Sun Life 2012 Annual Report Download - page 145

The table below presents additional significant terms and conditions of the Innovative Capital Instruments:
Issuer Issuance Date
Distribution or interest
payment dates
Annual
yield
Redemption date at
the issuer’s option
Conversion date at
the holder’s option
December 31,
2012
December 31,
2011
Sun Life Capital Trust(1)(2)(3)(4)
SLEECS A October 19, 2001 June 30, December 31 6.865% December 31, 2006 Any time $– $–
SLEECS B June 25, 2002 June 30, December 31 7.093% June 30, 2007 Any time 200 200
Sun Life Capital Trust II(1)(2)
SLEECS 2009-1 November 20, 2009 June 30, December 31 5.863%(5) December 31, 2014 No conversion option 496 495
$ 696 $ 695
Fair value $ 784 $ 712
(1) Subject to the approval of OSFI, (i) the SL Capital Trusts may, in whole or in part, on the redemption date specified above or on any distribution date thereafter, or in the case
of SLCT II, on any date thereafter, redeem any outstanding SLEECS without the consent of the holders, and (ii) upon occurrence of a regulatory event or a tax event (as
defined), prior to the redemption date specified above, the SL Capital Trusts may redeem all, but not part of, any class of SLEECS without the consent of the holders.
(2) The SLEECS A were redeemed at par on December 31, 2011. The SLEECS B may be redeemed for cash equivalent to (i) the greater of the Early Redemption Price or the
Redemption Price if the redemption occurs prior to June 30, 2032 or (ii) the Redemption Price if the redemption occurs on or after June 30, 2032. Redemption Price refers to
an amount equal to one thousand dollars plus the unpaid distributions, other than unpaid distributions resulting from a Missed Dividend Event, to the redemption date. Early
Redemption Price for the SLEECS B refers to the price calculated to provide an annual yield, equal to the yield of a Government of Canada bond issued on the redemption
date that has a maturity date of June 30, 2032, plus 32 basis points, plus the unpaid distributions, other than unpaid distributions resulting from a Missed Dividend Event, to
the redemption date. The SLEECS 2009-1 may be redeemed for cash equivalent to, on any day that is not an Interest Rate Reset Date, accrued and unpaid interest on the
SLEECS 2009-1 plus the greater of par and a price calculated to provide an annual yield equal to the yield of a Government of Canada bond maturing on the next Interest
Reset Date plus (i) 0.60% if the redemption date is prior to December 31, 2019 or (ii) 1.20% if the redemption date is any time after December 31, 2019. On an Interest Rate
Reset Date, the redemption price is equal to par plus accrued and unpaid interest on the SLEECS 2009-1.
(3) The non-cumulative perpetual preferred shares of Sun Life Assurance issued upon an Automatic Exchange Event in respect of the SLEECS B will become convertible, at the
option of the holder, into a variable number of common shares of SLF Inc. on distribution dates on or after December 31, 2032.
(4) Holders of SLEECS B may exchange, at any time, all or part of their holdings of SLEECS B at a price for each SLEECS of 40 non-cumulative perpetual preferred shares of
Sun Life Assurance. SLCT I will have the right, at any time before the exchange is completed, to arrange for a substituted purchaser to purchase SLEECS tendered for
surrender to SLCT I so long as the holder of the SLEECS so tendered has not withheld consent to the purchase of its SLEECS. Any non-cumulative perpetual preferred
shares issued in respect of an exchange by the holders of SLEECS B will become convertible, at the option of the holder, into a variable number of common shares of SLF
Inc. on distribution dates on or after December 31, 2032.
(5) Holders of SLEECS 2009-1 are eligible to receive semi-annual interest payments at a fixed rate until December 31, 2019. The interest rate on the SLEECS 2009-1 will reset
on December 31, 2019 and every fifth anniversary thereafter to equal the five-year Government of Canada bond yield plus 3.40%.
Fair value is based on market prices for the same or similar instruments as appropriate. Interest expense on Innovative capital
instruments was $44 and $109 for 2012 and 2011, respectively.
15. Subordinated Debt
The following obligations are included in Subordinated debt as at December 31, and qualify as capital for Canadian regulatory
purposes:
Currency
Interest
Rate
Earliest Par
Call date(1) Maturity 2012 2011
Sun Life Assurance:
Issued May 15, 1998(2) Cdn. dollars 6.30% – 2028 $ 150 $ 150
Issued June 25, 2002(3) Cdn. dollars 6.15% June 30, 2012 2022 –800
Sun Life Financial Inc.:
Issued May 29, 2007(4) Cdn. dollars 5.40% May 29, 2037 2042 398 398
Issued January 30, 2008(5) Cdn. dollars 5.59% January 30, 2018 2023 398 398
Issued June 26, 2008(6) Cdn. dollars 5.12% June 26, 2013 2018 350 349
Issued March 31, 2009(7) Cdn. dollars 7.90% March 31, 2014 2019 499 498
Issued March 2, 2012(8) Cdn. dollars 4.38% March 2, 2017 2022 796 –
Sun Canada Financial Co.:
Issued December 15, 1995(9) U.S. dollars 7.25% n/a 2015 149 153
Total $ 2,740 $ 2,746
Fair value $ 2,912 $ 2,836
(1) The relevant debenture may be redeemed, at the option of the issuer. Prior to the date noted, the redemption price is the greater of par and a price based on the yield of a
corresponding Government of Canada bond; from the date noted, the redemption price is par and redemption may only occur on a scheduled interest payment date.
Redemption of all subordinated debentures is subject to regulatory approval. The notes issued by Sun Canada Financial Co. are not redeemable prior to maturity.
(2) 6.30% Debentures, Series 2, due 2028. Issued by The Mutual Life Assurance Company of Canada, which thereafter changed its name to Clarica Life Insurance Company
(“Clarica”). Clarica was amalgamated with Sun Life Assurance effective December 31, 2002.
(3) 6.15% Debentures due June 30, 2022. Redeemed on June 30, 2012.
(4) Series 2007-1 Subordinated Unsecured 5.40% Fixed/Floating Debentures due 2042. From May 29, 2037, interest is payable at 1.00% over the 90-day Bankers’ Acceptance
Rate.
(5) Series 2008-1 Subordinated Unsecured 5.59% Fixed/Floating Debentures due 2023. From January 30, 2018, interest is payable at 2.10% over the 90-day Bankers’
Acceptance Rate.
(6) Series 2008-2 Subordinated Unsecured 5.12% Fixed/Floating Debentures due 2018. From June 26, 2013, interest is payable at 2.00% over the 90-day Bankers’ Acceptance
Rate.
(7) Series 2009-1 Subordinated Unsecured 7.90% Fixed/Floating Debentures due 2019. From March 31, 2014, interest is payable at 7.15% over the 90-day Bankers’
Acceptance Rate.
(8) Series 2012-1 Subordinated Unsecured 4.38% Fixed/Floating Debentures due 2022. From March 2, 2017, interest is payable at 2.70% over the 90-day Bankers’ Acceptance
Rate.
(9) 7.25% Subordinated Notes due December 15, 2015.
Fair value is based on market prices for the same or similar instruments as appropriate. Interest expense on subordinated debt was
$175 and $171 for 2012 and 2011, respectively.
Notes to Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2012 143