Sun Life 2015 Annual Report Download - page 149

Fair value is determined based on quoted market prices for identical or similar instruments. When quoted market prices are not
available, fair value is determined from observable market data by dealers that are typically the market makers. The fair value is
categorized in Level 2 of the fair value hierarchy.
Interest expense on subordinated debt was $112 and $115 for 2015 and 2014.
16. Share Capital
The authorized share capital of SLF Inc. consists of the following:
• An unlimited number of common shares without nominal or par value. Each common share is entitled to one vote at meetings of the
shareholders of SLF Inc. There are no pre-emptive, redemption, purchase, or conversion rights attached to the common shares.
• An unlimited number of Class A and Class B non-voting shares, issuable in series. The Board is authorized before issuing the
shares, to fix the number, the consideration per share, the designation of, and the rights and restrictions of the Class A and Class B
shares of each series, subject to the special rights and restrictions attached to all the Class A and Class B shares. The Board has
authorized thirteen series of Class A non-voting preferred shares, nine of which are outstanding.
The common and preferred shares of SLF Inc. qualify as capital for Canadian regulatory purposes, and are included in Note 22.
Dividends and Restrictions on the Payment of Dividends
Under the provisions of the Insurance Companies Act (Canada), SLF Inc. and Sun Life Assurance are each prohibited from declaring
or paying a dividend on any of its shares if there are reasonable grounds for believing that it is, or by paying the dividend would be, in
contravention of: (i) the requirement that it maintains adequate capital and adequate and appropriate forms of liquidity, (ii) any
regulations under the Insurance Companies Act (Canada) in relation to capital and liquidity, and (iii) any order by which OSFI directs it
to increase its capital or provide additional liquidity.
SLF Inc. and Sun Life Assurance have each covenanted that, if a distribution is not paid when due on any outstanding SLEECS issued
by the SL Capital Trusts, then (i) Sun Life Assurance will not pay dividends on its public preferred shares, if any are outstanding, and
(ii) if Sun Life Assurance does not have any public preferred shares outstanding, then SLF Inc. will not pay dividends on its preferred
shares or common shares, in each case, until the 12th month (in the case of the SLEECS issued by SLCT I) or 6th month (in the case
of SLEECS issued by SLCT II) following the failure to pay the required distribution in full, unless the required distribution is paid to the
holders of SLEECS. Public preferred shares means preferred shares issued by Sun Life Assurance which: (a) have been issued to the
public (excluding any preferred shares held beneficially by affiliates of Sun Life Assurance); (b) are listed on a recognized stock
exchange; and (c) have an aggregate liquidation entitlement of at least $200. As at December 31, 2015, Sun Life Assurance did not
have outstanding any shares that qualify as public preferred shares.
The terms of SLF Inc.‘s outstanding preferred shares provide that for so long as Sun Life Assurance is a subsidiary of SLF Inc., no
dividends on such preferred shares are to be declared or paid if the MCCSR ratio of Sun Life Assurance is then less than 120%.
The terms of SLF Inc.‘s outstanding preferred shares also restrict our ability to pay dividends on SLF Inc.‘s common shares. Under the
terms of SLF Inc.‘s preferred shares, SLF Inc. cannot pay dividends on its common shares without the approval of the holders of the
preferred shares unless all dividends on the preferred shares for the last completed period for which dividends are payable have been
declared and paid or set apart for payment.
Currently, the above limitations do not restrict the payment of dividends on SLF Inc.‘s preferred or common shares.
The declaration and payment of dividends on SLF Inc.‘s shares are at the sole discretion of the Board of Directors and will be
dependent upon our earnings, financial condition and capital requirements. Dividends may be adjusted or eliminated at the discretion of
the Board on the basis of these or other considerations.
16.A Common Shares
The changes in common shares issued and outstanding for the years ended December 31 are as follows:
2015 2014
Common shares (in millions of shares)
Number of
shares Amount
Number of
shares Amount
Balance, January 1 613.1 $ 8,465 609.4 $ 8,304
Stock options exercised (Note 20) 1.6 54 2.4 83
Common shares repurchased(1) (5.3) (74) (0.9) (13)
Canadian Dividend Reinvestment and Share Purchase Plan(2) 2.0 88 2.2 91
Shares issued as consideration for business acquisition (Note 3) 0.9 34 ––
Balance, December 31 612.3 $ 8,567 613.1 $ 8,465
(1) On November 10, 2014, SLF Inc. launched a normal course issuer bid to purchase and cancel up to 9 million common shares. The program expired on November 9, 2015.
The purchases were made through the facilities of the Toronto Stock Exchange and alternative Canadian trading platforms (the “Exchanges”), at prevailing market rates. In
2015, the common shares purchased and cancelled under this program were purchased at an average price per share of $39.97 ($41.75 in 2014) for a total amount of $212
($39 in 2014). The total amount paid to purchase the shares is allocated to Common shares and Retained earnings in our Consolidated Statements of Changes in Equity.
The amount allocated to Common shares is based on the average cost per common share and amounts paid above the average cost are allocated to Retained earnings.
(2) Under SLF Inc.‘s Canadian DRIP, Canadian-resident common and preferred shareholders may choose to have their dividends automatically reinvested in common shares
and may also purchase common shares for cash. For dividend reinvestments, SLF Inc. may, at its option, issue common shares from treasury at a discount ofupto5%to
the volume weighted average trading price or direct that common shares be purchased by the DRIP agent for participants through the Exchanges at the market price.
Common shares acquired by participants through optional cash purchases may be issued from treasury or purchased through the Exchanges at SLF Inc.‘s option, in either
case at no discount. The common shares issued from treasury for dividend reinvestments in all of 2014 and 2015 were issued with no discount. An insignificant number of
common shares were issued from treasury in 2014 and 2015 for optional cash purchases at no discount.
Notes to Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2015 147