Sun Life 2012 Annual Report Download - page 150

to participate in the plan prior to the beginning of the plan year and this election is irrevocable. Awards generally vest immediately;
however, participants are not permitted to redeem the DSUs until termination, death or retirement. The value at the time of redemption
will be based on the fair value of the common shares immediately before their redemption.
Sun Share Unit (“Sun Shares”) Plan: In December 2010, the Board approved the Sun Share Unit Plan which replaced the
Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”) plans for new awards granted effective in 2011. Under the Sun
Share plan, participants are granted units that are equivalent in value to one common share and have a grant price equal to the
average of the closing price of a common share on the TSX on the five trading days immediately prior to date of the grant. Participants
must hold units for up to 36 months from the date of grant. The units earn dividend equivalents in the form of additional units at the
same rate as the dividends on common shares. Units may vest or become payable if we meet specified threshold performance targets.
The plan provides for an enhanced payout if we achieve superior levels of performance to motivate participants to achieve a higher
return for shareholders (enhanced payout is determined through a multiplier that can be as low as zero or as high as two times the
number of units that vest). Payments to participants are based on the number of units earned multiplied by the average closing price of
a common share on the TSX on the five trading days immediately prior to the vesting date.
RSU Plan: As noted previously, the Sun Share plan has replaced the RSU plan for new awards granted effective in 2011. Under the
RSU plan, participants were granted units that are equivalent in value to one common share and have a grant price equal to the
average closing price of a common share on the TSX on the five trading days immediately prior to the date of grant. Plan participants
generally hold RSUs for 36 months from the date of grant. RSUs earn dividend equivalents in the form of additional RSUs at the same
rate as the dividends on common shares. The redemption value is the average closing price of a common share on the TSX on the five
trading days immediately prior to the vesting date.
PSU Plan/Incentive Share Unit (“ISU”) Plan: As noted previously, the Sun Share plan has replaced the PSU plan for new awards
granted effective in 2011. Grants under the ISU plan will continue. Under these arrangements, participants are granted units that are
equivalent in value to one common share and have a grant price equal to the average of the closing price of a common share on the
TSX on the five trading days immediately prior to the date of grant. Participants must hold units for 36 months (or 40 months in the
case of ISUs) from the date of grant. The units earn dividend equivalents in the form of additional units at the same rate as the
dividends on common shares. No units will vest or become payable unless we meet our specified threshold performance targets. The
plans provide for an enhanced payout if we achieve superior levels of performance to motivate participants to achieve a higher return
for shareholders. Payments to participants are based on the number of units vested multiplied by the average closing price of a
common share on the TSX on the five trading days immediately prior to the vesting date.
Additional information for other share-based payment plans: The units outstanding under these plans and the liabilities accrued
on the statement of financial position are summarized in the following table:
Number of units (in thousands) Sun Shares DSUs RSUs PSUs/ISUs Total
Units outstanding December 31, 2011 1,863 739 3,386 942 6,930
Units outstanding December 31, 2012 4,653 842 1,213 576 7,284
Liability accrued as at December 31, 2012 $ 56 $ 21 $ 31 $ 15 $ 123
Compensation expense and the income tax expense (benefit) for other share-based payment plans for the years ended December 31
are shown in the following table. Since expenses for the DSUs are accrued as part of incentive compensation in the year awarded, the
expenses below do not include these accruals. The expenses presented in the following table include increases in the liabilities for Sun
Shares, DSUs, RSUs and PSUs due to changes in the fair value of the common shares and the accruals of the Sun Shares RSU and
PSU liabilities over the vesting period, and exclude any adjustment in expenses due to the impact of hedging.
For the years ended December 31, 2012 2011
Compensation expense(1) $84 $11
Income tax expense (benefit)(2) $ (23) $ (4)
(1) $82 of the compensation expense in 2012 relates to the continuing operations ($8 in 2011).
(2) $(22) of the income tax expense (benefit) in 2012 relates to the continuing operations ($(3) in 2011).
20.D Share-Based Payment Plans of MFS
Share-based payment awards within MFS are based on their own shares. Stock options and restricted shares are settled in shares and
restricted stock units are settled in cash. The restricted share awards and stock options vest over a four-year period. The restricted
stock units vest over a two-year or four-year period from the grant date and holders are entitled to receive non-forfeitable dividend
equivalent payments over the vesting period. Dividends are paid to restricted shareholders and are not forfeited if the award does not
ultimately vest.
Although the stock options and restricted shares are settled in shares, all of the awards, including the outstanding shares held by
employees, are accounted for as cash-settled share-based payment awards because the parent company has a practice of purchasing
the issued shares from employees after a specified holding period. The fair value of options is determined using the Black-Scholes
option pricing model, while the fair value of restricted shares, restricted stock units and outstanding shares are estimated using a
market consistent share valuation model. The compensation expense recorded each period is impacted by changes in fair value of the
awards and shares outstanding as well as the number of new awards granted and the number of issued shares repurchased. The
liability accrued related to these plans as at December 31, 2012 was $546.
148 Sun Life Financial Inc. Annual Report 2012 Notes to Consolidated Financial Statements