Order Execution Policy

I. THE POLICY

1. Purpose

   The purpose of the Order Execution Policy (“the Policy”) is to set out the strategy adopted by Fundsmith LLP (“Fundsmith” or “the Firm”) to obtain the best possible result for each Fund when orders are placed with other entities for execution.

2. Introduction

   Fundsmith LLP (“Fundsmith” or “the Firm”) is authorised in the UK by the Financial Conduct Authority (“FCA”) as a Collective Portfolio Management Firm. Fundsmith is:

   • The authorised corporate director of three open-ended collective investment schemes which are authorised under UK UCITS;
   • Authorised under UK AIFMD as a full scope alternative investment fund manager in respect of two US domiciled limited partnerships, which are considered non-UK AIFs.
   
   

   The above funds are collectively referred to as “Funds”, and each a “Fund”.

   The Funds invest in listed equities on a global basis, employing a buy-and-hold investment strategy that seeks to achieve long-term growth in value. The Firm’s approach is to be a long-term investor in its investee companies and it does not adopt short-term trading strategies.

   Fundsmith has delegated the management of trade execution for its Funds to its affiliate, Fundsmith Investment Services Limited (“FISL”). Fundsmith and FISL are related entities by virtue of common ownership. FISL is also the investment manager of the Fundsmith SICAV and a number of segregated mandates. FISL is responsible for the implementation of the Policy in respect of all clients of both firms.
   FISL has engaged Northern Trust Securities LLP (“NTS”) to provide broker and trade execution services for the Funds on an agency or matched principal basis. NTS is a leading provider of execution services with in-depth expertise of trade execution across global equity markets. NTS was selected to undertake this function following detailed due diligence of its execution capabilities.
   See section four for information on NTS’ selection of execution venues.
   See section six for information on Fundsmith’s oversight of FISL and NTS.

3. Execution factors

   In its role as management company to the Funds, Fundsmith ensures that all sufficient steps are taken to obtain the best possible result for each Fund that it manages when orders are placed on behalf of the Funds with other entities, taking into account:

   • price;
   • costs;
   • speed;
   • likelihood of execution;
   • likelihood of settlement;
   • order size and nature;
   • and any other consideration relevant to the execution of the decision to deal,
   
   

   (collectively, the “Execution Factors”).

   When determining the relative importance of the Execution Factors, the following criteria are taken into account:

   • the objective, investment policy and risks specific to the Fund, as indicated in its prospectus or its constituting instrument;
   • the characteristics of the order;
   • the characteristics of the financial instruments that are the subject of the order;
   • the characteristics of the execution venues to which the order can be directed.
   
   

   The relative importance of the Execution Factors will vary considerably between orders. In executing trades, NTS will use their expertise and commercial judgement to evaluate the available market information to achieve the optimal balance across a range of potentially conflicting Execution Factors. Notwithstanding that, in certain situations, the Execution Factors will generally be prioritised as follows:

   For orders in equities that are highly liquid, price and costs will usually be the most important Execution Factors. For orders where there is less liquidity, the price, size of order and likelihood of execution tend to be prioritised. Furthermore, given order sizes can be significant, market impact is an important factor and the preference, where possible, will be to trade in blocks.

   In responding to significant subscriptions and redemptions, program trades are undertaken, which typically involve single trades in multiple equities. In these circumstances, speed, price and likelihood of execution and settlement tend to be the most important Execution Factors.

4. Execution venues

   NTS use their expertise and judgement to obtain prices from execution venues including: regulated markets; multilateral trading facilities; organised trading facilities; systematic internalisers; market makers and other liquidity providers; as well as non-UK / non-EU entities performing similar functions to the foregoing.

   NTS conducts ongoing monitoring on its chosen execution venues, which includes, but is not limited to, consideration of creditworthiness and financial stability and review of the performance of the execution venue.

   See Appendix I for a list of execution venues on which NTS places significant reliance in meeting its obligation to take all reasonable steps to obtain the best possible result for the execution of orders on a consistent basis.

5. Execution outside of a trading venue

   NTS may execute an order on behalf of the Funds which takes place outside of a trading venue, being a regulated market, a multilateral trading facility or an organised trading facility. Orders executed outside a trading venue may give rise to counterparty risk. Additional information about the consequences of this can be provided on request.

6. Oversight

   Fundsmith monitors the implementation of the Policy and the effectiveness of the order execution arrangements on a regular basis to identify any deficiencies and correct them where appropriate.

   Fundsmith maintains a supplier management framework, the purpose of which is to ensure that suppliers remain appropriate to provide the relevant service. The execution arrangements of FISL and NTS are subject to ongoing oversight to ensure they continue to allow Fundsmith to obtain the best possible results for the Funds on a consistent basis.

   The execution quality of NTS is reviewed through second line compliance monitoring that considers third party total cost analysis.

APPENDIX I: EXECUTION VENUES FOR EQUITY AND EQUITY-LIKE INSTRUMENTS