Friends Provident Stewardship Fund invests in Amersham International, a drugs company that uses animals for clinical testing. At one time Amersham was the the fund's biggest single shareholding, representing about 3 per cent of pounds 375m invested.
Investors have criticised the fund's marketing literature for not stating clearly enough its policy towards animal testing. One disillusioned investor cancelled her policies with Friends Provident.
Helen Lye, who works as a secretary in a London embassy, chose the Stewardship Fund for her personal pension and endowment mortgage policies several years ago. She is particularly concerned about animal experimentation.
She said she was reassured by Stewardship's marketing material. A recent publicity leaflet states that investments are 'directed away from companies involved in experiments on animals'. Another leaflet put out in 1990 included a graphic with two lines crossing out an illustration of a laboratory animal.
Alan Huw Smith, Amersham director of corporate affairs, said the company might sometimes need to arrange for products to be tested on animals, but this was not a main part of the business or a regular practice.
Miss Lye said she was angry when she found out earlier this year that the Stewardship Fund had chosen Amersham International. 'I cannot understand why, with so many companies to choose from, they have channelled our money into Amersham.'
She has stopped making payments to her pension and endowment policies. 'I realise I shall probably be considerably out of pocket as a result.'
Diane Fear, a retired housing officer from St Albans, Hertfordshire, wanted a small personal equity plan. 'I stressed to my financial adviser that I wanted something ethical, especially in respect of animals as I'm an animal rights campaigner. They recommended Friends Provident's Stewardship. When I realised they invested in Amersham International, I felt totally misled.' Miss Fear did not make the investment.
Investment policies for the Stewardship Fund are set by a committee of reference that meets four times a year. It includes two members of Friends Provident's main board and external advisers with an interest in ethical issues, including the actress
Roger Whiffin, secretary for the committee, said: 'The animal-testing policy has been discussed at pretty well every meeting this year.'
Current policy is that Stewardship does not invest in cosmetic manufacturers, in companies that provide animal- testing services, or in retailers selling soaps or cosmetics tested on animals unless approved by the RSPCA.
An exception is made where products are deemed to make an important contribution to human health. Mr Whiffin said in a letter to Ms Lye: 'It is this exception that has allowed Amersham into the portfolio.'
Peter Sylvester, investment director at Friends Provident, denies that Stewardship literature is misleading. 'We've never said 'no animal testing'. Our marketing department doesn't agree that the phrase 'directed away from animal- testing' implies a total ban on animal-testing.'
Financial advisers should have ensured customers were given any further details they needed, he said. 'Our Stewardship criteria are two inches thick - you can't give that information in marketing material.'
The Stewardship Fund has over the past weeks sold the bulk of its holding in Amersham International for investment reasons.
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