Transcription
Ground RulesIndustry Classification Benchmark(Equity)v4.0ftserussell.comAn LSEG BusinessJune 2022
Contents1.0Introduction .41.1Industry Classification Benchmark . 41.2FTSE Russell . 42.0Management Responsibilities.52.1FTSE Russell . 52.2FTSE Russell Industry Classification Advisory Committee . 52.3FTSE Russell Policy Advisory Board . 53.0FTSE Russell Index Policies .63.1Challenges and Appeals . 63.2Policy for Benchmark Methodology Changes . 64.0Classification Guidelines .74.1Basis of Decisions . 74.2Allocation of Companies to Subsectors . 74.3Changes to the Classification of a Company . 84.4Industry Sectors . 94.5Changes to the Industry Classification Benchmark . 95.0Periodic Reviews . 105.1Periodic Reviews . 105.2Classification Queries . 106.0Structure and Definitions . 116.1Technology. 116.2Telecommunications . 136.3Health Care . 146.4Financials . 156.5Real Estate . 176.6Consumer Discretionary . 186.7Consumer Staples . 216.8Industrials . 22FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 20222 of 32
6.9Basic Materials. 256.10Energy . 276.11Utilities . 28Appendix A: Collective Investment Schemes . 29Appendix B: REIT and REIT equivalent company structures. 30Appendix C: Further Information . 32FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 20223 of 32
Section 1Introduction1.0Introduction1.1Industry Classification Benchmark1.1.1The Industry Classification Benchmark (ICB) is a detailed and comprehensive structure for sectorand industry analysis, facilitating the comparison of companies across four levels of classificationand national boundaries. The classification system allocates companies to the Subsector whosedefinition closely describes the nature of its business as determined from the source of its revenueor the source of the majority of its revenue where available, as detailed in Rule 4.2.1.The structure and definitions of all Subsectors of ICB are available in Section 6.1.2FTSE RussellFTSE Russell is a trading name of FTSE International Limited, Frank Russell Company, FTSEGlobal Debt Capital Markets Limited (and its subsidiaries FTSE Global Debt Capital Markets Inc.and FTSE Fixed Income Europe Limited), FTSE Fixed Income LLC, The Yield Book Inc and BeyondRatings.FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 20224 of 32
Section 2Management Responsibilities2.0Management Responsibilities2.1FTSE Russell2.1.1FTSE Russell is responsible for maintaining ICB, and for the classification of all companies withinICB.2.1.2FTSE Russell will maintain a record of all changes in the classification of companies and isresponsible for ensuring the timely publication of all company classification changes.2.1.3FTSE Russell will monitor corporate events, which occur between quarterly meetings, that mayaffect the industrial classification of a company.2.2FTSE Russell Industry Classification Advisory Committee2.2.1The FTSE Russell Industry Classification Advisory Committee has been established by FTSERussell. The Committee may recommend changes to the ICB Ground Rules and the ICB structure,for approval by the FTSE Russell Governance Board.2.2.2The Terms of Reference of the FTSE Russell Industry Classification Advisory Committee are set outon the FTSE Russell website and can be accessed using the following link:FTSE Russell Industry Classification Advisory Committee.pdf2.3FTSE Russell Policy Advisory Board2.3.1The FTSE Russell Policy Advisory Board, whose membership is representative of users of FTSERussell Indices, has been established by FTSE Russell as an independent committee. The FTSERussell Policy Advisory Board provides strategic advice to FTSE Russell on the construction andmaintenance of agreed indices (as stipulated in their terms of reference) and to oversee thepractitioner committees established by FTSE Russell to assist in the management of the indices.The FTSE Russell Policy Advisory Board terms of reference also include the provision of strategicadvice on the construction and maintenance of ICB.2.3.2The Terms of Reference of the FTSE Russell Policy Advisory Board are set out on the FTSE Russellwebsite and can be accessed using the following link:FTSE Russell Policy Advisory Board.pdfFTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 20225 of 32
Section 3FTSE Russell Index Policies3.0FTSE Russell Index PoliciesThese Ground Rules should be read in conjunction with the following policy documents which can beaccessed using the links below:3.1Challenges and Appeals3.1.1FTSE Russell’s Challenges and Appeals procedure can be accessed using the following link:ICB Challenges and Appeals.pdf3.2Policy for Benchmark Methodology Changes3.2.1Details of FTSE Russell’s policy for making benchmark methodology changes can be accessedusing the following link:Policy for Benchmark Methodology Changes.pdfFTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 20226 of 32
Section 4Classification Guidelines4.0Classification Guidelines4.1Basis of Decisions4.1.1FTSE Russell will at all times approach decisions affecting the industry classification of companieswith reference to these guidelines.4.2Allocation of Companies to Subsectors4.2.1A company will be allocated to that Subsector of ICB whose definition most closely coincides withthe source of the company’s revenue or the source of the majority of its revenue. The principalsource of information used for the classification of a company shall be its audited accounts anddirectors' report. Where a company carries out two or more lines of business that differ substantiallyfrom each other, FTSE Russell will base its decision on the accounting segmentation published inthe audited accounts and directors’ report. Interim statements will not normally be used. Changes ina company’s business or structure will be considered under Rule 4.3.1.Where revenue information is unavailable or insufficient, or where a company is new or is in thecourse of changing its line of business, the company will be allocated to that Subsector whosedefinition most closely coincides with the description of the company’s business as stated in thecompany’s annual report, or if the annual report is not available, the description of the company’sbusiness provided in the company’s listing prospectus or in the company’s regulatory filings or, ifnone of these is available, the business description provided on the company’s website.4.2.2Segmental reporting normally discloses revenue before tax, minority interests, extraordinary itemsand interest earned or incurred. Unless there is audited evidence that any of these items isspecifically attributable to a class of business for which revenue is disclosed, it will be disregarded inassessing the sources of revenue. Where any part of the company's business is to earn interest orincur interest, or interest expenses are central to the business, then such interest shall be taken intoaccount in determining the company's business.4.2.3A company which has businesses in two or more Subsectors is allocated to that Subsector whichprovides the largest part of the revenue as indicated by the latest available report and accounts,subject to Rule 4.2.2.A company will be classified based on confirmation of majority of revenue (50% or greater) beingattributed to a single sub-sector as indicated by the latest available report and accounts, subject toRule 4.2.2. A diversified classification (Diversified Materials, General Mining, Multi-utilities,FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 20227 of 32
Diversified Retailers, Diversified Financial Services or Diversified REITs.) will result in cases where asingle sub-sector does NOT contribute 50% or more and there are three or more distinct andmaterial (material defined as 10% or greater) sub-sectors that contribute to total revenue. E.g. For aregulated bank to be classified as Diversified Financial banking revenues would have to be below50% and there must be two additional sectors that contribute greater than 10% each. A bank with40% banking revenue, 30% asset management revenues and 30% Investment Services would beclassified as Diversified Financial.A company engaged in three or more classes of business within the Industrials Industry that differsubstantially from each other, no one of which contributes 50% or more of revenue nor less than10%, will be classified as Diversified Industrials. If there is a contribution of over 50% from any otherone Industry group, the Subsector of that Industry group with the highest revenue will be assigned tothe company.4.2.4Companies which are classified as ICB Subsectors Closed End Investments and Open End andMiscellaneous Investment Vehicles are classified based on their structure and not the source of thecompany’s revenue. Additionally, investment holding companies will be assigned an ICBclassification based on their investment objective. Where the investment holding company isdeemed to hold controlling interests in companies, the ICB will either be assigned to DiversifiedFinancial Services or where there is a single investment theme (e.g. infrastructure, property,biotechnology), to the subsector which it represents. Where the investment holding company isdeemed to hold non-controlling interests, the company will be treated akin to an investment trust andassigned an ICB of Closed End Investments.Please refer to Appendix A for further details.4.2.5FTSE Russell will seek to maintain stability in the classification of companies by disregarding what itconsiders to be temporary fluctuations in the fortunes of individual businesses.4.2.6In exceptional circumstances, the classification may reflect other factors, if the FTSE RussellIndustry Classification Advisory Committee considers that ignoring these factors may result in amisleading classification.For example, FTSE Russell may, in consultation with the FTSE Russell Industry ClassificationAdvisory Committee, classify companies on the basis of either the immediate end use of theirproduct or the industrial process used.4.2.7The ICB classification allocated to a company will also apply to the fixed income securities issued bythat company.4.3Changes to the Classification of a Company4.3.1Where a significant change takes place in a company's structure as a result of a corporate event(such as a merger or demerger), its ICB classification will be reassessed on the basis of financialdata formally published by the company. The ICB classification will be allocated in line with Rule4.2.1.4.3.2Any adjustment resulting from a change in a company’s classification under Rule 4.3.1 will beimplemented either concurrent with, or shortly after (e.g. T 2), the implementation of the associatedcorporate event.4.3.3A company's classification may also be reviewed by FTSE Russell either at its discretion or at therequest of the company or professional advisors acting on the company’s behalf.Any adjustment resulting from a change in a company’s classification will be effective on the Mondayafter the third Friday of March, June, September and December. The cut-off date for the receipt ofdata or other justification relating to any such change is the second Friday of February, May, Augustand November.FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 20228 of 32
Please note: in circumstances where an incorrect ICB classification has been assigned to acompany at IPO, FTSE Russell reserves the right to update the ICB classification with a minimumT 2 notice.4.4Industry Sectors4.4.1FTSE Russell will seek to avoid the maintenance of Sectors or Subsectors containing a singlecompany.4.5Changes to the Industry Classification BenchmarkChanges to the structure of ICB will be evolutionary. Any changes to the ICB structure (Subsectors,Sectors, Supersectors or Industries) shall take place with a minimum of six months’ notice. Thesechanges will be considered by the FTSE Russell Industry Classification Advisory Committee and willbe based on long-term trends, rather than what it considers may be temporary fluctuations withinindividual industries.FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 20229 of 32
Section 5Periodic Reviews5.0Periodic Reviews5.1Periodic Reviews5.1.1The classification of all companies in the ICB global universe will be reviewed following receipt oftheir annual report.The cut-off dates for the receipt of data for consideration at periodic reviews and the correspondingimplementation dates are shown below:Cut-Off DateEffective DateSecond Friday of FebruaryMonday after the third Friday of MarchSecond Friday of MayMonday after the third Friday of JuneSecond Friday of AugustMonday after the third Friday of SeptemberSecond Friday of NovemberMonday after the third Friday of December5.1.2Review Procedures: the industry classification of each company will be determined by analysingthe financial reports based on the rules under Section 4 of these Classification Guidelines.5.1.3Implementation: periodic changes to the industry classification of a company will be implementedafter the close on the third Friday of March, June, September and December.5.1.4Monthly Announcements: on the first business day of each month an indicative list of pendingperiodic review changes (to be implemented as per Rule 5.1.2) will be announced.5.1.5Quarterly Periodic Review Announcement: the confirmed periodic review changes will beannounced on the Wednesday following the second Friday of February, May, August andNovember. Any revisions to those announcements may be made up until the Friday two weeks priorto the implementation date. Revisions after this date will only be considered under exceptionalcircumstances.5.2Classification QueriesMarket participants who wish to query the classification of a company can access the form using thefollowing linkICB Classification Data Form.pdfor request an ICB Classification Data Form by contacting info@ftserussell.com.FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 202210 of 32
Section 6Structure and Definitions6.0Structure and DefinitionsEffective 1 July 20196.1TechnologyCompanies that are primarily engaged in the advancement of the information technology andelectronics industries. It includes companies developing integrated computer systems and services,application software not specific to industry market segments, digital platform providers thatgenerate revenue from advertising contents, and derive subscription fees from an advertiser. Alsoincluded are companies that develop next generation electronics and related components.Disruptors leveraging “new” technology will not generally constitute their placement in theTechnology Industry. Rather, individual company technology applications and services will bereviewed as to the markets they serve. Examples include: companies that provide health care,technology equipment, electronic entertainment (video games), e-retailers, and transactionprocessing service tion10 Technology1010 Technology101010 Software andComputer Services10101010Computer ServicesCompanies that provide consulting orintegration services to other businessesrelating to information technology. Includesproviders of computer-system design,systems integration, network and systemsoperations, cloud computing, distributedledger technology (DLT) consulting andintegration, data management and storage,repair services and technical support.10101015SoftwarePublishers and distributors of computersoftware for home or corporate use.Excludes computer game producers, whichare classified under Toys Subsector.10101020Consumer DigitalServicesCompanies involved in digital platformsthat primarily generate revenue fromadvertising, content delivery and othervirtual products for consumers. To a lesserextent they generate subscription feerevenue through related services offeredby the platform and/or by the advertisers toutilize data content and customer insight.FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 202211 of 32
101020 TechnologyHardware andEquipment10102010SemiconductorsProducers and distributors ofsemiconductors and other integrated chips,including other products related to thesemiconductor industry, such asmotherboards. Excludes makers of printedcircuit boards, which are classified underElectronic Components Subsector.10102015ElectronicComponentsCompanies involved in the application ofhigh-technology parts to finished products,including printed circuit boards. Excludescommunications-related equipment, whichare classified under TelecommunicationsEquipment Subsector and technology partsfor consumer electronics, which areclassified under Electrical Components.Manufactures of tools and/or devices thatare used in the creation of semiconductors,lasers, photonics, wafers, and other hightechnology components, includingsemiconductor capital equipment.Manufacturers and distributors ofcomputers, servers, mainframes,workstations and other computer hardwareand subsystems, such as mass-storagedrives, mice, keyboards and printers.Companies in this group can providediverse applications for consumer andcommercial use. Including companiesproviding computing hardware forcryptocurrency 30ComputerHardware10102035Electronic OfficeEquipmentManufacturers and distributors of electronicoffice equipment, including photocopiersand fax machines.FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 202212 of 32
6.2TelecommunicationsContains companies that own and operate telecommunication infrastructures to provide contentdelivery services. Also included are manufacturers of telecommunication equipment nications Equipment151020TelecommunicationsService Providers15102010 CableTelevision ServicesMakers and distributors of high-technologycommunication products, includingsatellites, mobile telephones, fibers optics,switching devices, local and wide-areanetworks, teleconferencing equipment andconnectivity devices for computers,including hubs and routers.Companies that distribute media contentthrough cable and wireless networks,accessed through computers or televisions.15102015Telecommunications ServicesProviders of mobile and fixed-linetelephone services, including cellular,satellite and paging services. Includeswireless tower companies that own,operate and lease mobile site towers tomultiple wireless service providers.Includes companies that primarily providestelephone services through the internet.Excludes companies whose primarybusiness is internet access.FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 202213 of 32
6.3Health CareConsists of companies that manufacture health care equipment and supplies or that provide healthcare-related services such as lab services, in-home medical care and operate health care facilities.Also included are companies involved in research, development and production of pharmaceuticalsand biotechnology products, and medical cannabis tion20 Health Care2010 Health Care201010 Health CareProviders20101010 HealthCare FacilitiesOwners and operators of primaryhealthcare property, community hospitals,retirement homes, nursing homes, andrelated medical businesses.Companies that offers managed healthcare benefits and services (e.g., HealthManagement Organizations (HMO)including state sponsored programs20101020 HealthCare ManagementServices20101025 HealthCare Services20101030 HealthCare: Misc.201020 MedicalEquipment andServices20102010 MedicalEquipment20102015 MedicalSupplies20102020 MedicalServices201030Pharmaceuticals andBiotechnologyCompanies that provide variousspecialized disease management servicesto physicians, health plans, and hospitals.Primary business lines in this category canalso include general consultation services,paramedical services, operation of healthportals and distribution of health foodproducts.Includes Healthcare companies that arenot classified in the Healthcare Facilities,Healthcare Management Services orHealthcare Services Subsectors.Manufacturers and distributors of medicaldevices such as MRI scanners, prosthetics,pacemakers, X-ray machines and othernon-disposable medical devices.Manufacturers and distributors of medicalsupplies used by health care providers andthe general public. Includes makers ofcontact lenses, eyeglass lenses, bandagesand other disposable medical supplies.Companies that operate and managemedical labs and testing services.20103010BiotechnologyCompanies engaged in research into anddevelopment of biological substances forthe purposes of drug discovery anddiagnostic development, and which derivethe majority of their revenue from either thesale or licensing of these drugs anddiagnostic tools.20103015PharmaceuticalsManufacturers of prescription or over-thecounter drugs, such as aspirin, coldremedies and birth control pills. Includesvaccine producers but excludes vitaminproducers, which are classified under FoodProducts Subsector.Companies that engage in cannabiscultivation, cannabis distribution includingdispensaries, the processing anddistribution of cannabis plants, and thecreation of cannabis derivativeproducts. Companies that primarilyengage in the research, development andmanufacturing of cannabis (THC/CBD)based drugs are classified in theBiotechnology or the FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 202214 of 32
6.4FinancialsConsists of companies engaged in savings, loans, security investment and related activities such asfinancial data and information providers. Other examples include mortgage/consumer/corporatefinancing, investment banking and brokerage, asset management and custody, insurance, andMortgage 30 Financials3010 Banks301010 Banks30101010 Banks3020 FinancialServices302010 Finance andCredit Services30201020Consumer LendingCompanies with a banking licenseproviding a broad range of financialservices, including retail banking, loansand money transmissions.Companies that are not Banks that providefinancial services to consumers includingpayday loans, student loans, automobileloans, etc.Companies that are not Banks that providemortgages, mortgage insurance and otherrelated services.Companies provide financial decisionsupport tools for investment institutions.Including financial database operators andindex data providers.Companies providing a diversified range ofservices such as investment banking,trading, and asset management.Diversified Investment Holding companiesengaged in acquiring equity stake ofsecurities are also classified in this group.Companies that provide custodial, trusteeand other related fiduciary services. i.e.mutual fund and private investmentmanagement. Also includes companiesengaged in private equity and venturecapital.Companies that provide trading andbrokerage services for financial assetssuch as equities, commodities, debts,currency, cryptocurrency. Also includes theoperators of stock, currency, and otherfinancial market exchanges.Mortgage REITs that invest in acombination of segments with no specificdominance over one or the other.REITs primarily involved in lending moneyto commercial real estate owners andoperators directly or indirectly through thepurchase of mortgages, mortgage backedsecurities and other mortgage relatedassets.REITs primarily involved in lending moneyto residential real estate owners andoperators directly or indirectly through thepurchase of mortgages, mortgage backedsecurities and other mortgage relatedassets.Corporate closed-ended investmententities identified under distinguishinglegislation, such as investment trusts andventure capital trusts.Cash shells, Special Purpose AcquisitionCompany (SPACs), Non-corporate, openended investment instruments such asopen-ended investment companies andfunds, unit trusts, ETFs and currency fundsand split capital trusts.Companies engaged principally in life andhealth insurance.30201025Mortgage Finance30201030Financial DataProviders302020 InvestmentBanking andBrokerage Services30202000DiversifiedFinancial Services30202010 AssetManagers andCustodians30202015InvestmentServices302030 MortgageReal EstateInvestment Trusts30203000Mortgage REITs:Diversified30203010Mortgage REITs:Commercial30203020Mortgage REITs:Residential3030 Insurance302040 Closed EndInvestments30204000 ClosedEnd Investments302050 Open Endand MiscellaneousInvestment Vehicles30205000 OpenEnd andMiscellaneousInvestmentVehicles303010 LifeInsurance30301010 LifeInsurance303020 NonlifeInsurance30302010 Full LineInsuranceCompanies that provide a wide range ofinsurance products such as a combinationof life, property/casualty, and specialtyinsuranceFTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 202215 of 32
30302015Insurance BrokersInsurance brokers and agents30302020ReinsuranceCompanies engaged principally inreinsurance.30302025 Propertyand CasualtyInsuranceCompanies engaged principally inaccident, fire, automotive, marine,malpractice and other classes of nonlifeinsurance.FTSE Russell An LSEG Business Industry Classification Benchmark (Equity), v4.0, June 202216 of 32
6.5Real EstateConsists of companies engaged in real estate investment, development, and other real estaterelated services. Also includes Equity REITs. Mortgage REITs are classified under torDefinition35 Real Estate3510 Real Estate351010 Real EstateInvestment andServicesDevelopment35101010 RealEstate Holding andDevelopmentCompanies that invest directly or indirectlyin a variety of types of properties without aconcentration on any single type.35101015 RealEstate ServicesCompanies that provide services to realestate companies but do not own theproperties themselves. Includes agencies,brokers, leasing companies, managementcompanies and advisory services.35102000Diversified REITsREITs that invest in a combination of otherdefined REIT categories.35102010 HealthCare REITsREITs that primarily invest in health carefacilities including hospitals, nursing homesand assisted living properties.35102015 Hoteland Lodging REITsREITs that primarily invest in hotels,motels, resorts or other lodging properties.35102020Industrial REITsREITs that primarily invest in industrialproperties including industrial warehousesand distribution properties.35102025InfrastructureREITsREITs that primarily invest in infrastructureassets including roads, bridges, tunnels,airports, power generation, fuels, pipelines,water and waste management, andcommunication assets.35102030 OfficeREITsREITs that primarily invest in officeproperties.35102040Residential REITsREITs that primarily invest in residentialproperties including manufactured homes,multifamily homes, apartments, andstudent housing properties.35102045 RetailREITsREITs that primarily invest in retailproperties including malls, shoppingcenters, neighborhood and communityshopping centers, strip malls, free standingstores, and factory outlets.35102050 StorageREITsREITs that primarily invest in public selfstorage properties.35102060 TimberREITsREITs that primarily invest in timberlandand timber-related products and activities.35102070 OtherSpecialty REITsREITs that primarily invest in any singletype of facility or property not specificallydefined within another REITs industry.351020 Real
Management Responsibilities 2.0 Management Responsibilities 2.1 FTSE Russell 2.1.1 FTSE Russell is responsible for maintaining ICB, and for the classification of all companies within ICB. 2.1.2 FTSE Russell will maintain a record of all changes in the classification of companies and is
