SHARE YIELD OPTIMIZATION PROGRAM

The Securities Investor Protection Act of 1970 does not protect loaned shares in certain circumstances. Therefore, under SEC rules, IB is required to pay you an amount equivalent to the value of your shares in cash as collateral to protect you in the highly unlikely event that you do not get your shares back.

Stocks are in demand in the lending market because other traders want to borrow them to execute short sales, potentially changing the value of the stock.

If you lend shares, you will receive the full equivalent amount to any dividends paid. However, any cash amounts you receive in lieu of dividends during the lending period will be treated as regular income that is not taxable according to the reduced rates for qualified dividends. IB will endeavor to return shares to you prior to the distribution of any dividend in order to mitigate or avoid any potential adverse tax consequences.

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Similarly, IB cannot guarantee that all shares suitable for lending will actually be lent.

For periods during which your securities are on loan, you give up your voting rights associated with those shares.

If you sell, borrow against, or withdraw cash balances from your margin account (in such a way that your securities become margin securities and no longer qualify as fully paid shares or margin surplus shares), the loan will terminate immediately and you will not receive any further interest on the loan.

IB lends only fully paid U.S. equities and eligible U.S. corporate bonds.

• To optimize your return, we focus on stocks with a lending rate offset of more than 25bps to the Fed Funds rate, the industry's benchmark rate. Therefore, not all stocks in your portfolio may be on loan.
• The stock universe that is in highest demand, and therefore most valuable from the perspective of a stock lender, is referred to as „Hard to Borrow“ (HTB) and represents a subset of all stocks available for lending in the U.S.
• Which stocks are most in demand changes constantly. There is no exhaustive method to predict which stocks might become hard to borrow (HTB) in the future. Therefore, IB designed the Stock Yield Enhancement Program (SYEP) to consider all stocks in a client's account. If a stock is classified as HTB, the IB algorithm can scan all client portfolios in the program for the most efficiently lendable stocks.

None. Your ability to borrow continues to be based on your equity positions.

Yes. Your Share Yield Optimization Program activity will be reflected in three different sections on your account statements:

• Securities lent under management by IB: In this section, cash collateral is listed under the item "Collateral Amount".
• Securities lent managed by IB - Transactions: This section lists each individual stock loan, including transaction ID, quantity, interest rate on the client's collateral, and collateral amount.
• Securities Lent by IB - Interest Details: This section lists each stock lending transaction with the interest rate received by IB, the interest paid to IB, and the interest paid on the customer's collateral.

Yes. IB values all positions at the end of each day using the mark-to-market method, as is standard in the industry. The mark-to-market price is calculated by rounding the closing price of the security at the end of the day to the nearest whole dollar. The security amount is then calculated by multiplying the security price by 102% for U.S. equities and multiplying the rounded result by the number of shares (the minimum security amount required is 100%, but may be higher depending on applicable laws and market conventions).

Example: Customer A has signed up for the SYEP and IB has subsequently lent 5000 shares of XYZ on behalf of this customer. The closing price of XYZ is $22.15. The mark-to-market calculation is made using the following equation: $22.15 * 1.02 = 22.59 rounded up to the nearest round dollar amount = 23 * 5000 = $115,000.

You can sell lent shares at any time at your discretion. Upon a sale, IB reclaims the loaned shares from the market and makes regular delivery on your behalf on the settlement date. The lending of the shares is terminated.

You can sell any number of shares, including the total amount of shares. There is no difference for you between trading lent and non-lent shares.

Provided that the shares are fully paid up, the program gives you the same benefits for existing subscribed call options against the shares as without.

The U.S. imposes the same withholding tax on dividends and on compensation in lieu of dividends on persons who are not U.S. taxpayers. The standard rate is 30%. However, if you qualify to claim a US tax treaty, a lower tax rate may be used.

The sale of shares that have been loaned out has no particular effect on the tax treatment of your investment income. Income from equalization payments, or equalization payments in lieu of dividends or interest, is considered regular income and does not meet the definition of qualified dividend income. Therefore, these amounts are taxed at the regular tax rate and not at the qualified dividend rate.

IB attempts to counter effects through equalization payments by recalling shares prior to a dividend payment. However, IB cannot guarantee that the borrower will be able to return the shares within the required time window to avoid taxation of the equalization payment.

The Equity Yield Optimization Program offers customers the opportunity to earn additional income on securities positions that would otherwise be held separately (i.e., fully deposited and excess margin securities) by allowing IB to lend these securities to third parties. Customers participating in the program will receive a share of the interest paid by the borrower on the cash collateral as a loan fee for each day the loan is in place. They will also receive cash collateral to secure repayment of the equity loan at its end.

The income a client receives in return for loaned shares depends on the loan rates set in the OTC Securities Lending. These rates may vary not only depending on a particular security lent, but also depending on the loan date. In addition, IB retains a portion of the gross interest rate paid in exchange for originating, terminating, as well as managing the transactions. In determining the customer portion of these fees, the percentage of the market interest rate is applied to the loan collateral. This daily gross loan interest rate is split equally between IB and the customer. Example: assume the loan security is CAD 10,000 and the annual market interest rate is 15%. In this example, the daily gross loan interest rate would be 4.16 CAD (($10,000 *.15)/360), of which 2.08 CAD would be received by the customer and 2.08 CAD by IB. The loan interest rate is calculated and totaled daily similar to interest credits.

The cash collateral underlying the securities loan, which is used to determine interest payments, is calculated using the industry standard method of multiplying the closing price of the stock by 102% and then rounding to the nearest whole dollar amount. Example: a loan of 100 shares of a stock with a closing price of CAD 59.24 would yield CAD 6,100 (CAD 59.24 * 1.02 = CAD 60.4248; rounded to CAD 61, multiplied by 100).

The provisions of the Securities Investor Protection Act of 1970 do not protect you as a lender with respect to securities lending transactions in which you lend your fully paid securities to IB. Therefore, the cash collateral paid to you (and shown on your account statement) may be the only source of payment of IB's liability if IB fails to repay you for the securities.

Clients who meet the criteria and wish to participate in the Equity Return Optimization Program can enroll by selecting "Trading Access" and then "Trading Configuration" in Account Management, and then selecting the "USA (Equity Return Optimization Program)" field in the "Trading Authorizations" section.

The cash account must meet this minimum capital requirement only at the time of enrollment in the program. If the capital subsequently falls below the minimum required threshold, there are no consequences for existing loans or the ability to initiate new loans.

Customers who wish to terminate their participation in the Stock Return Optimization Program may do so by selecting "Trading Access" and then "Trading Configuration" in Account Management, and then unselecting their "USA (Stock Return Optimization Program)" field in the "Trading Authorizations" section. Termination requests are normally processed at the end of the day.

There is no guarantee that all eligible shares in a given account will be lent through the Stock Yield Optimization Program, as it is possible that there may not be advantageous interest rates for certain securities, that IB may not have access to a market of willing borrowers, or that IB may not want to lend your shares.

No. Loans can be made in any whole share quantities, but externally we lend shares only in multiples of 100, so there is a possibility that we might lend 75 shares from one customer and 25 from another if there were the external demand to lend 100 shares.

In the event that the demand for the loan of a particular security is less than the number of shares available from participants in the Share Yield Optimization Program, loans will be allocated on a pro rata basis (e.g. if the total supply is 20,000 and the demand is 10,000, 50% of a client's shares are expected to be lent).

It is possible that shares are lent to any counterparty and not exclusively to other IB clients.

No. The Program is administered entirely by IB. IB will determine in its sole discretion, after determining the securities that IB may lend pursuant to a margin loan, whether any of the fully paid or excess margin securities may be lent and to initiate loans.

The loan is terminated one day (T+1) after the respective action (trade, allocation, exercise) that resulted in the position being closed or reduced.

A halt will not directly affect the ability to lend shares. To the extent that IB can continue to lend the shares, such loan will continue regardless of whether or not the shares are subject to a trading halt.

No. The cash collateral securing the loan never affects the margin requirement or funding.

If a customer holds fully paid-up securities lent through the Equity Yield Optimization Program and subsequently initiates a margin loan, the loan will be terminated to the effect that the securities no longer qualify as excess margin securities. If a customer holds excess margin securities that were lent through the program and thereby increased the existing margin loan, the loan may again be terminated to the effect that the securities no longer qualify as excess margin securities.

The stock loan is automatically terminated in the following cases:

• If the customer terminates participation in the program
• Share transfer
• Lending of a certain amount against the shares
• Sale of shares
• Call allocation/put exercise
• Account closure

No. The lender of the securities has the right to vote or give consent with respect to the securities if the record date or the deadline for voting, giving consent or otherwise taking action falls within the term of the loan.

After logging out, you will not be able to re-register for the account for 90 days.