firms are going to do next to keep us entertained, stayed tuned.

The best way to deal with large taxable fund distributions is to avoid them altogether. Duh!

So how do you do that? Well, first consider investing the maximum amounts you can in tax-exempt or tax-deferred vehicles such as IRAs -- both traditional and Roth -- and employer-based plans such as 401(k)s, 403(b)s and 457 plans. Once you max those out, check out funds that bill themselves as tax-managed, which means that the managers are obligated by the fund's investment objective to do everything in their power to minimize your tax bill.

Remember that income-oriented vehicles such as taxable bond and real estate investment trust funds are by nature tax-inefficient, so you'll get income, which triggers a tax bill, no matter what, unless you hold these investments in retirement plan or other tax-exempt or deferred accounts.

Outside of these strategies, there are a couple of ways to check out a fund 's tax efficiency, including:

* Portfolio Turnover Rates
* Tax-Adjusted Returns
* Morningstar's (www.morningstar.com) Tax-Cost Ratio

Let's work through these step by step.

A fund's portfolio turnover rate is a rough percentage of how often the fund manager bought or sold securities within a fund portfolio during a specific period of time. Such returns are usually stated on a yearly basis, although BetterInvesting's Standard and Poor's Data Service and Fund Tools (www.betterinvesting.org/mutualfunds/resource) gives you a five-year average.

So, if a fund has a turnover rate of 100 percent in one year, that means the manager bought and sold securities to the extent that the entire portfolio was turned over once. While 100 percent turnover can seem like a lot, it isn't that atypical. Most stock funds have an average yearly turnover rate of about 90 percent. Turnover is significant because when managers sell securities at a profit, fund shareholders are responsible for paying tax on those gains, as well as any interest and dividend gains. So the more profitable sales, the higher the tax.

Funds with turnover rates of 20 percent or less tend to be more tax efficient than funds with higher turnover rates, so if you buy a fund with this characteristic, you are less likely to be stuck with a big tax bill. Many index funds fall into this category because since the fund's charter is to buy and hold the components of a stock, bond or other index, the manager doesn't engage in a lot of trading.

A second way to measure a fund's tax efficiency is to look at its tax-adjusted return. To find this number, subtract a fund's taxable return from its total return for a specific period (say five years). The resulting percentage will show you how much of your fund's returns were lost to taxes during that period of time. The lower the difference, the more tax efficient a fund is.

The tax-cost ratio is a metric developed by Morningstar that provides a percentage-point reduction in a fund's annualized return that comes from taxes. You can find your fund's tax-cost ratio by logging onto Morningstar (registration is free for non-premium data), entering the fund's ticker symbol and clicking on the "Tax Analysis" link on the left toolbar.

Here are a couple more resources:

USA Today Fund Tax Article
www.usatoday.com/money/perfi/columnist/waggon/2005-11-10-capital-gains_x.htm

Smart Money Fund Tax Tool:
www.smartmoney.com/tax/capital/index.cfm?story=capitalgains