Sun Life 2010 Annual Report Download - page 119

The unrecognized compensation cost, adjusted for an estimate of future forfeitures, for non-vested stock options as at December 31,
2010 was $11. The weighted average recognition period over which this compensation cost is expected to be recognized is 1.79 years.
The stock options outstanding and exercisable as at December 31, 2010, by exercise price, are as follows:
Options Outstanding Options Exercisable
Range of exercise prices
Number of
Stock
Options
(Thousands)
Weighted
Average
Remaining
Contractual
Life (Years)
Weighted
Average
Exercise
Price
Number of
Stock
Options
(Thousands)
Weighted
Average
Remaining
Contractual
Life (Years)
Weighted
Average
Exercise
Price
$18.00 to $24.00 4,172 6.74 $ 19.94 1,588 4.43 $ 19.72
$24.01 to $30.00 2,333 4.37 28.41 1,736 3.07 28.44
$30.01 to $35.00 3,790 7.02 30.96 1,017 1.23 32.87
$35.01 to $45.00 918 3.86 40.39 918 3.86 40.39
$45.01 to $53.00 2,980 6.15 49.81 2,208 5.92 49.99
14,193 6.11 $ 31.87 7,467 4.05 $ 35.03
The weighted average fair values of the stock options, calculated using the Black-Scholes option-pricing model, granted during the
year ended December 31, 2010, was $7.53 ($4.44 and $6.59 for 2009 and 2008, respectively). The Black-Scholes option-pricing model
used the following assumptions to determine the fair value of options granted during the years ending December 31:
Weighted average assumptions 2010 2009 2008
Risk-free interest rate 2.9% 2.3% 3.4%
Expected volatility 35.3% 32.7% 23.8%
Expected dividend yield 4.0% 4.0% 3.8%
Expected life of the option (in years) 6.4 5.9 5.6
Exercise Price $ 30.21 $ 20.44 $ 40.47
Expected volatility is based on historical volatility of the common shares, implied volatilities from traded options on the common shares
and other factors. The expected term of options granted is derived based on historical employee exercise behaviour and employee
termination experience. The risk-free rate for periods within the expected term of the option is based on Canadian government bond
yield curve in effect at the time of grant.
18.B Employee share ownership plan
In Canada, we match eligible employees’ contributions to the Sun Life Financial Employee Stock Plan. The match is provided for
employees who have met two years of employment eligibility and is equal to 50% of the employee’s contributions up to 5% of an
employee’s annual compensation. The match is further capped by a one thousand five hundred dollar annual maximum. Employees
may elect to contribute from 1% to 20% of their target annual compensation to the Sun Life Financial Employee Stock Plan. Our
contributions vest immediately and are expensed. We recorded an expense of $4 for the year ended December 31, 2010 ($4 and $4
for 2009 and 2008 respectively).
18.C Other stock-based compensation plans
All other stock-based compensation plans use notional units that are valued based on the common share price on the TSX. Any
fluctuation in the common share price changes the value of the units, which affects our stock-based compensation expense. Upon
redemption of these units, payments are made to the employees with a corresponding reduction in the accrued liability. We use equity
swaps and forwards to hedge our exposure to variations in cash flows due to changes in the common share price for all of these plans.
Details of these plans are as follows:
Senior Executives’ Deferred Share Unit (“DSU”) Plan: Under the DSU plan, designated executives may elect to receive all or a
portion of their annual incentive award in the form of DSUs. Each DSU is equivalent in value to one common share and earns dividend
equivalents in the form of additional DSUs at the same rate as the dividends on common shares. The designated executives must elect
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.
Restricted Share Unit (“RSU”) Plan: Under the RSU plan, participants are 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.
Performance Share Unit (“PSU”) Plan/Incentive Share Unit (“ISU”) Plan: Under these arrangements, participants are granted
units that are the equivalent in value to one common share and have a grant price equal to the average of the closing price of a
Notes to the Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2010 115