ORDINARY GENERAL SHAREHOLDERS MEETING OF BANCO SANTANDER, S.A. MARCH 2016

Transcription

1 ORDINARY GENERAL SHAREHOLDERS MEETING OF BANCO SANTANDER, S.A. MARCH 2016 Item One One A. One B. Annual accounts and corporate management. Examination and, if appropriate, approval of the annual accounts (balance sheet, profit and loss statement, statement of recognised income and expense, statement of changes in total equity, cash flow statement, and notes) of Banco Santander, S.A. and its consolidated Group, all with respect to the Financial Year ended 31 December Examination and, if appropriate, approval of the corporate management for Financial Year Proposals: 1 One A.- To approve the annual financial statements (balance sheet, income statement, statement of recognised income and expense, statement of changes in total equity, statement of cash flows, and notes) of Banco Santander, S.A. and of its consolidated Group, all with respect to the Financial Year ended 31 December One B.- To approve the corporate management for Financial Year Each of the proposals made under items One A and One B will be subject to a separate vote. (en) propuestas de acuerdos jgo 2016 (2) 1/123

2 Item Two Application of results obtained during Financial Year Proposal: To approve the application of results in the amount of 2,276,645, euros obtained by the Bank in Financial Year 2015, to be distributed as follows: Euros 2,268,134, for the payment of dividends already paid out prior to the date of the Ordinary General Shareholders Meeting (1,437,556, euros), for the acquisition of bonus share rights (derechos de asignación gratuita), with a waiver of the exercise thereof, from those shareholders who opted to receive in cash the remuneration equal to the second interim dividend (108,853, euros) under the Santander Dividendo Elección scrip dividend scheme and for the payment of the final cash dividend in a total amount of 721,724, million euros which will take place after next 1 May. Euros 8,510, to increase the Voluntary Reserve. Euros 2,276,645, in total. (en) propuestas de acuerdos jgo 2016 (2) 2/123

3 Item Three Three A. Three B. Three C. Three D. Three E. Three F. Three G. Board of directors: appointment, re-election or ratification of directors. Ratification of appointment of Ms Belén Romana García. Ratification of appointment of Mr Ignacio Benjumea Cabeza de Vaca. Re-election of Ms Sol Daurella Comadrán. Re-election of Mr Ángel Jado Becerro de Bengoa. Re-election of Mr Javier Botín-Sanz de Sautuola y O Shea. Re-election of Ms Isabel Tocino Biscarolasaga. Re-election of Mr Bruce Carnegie-Brown. REPORT SUBMITTED BY THE BOARD OF DIRECTORS OF BANCO SANTANDER, S.A. REGARDING THE PROPOSALS REFERRED TO IN ITEM THREE OF THE AGENDA FOR THE ORDINARY GENERAL SHAREHOLDERS MEETING CALLED FOR 17 MARCH 2016, ON FIRST CALL, AND FOR 18 MARCH 2016, ON SECOND CALL This report is made in compliance with the provisions of section 529 decies of the Spanish Capital Corporations Law (Ley de Sociedades de Capital) and is intended to provide a rationale for the proposals for ratification and re-election of directors of Banco Santander, S.A. (the Bank or the Company ) that are submitted for the approval of the shareholders acting at the ordinary general shareholders meeting under item Three of its agenda, evaluating for such purposes the expertise, experience and merits of the persons whose ratification or re-election is proposed at the general shareholders meeting. In light of the foregoing, the board s evaluations of the expertise, experience and merits of Ms Belén Romana García, Mr Ignacio Benjumea Cabeza de Vaca, Ms Sol Daurella Comadrán, Mr Ángel Jado Becerro de Bengoa, Mr Javier Botín-Sanz de Sautuola y O Shea, Ms Isabel Tocino Biscarolasaga and Mr Bruce Carnegie-Brown are included below, separately, in view of the reasoned proposal made by the appointments committee at its meeting of 11 February 2016, in accordance with the aforementioned section 529 decies of the Spanish Capital Corporations Law and articles 17.4 and 21 of the rules and regulations of the board, and with which the board concurs in all respects. The aforementioned proposal of the appointments committee is attached as an Exhibit to this management report. Similarly, for the purposes of section 518.e) of the Spanish Capital Corporations Law, this report contains full information on the identity, curriculum vitae and category of each one of the directors. (i) Ms Belén Romana García (item Three A) (a) Description of her profile: Born in 1965 in Madrid. Graduate in Business and Economics from Universidad Autónoma, Madrid, and a Government Economist (Economista del Estado). She was appointed a director of the Company on an interim basis at the board meeting of 22 December She is a non-executive director of Aviva plc, London. (en) propuestas de acuerdos jgo 2016 (2) 3/123

4 Other significant positions: she has served as director general for Economic Policy and head of the Spanish Treasury of the Ministry for Economy of the Spanish government, as well as director of the Bank of Spain (Banco de España) and of the Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores). She has also held the position of director of the Instituto de Crédito Oficial and of other entities on behalf of the Spanish Ministry for Economy. She has been executive chair of the asset management company Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria, S.A. (SAREB). (b) Evaluation: The board concurs with the evaluation of the appointments committee and considers that the curriculum vitae and business career of Ms Belén Romana García, who has successfully held various management positions, demonstrate that she has the expertise, experience and merits necessary to hold the position of director. (c) Category of director: The board concurs with the considerations of the appointments committee and considers Ms Belén Romana García to be an independent director, as she fulfils the requirements established in sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board. (ii) Mr Ignacio Benjumea Cabeza de Vaca (item Three B) (a) Description of his profile: Born in 1952 in Madrid. Graduate in Law from Universidad de Deusto, ICADE-E3 and State Attorney (Abogado del Estado). He was appointed a director of the Company on an interim basis at the board meeting of 30 June 2015, his appointment becoming effective on 21 September He is vice-chairman of the Foundation for Financial Studies (Fundación de Estudios Financieros) and a member of the Board of Trustees and of the Executive Committee of the Banco Santander Foundation. Other significant positions: he has been senior executive vice president, general secretary and secretary of the board of Banco Santander, S.A., Banco Santander de Negocios and of Santander Investment, as well as a director of the latter two entities. Furthermore, he has been technical secretary general of the Ministry for Employment and Social Security, general secretary of Banco de Crédito Industrial and a director of Dragados y Construcciones, S.A., Bolsas y Mercados Españoles (BME) and of the Governing Body of the Madrid Stock Exchange. (b) Evaluation: The board concurs with the evaluation of the appointments committee and considers that the curriculum vitae and business career of Mr Ignacio Benjumea (en) propuestas de acuerdos jgo 2016 (2) 4/123

5 Cabeza de Vaca, who has successfully held various management positions in both and public and private sectors, and in particular within the Santander Group, demonstrate that he has the expertise, experience and merits necessary to hold the position of director. (c) Category of director: The board, which concurs with the evaluation of the appointments committee, considers Mr Ignacio Benjumea Cabeza de Vaca to be an external (neither proprietary nor independent) director, pursuant to the provisions of sub-sections 2 to 4 of section 529 duodecies of the Spanish Capital Corporations Law and of article 6.2 of the rules and regulations of the board. (iii) Ms Sol Daurella Comadrán (item Three C) (a) Description of her profile: Born in 1966 in Barcelona. Graduate in Business and Master in Business Administration. She was appointed a director of the Company on an interim basis at the board meeting of 25 November 2014, her appointment becoming effective on 18 February She is executive chair of Olive Partners, S.A. and holds various positions in companies within Grupo Cobega. Other significant positions: she has been a member of the Governing Board of the Círculo de Economía and an independent external director of Banco Sabadell, S.A, Ebro Foods, S.A. and Acciona, S.A. She is also honorary consul-general for Iceland in Catalonia. (b) Evaluation: The board concurs with the evaluation of the appointments committee and considers that the curriculum vitae and business career of Ms Sol Daurella Comadrán, both in management positions and as an independent director of other large Spanish groups, demonstrate that she has the expertise, experience and merits necessary to hold the position of director. (c) Category of director: The board, which concurs with the evaluation of the appointments committee, considers Ms Sol Daurella Comadrán to be an independent director, as she fulfils the requirements established in sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board. (iv) Mr Ángel Jado Becerro de Bengoa (item Three D) (a) Description of his profile: Born in 1945 in Santander. Graduate in Law and Diploma in Business Administration and Management. He was appointed a director of the Company by the shareholders acting at the Ordinary General Shareholders Meeting on 11 June (en) propuestas de acuerdos jgo 2016 (2) 5/123

6 Other significant positions: he was a director of Banco Santander between 1972 and 1999, and a director of Banco Banif, S.A. between 2001 and He also currently holds various positions in investment trusts. (b) Evaluation: The board concurs with the evaluation of the appointments committee and considers that the curriculum vitae and business career of Mr Ángel Jado Becerro de Bengoa within the Santander Group demonstrate that he has the expertise, experience and merits necessary to hold the position of director. (c) Category of director: The board, which concurs with the considerations of the appointments committee, considers Mr Ángel Jado Becerro de Bengoa to be an independent director, as he fulfils the requirements established in sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board. (v) Mr Javier Botín-Sanz de Sautuola y O Shea (item Three E) (a) Description of his profile: Born in 1973 in Santander. Graduate in Law. He was appointed a director of the Company by the board of directors at its meeting of 25 July He is chairman and chief executive officer of JB Capital Markets, Sociedad de Valores, S.A.U. Other significant positions: in addition to his professional activity in the financial sector, he works with several non-profit organisations. He has been chairman of the Botín Foundation since 2014 and is also a trustee of Princesa de Girona Foundation and of the Prehistoric Research Institute of Cantabria. (b) Evaluation: The board concurs with the evaluation of the appointments committee and considers that the curriculum vitae and business career of Mr Javier Botín-Sanz de Sautuola y O Shea within the Santander Group, as well as in management positions outside the Group, demonstrate that he has the expertise, experience and merits necessary to hold the position of director. (c) Category of director: D. Javier Botín-Sanz de Sautuola y O Shea is an external proprietary director, in accordance with sub-section 3 of section 529 duodecies of the Spanish Capital Corporations Law and article 6.2(b) of the rules and regulations of the board. (vi) Ms Isabel Tocino Biscarolasaga (item Three F) (a) Description of her profile: Born in 1949 in Santander. Doctor in Law. She has undertaken graduate studies in business administration at IESE and the Harvard Business School. She joined the board of directors of the Bank in (en) propuestas de acuerdos jgo 2016 (2) 6/123

7 She is a full professor at Universidad Complutense de Madrid. Other significant positions: she has been Spanish Minister for the Environment, chairwoman of the European Affairs Committee and of the Foreign Affairs Committee of the Spanish Congress and chairwoman for Spain and Portugal and vice-chairwoman for Europe of Siebel Systems. She is currently an elected member of the Spanish State Council, a member of the Royal Academy of Doctors and a non-executive director of ENCE Energía y Celulosa, S.A., Naturhouse Health, S.A. and Enagás, S.A. (b) Evaluation: The board concurs with the evaluation of the appointments committee and considers that the curriculum vitae and business career of Ms Isabel Tocino Biscarolasaga, in both the public and private sectors as well as within the Santander Group, demonstrate that she has the expertise, experience and merits necessary to hold the position of director. (c) Category of director: The board, which concurs with the evaluation of the appointments committee, considers Ms Isabel Tocino Biscarolasaga to be an independent director, as she fulfils the requirements established in sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board. (vii) Mr Bruce Carnegie-Brown (item Three G) (a) Description of his profile: Born in 1959 in Freetown (Sierra Leone). Master of Arts degree in English Language and Literature from the University of Oxford. He was appointed a director of the Company on an interim basis at the board meeting of 25 November 2014, his appointment becoming effective on 12 February He is the first vice-chairman and lead director (consejero coordinador) of the Company. Other significant positions: he was previously non-executive chairman of Aon UK Ltd, founder and managing partner of the quoted private equity division of the private equity fund 3i Group Plc., chairman and chief executive officer of Marsh Europe, and has held various positions at JP Morgan Chase and Bank of America. He was also independent lead director of Close Brothers Group plc ( ) and Catlin Group Ltd ( ). Currently, he is non-executive chairman of Moneysupermarket.com Group Plc and a non-executive director of Santander UK Plc. (b) Evaluation: The board concurs with the evaluation of the appointments committee and considers that the curriculum vitae and business career of Mr Bruce Carnegie- Brown and, in particular, his good work at Santander UK plc in recent years (en) propuestas de acuerdos jgo 2016 (2) 7/123

8 demonstrate that he has the expertise, experience and merits necessary to hold the position of director, vice-chairman and lead director. (c) Category of director: The board, which concurs with the considerations of the appointments committee, considers Mr Bruce Carnegie-Brown to be an independent director, as he fulfils the requirements established in sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board. (en) propuestas de acuerdos jgo 2016 (2) 8/123

9 EXHIBIT REASONED PROPOSAL OF THE APPOINTMENTS COMMITTEE (MEETING OF 11 FEBRUARY 2016) REASONED PROPOSAL OF THE APPOINTMENTS COMMITTEE OF BANCO SANTANDER, S.A. REGARDING THE RATIFICATIONS AND RE-ELECTIONS OF DIRECTORS OF BANCO SANTANDER, S.A. WHICH ARE SUBMITTED FOR THE APPROVAL OF THE SHAREHOLDERS ACTING AT THE NEXT ORDINARY GENERAL SHAREHOLDERS MEETING This reasoned proposal is made in accordance with the provisions of section 529 decies of the Spanish Capital Corporations Law and of articles 17.4 and 21 of the rules and regulations of the board, and is intended to propose to the board of directors of Banco Santander, S.A. (the Bank or the Company ) the ratifications and re-elections of directors to be submitted to the shareholders acting at the next ordinary general shareholders meeting. Pursuant to the aforementioned article 21 of the rules and regulations of the board of the Company, the appointments committee shall prepare a reasoned report on and proposal for appointments, re-elections and ratifications of directors, regardless of the category to which they are assigned. Similarly, in the event of re-election or ratification of a director, the proposal shall contain an evaluation of work performed and effective dedication to the position during the last period of time during which the proposed director held office. The analysis of the board s competencies matrix performed in 2015, with the support of independent advisors, found that the skills to be emphasized in order to engage the profiles best aligned with the strategic objectives of the Group were the following: business expertise beyond banking, new technologies, strategy, international experience, financial and regulatory expertise, and diversity (particularly in number of women). Such analysis led to the appointment on an interim basis of the directors whose ratification is proposed at the general shareholders meeting. Similarly, taking into account the board s current competencies matrix, it is considered appropriate to re-elect the persons referred to in section II of this report, also taking into account the analysis that is included herein regarding the evaluation of their work and effective dedication. The report on the activities of this committee in financial year 2015, which will be published upon the call of the next ordinary general shareholders meeting, includes the board s competencies matrix and describes the process of analysing the needs of the board in greater detail. Pursuant to all of the foregoing, the committee s proposal is the following: I. Ratifications At the proposal of this committee, the Company s board of directors appointed Mr Ignacio Benjumea Cabeza de Vaca as director of the Company on 30 June 2015, and Ms Belén Romana García as director of the Company on 22 December 2015, under the powers of interim appointment legally delegated thereto. It is therefore necessary to submit their ratification, to the shareholders acting at the next ordinary general shareholders meeting, as detailed below. (en) propuestas de acuerdos jgo 2016 (2) 9/123

10 For purposes of the evaluation of the work and effective dedication of these directors, it must be taken into account that the aforementioned appointments became effective on 21 September 2015, in the case of Mr Ignacio Benjumea Cabeza de Vaca, once obtained the relevant authorisation from the Central European Bank (confirming his suitability for the position), and on the same 22 December 2015, in the case of Ms Belén Romana García, due to having obtained the corresponding authorisation prior to her appointment by the board. The relevant considerations for the proposed ratification of each one of these directors are set forth below: (a) Ms Belén Romana García It is proposed to ratify her appointment as an independent director. From the information available to the Bank, Ms Belén Romana García has the necessary knowledge and experience to perform the duties of her position. She is a graduate in Business and Economics from Universidad Autónoma de Madrid and has undertaken postgraduate studies at Tufts University, United States, as well as an International Economics programme at the University of Harvard. She is also a Government Economist (Economista del Estado). Ms Belén Romana García has significant experience as a business manager and has held executive positions at the highest levels in institutions from various sectors and countries. She is currently part of the board of directors of the British insurer Aviva Plc., a FTSE100 company serving 34 million clients in 16 countries, being a member of said company s risk, nomination, and governance committees. She has previously held various executive positions, in both the public and the private sector. Specifically: (i) she worked at Fraser Consulting A.G., Essen, Germany; (ii) she was a fixed-income, options and futures trader at Bestinver; (iii) she practised as a Government Economist in the General Directorate of Economic Policy; (iv) she was director general for Economic Policy; (v) she was head of the Spanish Treasury and Financial Policy; (vi) she was general secretary of Círculo de Empresarios; (vii) she was head of strategy and corporate development at ONO; and (viii) she was executive chair of the asset management company SAREB. Apart from the aforementioned executive positions, Ms Romana has also held non-executive positions, including the following, among others: (i) member of the boards of directors of various companies and public agencies in different sectors and activities as a representative of the Ministry for Economy of the Kingdom of Spain; (ii) director of tha Bank of Spain and of the Spanish National Securities Market Commission (CNMV), (iii) head of the Spanish delegation of the European Union s Financial Services, Banking Supervision and Securities Committees, representing the Directorate General of the Treasury and Finance Policy; (iv) independent director and member of the nominating and compensation committee at Fortis Holding SA/NV; (v) independent director, chair (en) propuestas de acuerdos jgo 2016 (2) 10/123

11 of the remuneration committee and member of the audit committee at Banesto; (vi) independent director and chair of the audit committee at Acerinox; and (vii) member of the European Commission s Expert Group on a Debt Redemption Fund and Eurobills. Consequently, it is considered that Ms Belén Romana García has the expertise, experience and merits necessary to hold the position of director. Additionally, for the purposes established in Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, in Royal Decree 84/2015, of 13 February, implementing Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, and in the internal procedure for the selection and on-going evaluation of key personnel for the performance of banking activities within the Santander Group, this committee reaffirms that, at this date, Ms Belén Romana García possesses the necessary knowledge and experience to hold the position of director of the Company and that she is able to carry out good governance thereof, having assessed the content and currency of the reputation and good corporate governance questionnaire completed by the subject, her professional background, and the suitability report issued by the Company s Legal Affairs and Compliance divisions. Additionally, according to the information provided, Ms Belén Romana García is within the maximum number of positions established in section 26 of Law 10/2014, of 26 June, and she is considered able to devote sufficient time to performing the duties of her position. With reference to the evaluation of the work and effective dedication of the director from her appointment to the present date, this committee notes the performance of the duties of her position and her attendance at and informed participation in the meetings of the board and of the audit committee since her appointment on 22 December Furthermore, Ms Belén Romana García has participated in the information programme made available to new directors by the Bank, which has provided her with quick and sufficient knowledge of the Company and of its Group, including its governance rules. Finally, with respect to the category of director, this committee considers that Ms Belén Romana García fulfils the requirements established in sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board to be considered an independent director. (b) Mr Ignacio Benjumea Cabeza de Vaca It is proposed to ratify his appointment as an external (neither proprietary nor independent) director. From the information available to the Bank, Mr Ignacio Benjumea Cabeza de Vaca has the necessary knowledge and experience to perform the duties of his position. (en) propuestas de acuerdos jgo 2016 (2) 11/123

12 He is graduate in Law and Business Administration from Universidad de Deusto, (ICADE E-3, and a State Attorney (Abogado del Estado). He is vice-chairman of the Foundation for Financial Studies (Fundación de Estudios Financieros) and a member of the board of trustees and of the executive committee of Fundación Banco Santander. He has performed various duties within the Bank s Group at the highest level of demands and responsibility, having performed the role of senior executive vice president, general secretary and secretary of the board of Banco Santander, S.A. and, previously, director and executive vice president of Banco Santander de Negocios and Santander Investment. Additionally, during his professional career he has held positions involving high responsibility, complexity and expertise in the management of companies in various sectors, including institutions within or related to the financial sector. Specifically, before joining the board of directors of the Bank as a director, Mr Benjumea Cabeza de Vaca performed the duties of (i) director of Dragados y Construcciones, S.A., (ii) director of the Governing Body of Bolsa de Valores de Madrid, S.A., (iii) director of Bolsas y Mercados Españoles, holding company of Mercados y Sistemas Financieros, S.A., (iv) general secretary and secretary of the board of Banco de Crédito Industrial, (v) technical secretary general of the Ministry for Employment and Social Security, and (vi) assistant director-general of the Ministry for Territorial Administration. Consequently, it is considered that Mr Ignacio Benjumea Cabeza de Vaca has the expertise, experience and merits necessary to hold the position of director. Additionally, for the purposes established in Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, in Royal Decree 84/2015, of 13 February, implementing Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, and in the internal procedure for the selection and on-going evaluation of key personnel for the performance of banking activities within the Santander Group, this committee reaffirms that, at this date, Mr Ignacio Benjumea Cabeza de Vaca possesses the necessary knowledge and experience to hold the position of director of the Company and that he is able to carry out good governance thereof, having assessed the content and currency of the reputation and good corporate governance questionnaire completed by the subject, his professional background, and the suitability report issued by the Company s Legal Affairs and Compliance divisions. Additionally, according to the information provided, Mr Benjumea Cabeza de Vaca is within the maximum number of positions established in section 26 of Law 10/2014, of 26 June, and he is considered able to devote sufficient time to performing the duties of his position. With reference to the need to evaluate the work and effective dedication of the director from the effective date of his appointment to the present date, this committee notes that his appointment became effective on 21 September From then to the present date, this committee notes the performance of the duties (en) propuestas de acuerdos jgo 2016 (2) 12/123

13 II. of his position and his attendance at and informed participation in the meetings of the board, the executive committee, the appointments committee, the remuneration committee and the risk supervision, regulation and compliance committee,. Furthermore, it is noted that, given the extensive experience of Mr Ignacio Benjumea Cabeza de Vaca as general secretary and secretary of the Board of the Bank until the past year, he has detailed knowledge of the Company and of its Group, including its governance rules, without prejudice to which he has participated in the information programme made available to new directors by the Bank. Finally, with respect to the category of director, this committee considers that Mr Ignacio Benjumea Cabeza de Vaca should be considered an external (neither proprietary nor independent) director pursuant to sub-sections 2 to 4 of section 529 duodecies of the Spanish Capital Corporations Law and to the provisions of article 6.2 of the rules and regulations of the board, particularly taking into account that until his appointment as a director he had been part of the senior management of the Company. Re-elections Pursuant to article 55.1 of the Bylaws, the term of office of directors shall be three years, though it is established that one-third of the board shall be renewed every year, following the order established by the length of service of each director on the board, according to the date and order of the respective appointment. Consequently, it is proposed to re-elect Ms Sol Daurella Comadrán, Mr Ángel Jado Becerro de Bengoa, Mr Javier Botín-Sanz de Sautuola y O Shea, Ms Isabel Tocino Biscarolasaga and Mr Bruce Carnegie-Brown. The detailed report for each one of these directors is set forth below: (a) Ms Sol Daurella Comadrán It is proposed to re-elect her as an independent director for the Bylaw-mandated period of three years. From the information available to the Bank, Ms Sol Daurella Comadrán has the necessary knowledge and experience to perform the duties of her position. She is a graduate in Business and has an Master in Business Administration from ESADE Business School. She has significant experience as a business manager and has held executive positions at the highest level in institutions from various sectors and countries. Ms Daurella is executive chair of Olive Partners, S.A. and holds various positions in companies linked to Grupo Cobega. In particular, she is a director of: (i) The Equatorial Coca-Cola Bottling Company, holding company of the bottling companies of Coca-Cola in Cape Verde, Guinea-Conakry, Guinea-Bissau, Equatorial Guinea, Gambia, Sierra Leone, Ghana, Liberia and São Tomé, (ii) Nord Africa Bottling Company, holding company of the bottling companies of Coca-Cola in Fez, Marrakech, Casablanca, Rabat and Mauritania, and (en) propuestas de acuerdos jgo 2016 (2) 13/123

14 (iii) Vifilfell, franchise and bottling company of Coca-Cola in Iceland. She is also co-chairman of Cacaolat. She has previously held positions, among others, in the following institutions: (i) Sud-Boissons and Société de Boissons Gazeuses de la Côte d Azur, bottlers for Coca-Cola in Toulouse and the French Riviera, (ii) Copesco & Sefrisa, S.A., importer and distributor of cod, producer of smoked salmon and other high-end gastronomic products and distributor of French and Spanish wines, (iii) J. Walter Thompson, one of the main advertising agencies of the sector in Spain, (iv) Banesto Banca Privada, banking institution part of the former Grupo Banesto (previously Bandesco), (v) Electrolux, S.A., Spanish subsidiary of the Swedish multinational fundamentally dedicated to the manufacture and distribution of electro-domestic goods, (vi) Permutadora, S.A., packaging company and distributor of veterinary products in Portugal, (vii) Emisions Digitals de Catalunya, S.A., operating platform of Televisión Terrestre Digital in Spain, of Grupo Godó; (viii) Banco de Sabadell, S.A., Ebro Foods, S.A. and Acciona, S.A., as independent director; and (ix) Teatre Nacional de Catalunya. She is a member of the boards of trustees of various foundations and honorary consul-general for Iceland in Catalonia. Consequently, it is considered that Ms Sol Daurella Comadrán has the expertise, experience and merits necessary to hold the position of director. Additionally, for the purposes established in Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, in Royal Decree 84/2015, of 13 February, implementing Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, and in the internal procedure for the selection and on-going evaluation of key personnel for the performance of banking activities within the Santander Group, this committee reaffirms that, at this date, Ms Sol Daurella Comadrán possesses the necessary knowledge and experience to hold the position of director of the Company and that she is able to carry out good governance thereof, having assessed the content and currency of the reputation and good corporate governance questionnaire completed by the subject, her professional background, and the suitability report issued by the Company s Legal Affairs and Compliance divisions. Additionally, according to the information provided, Ms Sol Daurella Comadrán is within the maximum number of positions established in section 26 of Law 10/2014, of 26 June, and she is considered able to devote sufficient time to performing the duties of her position. With reference to the evaluation of the work and effective dedication of the director from the ratification of her appointment at the ordinary general shareholders meeting in financial year 2015 to the present date, this committee notes the performance of the duties of her position and her attendance at and informed participation in the meetings of the board and of the appointments and remuneration committees. Finally, with respect to the category of director, this committee considers that Ms Sol Daurella Comadrán fulfils the requirements established in sub-section 4 of (en) propuestas de acuerdos jgo 2016 (2) 14/123

15 section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board to be considered an independent director. (b) Mr Ángel Jado Becerro de Bengoa It is proposed to re-elect him as an independent director for the Bylaw-mandated period of three years. From the information available to the Bank regarding Mr Ángel Jado Becerro de Bengoa and from his career within the Santander Group, he has the necessary knowledge and the detailed experience of the Company and its Group to perform the duties of his position. He is a graduate in Law and holds a diploma in Business Administration and Management, for which reason he has appropriate academic training to perform the duties of his position. He was a director of Banco Santander between 1972 and Between 2001 and 2013, he was a director of Banco Banif, S.A. In 2010, he was again appointed as a director of Banco Santander, for which position he was re-elected in He also currently holds various positions in investment truts. Consequently, it is considered that Mr Ángel Jado Becerro de Bengoa has the expertise, experience and merits necessary to hold the position of director. Additionally, for the purposes established in Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, in Royal Decree 84/2015, of 13 February, implementing Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, and in the internal procedure for the selection and on-going evaluation of key personnel for the performance of banking activities within the Santander Group, this committee reaffirms that, at this date, Mr Ángel Jado Becerro de Bengoa possesses the necessary knowledge and experience to hold the position of director of the Company and that he is able to carry out good governance thereof, having assessed the content and currency of the reputation and good corporate governance questionnaire completed by the subject, his professional background, and the suitability report issued by the Company s Legal Affairs and Compliance divisions. Additionally, according to the information provided, Mr Ángel Jado Becerro de Bengoa is within the maximum number of positions established in section 26 of Law 10/2014, of 26 June, and he is considered able to devote sufficient time to performing the duties of his position. With reference to the evaluation of the work and effective dedication of the director from his re-election at the ordinary general shareholders meeting in financial year 2013 to the present date, this committee notes the performance of the duties of his position and his attendance at and informed participation in the meetings of the board, the audit committee, the appointments committee, the remuneration committee, and the risk supervision, regulation and compliance committee. (en) propuestas de acuerdos jgo 2016 (2) 15/123

16 Finally, with respect to the category of director, this committee considers that Mr Ángel Jado Becerro de Bengoa fulfils the requirements established in sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board to be considered an independent director. (c) Mr Javier Botín-Sanz de Sautuola y O Shea It is proposed to re-elect him as a proprietary director for the Bylaw-mandated period of three years. From the information available to the Bank regarding Mr Javier Botín-Sanz de Sautuola y O Shea and from his career within the Group, he has the necessary knowledge and experience to perform the duties of his position. He is a graduate in Law, for which reason he has appropriate academic training to perform the duties of his position. He has also held positions of high responsibility, complexity and expertise as part of the management of various institutions for more than ten years. He joined the Group in 2004 as a director of Banco Santander. He currently holds the position of chairman and chief executive officer of JB Capital Markets, Sociedad de Valores, S.A. In addition to his professional activity in the financial sector, he cooperates with several non-profit making organisations. He has been chairman of Fundación Botín since 2014 and is a trustee of Fundación Princesa de Girona and of the Prehistoric Research Institute of Cantabria. Consequently, it is considered that Mr Javier Botín-Sanz de Sautuola y O Shea has the expertise, experience and merits necessary to hold the position of director. Additionally, for the purposes established in Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, in Royal Decree 84/2015, of 13 February, implementing Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, and in the internal procedure for the selection and on-going evaluation of key personnel for the performance of banking activities within the Santander Group, this committee reaffirms that, at this date, Mr Javier Botín-Sanz de Sautuola y O Shea possesses the necessary knowledge and experience to hold the position of director of the Company and that he is able to carry out good governance thereof, having assessed the content and currency of the reputation and good corporate governance questionnaire completed by the subject, his professional background, and the suitability report issued by the Company s Legal Affairs and Compliance divisions. Additionally, according to the information provided, Mr Javier Botín- Sanz de Sautuola y O Shea is within the maximum number of positions established in section 26 of Law 10/2014, of 26 June, and he is considered able to devote sufficient time to performing the duties of his position. With reference to the evaluation of the work and effective dedication of the director from his re-election at the ordinary general shareholders meeting in (en) propuestas de acuerdos jgo 2016 (2) 16/123

17 financial year 2013 to the present date, this committee notes the performance of the duties of his position and his attendance at and informed participation in the board meetings that have been held. Finally, with respect to the category of director, this committee considers that Mr Javier Botín-Sanz de Sautuola y O Shea fulfils the requirements established in sub-section 3 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(b) of the rules and regulations of the board to be considered a proprietary director. (d) Ms Isabel Tocino Biscarolasaga It is proposed to re-elect her as an independent director for the Bylaw-mandated period of three years. From the information available, Ms Isabel Tocino Biscarolasaga has the necessary knowledge and experience to perform the duties of her position. She is a doctor in Law, a full professor at Universidad Complutense de Madrid, and has undertaken senior management programmes at both IESE and the Harvard Business School, for which reason she has sufficient academic training to perform the duties of her position. During an extensive professional career, she has held positions of high responsibility, complexity and expertise in the public and private sectors. She has been Minister for the Environment, a member of the Spanish Congress, chairwoman of the European Affairs Committee and of the Foreign Affairs Committee of the Spanish Congress and chairwoman for Spain and Portugal and vice-chairwoman for Europe of Siebel Systems. She is currently an elected member of the Spanish State Council, a member of the Royal Academy of Doctors and a non-executive director of ENCE Energía y Celulosa, S.A., Naturhouse Health, S.A. and Enagás, S.A. She is also a member of the Advisory Board of Accenture. Consequently, it is considered that Ms Isabel Tocino Biscarolasaga has the expertise, experience and merits necessary to hold the position of director. Additionally, for the purposes established in Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, in Royal Decree 84/2015, of 13 February, implementing Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, and in the internal procedure for the selection and on-going evaluation of key personnel for the performance of banking activities within the Santander Group, this committee reaffirms that, at this date, Ms Isabel Tocino Biscarolasaga possesses the necessary knowledge and experience to hold the position of director of the Company and that she is able to carry out good governance thereof, having assessed the content and currency of the reputation and good corporate governance questionnaire completed by the subject, her professional background, and the suitability report issued by the Company s Legal Affairs and Compliance divisions. Additionally, according to the information provided, Ms Isabel Tocino (en) propuestas de acuerdos jgo 2016 (2) 17/123

18 Biscarolasaga is within the maximum number of positions established in section 26 of Law 10/2014, of 26 June, and she is considered able to devote sufficient time to performing the duties of her position. With reference to the evaluation of the work and effective dedication of the director from her re-election at the ordinary general shareholders meeting in financial year 2013 to the present date, this committee notes the performance of the duties of her position and her attendance at and informed participation in the meetings of the board, the executive committee, the delegated risk committee (until its abolition), the audit committee, the remuneration committee and the risk supervision, regulation and compliance committee. Finally, with respect to the category of director, this committee considers that pursuant to sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and to article 6.2(c) of the rules and regulations of the board, she must be considered an independent director. (e) Mr Bruce Carnegie-Brown It is proposed to re-elect him as an independent director for the Bylaw-mandated period of three years. From the information available to the Bank, Mr Bruce Carnegie-Brown has the necessary knowledge and experience to perform the duties of his position. He is a university graduate (Master of Arts in English Language and Literature) from the University of Oxford and has held positions of high responsibility, complexity and expertise in entities from different sectors, including the financial sector, for more than thirty years. He was founder and managing partner of 3i Quoted Private Equity plc (quoted private equity division of 3i Group plc). Among others, he has also held the positions of chief executive officer in various entities of the Marsh & McLennan group between 2003 and 2006, Head of Debt Markets in Europe and Asia at JP Morgan (January 2001 to January 2003), independent lead director of Catlin Group Limited (August 2010 to May 2014) and Close Brothers Group plc (June 2008 to November 2014), and of non-excutive chairman of Aon UK Ltd (October 2012 to November 2015). He is currently a non-executive director of Santander UK plc and non-executive chairman of Moneysupermarket.com Group plc. Additionally, for the purposes established in Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, in Royal Decree 84/2015, of 13 February, implementing Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit institutions, and in the internal procedure for the selection and on-going evaluation of key personnel for the performance of banking activities within the Santander Group, this committee reaffirms that, at this date, Mr Bruce Carnegie-Brown possesses the necessary knowledge and experience to hold the position of director of the Company and that he is able to carry out good governance thereof, having assessed the content and currency of the reputation and good corporate governance questionnaire (en) propuestas de acuerdos jgo 2016 (2) 18/123

19 Proposals: 1 Three A.- Three B.- completed by the subject, his professional background, and the suitability report issued by the Company s Legal Affairs and Compliance divisions. Additionally, according to the information provided, Mr Bruce Carnegie-Brown is within the maximum number of positions established in section 26 of Law 10/2014, of 26 June, and he is considered able to devote sufficient time to performing the duties of his position. With reference to the need to evaluate the work and effective dedication of the director from the ratification of his appointment at the ordinary general shareholders meeting in financial year 2015 to the present date, this committee notes the performance of the duties of his position and his attendance at and informed participation in the meetings of the board, the executive committee, the appointments committee, the remuneration committee and the risk supervision, regulation and compliance committee. Finally, with respect to the category of director, this committee considers that Mr Bruce Carnegie-Brown fulfils the requirements established in sub-section 4 of section 529 duodecies of the Spanish Capital Corporations Law and in article 6.2(c) of the rules and regulations of the board to be considered an independent director. To ratify the appointment of Ms Belén Romana García as a director, which appointment was approved by the board at its meeting of 22 December Ms Belén Romana García will be classified as an independent director. To ratify the appointment of Mr Ignacio Benjumea Cabeza de Vaca as a director, which appointment was approved by the board at its meeting of 30 June 2015, effective from 21 September Mr Ignacio Benjumea Cabeza de Vaca will be classified as an external (neither proprietary nor independent) director. With reference to the annual renewal of one-third of the board positions as provided by article 55 of the Bylaws, to re-elect the following persons for a new three-year period: Three C.- Three D.- Three E.- Three F.- To re-elect Ms Sol Daurella Comadrán as a director, with the classification of independent director. To re-elect Mr Ángel Jado Becerro de Bengoa as a director, with the classification of independent director. To re-elect Mr Javier Botín-Sanz de Sautuola y O Shea as a director, with the classification of external proprietary director. To re-elect Ms Isabel Tocino Biscarolasaga as a director, with the classification of independent director. 1 Each one of the ratification and re-election proposals made under items Three A to Three G shall be submitted to a separate vote. (en) propuestas de acuerdos jgo 2016 (2) 19/123

20 Three G.- To re-elect Mr Bruce Carnegie-Brown as a director, with the classification of independent director. (en) propuestas de acuerdos jgo 2016 (2) 20/123

21 Item Four Appointment of the external auditor for Financial Years 2016, 2017 and As was reported as a significant event (hecho relevante) on 6 July 2015, the board of directors of Banco Santander, S.A. has selected PricewaterhouseCoopers Auditores, S.L. to perform the external audit of Banco Santander and of its consolidated Group. This decision was adopted in line with corporate governance recommendations regarding the rotation of the external auditor, at the proposal of the audit committee and as the result of a fully transparent selection process. Proposal: For the verification of the annual accounts and of the management report of the Bank and of the consolidated Group corresponding to Financial Years 2016, 2017 and 2018, to elect PricewaterhouseCoopers Auditores, S.L., with registered office in Madrid, Paseo de la Castellana, nº 259 B, with Tax ID Code B and registered in the Official Registry of Auditors of Accounts (Registro Oficial de Auditores de Cuentas) of the Accounting and Audit Institute (Instituto de Contabilidad y Auditoría de Cuentas) of the Ministry for Economy and Competition with number S0242, as external auditor. (en) propuestas de acuerdos jgo 2016 (2) 21/123

22 Item Five Five A. Amendment of the following articles of the Bylaws: Amendment of article 23 (power and duty to call a meeting), related to the general shareholders meeting. Five B. Amendment of articles regarding the board of directors: article 40 (creation of shareholder value) and article 45 (secretary of the board). Five C. Amendment of articles regarding the committees of the board: article 50 (committees of the board of directors), article 53 (audit committee), article 54 (appointments committee), article 54 bis (remuneration committee) and article 54 ter (risk supervision, regulation and compliance committee). REPORT SUBMITTED BY THE BOARD OF DIRECTORS OF BANCO SANTANDER, S.A. REGARDING THE PROPOSAL INCLUDED IN ITEM FIVE OF THE AGENDA FOR THE ORDINARY GENERAL SHAREHOLDERS MEETING CALLED FOR 17 MARCH 2016, ON FIRST CALL, AND FOR 18 MARCH 2016, ON SECOND CALL. I. Introduction and purpose of the report This report is prepared in compliance with the provisions of section 286 of the Spanish Capital Corporations Law (Ley de Sociedades de Capital) in order to provide a rationale for the proposed amendments of the Bylaws of Banco Santander, S.A. (the Bank or the Company ), which are submitted for approval of the shareholders at the general shareholders meeting under item Five of the agenda thereof. The Bylaws contain the rules for the organisation of the Company and, at the same time, establish and define or specify the rights and obligations of the shareholders to the extent allowed by the mandatory rules of law. This scope of the Bylaws, which explains the natural tendency towards a certain stability of their regulatory content, is not in any way incompatible with the possibility of an amendment thereof. On the contrary, companies should revise, update and technically improve their organisational structure and operating rules in order to have at all times the appropriate instruments to respond rapidly and efficiently to changing needs due to amendments in legislation or other reasons that might arise. A modification of the Bylaws normally provides the appropriate framework to carry out these updates. For this purpose, it is deemed beneficial to the corporate interest to propose to the shareholders acting at the Bank s general shareholders meeting the amendment of certain bylaw provisions, including some new provisions and modifying others which have been in effect until now. Specifically, the proposed amendments involve articles 23 (sub-section 3), 40 (sub-section 1), 45 (sub-section 2), 50 (sub-section 2), 53 (sub-sections 1, 2, 4 and 5), 54 (sub-section 2), 54 bis (sub-section 2) and 54 ter (sub-section 2). II. Rationale for and organisation of the proposal The amendment of the Bylaws submitted to the shareholders at the general shareholders meeting principally seeks to conform the Bylaws to: (i) certain amendments of the Spanish Capital Corporations Law, introduced by Law 15/2015 of 2 July on Voluntary Jurisdiction (the Voluntary Jurisdiction Law ) and Law 22/2015 of 20 July on the Audit of Financial Statements (the Audit Law ); and (ii) the recommendations of the new good governance (en) propuestas de acuerdos jgo 2016 (2) 22/123

23 code of listed companies, approved by resolution of the Board of the National Securities Market Commission (Comisión Nacional del Mercado de Valores) on 18 February 2015 (the New Code ), which replaces the unified good governance code of listed companies of 2006 (in its restated version published in June 2013, the Unified Code ). Additionally, certain amendments seek to introduce greater flexibility in the Bylaws regarding the composition of the committees of the board. III. Detailed rationale for the proposal The proposed amendments are justified and explained in greater detail below: 1. Proposed amendment of sub-section 3 of article 23 It is proposed to amend sub-section 3 of article 23 of the Bylaws to conform it to section 169 of the Spanish Capital Corporations Law, as amended by the Voluntary Jurisdiction Law. As such, the reference to the power of the judge of the place where the registered office is located to call the ordinary general shareholders meeting in the circumstance described in sub-section 3 is replaced by a reference to the court clerk or company registrar of the place where the registered office is located, as established in the aforementioned rule of the Spanish Capital Corporations Law. 2. Proposed amendment of sub-section 1 of article 40 It is proposed to amend sub-section 1 of article 40 of the Bylaws to conform the text thereof to recommendation 12 of the New Code, which replaces recommendation 7 of the Unified Code, stating that the board of directors will be guided by the corporate interest, understood as the achievement of a business that is profitable and sustainable over the long term and that promotes the continuity thereof and the maximisation of the value of the company, in line with the provisions of article 5 of the Rules and Regulations of the Board. 3. Proposed amendment of sub-section 2 of article 45 The reform of sub-section 2 of article 45 of the Bylaws has the purpose of conforming the text of letter d) of such sub-section to recommendation 35 of the New Code, which replaces recommendation 17 of the Unified Code, stating that the secretary of the board shall ensure that the board of directors carries out its activities and adopts its decisions being mindful of the good governance recommendations applicable to the Company, in line with what is already provided in article 11 of the Rules and Regulations of the Board. 4. Proposed amendment of sub-section 2 of article 50 and of sub-sections 1, 2, 4 and 5 of article 53 The reform of article 53 of the Bylaws has a triple purpose. First, the proposed amendment of sub-section 1 of article 53 of the Bylaws consists of increasing the maximum number of members of the audit committee, currently set at seven directors, to a maximum of nine directors, which seeks to grant the Company s board of directors greater flexibility to establish the composition that is appropriate for the audit committee at any time, and the proposed amendment of sub-section 5 seeks to (en) propuestas de acuerdos jgo 2016 (2) 23/123

24 introduce a technical improvement, clarifying the scope of the meeting of the audit committee referred to in that sub-section. Second, the proposed amendments of sub-sections 2 and 4 of article 53 of the Bylaws seek to conform its text to the amendments introduced to section 529 quaterdecies of the Spanish Capital Corporations Law by the fourth final provision of the Audit Law, which will enter into force on 17 June First, it is proposed to amend sub-section 2 of article 53 of the Bylaws to include the requirement that the members of the audit committee, as a group, have the appropriate technical knowledge in the Company s sector of activity, as will be required under sub-section 1 of the aforementioned section 529 quaterdecies of the Spanish Capital Corporations Law. Second, it is proposed to amend sub-section 4 of article 53 of the Bylaws to conform the text outlining the duties of the audit committee to the changes introduced in subsection 4 of section 529 quaterdecies of the Spanish Capital Corporations Law, though they do not imply a substantial amendment of the current functioning of the Bank s audit committee. Finally, and with relation to the amendment of sub-section 4 of article 53 of the Bylaws, it is proposed to amend sub-section 2 of article 50 to clarify that, pursuant to the provisions of the Spanish Capital Corporations Law, the audit committee does have decision-making powers for the purposes of authorising the provision by the external auditor of non-audit services. 5. Proposed amendment of sub-section 2 of articles 54, 54 bis and 54 ter The proposed amendment of sub-section 2 of articles 54, 54 bis and 54 ter of the Bylaws consists of increasing the maximum number of members of the appointments, remuneration, and risk supervision, regulation and compliance committees, currently set at seven directors, to a maximum of nine directors, for the purpose of granting the Company s board of directors greater flexibility to establish the composition that is appropriate for these committees at any time. The content of the proposed amendments of the bylaws has been split into three items on the agenda (Five A, Five B and Five C) for purposes of the vote thereon. Each one of them corresponds to a block of articles, separated by subject matter: (i) (ii) The first block (corresponding to item Five A of the agenda) is made up of the sole proposal that affects the bylaw rules dedicated to the shareholders at the general shareholders meeting. It contains the proposed amendment of article 23 (power and duty to call a meeting). The second block (corresponding to item Five B of the agenda) encompasses those proposed amendments that affect the regulation in the bylaws dedicated to the board of directors. Within this block are the proposed amendments of articles 40 (creation of shareholder value) and 45 (secretary of the board). (iii)the third and final block (corresponding to item Five C of the agenda) groups together the proposed amendments regarding the committees of the board. This block includes the proposed amendments of articles 50 (committees of the board of directors), 53 (en) propuestas de acuerdos jgo 2016 (2) 24/123

25 (audit committee), 54 (appointments committee), 54 bis (remuneration committee) and 54 ter (risk supervision, regulation and compliance committee). It is stated for the record that, pursuant to the provisions of section 4.2.c) of Law 10/2014 of 26 June on the organisation, supervision and solvency of credit institutions, and of section 10 of Royal Decree 84/2015 of 13 February implementing Law 10/2014 of 26 June on the organisation, supervision and solvency of credit institutions, the proposed amendments of bylaw provisions covered by this report are subject to receipt of the applicable government approval. For easier identification and understanding of the proposed amendments, attached to this report as an Exhibit, for merely informational purposes, is a table providing a comparative view of the bylaw provisions proposed to be amended: the column on the left contains a transcription of the text currently in force, and the column on the right, the text of the proposed amendment. (en) propuestas de acuerdos jgo 2016 (2) 25/123

26 EXHIBIT COMPARATIVE INFORMATION REGARDING THE PROVISIONS OF THE BYLAWS PROPOSED TO BE AMENDED CURRENT TEXT PROPOSED AMENDMENT Bylaw amendments proposed under item Five A of the Agenda Article 23. Power and duty to call a meeting 1. The board of directors must call a general shareholders meeting: (a) When required pursuant to the provisions applicable to the ordinary general shareholders meeting as set forth in the preceding article. (b) When so requested by shareholders holding at least three percent of share capital, and such request sets forth the matters to be addressed at the meeting; in such case, the general shareholders meeting must be called by the board of directors to be held within two months of the date on which a notarial request for such (c) purpose is submitted to the board. When it deems it appropriate in the interest of the Company. 2. The board of directors shall prepare the agenda, which shall necessarily include the matters requested to be addressed. 3. If the ordinary general shareholders meeting is not called within the statutory time period, it may be called, at the request of the shareholders and upon notice thereof being given to the directors, by a judge of the place where the registered office is located, who shall also designate the person who is to preside over such Meeting. Article 23. Power and duty to call a meeting 1. The board of directors must call a general shareholders meeting: (a) When required pursuant to the provisions applicable to the ordinary general shareholders meeting as set forth in the preceding article. (b) When so requested by shareholders holding at least three percent of share capital, and such request sets forth the matters to be addressed at the meeting; in such case, the general shareholders meeting must be called by the board of directors to be held within two months of the date on which a notarial request for such (c) purpose is submitted to the board. When it deems it appropriate in the interest of the Company. 2. The board of directors shall prepare the agenda, which shall necessarily include the matters requested to be addressed. 3. If the ordinary general shareholders meeting is not called within the statutory time period, it may be called, at the request of the shareholders and upon notice thereof being given to the directors, by the court clerk or by the company registrar of the place where the registered office is located. (en) propuestas de acuerdos jgo 2016 (2) 26/123

27 Bylaw amendments proposed under item Five B of the Agenda Article 40. Creation of shareholder value 1. The board of directors and its representative decision-making bodies shall exercise their powers and, in general, perform their duties with a view to maximizing the value of the company in the interest of the shareholders. 2. Additionally, the board shall ensure that the Company faithfully complies with applicable law, respects the uses and good practices of the industries or countries where it carries out its activities and observes the additional principles of social responsibility that it has voluntarily accepted. Article 45. Secretary of the board 1. The board of directors, upon a prior report of the appointments committee, shall appoint a secretary. The secretary of the board of directors shall always be the general secretary of the company. 2. The secretary, in addition to the duties assigned thereto by law, the bylaws or the rules and regulations of the board, must perform the following: a) Keep the documentation of the board of directors, record the events of the meetings in the minute books and attest to the content thereof and of the resolutions adopted. b) Ensure the actions of the board of directors observe applicable law and are in accordance with the bylaws and other internal rules and regulations of the Company. c) Assist the chairman to ensure that the directors receive the Article 40. Creation of shareholder value 1. The board of directors and its representative decision-making bodies shall exercise their powers and, in general, perform their duties guided by the corporate interest, understood as the achievement of a business that is profitable and sustainable over the long term and that promotes the continuity thereof and the maximisation of the value of the company. 2. Additionally, the board shall ensure that the Company faithfully complies with applicable law, respects the uses and good practices of the industries or countries where it carries out its activities and observes the additional principles of social responsibility that it has voluntarily accepted. Article 45. Secretary of the board 1. The board of directors, upon a prior report of the appointments committee, shall appoint a secretary. The secretary of the board of directors shall always be the general secretary of the company. 2. The secretary, in addition to the duties assigned thereto by law, the bylaws or the rules and regulations of the board, must perform the following: a) Keep the documentation of the board of directors, record the events of the meetings in the minute books and attest to the content thereof and of the resolutions adopted. b) Ensure the actions of the board of directors observe applicable law and are in accordance with the bylaws and other internal rules and regulations of the Company. c) Assist the chairman to ensure that the directors receive the (en) propuestas de acuerdos jgo 2016 (2) 27/123

28 information relevant to the performance of their duties sufficiently in advance and in the proper form. d) Ensure the observance of the good governance recommendations assumed by the Company. e) Guarantee that the governance procedures and rules are respected and regularly reviewed. 3. The board of directors, upon a prior report of the appointments committee, may appoint a vice secretary in order that he shall assist the secretary of the board of directors or replace him in the event of absence, impossibility to act or illness. 4. In the event of absence or impossibility to act, the secretary and the vice secretary of the board may be replaced by the director appointed by the board itself from among the directors present at the meeting in question. The board may also resolve that any employee of the company act as such interim replacement. 5. The general secretary shall also be the secretary of all the committees of the board. information relevant to the performance of their duties sufficiently in advance and in the proper form. d) Ensure that the board of directors carries out its activities and adopts its decisions being mindful of the good governance recommendations applicable to the Company. e) Guarantee that the governance procedures and rules are respected and regularly reviewed. 3. The board of directors, upon a prior report of the appointments committee, may appoint a vice secretary in order that he shall assist the secretary of the board of directors or replace him in the event of absence, impossibility to act or illness. 4. In the event of absence or impossibility to act, the secretary and the vice secretary of the board may be replaced by the director appointed by the board itself from among the directors present at the meeting in question. The board may also resolve that any employee of the company act as such interim replacement. 5. The general secretary shall also be the secretary of all the committees of the board. Bylaw amendments proposed under item Five C of the Agenda Article 50. Committees of the board of directors 1. Without prejudice to such powers as may be delegated individually to the chairman, the chief executive officer or any other director and to the power of the board of directors to establish committees for each specific area of business, the board of directors may establish an executive committee, to which general decision-making powers Article 50. Committees of the board of directors 1. Without prejudice to such powers as may be delegated individually to the chairman, the chief executive officer or any other director and to the power of the board of directors to establish committees for each specific area of business, the board of directors may establish an executive committee, to which general decision-making powers (en) propuestas de acuerdos jgo 2016 (2) 28/123

29 shall be delegated, and an executive risk committee, to which powers shall be delegated in connection with risks. If such committees are established, their operation shall be governed by the provisions of articles 51 and 52 below. 2. The board may also establish committees with supervisory, reporting, advisory and proposal-making powers in connection with the matters within their scope of authority, and must in any event create the committees required by applicable law, including an audit committee, an appointments committee, a remuneration committee and a risk supervision, regulation and compliance committee. 3. To the extent not provided for in these bylaws, the operation of the committees of the board shall be governed by the provisions of the rules and regulations of the board. Article 53. Audit committee 1. The audit committee shall consist of a minimum of three directors and a maximum of seven, all of whom shall be external or non-executive, with independent directors having majority representation. 2. The members of the audit committee shall be appointed by the board of directors, taking into account their knowledge, skills and experience in the areas of accounting, auditing or risk management. 3. The audit committee must in all events be presided over by an independent director, who shall also be knowledgeable about and experienced shall be delegated, and an executive risk committee, to which powers shall be delegated in connection with risks. If such committees are established, their operation shall be governed by the provisions of articles 51 and 52 below. 2. The board may also establish committees with supervisory, reporting, advisory and proposal-making powers in connection with the matters within their scope of authority, and must in any event create the committees required by applicable law, including an appointments committee, a remuneration committee, a risk supervision, regulation and compliance committee and an audit committee, which for the purposes of sub-section 4(v) of article 53 will also have decision-making powers. 3. To the extent not provided for in these bylaws, the operation of the committees of the board shall be governed by the provisions of the rules and regulations of the board. Article 53. Audit committee 1. The audit committee shall consist of a minimum of three directors and a maximum of nine, all of whom shall be external or non-executive, with independent directors having majority representation. 2. The board of directors shall appoint the members of the audit committee taking into account their knowledge, skills and experience in the areas of accounting, auditing or risk management, such that, as a whole, the audit committee has the appropriate technical knowledge regarding the Company s sector of activity. 3. The audit committee must in all events be presided over by an independent director, who shall also be knowledgeable about and experienced (en) propuestas de acuerdos jgo 2016 (2) 29/123

30 in matters of accounting, auditing or risk management. The chairman of the audit committee shall be replaced every four years, and may be re-elected once after the passage of one year from the date on which his term of office expired. 4. The audit committee shall have at least the following powers and duties: (i) Have its chairman and/or secretary report to the general shareholders meeting with respect to matters raised therein by shareholders regarding its powers. (ii) Supervise the effectiveness of the Bank s internal control and internal audit, and discuss with the external auditor any significant weaknesses detected in the internal control system during the conduct of the audit. (iii) Supervise the process of preparation and submission of regulated financial information. (iv) Propose to the board of directors the selection, appointment, reelection and replacement of the external auditor, as well as the terms of its engagement, and in matters of accounting, auditing or risk management. The chairman of the audit committee shall be replaced every four years, and may be re-elected once after the passage of one year from the date on which his term of office expired. 4. The audit committee shall have at least the following powers and duties: (i) Have its chairman and/or secretary report to the general shareholders meeting with respect to matters raised therein by shareholders regarding its powers and, in particular, regarding the result of the audit, explaining how such audit has contributed to the integrity of the financial information and the role that the committee has performed in (ii) the process. Supervise the effectiveness of the Bank s internal control and internal audit, and discuss with the external auditor any significant weaknesses detected in the internal control system during the conduct of the audit, all without violating its independence. For such purposes, if applicable, the audit committee may submit recommendations or proposals to the board of directors and set the corresponding period for compliance therewith. (iii) Supervise the process of preparation and submission of regulated financial information and submit recommendations or proposals intended to safeguard its integrity to the board of directors. (iv) Propose to the board of directors the selection, appointment, reelection and replacement of the external auditor, taking responsibility for the selection (en) propuestas de acuerdos jgo 2016 (2) 30/123

31 regularly gather information therefrom regarding the audit plan and the implementation thereof, in addition to preserving its independence in the performance of its duties. (v) Establish appropriate relations with the external auditor to receive information on those issues that might jeopardize its independence, for examination by the audit committee, and on any other issues relating to the financial statements audit process, as well as maintain such other communication as is provided for in legislation regarding the auditing of financial statements and in technical auditing regulations. In any event, the audit committee shall receive annually from the external auditor written confirmation of its independence in relation to the Company or to entities directly or indirectly related thereto, as well as information regarding additional services of any kind provided by the aforementioned auditor, or by persons or entities related thereto, and the fees received by such entities pursuant to the provisions in the law on auditing of accounts. (vi) Issue, on an annual basis and prior to the issuance of the auditor s report, a report stating an opinion process in accordance with applicable law, as well as the terms of its engagement, and regularly gather information therefrom regarding the audit plan and the implementation thereof, in addition to preserving its independence in the performance of its duties. (v) Establish appropriate relations with the external auditor to receive information on those issues that might entail a threat to its independence, for examination by the audit committee, and on any other issues relating to the financial statements audit process, and, when applicable, the authorisation of services other than those which are prohibited, under the terms established in the law applicable to the activity of audit of accounts, as well as maintain such other communication as is provided for therein. In any event, the audit committee shall receive annually from the external auditor written confirmation of its independence in relation to the Company or to entities directly or indirectly related thereto, as well as detailed and individualized information regarding additional services of any kind provided by the aforementioned auditor, or by persons or entities related thereto, and the fees received by such entities pursuant to the provisions in the law on the activity of audit of accounts. (vi) Issue, on an annual basis and prior to the issuance of the auditor s report, a report stating an opinion (en) propuestas de acuerdos jgo 2016 (2) 31/123

32 on the independence of the external auditor. Such report shall, in all cases, contain the evaluation regarding the provision of the additional services mentioned in subsection (v) above, considered individually and as a whole, other than of legal audit and with relation to the rules on independence or to the law on auditing of accounts. (vii) Previously report to the board of directors regarding all the matters established by law, the bylaws and in the rules and regulations of the board, and in particular regarding: a) the financial information that the company must publish from time to time; b) the creation or acquisition of interests in special-purpose entities or with registered office in countries or territories that are considered tax havens; and c) related-party transactions. The provisions in paragraphs (iv), (v) and (vi) are without prejudice to the law on auditing of accounts. 5. The audit committee shall meet as many times as it is called to meeting upon resolution made by the committee itself or by the chairman thereof, and at least four times per year. Any member of the management team or of the Company s personnel shall, when so required, attend the meetings of the audit committee, provide it with his cooperation and make available to it such information as he may have in his possession. The audit committee may also require that the external auditor attend such meetings. One of its meetings shall be devoted to preparing on whether the independence of the external auditor is compromised. Such report shall, in all cases, contain a reasoned evaluation regarding the provision of each and every one of the additional services mentioned in subsection (v) above, considered individually and as a whole, other than of legal audit and with relation to the rules on independence or to the law on the activity of audit of accounts. (vii) Previously report to the board of directors regarding all the matters established by law, the bylaws and in the rules and regulations of the board, and in particular regarding: a) the financial information that the company must publish from time to time; b) the creation or acquisition of interests in special-purpose entities or with registered office in countries or territories that are considered tax havens; and c) related-party transactions. The provisions in paragraphs (iv), (v) and (vi) are without prejudice to the law on auditing of accounts. 5. The audit committee shall meet as many times as it is called to meeting upon resolution made by the committee itself or by the chairman thereof, and at least four times per year. Any member of the management team or of the Company s personnel shall, when so required, attend the meetings of the audit committee, provide it with his cooperation and make available to it such information as he may have in his possession. The audit committee may also require that the external auditor attend such meetings. One of its meetings shall be devoted to preparing (en) propuestas de acuerdos jgo 2016 (2) 32/123

33 the information that the board is to approve and include in the annual public documents. 6. Meetings of the audit committee shall be validly held when at least one half of its members are present in person or by proxy. The committee shall adopt its resolutions upon a majority vote of those present in person or by proxy. In the event of a tie, the chairman of the committee shall have a tie-breaking vote. The committee members may grant a proxy to another member. The resolutions of the audit committee shall be recorded in a minute book, and every one of such minutes shall be signed by the chairman and the secretary. 7. The rules and regulations of the board shall further develop the rules applicable to the audit committee established in this article. Article 54. Appointments committee 1. An appointments committee shall be established and entrusted with general proposal-making and reporting powers on matters relating to appointment and withdrawal of directors on the terms established by law. 2. The appointments committee shall be composed of a minimum of three directors and a maximum of seven, all of whom shall be external or nonexecutive directors, with independent directors having majority representation. 3. The members of the appointments committee shall be appointed by the board of directors taking into account the directors knowledge, skills and experience and the responsibilities of the committee. 4. The appointments committee must in all events be presided over by an independent director. the information within the committee s scope of authority that the board is to approve and include in the annual public documents. 6. Meetings of the audit committee shall be validly held when at least one half of its members are present in person or by proxy. The committee shall adopt its resolutions upon a majority vote of those present in person or by proxy. In the event of a tie, the chairman of the committee shall have a tie-breaking vote. The committee members may grant a proxy to another member. The resolutions of the audit committee shall be recorded in a minute book, and every one of such minutes shall be signed by the chairman and the secretary. 7. The rules and regulations of the board shall further develop the rules applicable to the audit committee established in this article. Article 54. Appointments committee 1. An appointments committee shall be established and entrusted with general proposal-making and reporting powers on matters relating to appointment and withdrawal of directors on the terms established by law. 2. The appointments committee shall be composed of a minimum of three directors and a maximum of nine, all of whom shall be external or non-executive directors, with independent directors having majority representation. 3. The members of the appointments committee shall be appointed by the board of directors taking into account the directors knowledge, skills and experience and the responsibilities of the committee. 4. The appointments committee must in all events be presided over by an independent director. (en) propuestas de acuerdos jgo 2016 (2) 33/123

34 5. The rules and regulations of the board of directors shall govern the composition, operation and powers and duties of the appointments committee. Article 54 bis. Remuneration committee 1. A remuneration committee shall be established and entrusted with general proposal-making and reporting powers on matters relating to remuneration on the terms established by law. 2. The remuneration committee shall be composed of a minimum of three directors and a maximum of seven, all of whom shall be external or nonexecutive directors, with independent directors having majority representation. 3. The board of directors shall appoint the members of the remuneration committee taking into account the directors knowledge, skills and experience and the responsibilities of the committee. 4. The remuneration committee must in all events be presided over by an independent director. 5. The rules and regulations of the board of directors shall govern the composition, operation and powers and duties of the remuneration committee. Article 54 ter. Risk supervision, regulation and compliance committee 1. A risk supervision, regulation and compliance committee shall be established and entrusted with general powers to support and advise the board of directors in its risk control and oversight duties, in the definition of the risk policies of the Group, in relations with supervisory authorities and in compliance matters. 2. The risk supervision, regulation, and compliance committee shall consist of a minimum of three and a maximum of seven directors, all of whom shall be 5. The rules and regulations of the board of directors shall govern the composition, operation and powers and duties of the appointments committee. Article 54 bis. Remuneration committee 1. A remuneration committee shall be established and entrusted with general proposal-making and reporting powers on matters relating to remuneration on the terms established by law. 2. The remuneration committee shall be composed of a minimum of three directors and a maximum of nine, all of whom shall be external or non-executive directors, with independent directors having majority representation. 3. The board of directors shall appoint the members of the remuneration committee taking into account the directors knowledge, skills and experience and the responsibilities of the committee. 4. The remuneration committee must in all events be presided over by an independent director. 5. The rules and regulations of the board of directors shall govern the composition, operation and powers and duties of the remuneration committee. Article 54 ter. Risk supervision, regulation and compliance committee 1. A risk supervision, regulation and compliance committee shall be established and entrusted with general powers to support and advise the board of directors in its risk control and oversight duties, in the definition of the risk policies of the Group, in relations with supervisory authorities and in compliance matters. 2. The risk supervision, regulation, and compliance committee shall consist of a minimum of three and a maximum of nine directors, all of whom shall be (en) propuestas de acuerdos jgo 2016 (2) 34/123

35 external or non-executive, with independent directors having majority representation. 3. The members of the risk supervision, regulation and compliance committee shall be appointed by the board of directors, taking into account the directors' knowledge, skills and experience and the tasks of the committee. 4. The risk supervision, regulation and compliance committee must in all events be presided over by an independent director. 5. The rules and regulations of the board shall govern the composition, operation and powers of the risk supervision, regulation and compliance committee. external or non-executive, with independent directors having majority representation. 3. The members of the risk supervision, regulation and compliance committee shall be appointed by the board of directors, taking into account the directors' knowledge, skills and experience and the tasks of the committee. 4. The risk supervision, regulation and compliance committee must in all events be presided over by an independent director. 5. The rules and regulations of the board shall govern the composition, operation and powers of the risk supervision, regulation and compliance committee. (en) propuestas de acuerdos jgo 2016 (2) 35/123

36 Proposals 1 : Item Five A It is proposed to amend sub-section 3 of article 23 of the Bylaws, without changing the other sub-sections of such rule, such that the aforementioned sub-section 3 of article 23 will read as follows: 3. If the ordinary general shareholders meeting is not called within the statutory time period, it may be called, at the request of the shareholders and upon notice thereof being given to the directors, by the court clerk or by the company registrar of the place where the registered office is located. Item Five B In relation to the bylaw provisions regarding the board of directors, it is proposed to amend the following rules: (i) (ii) To amend sub-section 1 of article 40 of the Bylaws, without changing the other subsections of such rule, such that the aforementioned sub-section 1 of article 40 will read as follows: 1. The board of directors and its representative decision-making bodies shall exercise their powers and, in general, perform their duties guided by the corporate interest, understood as the achievement of a business that is profitable and sustainable over the long term and that promotes the continuity thereof and the maximisation of the value of the company. To amend sub-section 2 of article 45 of the Bylaws, without changing the other subsections of such rule, such that the aforementioned sub-section 2 of article 45 will read as follows: 2. The secretary, in addition to the duties assigned thereto by law, the bylaws or the rules and regulations of the board, must perform the following: a) Keep the documentation of the board of directors, record the events of the meetings in the minute books and attest to the content thereof and of the resolutions adopted. b) Ensure the actions of the board of directors observe applicable law and are in accordance with the bylaws and other internal rules and regulations of the Company. c) Assist the chairman to ensure that the directors receive the information relevant to the performance of their duties sufficiently in advance and in the proper form. 1 Each one of the proposals made under items Five A, Five B and Five C shall be submitted to a separate vote. (en) propuestas de acuerdos jgo 2016 (2) 36/123

37 Item Five C d) Ensure that the board of directors carries out its activities and adopts its decisions being mindful of the good governance recommendations applicable to the Company. e) Guarantee that the governance procedures and rules are respected and regularly reviewed. In relation to the bylaw provisions regarding the committees of the board of directors, it is proposed to amend the following rules: (i) (ii) To amend sub-section 2 of article 50 of the Bylaws, without changing the other subsections of such rule, such that the aforementioned sub-section 2 reads as follows: 2. The board may also establish committees with supervisory, reporting, advisory and proposal-making powers in connection with the matters within their scope of authority, and must in any event create the committees required by applicable law, including an appointments committee, a remuneration committee, a risk supervision, regulation and compliance committee and an audit committee, which for the purposes of sub-section 4(v) of article 53 will also have decision-making powers. To amend sub-sections 1, 2, 4 and 5 of article 53 of the Bylaws, without changing the other sub-sections of such rule, such that the aforementioned sub-sections 1, 2, 4 and 5 of article 53 will read as follows: 1. The audit committee shall consist of a minimum of three directors and a maximum of nine, all of whom shall be external or non-executive, with independent directors having majority representation. 2. The board of directors shall appoint the members of the audit committee taking into account their knowledge, skills and experience in the areas of accounting, auditing or risk management, such that, as a whole, the audit committee has the appropriate technical knowledge regarding the Company s sector of activity. 4. The audit committee shall have at least the following powers and duties: (i) (ii) Have its chairman and/or secretary report to the general shareholders meeting with respect to matters raised therein by shareholders regarding its powers and, in particular, regarding the result of the audit, explaining how such audit has contributed to the integrity of the financial information and the role that the committee has performed in the process. Supervise the effectiveness of the Bank s internal control and internal audit, and discuss with the external auditor any significant weaknesses detected in the internal control system during the conduct of the audit, all without violating its independence. For such purposes, if applicable, the audit committee may submit recommendations or proposals to the (en) propuestas de acuerdos jgo 2016 (2) 37/123

38 (iii) (iv) (v) (vi) (vii) board of directors and set the corresponding period for compliance therewith. Supervise the process of preparation and submission of regulated financial information and submit recommendations or proposals intended to safeguard its integrity to the board of directors. Propose to the board of directors the selection, appointment, reelection and replacement of the external auditor, taking responsibility for the selection process in accordance with applicable law, as well as the terms of its engagement, and regularly gather information therefrom regarding the audit plan and the implementation thereof, in addition to preserving its independence in the performance of its duties. Establish appropriate relations with the external auditor to receive information on those issues that might entail a threat to its independence, for examination by the audit committee, and on any other issues relating to the financial statements audit process, and, when applicable, the authorisation of services other than those which are prohibited, under the terms established in the law applicable to the activity of audit of accounts, as well as maintain such other communication as is provided for therein. In any event, the audit committee shall receive annually from the external auditor written confirmation of its independence in relation to the Company or to entities directly or indirectly related thereto, as well as detailed and individualized information regarding additional services of any kind provided by the aforementioned auditor, or by persons or entities related thereto, and the fees received by such entities pursuant to the provisions in the law on the activity of audit of accounts. Issue, on an annual basis and prior to the issuance of the auditor s report, a report stating an opinion on whether the independence of the external auditor is compromised. Such report shall, in all cases, contain a reasoned evaluation regarding the provision of each and every one of the additional services mentioned in subsection (v) above, considered individually and as a whole, other than of legal audit and with relation to the rules on independence or to the law on the activity of audit of accounts. Previously report to the board of directors regarding all the matters established by law, the bylaws and in the rules and regulations of the board, and in particular regarding: a) the financial information that the company must publish from time to time; (en) propuestas de acuerdos jgo 2016 (2) 38/123

39 (iii) (iv) (v) b) the creation or acquisition of interests in special-purpose entities or with registered office in countries or territories that are considered tax havens; and c) related-party transactions. The provisions in paragraphs (iv), (v) and (vi) are without prejudice to the law on auditing of accounts. 5. The audit committee shall meet as many times as it is called to meeting upon resolution made by the committee itself or by the chairman thereof, and at least four times per year. Any member of the management team or of the Company s personnel shall, when so required, attend the meetings of the audit committee, provide it with his cooperation and make available to it such information as he may have in his possession. The audit committee may also require that the external auditor attend such meetings. One of its meetings shall be devoted to preparing the information within the committee s scope of authority that the board is to approve and include in the annual public documents. To amend sub-section 2 of article 54 of the Bylaws, without changing the other subsections of such rule, such that the aforementioned sub-section 2 of article 54 will read as follows: 2. The appointments committee shall be composed of a minimum of three directors and a maximum of nine, all of whom shall be external or nonexecutive directors, with independent directors having majority representation. To amend sub-section 2 of article 54 bis of the Bylaws, without changing the other sub-sections of such rule, such that the aforementioned sub-section 2 of article 54 bis will read as follows: 2. The remuneration committee shall be composed of a minimum of three directors and a maximum of nine, all of whom shall be external or nonexecutive directors, with independent directors having majority representation. To amend sub-section 2 of article 54 ter of the Bylaws, without changing the other sub-sections of such rule, such that sub-section 2 of article 54 ter will read as follows: 2. The risk supervision, regulation, and compliance committee shall consist of a minimum of three and a maximum of nine directors, all of whom shall be external or non-executive, with independent directors having majority representation. Pursuant to the provisions of section 4.2.c) of Law 10/2014 of 26 June on the organisation, supervision and solvency of credit institutions, and section 10 of Royal Decree 84/2015 of 13 February implementing Law 10/2014 of 26 June on the organisation, supervision and solvency of credit institutions, the foregoing proposed bylaw amendments are subject to receipt of the applicable government approval. (en) propuestas de acuerdos jgo 2016 (2) 39/123

40 Item Six Six A. Six B. Amendment of the following articles of the Rules and Regulations for the General Shareholders Meeting: Amendment of article 6 (information available as of the date of the call to meeting), relating to the publication of information regarding the general shareholders meeting. Amendment of article 21 (voting on proposed resolutions), relating to the procedure at the general shareholders meeting. PROPOSAL SUBMITTED BY THE BOARD OF DIRECTORS OF BANCO SANTANDER, S.A. REGARDING ITEM SIX OF THE AGENDA FOR THE ORDINARY GENERAL SHAREHOLDERS MEETING CALLED FOR 17 MARCH 2016, ON FIRST CALL, AND FOR 18 MARCH 2016, ON SECOND CALL Submitted for the approval of the shareholders under item Six of the agenda for the general shareholders meeting of Banco Santander, S.A. (the Bank or the Company ) are: (i) the amendment of article 6 (sub-section 1) of the Rules and Regulations for the General Shareholders Meeting (item Six A); and (ii) the amendment of article 21 (sub-section 1) of such Rules and Regulations (item Six 6 B). The reason for the aforementioned proposed amendment is the appropriateness of conforming the organisational rules of the Company to the recommendations of the new good governance code of listed companies, approved by resolution of the Board of the National Securities Market Commission (Comisión Nacional del Mercado de Valores) on 18 February 2015 (the New Code ), a purpose which is also shared by part of the amendments of the Bylaws that are submitted to the shareholders at the general shareholders meeting under the foregoing item Five of the agenda, and which this proposal complements. It is also proposed to include certain technical improvements in the text of the regulations. First, under item Six A of the agenda it is proposed to amend article 6 (sub-section 1) to conform the Rules and Regulations for the General Shareholders Meeting to recommendation 10 of the New Code. Specifically, it is proposed to include within subsection 1 of article 6, regarding information available as of the date of the call to meeting, specific amendments to apply the provisions of letters a) and b) of recommendation 10 of the New Code. Thus, as regards the former, it is established in the last paragraph of this subsection that proposals that are the object of a request for a supplement to the call to meeting, as well as rationales therefor, shall be published as soon as possible via the Company s website, a circumstance that was already established for alternative proposals regarding items in the agenda in sub-paragraph (iv) of such sub-section. Also, as regards the latter, it is provided that the forms of the attendance, proxy-granting and distance-voting card will be updated when the inclusion of new items in the agenda has been requested or alternative proposed resolutions have been submitted in accordance with applicable law. Second, under item Six B of the agenda, it is proposed to amend sub-section 1 of article 21, regarding voting on proposed resolutions, to conform it to the recommendations of letter c) of recommendation 10 of the New Code. First, it is clarified that all validly submitted proposed resolutions shall be the object of a vote, the Chairman having the power to decide the order in (en) propuestas de acuerdos jgo 2016 (2) 40/123

41 which they shall be submitted to a vote when there are alternative proposals or proposals that do not appear in the agenda. Additionally, and supplementing the foregoing, it is established that, in such vote, a vote in favour of a proposed resolution by the shareholders at the general shareholders meeting implies a vote against incompatible alternative proposals. The amendment of sub-section 1 of article 21 is supplemented by a technical improvement, including within this rule a provision that was already contained in article 23.5 of the Rules and Regulations for the General Shareholders Meeting. For easier identification and understanding of the proposed amendments, attached to this report as an Exhibit, for merely informational purposes, is a table providing a comparative view of the provisions of the Rules and Regulations for the General Shareholders Meeting proposed to be amended: the column on the left contains a transcription of the text currently in force, and the column on the right, the text of the proposed amendment. (en) propuestas de acuerdos jgo 2016 (2) 41/123

42 EXHIBIT COMPARATIVE INFORMATION REGARDING THE PROVISIONS OF THE RULES AND REGULATIONS FOR THE GENERAL SHAREHOLDERS MEETING PROPOSED TO BE AMENDED CURRENT TEXT PROPOSED AMENDMENT Amendments proposed under item Six A of the Agenda Article 6. Information Available as of the Date of the Call to Meeting 1. In addition to what is required by provisions of Law or the Bylaws, beginning on the date of publication of the announcement of the call and until the General Shareholders Meeting is held, the Company shall maintain the following information continuously published on its website: (i) the announcement of the call to meeting; (ii) the total number of shares and voting rights on the date the meeting is called, with a breakdown by class of shares, if any such classes exist; (iii) the documents that must be submitted to the shareholders at the General Shareholders Meeting and, specifically, the reports prepared by directors, the external auditor and independent experts; (iv) the full text of the proposed resolutions submitted by the Board of Directors regarding each and every one of the items on the agenda or, with relation to merely informative items, a report prepared by the competent bodies, containing a discussion of such items. The proposed resolutions, if any, submitted by the shareholders as provided by Article 5.5 above Article 6. Information Available as of the Date of the Call to Meeting 1. In addition to what is required by provisions of Law or the Bylaws, beginning on the date of publication of the announcement of the call and until the General Shareholders Meeting is held, the Company shall maintain the following information continuously published on its website: (i) the announcement of the call to (ii) meeting; the total number of shares and voting rights on the date the meeting is called, with a breakdown by class of shares, if any such classes exist; (iii) the documents that must be submitted to the shareholders at the General Shareholders Meeting and, specifically, the reports prepared by directors, the external auditor and independent experts; (iv) the full text of the proposed resolutions submitted by the Board of Directors regarding each and every one of the items on the agenda or, with relation to merely informative items, a report prepared by the competent bodies, containing a discussion of such items. The proposed resolutions, if any, submitted by the shareholders as provided by Article 5.5 above (en) propuestas de acuerdos jgo 2016 (2) 42/123

43 shall also be included in the order that they are received; (v) in the event of appointment, ratification or re-election of members of the Board of Directors, the identity, curriculum vitae and category to which each one of them belongs, as well as the proposals and reports of the Board of Directors or of the Appointments Committee, as applicable in each case pursuant to the Law, the Bylaws or the Rules and Regulations of the Board. In the case of a legal person, the information must include that corresponding to the physical person to be appointed to perform the duties of the position on a permanent basis; and (vi) the forms of the attendance, proxy-granting and distance voting card, unless they are sent directly by the Company to each shareholder. If they cannot be published on the website for technical reasons, the Company shall specify how to obtain the forms in paper format, which it shall send to all shareholders that request them. Furthermore, when there is a supplement to the call to Meeting, the Company shall, starting on the date of publication thereof, also publish on its website the text of the proposals and rationales provided to the Company and to which such supplement refers. shall also be included in the order that they are received; (v) in the event of appointment, ratification or re-election of members of the Board of Directors, the identity, curriculum vitae and category to which each one of them belongs, as well as the proposals and reports of the Board of Directors or of the Appointments Committee, as applicable in each case pursuant to the Law, the Bylaws or the Rules and Regulations of the Board. In the case of a legal person, the information must include that corresponding to the physical person to be appointed to perform the duties of the position on a permanent basis; and (vi) the forms of the attendance, proxy-granting and distance voting card, unless they are sent directly by the Company to each shareholder. If they cannot be published on the website for technical reasons, the Company shall specify how to obtain the forms in paper format, which it shall send to all shareholders that request them. These forms shall be updated if the inclusion of new items on the agenda is requested or alternative proposed resolutions are submitted in accordance with applicable law. Furthermore, when there is a supplement to the call to Meeting, the Company shall disclose as soon as possible via its corporate website the text of the proposals and rationales provided to the Company and to which such supplement refers, without prejudice to the publication of the supplement in the terms indicated in (en) propuestas de acuerdos jgo 2016 (2) 43/123

44 2. Without prejudice to the provisions of other paragraphs of these Rules and Regulations and the requirements of any legal or bylaw provisions, beginning on the date of the announcement of the call to meeting, such information as is deemed appropriate to facilitate the attendance of the shareholders at the General Shareholders' Meeting and their participation therein shall also be contained in the Company s website, including: (i) Information on where the Meeting will be held, describing, if appropriate, how to gain access to (ii) the room. Description of the mechanisms that may be used for granting proxies and distance voting. (iii) Information, if appropriate, on systems or procedures to facilitate listening in on the meeting, such as means for simultaneous interpretation, broadcast using audiovisual media, information in other languages, etc. the foregoing article Without prejudice to the provisions of other paragraphs of these Rules and Regulations and the requirements of any legal or bylaw provisions, beginning on the date of the announcement of the call to meeting, such information as is deemed appropriate to facilitate the attendance of the shareholders at the General Shareholders' Meeting and their participation therein shall also be contained in the Company s website, including: (i) Information on where the Meeting will be held, describing, if appropriate, how to gain access to (ii) the room. Description of the mechanisms that may be used for granting proxies and distance voting. (iii) Information, if appropriate, on systems or procedures to facilitate listening in on the meeting, such as means for simultaneous interpretation, broadcast using audiovisual media, information in other languages, etc. Amendments proposed under item Six B of the Agenda Article 21. Voting on Proposed Resolutions 1. Once the shareholder presentations have ended and responses have been made pursuant to the provisions of these Rules and Regulations, the proposed resolutions regarding matters included in the agenda or which are not legally required to be set forth therein, including any proposals made by the shareholders during the meeting, shall be submitted to a vote. Article 21. Voting on Proposed Resolutions 1. Once the shareholder presentations have ended and, if applicable, responses have been made pursuant to the provisions of these Rules and Regulations, the proposed resolutions regarding matters included in the agenda or which are not legally required to be set forth therein, including any proposals made by the shareholders during the meeting in accordance with applicable law, shall be submitted to a vote. All validly made proposed resolutions shall be submitted to a vote in the terms set forth below. (en) propuestas de acuerdos jgo 2016 (2) 44/123

45 The adoption of resolutions shall proceed following the agenda set forth in the call to meeting. Resolutions proposed by the Board of Directors shall be first submitted to vote and then, if appropriate, resolutions proposed by others shall be voted upon following their priority in time. In any event, once a proposed resolution has been adopted, all others relating to the same matter and which are incompatible therewith shall be withdrawn and therefore need not be voted upon. If proposals have been made regarding matters that may be approved at the General Shareholders' Meeting without having appeared in the agenda, the Chairman shall decide the order in which they shall be submitted to a vote. It shall not be necessary for the Secretary to previously read aloud the text of proposed resolutions which has been provided to the shareholders at the beginning of the meeting, except when so requested by any shareholder or deemed appropriate by the Chairman for some or all of the proposals. In any event, the attendees shall be told to which item on the agenda the proposed resolution being submitted to vote refers. The adoption of resolutions shall proceed following the agenda set forth in the call to meeting. If there are alternative proposals regarding an item on the agenda, the Chairman shall decide the order in which they shall be submitted to a vote, which the Chairman shall also do if proposals have been made regarding matters that may be approved at the General Shareholders Meeting without having appeared in the agenda. In any event, the favourable vote of the General Shareholders Meeting of a proposed resolution with the necessary majority for its approval implies the rejection of those alternative proposals that are incompatible therewith. Likewise and pursuant to the provisions of article 23.5 below, when, at the time of voting, the Chairman of the General Shareholders Meeting notes the existence of a sufficient number of votes to approve or reject the proposed resolutions, the Chairman may, expressly stating that such circumstance has occurred, declare them approved or rejected, as applicable, without prejudice to the statements that the shareholders may wish to make to the Notary Public regarding the meaning of their vote or abstention. It shall not be necessary for the Secretary to previously read aloud the text of proposed resolutions which has been provided to the shareholders at the beginning of the meeting, except when so requested by any shareholder or deemed appropriate by the Chairman for some or all of the proposals. In any event, the attendees shall be told to which item on the agenda the proposed resolution being submitted to vote refers. (en) propuestas de acuerdos jgo 2016 (2) 45/123

46 2. When various proposals are included under a single item of the agenda, they shall be voted upon separately. In particular, there shall be separate voting on the appointment of each director and, in the event of amendments to the Bylaws or these Rules and Regulations, each article or group of articles that are substantially independent. As an exception, all those proposals made that are configured as unitary or indivisible, such as those relating to the approval of a complete text of the Bylaws or the Rules and Regulations for the General Shareholders Meeting, shall be voted on as a whole. 3. As a general rule, and without prejudice to the use of other alternative systems, at the election of the Chairman, voting on the proposed resolutions referred to in the preceding paragraph shall be carried out according to the following procedure: (i) Voting on the proposed resolutions referring to items included in the agenda shall be by a system of negative deduction. To this end, the votes corresponding to all shares present in person or by proxy, less (a) the votes corresponding to the shares whose holders or proxies state their vote against or in blank, or abstain, by communication or statement of their vote or abstention to the Notary Public, in order for note to be taken thereof for inclusion in the minutes, (b) the votes corresponding to the shares whose holders have voted against or in blank or have expressly stated their abstention by the means of communication to which the foregoing Article refers, and (c) the votes corresponding to the shares whose holders or 2. When various proposals are included under a single item of the agenda, they shall be voted upon separately. In particular, there shall be separate voting on the appointment of each director and, in the event of amendments to the Bylaws or these Rules and Regulations, each article or group of articles that are substantially independent. As an exception, all those proposals made that are configured as unitary or indivisible, such as those relating to the approval of a complete text of the Bylaws or the Rules and Regulations for the General Shareholders Meeting, shall be voted on as a whole. 3. As a general rule, and without prejudice to the use of other alternative systems, at the election of the Chairman, voting on the proposed resolutions referred to in the preceding paragraph shall be carried out according to the following procedure: (i) Voting on the proposed resolutions referring to items included in the agenda shall be by a system of negative deduction. To this end, the votes corresponding to all shares present in person or by proxy, less (a) the votes corresponding to the shares whose holders or proxies state their vote against or in blank, or abstain, by communication or statement of their vote or abstention to the Notary Public, in order for note to be taken thereof for inclusion in the minutes, (b) the votes corresponding to the shares whose holders have voted against or in blank or have expressly stated their abstention by the means of communication to which the foregoing Article refers, and (c) the votes corresponding to the shares whose holders or (en) propuestas de acuerdos jgo 2016 (2) 46/123

47 proxies have left the meeting prior to the vote on the proposed resolution in question and have left a record of such departure with the Notary Public, shall be deemed votes in favour. (ii) Voting on the proposed resolutions referring to items not included in the agenda shall be by a system of positive deduction. To this end, the votes corresponding to all shares present in person or by proxy, less (a) the votes corresponding to the shares whose holders or proxies state their vote in favour, or in blank, or abstain, by communication or statement of their vote or abstention to the Notary Public, in order for note to be taken thereof for inclusion in the minutes, and (b) the votes corresponding to the shares whose holders or proxies have left the meeting prior to the vote on the proposed resolution in question and have left a record of such departure with the Notary Public, shall be deemed votes against. (iii) The communications or statements to the Notary Public provided for in the two foregoing paragraphs with respect to the direction of the vote or abstention may be made individually for each of the proposed Resolutions or together for several or all of them, stating to the Notary Public the identity and status - shareholder or proxy of the person making such communication or statement, the number of shares to which it corresponds, and the direction of the vote or, if appropriate, the abstention. (iv) For the adoption of resolutions with respect to matters not proxies have left the meeting prior to the vote on the proposed resolution in question and have left a record of such departure with the Notary Public, shall be deemed votes in favour. (ii) Voting on the proposed resolutions referring to items not included in the agenda shall be by a system of positive deduction. To this end, the votes corresponding to all shares present in person or by proxy, less (a) the votes corresponding to the shares whose holders or proxies state their vote in favour, or in blank, or abstain, by communication or statement of their vote or abstention to the Notary Public, in order for note to be taken thereof for inclusion in the minutes, and (b) the votes corresponding to the shares whose holders or proxies have left the meeting prior to the vote on the proposed resolution in question and have left a record of such departure with the Notary Public, shall be deemed votes against. (iii) The communications or statements to the Notary Public provided for in the two foregoing paragraphs with respect to the direction of the vote or abstention may be made individually for each of the proposed Resolutions or together for several or all of them, stating to the Notary Public the identity and status - shareholder or proxy of the person making such communication or statement, the number of shares to which it corresponds, and the direction of the vote or, if appropriate, the abstention. (iv) For the adoption of resolutions with respect to matters not (en) propuestas de acuerdos jgo 2016 (2) 47/123

48 included in the agenda, the shares of shareholders who have participated in the Shareholders Meeting by distance voting shall not be deemed shares which are present in person or by proxy. For the adoption of any of the resolutions to which Sections 523 and 526 of the Spanish Capital Corporations Law or others in which the Law establishes any voting prohibition refer, the shares with respect to which no voting rights can be exercised based on the application of the provisions of said sections shall not be deemed shares present in person or by proxy. included in the agenda, the shares of shareholders who have participated in the Shareholders Meeting by distance voting shall not be deemed shares which are present in person or by proxy. For the adoption of any of the resolutions to which Sections 523 and 526 of the Spanish Capital Corporations Law or others in which the Law establishes any voting prohibition refer, the shares with respect to which no voting rights can be exercised based on the application of the provisions of said sections shall not be deemed shares present in person or by proxy. (en) propuestas de acuerdos jgo 2016 (2) 48/123

49 Proposals 1 : Item Six A With relation to article 6 of the Rules and Regulations for the General Shareholders Meeting, regarding the information available as of the date of the call to meeting, it is proposed to amend sub-section 1, without changing sub-section 2 of such rule, such that sub-section 1 of article 6 shall read as follows: 1. In addition to what is required by provisions of Law or the Bylaws, beginning on the date of publication of the announcement of the call and until the General Shareholders Meeting is held, the Company shall maintain the following information continuously published on its website: (i) (ii) (iii) (iv) (v) (vi) the announcement of the call to meeting; the total number of shares and voting rights on the date the meeting is called, with a breakdown by class of shares, if any such classes exist; the documents that must be submitted to the shareholders at the General Shareholders Meeting and, specifically, the reports prepared by directors, the external auditor and independent experts; the full text of the proposed resolutions submitted by the Board of Directors regarding each and every one of the items on the agenda or, with relation to merely informative items, a report prepared by the competent bodies, containing a discussion of such items. The proposed resolutions, if any, submitted by the shareholders as provided by Article 5.5 above shall also be included in the order that they are received; in the event of appointment, ratification or re-election of members of the Board of Directors, the identity, curriculum vitae and category to which each one of them belongs, as well as the proposals and reports of the Board of Directors or of the Appointments Committee, as applicable in each case pursuant to the Law, the Bylaws or the Rules and Regulations of the Board. In the case of a legal person, the information must include that corresponding to the physical person to be appointed to perform the duties of the position on a permanent basis; and the forms of the attendance, proxy-granting and distance voting card, unless they are sent directly by the Company to each shareholder. If they cannot be published on the website for technical reasons, the Company shall specify how to obtain the forms in paper format, which it shall send to all shareholders that request them. These forms shall be updated if the inclusion of new items on the agenda is requested or alternative proposed resolutions are submitted in accordance with applicable law. Furthermore, when there is a supplement to the call to Meeting, the Company shall disclose as soon as possible via its corporate website the text of the proposals and rationales provided to the Company and to which such supplement refers, without 1 Each one of the proposals made under items Six A and Six B shall be submitted to a separate vote. (en) propuestas de acuerdos jgo 2016 (2) 49/123

50 prejudice to the publication of the supplement in the terms indicated in the foregoing article 5. Item Six B It is proposed to amend sub-section 1 of article 21 of the Rules and Regulations for the General Shareholders Meeting, regarding voting on proposed resolutions, without changing the other sub-sections of such rule, such that the aforementioned sub-section 1 of article 21 shall read as follows: 1. Once the shareholder presentations have ended and, if applicable, responses have been made pursuant to the provisions of these Rules and Regulations, the proposed resolutions regarding matters included in the agenda or which are not legally required to be set forth therein, including any proposals made by the shareholders during the meeting in accordance with applicable law, shall be submitted to a vote. All validly made proposed resolutions shall be submitted to a vote in the terms set forth below. The adoption of resolutions shall proceed following the agenda set forth in the call to meeting. If there are alternative proposals regarding an item on the agenda, the Chairman shall decide the order in which they shall be submitted to a vote, which the Chairman shall also do if proposals have been made regarding matters that may be approved at the General Shareholders Meeting without having appeared in the agenda. In any event, the favourable vote of the General Shareholders Meeting of a proposed resolution with the necessary majority for its approval implies the rejection of those alternative proposals that are incompatible therewith. Likewise and pursuant to the provisions of article 23.5 below, when, at the time of voting, the Chairman of the General Shareholders Meeting notes the existence of a sufficient number of votes to approve or reject the proposed resolutions, the Chairman may, expressly stating that such circumstance has occurred, declare them approved or rejected, as applicable, without prejudice to the statements that the shareholders may wish to make to the Notary Public regarding the meaning of their vote or abstention. It shall not be necessary for the Secretary to previously read aloud the text of proposed resolutions which has been provided to the shareholders at the beginning of the meeting, except when so requested by any shareholder or deemed appropriate by the Chairman for some or all of the proposals. In any event, the attendees shall be told to which item on the agenda the proposed resolution being submitted to vote refers. (en) propuestas de acuerdos jgo 2016 (2) 50/123

51 Item Seven Delegation to the board of directors of the power to carry out the resolution to be adopted by the shareholders at the meeting to increase the share capital pursuant to the provisions of section a) of the Spanish Capital Corporations Law, depriving of effect the authorisation conferred under resolution Seven II) adopted at the ordinary general shareholders meeting of 27 March REPORT SUBMITTED BY THE BOARD OF DIRECTORS OF BANCO SANTANDER, S.A. REGARDING THE PROPOSAL REFERRED TO IN ITEM SEVEN OF THE AGENDA FOR THE ORDINARY GENERAL SHAREHOLDERS MEETING CALLED FOR 17 MARCH 2016, AT FIRST CALL, AND FOR 18 MARCH 2016, AT SECOND CALL This report is prepared in compliance with the provisions of sections 286, and of the Spanish Capital Corporations Law (Ley de Sociedades de Capital) in order to provide a rationale for the proposal relating to the capital increase with a delegation of powers to the board of directors to carry out such increase, the approval of which is proposed to the shareholders acting at the above-mentioned ordinary general shareholders meeting under item Seven of the agenda therefor. Pursuant to the provisions of section a) of the Spanish Capital Corporations Law, the shareholders acting at the general shareholders meeting may, if the requirements for amending the Bylaws are met, delegate to the directors the power to determine the date on which the previously-adopted resolution to increase the share capital should be carried out in the amount established in such resolution and to set the terms thereof for all matters not provided for in the resolution passed at the general shareholders meeting. The period for the exercise of this delegated power may not exceed one year. In this regard, the board of directors believes that the proposed resolution submitted at the general shareholders meeting is motivated by the opportunity provided under current corporate law to give the board an instrument which allows it to carry out a previouslyapproved capital increase at any time, within the limits and subject to the periods, terms and conditions decided by the shareholders at the meeting, without needing to hold another meeting. The dynamics of all commercial companies, particularly large companies, requires that their corporate decision-making bodies have the most suitable instruments at all times to adequately respond to the needs of the Company at any given time, according to the circumstances of the market. These needs may include the need to provide the Company with new funds, which will normally be accomplished by means of new capital contributions. Therefore, and for such purpose, the proposal set forth below is submitted to the shareholders acting at the general shareholders meeting, which proposal consists of delegating to the board the power to set the date on which the resolution of the shareholders to increase capital should be carried out, in the amount resolved at the meeting and within a period of one year, expressly authorising the board to delegate in turn to the executive committee the delegable powers it has received. Proposal: I) To rescind resolution Seven II) of the resolutions adopted by the shareholders acting at the ordinary general shareholders meeting of 27 March (en) propuestas de acuerdos jgo 2016 (2) 51/123

52 II) To delegate to the board of directors, pursuant to the provisions of section a) of the Spanish Capital Corporations Law, the broadest powers to do the following within one year from the date on which this general shareholders meeting is held: set the date and terms and conditions, as to all matters not provided for by the shareholders themselves acting at the general shareholders meeting, for a capital increase by issuing new shares that is approved at such general shareholders meeting in the amount of 500 million euros. In exercising these delegated powers, the board of directors shall (by way of example and not of limitation): determine if the new shares shall be issued with or without a premium and with or without voting rights; determine the deadline for exercising pre-emptive rights; freely offer the shares not subscribed for by such deadline; establish that, in the event the issue is not fully subscribed for, the capital will be increased only by the amount of the actual subscriptions; and amend the article of the Company s Bylaws regarding share capital. The capital increase referred to in this resolution shall become void if the board of directors does not exercise the powers delegated thereto within the period of one (1) year provided by the shareholders acting at the general shareholders meeting for carrying out the resolution. The board of directors is also authorised to delegate to the executive committee the delegable powers granted pursuant to this resolution. (en) propuestas de acuerdos jgo 2016 (2) 52/123

53 Item Eight Increase in share capital by such amount as may be determined pursuant to the terms of the resolution, by means of the issuance of new ordinary shares having a par value of one-half (0.5) euro each, with no share premium, of the same class and series as those that are currently outstanding, with a charge to reserves. Offer to acquire bonus share rights (derechos de asignación gratuita) at a guaranteed price. Express provision for the possibility of less than full allotment. Delegation of powers to the board of directors, which may in turn delegate such powers to the executive committee, to establish the terms and conditions of the increase as to all matters not provided for by the shareholders at this general shareholders meeting, to take such actions as may be required for implementation thereof, to amend the text of sections 1 and 2 of article 5 of the Bylaws to reflect the new amount of share capital, and to execute such public and private documents as may be necessary to carry out the increase. Application to the appropriate domestic and foreign authorities for admission to trading of the new shares on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges through Spain s Automated Quotation System (Mercado Continuo) and on the foreign Stock Exchanges on which the shares of Banco Santander are listed (currently Lisbon, London, Milan, Warsaw, Buenos Aires, Mexico and New York through American Depositary Shares (ADSs), and São Paulo through Brazilian Depositary Receipts (BDRs)) in the manner required by each of such Stock Exchanges. REPORT SUBMITTED BY THE BOARD OF DIRECTORS OF BANCO SANTANDER, S.A. REGARDING THE PROPOSAL INCLUDED IN ITEM EIGHT OF THE AGENDA FOR THE ORDINARY GENERAL SHAREHOLDERS MEETING CALLED FOR 17 MARCH 2016, ON FIRST CALL, AND FOR 18 MARCH 2016, ON SECOND CALL This report is prepared in relation with the proposal to increase share capital which will be submitted for approval under item Eight of the agenda for the said ordinary general shareholders meeting of Banco Santander, S.A. ( Banco Santander, Santander or the Bank ). The report is issued in compliance with the requirements established in sections 286 and 296 of the Spanish Capital Corporations Law (Ley de Sociedades de Capital) pursuant to which the board of directors must issue a report justifying the proposal to be submitted at the general shareholders meeting, given that the approval and execution of such proposal necessarily implies the amendment of sections 1 and 2 of article 5 of the Bylaws concerning share capital. For purposes of facilitating comprehension of the transaction giving rise to the proposed capital increase submitted at the general shareholders meeting, shareholders are first provided with a description of the purpose of and rationale for such capital increase. Next, a description of the main terms and conditions of the capital increase charged to reserves that constitutes the subject matter of this report is provided. Last, the proposed resolution to increase share capital which is submitted for approval at the general shareholders meeting is included. (en) propuestas de acuerdos jgo 2016 (2) 53/123

54 I. PURPOSE OF AND RATIONALE FOR THE PROPOSAL 1. Purpose In January 2015, Banco Santander reformulated its shareholder remuneration policy with the object of once again paying the majority of their quarterly remuneration in cash and announced its intention for the remuneration with a charge to financial year 2015 to amount to 0.20 euros per share. It also communicated its intention for the cash pay-out to represent between 30% and 40% of its recurring profit in subsequent years, instead of the then current 20%, and for shareholder remuneration to match the growth of its results. The Bank has the intention for remuneration with a charge to the 2016 results to be 0.21 euros per share, which would be paid, as always, in four payments, of which three would be received in cash and the other in shares or cash at the shareholder s discretion, under the Santander Dividendo Elección scrip dividend scheme. As such, the purpose of the proposed share capital increase submitted to the shareholders at the ordinary general shareholders meeting is to offer all shareholders of the Bank the option to receive their remuneration corresponding to one of the interim dividends for 2016 through the application of the Santander Dividendo Elección scrip dividend scheme. 2. Structure and options open to the shareholders The offer made to the shareholders to choose to receive, at their discretion, either shares of Banco Santander or cash upon the application of the Santander Dividendo Elección scheme (the Alternative Option ) is structured through a share capital increase to be charged to reserves (the Increase or the Capital Increase ), which is submitted for approval by the shareholders at the ordinary general shareholders meeting under item Eight of the agenda. Whenever the board of directors, or the executive committee by delegation therefrom, decides to carry out the Capital Increase: (a) (b) The shareholders of the Bank will receive a bonus share right (derecho de asignación gratuita) for each share of Santander that they own. These rights will be tradable and, as such, may be traded on the Spanish Stock Exchanges during a period of at least 15 calendar days. Once this period ends, the rights will automatically be converted into newly-issued shares of the Bank that will be allotted to their holders. The exact number of shares to be issued in the Increase, and therefore, the number of rights needed to receive a new share, will depend on the market price of the shares of the Bank at the time the Increase is carried out (the Market Price ), in accordance with the procedure described in this report. In any case, as further explained below, the maximum number of shares to be issued in the Increase will be such that the market value of those shares calculated at the Market Price will be approximately the amount respectively set forth in each case. The Bank, or an entity of its Group, will make an irrevocable commitment to acquire the bonus share rights for a fixed price from the shareholders who have received them on the record date (the Purchase Commitment ). Such fixed price will be calculated prior to the beginning of the trading period of the bonus share rights, on the basis of the Market Price (such that the price for each right (en) propuestas de acuerdos jgo 2016 (2) 54/123

55 will be the result of dividing the Market Price by the number of rights needed to receive a new share plus one). Thus, the Bank assures all its shareholders of the possibility of turning the bonus share rights into cash. Therefore, upon the implementation of the Increase, the shareholders of Banco Santander will have the option, at their discretion 1 : (a) (b) (c) Not to transfer their bonus share rights. In this case, at the end of the trading period, the shareholder shall receive, entirely free of charge, the corresponding number of new shares as fully paid-up. To transfer all or part of their bonus share rights to the Santander Group pursuant to the Purchase Commitment. Thus, instead of receiving shares, the shareholder would be opting to convert his rights into cash and to receive the Alternative Option in cash. To transfer all or part of their bonus share rights on the market. In this case, the shareholder would also be opting to convert his rights into cash, albeit not at a guaranteed fixed price, unlike in option (b) above. The gross value received by the shareholder in options (a) and (b) will be equivalent, given that the Market Price will be used to determine both the fixed price of the Purchase Commitment and the number of bonus share rights needed to receive a new share. In other words, the gross price that a shareholder will receive for selling to the Group all his bonus share rights under the Purchase Commitment will be approximately equal to the value of the new shares that he would receive if he did not sell his rights, calculated at Santander s market price on the date the Increase is carried out. However, the tax treatment of each option is different at present; option (a) has a more favourable tax treatment than option (b). The current tax treatment of the sales contemplated in options (b) and (c) is also different. See section II.6 below for a summary of the tax regime applicable to this structure in Spain. 3. Coordination with traditional dividends The Capital Increase would make it possible to apply the Santander Dividendo Elección scrip dividend scheme in lieu of one of the interim dividends for financial year 2016, it being expected, as stated, that the other two interim dividends and the final dividend with a charge to that financial year would be paid in cash. It is expected that the interim dividend in which the Santander Dividendo Elección scheme will be applied is that of November 2016, though the board of directors, or the executive committee by delegation therefrom, may decide not to apply such scheme or to apply it in lieu of another interim dividend. The board of directors, or the executive committee by delegation therefrom, may also decide not to apply the scheme to any of the interim dividends, in which case these would be paid in cash and the Increase would be ineffective pursuant to the provisions 1 The options available to the indirect shareholders of the Bank, such as participants in ADS or BDR programmes in the United States and Brazil, respectively, as holders of CDIs through the nominee services sponsored by Banco Santander in the United Kingdom or likewise, may bear certain differences due to the specific terms and conditions applicable to such programmes in which these shareholders participate. (en) propuestas de acuerdos jgo 2016 (2) 55/123

56 of section II.7 below. In this case, the board of directors could propose to apply the Santander Dividendo Elección scheme to the final dividend corresponding to financial year 2016, to which effect the board of directors would submit the corresponding capital increase resolution to the shareholders at the 2017 ordinary general shareholders meeting. 4. Amount of the Alternative Option and price of the Purchase Commitment On the date on which the interim dividend to which the Santander Dividendo Elección scrip dividend scheme applies is customarily paid, Banco Santander would offer the shareholders bonus shares whose market value would come to the amount set by the board of directors, or by the executive committee acting by delegation therefrom, subject to the limit of 750 million euros (the value that is set by the board of directors or the executive committee, the Amount of the Alternative Option ) 2. Given that, as stated above, the purpose of the Purchase Commitment is to allow the shareholders to convert the Amount of the Alternative Option into cash, and considering that in the Increase each outstanding share will grant its holder one bonus share right, the gross price per right at which the Purchase Commitment will be made would be equivalent to the amount per share of the Amount of the Alternative Option 3. The Amount of the Alternative Option and the purchase price of the bonus share rights will be determined and made public as provided in section II.3. II. MAIN TERMS AND CONDITIONS OF THE CAPITAL INCREASE The main terms and conditions of the Capital Increase are described below. 1. Amount of the Capital Increase, number of shares to be issued and number of bonus share rights needed to receive one new share The number of shares to be issued in the Capital Increase will be the result of dividing the Amount of the Alternative Option by the value of the shares of the Bank at the time the board of directors, or the executive committee by delegation therefrom, decides to carry out the Increase (i.e., the Market Price). The number so calculated will be rounded in order to obtain a whole number of shares and a ratio for conversion of rights into shares that is also whole. Additionally, for the same purposes, Banco Santander will ensure that a Santander Group company that holds Santander shares waives the necessary number of bonus share rights. Once the number of shares to be issued is established, the amount of the Capital Increase will be the result of multiplying that number by the par value of the Banco Santander shares (0.5 euro per share). Thus, the Capital Increase will be made at par value, with no share premium. Specifically, when the decision is made to carry out the Increase, the board of directors, or the executive committee by delegation therefrom, will determine the number of shares to be issued and, therefore, the amount of the Increase and the number of bonus share rights needed to receive a new share, using the following formula (rounded downwards to the nearest whole number): 2 Subject to rounding, if required, in accordance with the formulas set forth in section II.1 of this report. 3 Subject to rounding, if required, in accordance with the formulas set forth in section II.1 of this report. (en) propuestas de acuerdos jgo 2016 (2) 56/123

57 where, NNS = TNShrs / Num. rights NNS = Number of new shares to be issued; TNShrs = Number of outstanding shares of Banco Santander on the date the board of directors, or the executive committee by delegation therefrom, resolves to implement the Increase; and Num. rights = Number of bonus share rights needed for the allotment of one new share, which number will be obtained by applying the following formula, rounded up to the nearest whole number: where, Num. rights = TNShrs / Num. provisional shares Num. provisional shares = Amount of the Alternative Option / ListPri For the purposes hereof: Amount of the Alternative Option is the market value of the Increase, which shall be determined by the board of directors, or the executive committee by delegation therefrom, within the limit established in section I.4 above, based on the number of outstanding shares (i.e., TNShrs) and the remuneration paid through such time with a charge to financial year ListPri is the arithmetic mean of the average weighted prices of the Bank s shares on the Spanish Stock Exchanges in the 5 trading sessions ended prior to the resolution of the board of directors, or of the executive committee by delegation therefrom, to carry out the Capital Increase, rounded to the nearest one-thousandth of a euro and, in case of one-half of one-thousandth of a euro, rounded up to the nearest one-thousandth (amount referred to as Listing Price in this report). Example of calculation of the number of new shares to be issued, the amount of the Increase and the number of bonus share rights needed to receive a new share: Solely for the purpose of facilitating an understanding of how the formula should be applied, an example is given below. The results of these calculations are not representative of what the results will be when the Capital Increase is carried out, which results will depend on the various variables used in the formula. For the purposes of this example: - The Amount of the Alternative Option is 735,000,000 euros. - A ListPri of euros (closing price of Santander s shares on 10 February 2016) is assumed. - The TNShrs is 14,434,492,579 (number of shares of Santander outstanding on the date of this report). Therefore: (en) propuestas de acuerdos jgo 2016 (2) 57/123

58 Num. provisional shares = Amount of the Alternative Option / ListPri = 735,000,000 / = 206,809, Num. rights = TNShrs / Num. provisional shares = 14,434,492,579 / 206,809, = = 70 (rounded upwards) NNS = TNShrs / Num. rights = 14,434,492,579 / 70 = 206,207, = 206,207,036 (rounded downwards) Consequently, in this example, (i) the number of new shares to be issued in the Increase would be 206,207,036, (ii) the amount of the Increase would be 103,103, euros (206,207,036 x 0.5), and (iii) 70 bonus share rights (or old shares) would be needed to receive a new share Bonus share rights Each outstanding share of the Bank will grant its holder one bonus share right. The number of bonus share rights needed to receive a new share will be automatically determined according to the proportion between the number of new shares issued in the Increase and the number of outstanding shares, calculated in accordance with the formula set forth in section II.1 above. The holders of debentures or instruments convertible into shares of Banco Santander existing at any time shall have no bonus share rights; however, if applicable, they will be entitled to a modification of the ratio for conversion of debentures into shares (or of the minimum and/or maximum limits of such ratio, when the ratio is variable) in proportion to the amount of the Capital Increase. If the number of bonus share rights needed to receive one share (70 in the example above) multiplied by the number of new shares (206,207,036 in the same example) is lower than the number of outstanding shares (14,434,492,579), Santander, or a company of its Group, will waive a number of bonus share rights equal to the difference between the two figures (i.e. 59 rights in the above-mentioned example) for the sole purpose of having a whole number of new shares and not a fraction. The bonus share rights will be allotted to the shareholders of Banco Santander who appear as such in the book-entry registries of Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A.U. (Iberclear) at the corresponding date in accordance with the applicable rules for clearing and settlement of securities. The bonus share rights may be traded for the term determined by the board of directors, or by the executive committee by delegation therefrom, subject to a minimum term of fifteen calendar days. 3. Commitment to Purchase bonus share rights As explained before, upon the implementation of the Increase, the Bank and/or, with the Bank s guarantee, any company of its Group, will make an irrevocable commitment to purchase the bonus share rights (the Purchase Commitment, as defined above), so that the shareholders of the Bank will be assured of the possibility of selling to the Bank, or to an entity of its Group, the bonus rights received on the record date, 4 In this example, a Santander Group company would have to waive 59 bonus share rights corresponding to 59 Santander shares owned by it, so that a whole number of shares is issued. (en) propuestas de acuerdos jgo 2016 (2) 58/123

59 receiving in return, at their choice, all or a part of the Alternative Option in cash. The Purchase Commitment will be in force and may be accepted within the trading period of the bonus share rights established by the board, or by the executive committee by delegation therefrom. The purchase price under the Purchase Commitment will be fixed and will be calculated prior to the opening of the trading period of the bonus share rights according to the following formula (in which the definitions set out in section II.1 above apply), rounded to the nearest one-thousandth of a euro and, in the event of onehalf of one-thousandth of a euro, rounded up to the nearest one-thousandth (the Purchase Price ): Purchase Price = ListPri / (Num. rights + 1). The final Purchase Price so calculated will be fixed and made public when the Increase is carried out. It is expected that Banco Santander will waive entitlement to the new shares corresponding to the bonus share rights acquired by Banco Santander under the Purchase Commitment, and the Bank s share capital will only be increased by the amount corresponding to the bonus share rights not waived. 4. Rights of the new shares The new shares to be issued in the Capital Increase will be ordinary shares with a par value of one-half (0.5) euro each, of the same class and series as those currently outstanding, represented in book-entry form, the records of which will be kept by Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A.U. (Iberclear) and its member entities. The new shares will grant their holders the same economic, voting and related rights as those currently outstanding from the time at which the Increase is declared to have been subscribed and paid up. The new shares will be delivered fully paid-up and entirely free of charge. 5. Balance sheet and reserves to which the Capital Increase will be charged The balance sheet used for the purposes of the Capital Increase is that corresponding to 31 December 2015, which was audited by Deloitte, S.L. on 12 February 2016 and which is submitted for approval of the shareholders at the ordinary general shareholders meeting under item One A of the agenda therefor. The Capital Increase will be charged entirely to the reserves contemplated in section of the Spanish Capital Corporations Law. When the Increase is carried out, the board of directors, or the executive committee by delegation therefrom, shall determine the reserve to be used and the amount thereof in accordance with the balance sheet used for the purposes of the Increase. 6. Tax regime The tax regime applicable to shareholders in Spain will generally be as follows (without prejudice to the special provisions applicable to persons who are non-residents or who are subject to taxation in regional (foral) territories, as well as to potential future regulatory changes that may affect the applicable tax regime): The delivery of the shares issued in the Capital Increase will be considered for tax purposes as a delivery of fully paid-up bonus shares, and therefore, shall not be considered income for purposes of Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas) ( IRPF ), Corporate Income Tax (Impuesto sobre Sociedades) (en) propuestas de acuerdos jgo 2016 (2) 59/123

60 ( IS ), or Non-Resident Income Tax (Impuesto sobre la Renta de no Residentes) ( IRNR ), whether or not the shareholders act through a permanent establishment in Spain. The acquisition value, both of the new shares received in the Capital Increase and of the shares from which they arise, will be the result of dividing the total cost by the applicable number of shares, both old and new. The acquisition date of the new shares will be that of the shares from which they arise. If the shareholders sell their bonus share rights on the market, the amount so obtained will be taxed as follows in 2016: For purposes of the IRPF and the IRNR without permanent establishment, the amount obtained in the sale of the bonus share rights on the market follows the same rules as those applying to pre-emptive rights. Consequently, the amount obtained in the transfer of the bonus share rights reduces the acquisition value for tax purposes of the shares giving rise to such rights, by application of section 37.1.a) of Law 35/2006, of 28 November, on IRPF 5. In this way, if the amount obtained in such transfer is higher than the acquisition value of the securities from which the rights arise, the excess amount will be treated as a capital gain for the seller in the tax period in which the transfer takes place. Taxation under the IS and the IRNR with permanent establishment in Spain, to the extent that a full business cycle has been completed, will be determined in accordance with the relevant accounting rules. In the event that the holders of the bonus share rights accept the Purchase Commitment made by the Group, the tax regime applicable to the amount obtained in the transfer to the Bank or to a subsidiary thereof of the bonus share rights held in their capacity as shareholders will be that applicable to cash dividends and, therefore, shall be subject to the corresponding tax withholding. 7. Delegation of powers and implementation of the Increase It is proposed to delegate to the board of directors, with express authority to delegate in turn to the executive committee, the power to decide the date on which the Increase to be approved by the shareholders at an ordinary general shareholders meeting will be implemented, as well as to establish the terms and conditions of the Capital Increase as to all matters not provided for by the shareholders at the general shareholders meeting, all upon the terms established in section a) of the Spanish Capital Corporations Law. Notwithstanding the foregoing, if the board of directors, after taking into account the market conditions, among other matters, does not consider it advisable to carry out the Capital Increase, it will be entitled to decide not to carry out such Increase, in which case, it shall report such decision to the shareholders at the next ordinary general 5 As stated, it is expected that the Santander Dividend Elección scrip dividend scheme will be applied in October/November If it were ultimately applied on the date of the third interim dividend (January/February 2017), the taxation of the sale of rights on the market would be different from that which is set out here. From 1 January 2017, the amount obtained in the sale of the bonus share rights on the market will be considered as a capital gain for the seller. Such capital gain will be subject to IRPF tax withholding at the corresponding taxation rate. (en) propuestas de acuerdos jgo 2016 (2) 60/123

61 shareholders meeting. The Increase shall be null and void if the board of directors does not exercise the powers delegated thereto within the one-year period established by the shareholders for implementation of the resolution. When the board of directors, or the executive committee by delegation therefrom, agrees to carry out the Increase and establish all the terms and conditions thereof not already established by the shareholders at the general shareholders meeting, the Bank will make those terms and conditions public. In particular, prior to the beginning of the bonus period, the Bank will make publicly available a document containing information on the number and nature of the shares and the reasons for the Increase, all in accordance with section 26.1.e) of Royal Decree 1310/2005, of 4 November, which partially develops the provisions of Law 24/1988 of 28 July on the Securities Markets. Upon completion of the bonus share rights trading period: (a) The new shares will be allotted to the holders of the bonus share rights in the corresponding proportion. (b) The board of directors, or the executive committee by delegation therefrom, will declare the bonus share rights trading period closed and will reflect in the Bank s accounts the application of the reserves to the Capital Increase in the required amount, thus fully paying up the new shares. Finally, the board of directors, or the executive committee by delegation therefrom, will adopt the relevant resolutions amending the Bylaws in order to reflect the new amount of share capital resulting from the Capital Increase and applying for admission to listing of the new shares. 8. Admission to listing of the new shares The Bank will apply for the admission to listing of the new shares on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges through Spain s Automated Quotation System (Mercado Continuo), and will take the necessary steps and actions before the competent authorities of the foreign Stock Exchanges on which Banco Santander s shares are traded (currently, Lisbon, London, Milan, Warsaw, Buenos Aires, Mexico and New York through American Depositary Shares (ADSs), and São Paulo through Brazilian Depositary Receipts (BDRs)) in order for the new shares issued through the Increase to be admitted to listing. III. PROPOSED RESOLUTION TO BE SUBMITTED TO THE SHAREHOLDERS AT THE GENERAL SHAREHOLDERS MEETING The full text of the Capital Increase proposal that is submitted to the shareholders at the ordinary general shareholders meeting under item Eight of the agenda is as follows: Increase in share capital with a charge to reserves 1.- Capital increase It is resolved to increase the share capital by the amount that results from multiplying (a) the par value of one-half (0.5) euro per share of Banco Santander, S.A. ( Banco Santander or the Bank ) by (b) the determinable number of new shares of Banco Santander resulting from the formula set forth under section 2 below (the New Shares ). (en) propuestas de acuerdos jgo 2016 (2) 61/123

62 The capital increase is carried out through the issuance and flotation of the New Shares, which shall be ordinary shares with a par value of one-half (0.5) euro each, of the same class and series as those currently outstanding, represented in book-entry form. The capital increase is entirely charged to reserves of the type contemplated in section of the Spanish Capital Corporations Law. The New Shares are issued at par value, i.e., for their par value of one-half (0.5) euro, with no share premium, and will be allotted free of charge to the shareholders of the Bank. Pursuant to section 311 of the Spanish Capital Corporations Law, provision is made for the possibility of less than full allotment. 2.- New Shares to be issued The number of New Shares will be obtained by applying the following formula, rounded down to the nearest whole number: where, NNS = TNShrs / Num. rights NNS = Number of New Shares to be issued; TNShrs = Number of Banco Santander shares outstanding on the date the board of directors, or the executive committee by delegation therefrom, resolves to implement the capital increase; and Num. rights = Number of bonus share rights needed for the allotment of one New Share, which number will be obtained by applying the following formula, rounded up to the nearest whole number: Num. rights = TNShrs / Num. provisional shares where, Num. provisional shares = Amount of the Alternative Option / ListPri For the purposes hereof: Amount of the Alternative Option is the market value of the capital increase, which shall be determined by the board of directors, or by the executive committee by delegation therefrom, based on the number of outstanding shares (i.e. TNShrs) and the remuneration paid to the shareholders with a charge to financial year 2016 to that date, and which shall not exceed 750 million euros. ListPri is the arithmetic mean of the average weighted prices of the Bank s shares on the Spanish Stock Exchanges in the 5 trading sessions ended prior to the resolution of the board of directors, or of the executive committee by delegation therefrom, to carry out the capital increase, rounded to the nearest one-thousandth of a euro and, in case of one-half of onethousandth of a euro, rounded up to the nearest one-thousandth. 3.- Bonus share rights Each outstanding share of the Bank will grant its holder one bonus share right. The number of bonus share rights needed to receive a New Share will be automatically determined according to the proportion existing between the number of New Shares and the (en) propuestas de acuerdos jgo 2016 (2) 62/123

63 number of outstanding shares (TNShrs). Specifically, shareholders will be entitled to receive one New Share for as many bonus share rights held by them, determined in accordance with section 2 above (Num. rights). The holders of debentures or instruments convertible into shares of Banco Santander existing at any time shall have no bonus share rights; however, if applicable, they will be entitled to a modification of the ratio for conversion of debentures into share (or of the minimum and/or maximum limits of such ratio, when the ratio is variable), in proportion to the amount of the capital increase. In the event that (i) the number of bonus share rights needed for the allotment of one share (Num. rights) multiplied by the New Shares (NNS) is lower than (ii) the number of outstanding shares (TNShrs), Banco Santander, or a company of its Group, will waive a number of bonus share rights equal to the difference between the two figures, for the sole purpose of having a whole number of New Shares and not a fraction. The bonus share rights will be allotted to the shareholders of Banco Santander who appear as such in the book-entry registries of Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A.U. (Iberclear) at the corresponding date in accordance with the applicable rules for clearing and settlement of securities. During the bonus share rights trading period, a sufficient number of bonus share rights may be acquired on the market, in the proportion needed to subscribe for New Shares. The bonus share rights may be traded on the market for the period determined by the board of directors, or by the executive committee by delegation therefrom, subject to a minimum term of fifteen calendar days. 4.- Irrevocable commitment to acquire bonus share rights The Bank or, with the Bank s guarantee, the company of its Group that shall be determined, will make an irrevocable commitment to purchase the bonus share rights at the price specified below. The purchase commitment will be in force and may be accepted by such shareholders during the term, within the bonus share rights trading period, which will be determined by the board of directors, or by the executive committee by delegation therefrom. To this end, it is resolved to authorise the Bank, or the respective company of its Group, to acquire such bonus share rights (as well as the shares corresponding to those rights), subject to the maximum limit of the total number of rights issued and to the duty to comply in all cases with any limitations established by law. The Purchase Price of each bonus share right will be equal to the price resulting from the following formula, rounded to the nearest one-thousandth of a euro and, in the case of one-half of one-thousandth of a euro, rounded up to the nearest onethousandth: Purchase Price = ListPri / (Num. rights + 1) 5.- Balance sheet for the transaction and reserve to which the increase will be charged The balance sheet used for purposes of this capital increase is the balance sheet as of 31 December 2015, duly audited and approved by the shareholders at this ordinary general shareholders meeting. As mentioned above, the capital increase will be charged in its entirety to reserves of the type contemplated in section of the Spanish Capital Corporations Law. Upon implementation of the increase, the board of directors or, by delegation therefrom, the executive committee, will determine the reserve to be used and the amount thereof in accordance with the balance sheet used for the transaction. (en) propuestas de acuerdos jgo 2016 (2) 63/123

64 6.- Representation of the new shares The shares to be issued will be represented in book-entry form and the relevant records shall be kept by Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A.U. (Iberclear) and its member entities. 7.- Rights of the new shares The new shares will confer the same economic, voting and related rights upon their holders as the currently outstanding ordinary shares of Banco Santander as from the time at which the capital increase is declared to have been subscribed and paid up. 8.- Shares on deposit Once the bonus share rights trading period has ended, the New Shares that it has not been possible to allot for reasons not attributable to Banco Santander will be held on deposit and will be available to those who evidence lawful ownership of the respective bonus share rights. Three years after the date of conclusion of the bonus share rights trading period, the shares that have still to be allotted may be sold as provided in section 117 of the Spanish Capital Corporations Law, for the account and at the risk of the interested parties. The net proceeds from the sale will be deposited with Bank of Spain or with the General Deposit Bank (Caja General de Depósitos) and will be at the disposal of the interested parties. 9.- Application for admission to listing It is resolved to apply for the listing of the New Shares on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges through Spain s Automated Quotation System (Mercado Continuo), as well as to take the steps and actions that may be necessary and file the required documents with the competent authorities of the foreign Stock Exchanges on which Banco Santander shares are traded (currently, Lisbon, London, Milan, Warsaw, Buenos Aires, Mexico and New York through American Depositary Shares (ADSs), and São Paulo through Brazilian Depositary Receipts (BDRs)), for the New Shares issued under this capital increase to be admitted to listing, expressly stating Banco Santander s submission to such rules as may now be in force or hereafter be issued on stock exchange matters and, especially, on trading, continued listing and delisting. It is expressly stated for the record that, if the delisting of the Banco Santander shares is subsequently requested, the delisting resolution will be adopted with the same formalities that may be applicable and, in such event, the interests of shareholders opposing or not voting on the delisting resolution will be safeguarded in compliance with the requirements established in the Spanish Capital Corporations Law and related provisions, all in accordance with the provisions of the restated text of the Securities Market Law and its implementing provisions in force at any time Implementation of the capital increase Within one year of the date of this resolution, the board of directors, or the executive committee by delegation therefrom, may resolve to carry out the capital increase and to set the conditions therefor as to all matters not provided for in this resolution. However, if the board of directors does not consider it advisable to carry out the capital increase, it may decide not to do so and shall report such decision to the shareholders at the first ordinary general shareholders meeting held thereafter. In particular, in deciding to implement the increase, the board of directors or, by delegation therefrom, the executive committee, will analyse and take into account market conditions, among other issues, and in the case that such conditions or other elements mean it is not advisable in the view of the board to implement the increase, it (en) propuestas de acuerdos jgo 2016 (2) 64/123

65 may decide not to do so, reporting such decision to the shareholders at the ordinary general shareholders meeting on the aforementioned terms. The capital increase to which this resolution refers shall be null and void if the board of directors does not exercise the powers delegated thereto within the one-year period set by the shareholders at the general shareholders meeting for implementation of the resolution. Upon conclusion of the bonus share rights trading period: (a) (b) The New Shares will be allotted to those who, in accordance with the book-entry registry of Iberclear and its member entities, are holders of bonus share rights in the proportion resulting from section 3 above. The board of directors, or the executive committee by delegation therefrom, will declare the bonus share rights trading period closed and will reflect in the Bank s accounts the application of reserves in the amount of the capital increase, which increase will thus be fully paid up. Likewise, upon conclusion of the bonus share rights trading period, the board of directors, or the executive committee by delegation therefrom, will adopt the relevant resolutions amending the Bylaws in order to reflect the new amount of share capital resulting from the capital increase and applying for admission to listing of the new shares on the Spanish and foreign Stock Exchanges on which the shares of the Bank are listed Delegation for purposes of implementation Pursuant to the provisions of section 297.1a) of the Spanish Capital Corporations Law, it is resolved to delegate to the board of directors, with express authority to delegate, in turn, to the executive committee, the power to establish the terms and conditions of the capital increase as to all matters not provided for in this resolution. Specifically, and for illustrative purposes only, the following powers are delegated to the board of directors, with express authority to, in turn, delegate them to the executive committee: 1.- To determine, within one year as from approval thereof, the date on which the resolution so adopted to increase the share capital is to be implemented, and to set the Amount of the Alternative Option, the reserves out of which the capital increase is to be made from among those provided for in the resolution, the record date for the allotment of the bonus share rights and the duration of the bonus share rights trading period, as well as carrying out such operating adjustments, if applicable, that are necessary with relation to the provisions of this resolution as a consequence of the entry into force of the new regime for clearing and settlement of securities. 2.- To determine the exact amount of the capital increase, the number of New Shares and the bonus share rights needed for the allotment of New Shares in accordance with the rules established by the shareholders at this general shareholders meeting. 3.- To declare the capital increase to be closed and implemented. 4.- To amend sections 1 and 2 of article 5 of Banco Santander s Bylaws regarding share capital to conform it to the result of the implementation of the capital increase. 5.- To waive the right to the New Shares corresponding to the bonus share rights acquired by the Bank or by the respective company of its Group under the purchase commitment. 6.- To carry out all formalities that may be necessary to have the New Shares issued in the capital increase registered in the book-entry registry of Iberclear and admitted to listing on the domestic and foreign Stock Exchanges on which the shares of the Bank are (en) propuestas de acuerdos jgo 2016 (2) 65/123

66 listed, in accordance with the applicable procedures established at each of such Stock Exchanges. 7.- To take such actions as may be necessary or appropriate to implement and formalise the capital increase before any public or private, Spanish or foreign authorities or agencies, including actions for purposes of statement, supplementation or correction of defects or omissions that might prevent or hinder the full effectiveness of the preceding resolutions. In consideration of the foregoing, the shareholders are requested to approve the proposal submitted by the board of directors. (en) propuestas de acuerdos jgo 2016 (2) 66/123

67 Item Nine Proposal: Delegation to the board of directors of the power to issue nonconvertible fixed-income securities, preferred interests or debt instruments of a similar nature (including certificates, promissory notes and warrants), rescinding to the extent of the unused amount the delegations in force conferred by the shareholders acting at previous ordinary general shareholders meetings in such respect. I. To rescind, to the extent of the unused amount: - resolution Ten B approved at the ordinary general shareholders meeting of 27 March 2015, - resolution Eleven B approved at the ordinary general shareholders meeting of 28 March 2014, - resolution Twelve B approved at the ordinary general shareholders meeting of 22 March 2013, - resolution Ten B approved at the ordinary general shareholders meeting of 30 March 2012, and - resolution Nine B approved at the ordinary general shareholders meeting of 17 June II. To delegate to the board of directors, in accordance with the general regulations on the issuance of debentures and pursuant to the provisions of section 319 of the Regulations of the Commercial Registry, the power to issue, on one or more occasions, up to an amount of 50,000 million euros or its equivalent in another currency, in fixed-income securities, in any of the forms admitted under law and including bonds, certificates, promissory notes, debentures and preferred interests or other debt instruments of a similar nature (including warrants, settled through physical delivery or on a net basis). The board of directors may implement this power within a period of five years from the date of approval of the resolution by the shareholders at the general shareholders meeting, at the end of which period it will be rescinded, to the extent of the unused amount, due to expiration. In the exercise of the delegated powers granted herein, and by way of example and not of limitation, the board of directors shall be responsible for determining the amount of each issuance, always within the stated overall quantitative limit; the place of issuance domestic or foreign and the currency and, if it is foreign, the equivalent thereof in euros; the denomination, whether bonds (bonos), debentures (obligaciones), preferred interests (participaciones preferentes) or any other denomination permitted by law including those that are subordinated, if any, among those contemplated in articles 52 or 63 of (EU) Regulation No. 575/2013 of the European Parliament and of the Council, of 26 June 2013, regarding prudential requirements for credit institutions and investment companies ; the issuance date(s); the possibility of their being exchangeable, in whole or in part, for outstanding shares or other securities of other entities and, if exchangeable, whether mandatorily or voluntarily so, and in the latter case, whether at the option of the holder of the securities or the issuer or of including a call option on such shares; the interest rate, dates, and procedures for payment of the coupon; whether they are to be callable or not and, in the former case, the redemption period and events of redemption (in whole or in part); whether they are to be with or without a maturity date and, in the former case, the maturity date; the (en) propuestas de acuerdos jgo 2016 (2) 67/123

68 type of repayment, premiums and tranches; guarantees, including mortgages; form of representation, whether certificated or as book entries; the number of securities and the nominal value thereof; subscription procedure; applicable law, whether domestic or foreign; the application, if any, for admission to trading on official or unofficial, organised or unorganised, domestic or foreign secondary markets of the securities that are issued in compliance with the requirements in each case established by applicable laws and regulations; and, in general, any other condition applicable to the issuance, and, if applicable, appointing the Examiner (Comisario) and approving the basic rules that are to govern the legal relations between the Bank and the syndicate, if any and allowed, of holders of the securities that are issued. The delegation also includes the grant to the board of directors of the power, in each case, to decide the conditions for repayment of the fixed-income securities issued in reliance on this authorisation, including the power of the board to use, to the extent applicable, the means of withdrawal referred to in section 430 of the Spanish Capital Corporations Law or any other means that may be appropriate. In addition, the board of directors is authorised, whenever it deems appropriate, and subject to the necessary official authorisations being obtained as well as, if required, the approval of the Meetings of the respective syndicates or bodies representing the holders of the securities, to modify the conditions for repayment of the fixedincome securities issued and the maturity thereof, as well as the interest rate, if any, of those included in each of the issuances made pursuant to this authorisation. As to limits on the delegation, the aforementioned amount of 50,000 million euros is the maximum overall limit that may be reached at any time by the outstanding nominal balance of the promissory notes or similar securities issued, added to the nominal amount issued of other securities also issued under this authorisation granted to the board of directors. In the case of warrants, the sum of the premiums and exercise prices of the warrants from each issuance approved in accordance with this delegation shall be taken into account for the calculation of the above-mentioned limit. The board of directors is hereby authorised to delegate in turn to the executive committee those powers conferred pursuant to this resolution that may be delegated. (en) propuestas de acuerdos jgo 2016 (2) 68/123

69 Item Ten Director remuneration policy. REASONED PROPOSAL SUBMITTED BY THE BOARD OF DIRECTORS OF BANCO SANTANDER, S.A. REGARDING ITEM TEN OF THE AGENDA FOR THE GENERAL SHAREHOLDERS MEETING CALLED TO BE HELD ON 17 MARCH 2016, ON FIRST CALL, AND ON 18 MARCH 2016, ON SECOND CALL Under item Ten of the agenda, the remuneration policy for the directors of Banco Santander, S.A. (the Bank or the Company ), formulated as provided by section 529 novodecies of the Spanish Capital Corporations Law (Ley de Sociedades de Capital) (the Remuneration Policy ), is submitted to the shareholders for approval at the general shareholders meeting. The board has decided to submit to the shareholders at the general shareholders meeting the text attached as an Exhibit to this reasoned proposal and which stems from the report and proposal received from the remuneration committee, which report and proposal the board adopts as its own as to all the terms thereof. Although the aforementioned section 529 novodecies would allow the approval of a policy until 2019, the period covered by the Remuneration Policy only includes financial years 2016, with respect to which the policy approved at the last general shareholders meeting is completed and updated, 2017 and Consequently, the board shall propose to the shareholders at the ordinary general shareholders meeting the approval of a new remuneration policy no later than financial year The remuneration of the directors in their capacity as such included in the Remuneration Policy is consistent with the remuneration system contemplated in article 58 of the Bylaws and article 28 of the rules and regulations of the board and with the proposed establishment of the maximum amount of such remuneration submitted to the shareholders at the general shareholders meeting under item Eleven of the agenda. In addition, the remuneration for performance of executive duties that is also described in the Remuneration Policy complies with the requirements provided by the Spanish Capital Corporations Law and with the principles and rules set forth in the Company s Bylaws and rules and regulations of the board, as well as with such existing provisions as are especially applicable to the directors of the Company because of the status thereof as a credit institution (primarily, Law 10/2014 of 26 June on organisation, supervision and solvency of credit institutions, which transposes in Spain the content of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, and related provisions). With respect to the variable components of remuneration for the discharge of executive duties, and as described in more detail in the report of the remuneration committee, some changes are made to the policy approved at the last general shareholders meeting, which would be applicable from this financial year The changes are intended to: (i) simplify the structure of the variable components of remuneration, including within a single component (described as the Award ) the bonus and the long-term incentive established for executive directors in the previous policy; (ii) improve the ex ante risk adjustment of the variable remuneration, using a single group of annual quantitative and qualitative metrics that allow appropriate decisions within the appropriate risk framework to be compensated and (en) propuestas de acuerdos jgo 2016 (2) 69/123

70 strengthen the alignment of the variable remuneration with the long-term interests and objectives of the Bank; and (iii) increase the impact of the long-term elements and the multiyear performance measures and combine more effectively the short-term and long-term objectives (since fulfilment of short-term objectives will determine the maximum amount of the long-term amount and such amount may only be reduced, but not increased) 1. At the proposal of the remuneration committee, the board of directors has also approved a corporate share ownership policy in this financial year, applicable to the executive directors of the Company (as well as other senior management of the Group), which will require the executive directors, after a phase-in period, to maintain ownership of a volume of shares equal to twice the amount of their fixed remuneration, under the terms provided for in recommendation 62 of the Good Governance Code of Listed Companies. The board believes that the Remuneration Policy proposed for approval is reasonably in proportion to the importance of the Company, is in line with the financial situation thereof and is consistent with market standards at comparable companies. Furthermore, the factors that affect the various components of remuneration for the performance of executive duties are compatible with an appropriate and effective management of risks, without offering the executive directors incentives to assume risks that exceed the level tolerated by the Company, which is also consistent with the Company s strategy, objectives, values and interests over the long term. 1 In addition to the description included in the attached Remuneration Policy, the directors report regarding item Thirteen of the agenda, in which it is proposed to approve the delivery of shares in application of the new Award system (item Thirteen A in the case of executive directors), also contains a description of the changes with regard to the variable remuneration of executive directors. (en) propuestas de acuerdos jgo 2016 (2) 70/123

71 EXHIBIT DIRECTOR REMUNERATION POLICY FOR FINANCIAL YEARS 2016, 2017 AND 2018 (A) (i) (a) INTRODUCTION Principles of the remuneration policy Remuneration of directors in their capacity as such Remuneration of directors in their capacity as such will be based on the positions held by the directors on the collective decision-making body, membership on and attendance at the various committees, and any other objective circumstances that the board may take into account. (b) Remuneration of executive directors The principles of the remuneration policy for the performance of executive duties are as follows: (ii) Remuneration must be compatible with rigorous risk management, without favouring an inappropriate assumption thereof, and must be in line with the interests of the shareholders, fostering the longterm creation of value. Fixed remuneration must represent a significant proportion of total compensation. Variable remuneration must compensate directors performance in achieving the Group s objectives. The overall remuneration package and the structure thereof must be competitive, facilitating the attraction, retention, and appropriate remuneration of the directors. System for the remuneration of directors in their capacity as such The director remuneration system is regulated by article 58 of the Bylaws of Banco Santander and article 28 of the Rules and Regulations of the Board. Pursuant to such system, the remuneration of the directors in their capacity as such will consist of a fixed annual amount determined by the shareholders, which shall remain in effect until the shareholders resolve to amend it, though the board may reduce its amount in the years it considers such reduction appropriate. This remuneration will have two components: (a) annual allotment and (b) attendance fees. The specific amount payable for the above-mentioned items to each of the directors and the form of payment shall be determined by the board of directors. For such purpose, it shall take into consideration the positions held by each director on the board itself, membership on the various committees and attendance at committee meetings and any other objective criteria. In addition, the company will obtain a civil liability insurance policy for its directors upon customary terms that are proportionate to the circumstances of the company, and the directors may be entitled to receive compensation by means of the delivery of shares or option rights thereon, or by any other compensation system tied to the value of shares, provided the application of such compensation systems is previously approved by the shareholders at the general shareholders meeting. (en) propuestas de acuerdos jgo 2016 (2) 71/123

72 Independently of the directors right to receive remuneration in their capacity as such, they are also entitled to receive other compensation (salaries, incentives, bonuses, pensions, insurance and severance payments) as, following a proposal made by the remuneration committee and upon resolution by the board of directors, may be deemed appropriate in consideration for the performance of other duties in the company, whether they are the duties of an executive director or otherwise, other than the supervisory and collective decision-making duties that they discharge in their capacity as members of the board. (iii) Remuneration of executive directors For the performance of executive duties, executive directors shall be entitled to receive remuneration (including, if applicable, salaries, incentives, bonuses, possible severance payments for early termination from such duties, and amounts to be paid by the company for insurance premiums or contributions to savings schemes) which, following a proposal from the remuneration committee and by resolution of the board of directors, is deemed to be appropriate, subject to the limits of applicable law. (B) REMUNERATION OF DIRECTORS FOR Remuneration of directors in their capacity as such In 2016, the directors, in their capacity as such, shall continue to receive remuneration for the performance of supervisory and collective decision-making duties for a collective amount of up to EUR 6 million as authorised by the shareholders at the 2015 annual general shareholders meeting (and again subject to approval by the shareholders at the 2016 general shareholders meeting), with two components: (i) (ii) annual allotment; and attendance fees. The specific amount payable for the above-mentioned items to each of the directors and the form of payment thereof shall be determined by the board of directors under the terms set forth in section (A)(ii) above. In addition, as stated in the description of the director remuneration system, in 2016 the company will pay the premium for the civil liability insurance for its directors, obtained upon customary market terms and proportional to the circumstances of the company. (en) propuestas de acuerdos jgo 2016 (2) 72/123

73 2. Remuneration of directors for the performance of executive duties 2.1 Fixed components of remuneration Gross annual salary At the proposal of the committee, the board approved the following amounts as gross annual salary for executive directors in 2016: Thousands of euros Var (%) Ms Ana Botín-Sanz de Sautuola y O Shea 2,500 2,500 0% Mr José Antonio Álvarez Álvarez 1 2,000 2,000 0% Mr Rodrigo Echenique Gordillo 2 1,500 1,500 0% Mr Matías Rodríguez Inciarte 1,710 1,710 0% 1. At its meeting of 25 November 2014, the board of directors appointed Mr José Antonio Álvarez Álvarez as chief executive officer to replace Mr Javier Marín Romano. Mr José Antonio Álvarez Álvarez took office as director on 13 January 2015, with Mr Javier Marín Romano withdrawing from the position effective 12 January Executive director since 16 January Other fixed components of remuneration (i) Benefits systems: defined contribution plans (see section D below) 2. (ii) Company benefits: executive directors will also receive certain company benefits such as life insurance premiums, medical insurance, company vouchers and, as the case may be, allocating earnings from loans granted under employee conditions in accordance with the normal policy established by the Bank for senior management. Information in addition to this project is included in section D) below. 2.2 Variable components of remuneration The variable remuneration policy 3 for executive directors for 2016, which was approved by the board at the proposal of the remuneration committee, is based on the principles of the remuneration policy described in section A above. The variable remuneration4 of the executive directors is combined in one single amount, that of the previous bonus and LTI, thereby simplifying its structure and aligning it with the company s long-term sustainability and the interests of its shareholders. It consists of a single incentive linked to the achievement of short and long term objectives, structured as follows: The final amount of the incentive will be determined at the start of the following year (2017) based on the benchmark amount and subject to compliance with the short term objectives described in section (ii) below. 2 As stated in section D below, contributions to the benefits systems for some executive directors include both fixed components and variable components. 3 As shown in section D below, the contribution to pension systems for two executive directors includes both fixed and variable components, which are part of the total variable remuneration. (en) propuestas de acuerdos jgo 2016 (2) 73/123

74 40% of the resulting incentive shall be paid immediately and the remaining 60% shall be deferred in equal parts over five years, as follows: o The payment of the amount deferred over the first two years, payable in the two following years, 2018 and 2019, shall be conditional upon none of the malus clauses described in section (v) being triggered. o The amount deferred over the next three years (36% of the total), payable in 2020, 2021 and 2022, shall be conditional not only upon the aforementioned malus clauses not being triggered but also upon the achievement of the long term objectives described in section (iv) (deferred incentive subject to long-term performance objectives). The structure of the new incentive can be illustrated as follows (incentive for 2016): The variable components of executive directors total remuneration for 2016 must not exceed a limit of 200% of the fixed components, which must be authorised at the general shareholders meeting. (i) Benchmark incentive 2016 variable remuneration for executive directors shall be determined based on a standard benchmark bonus conditional on compliance with 100% of the established targets. The benchmark for 2016 has been set aggregating the following components: The 2015 benchmark incentive. The long-term benchmark incentive for 2015 (20% of the previous amount). At the proposal of the committee, the board of directors has factored in the following: The variable remuneration structure has been simplified by combining the bonus and LTI in a single incentive. A higher weighting is given to long-term objectives in total variable remuneration, as these will represent up to 36% of the new incentive. More efficient combination of the short and long term objectives as meeting the short term objectives will determine the maximum long-term amount and this may only be reduced, never increased. (en) propuestas de acuerdos jgo 2016 (2) 74/123

75 (ii) Setting the final incentive based on results for the year Based on the scheme described, 2016 variable remuneration for executive directors shall be set on the basis of the following key factors: A group of short term quantitative metrics measured against annual objectives. A qualitative assessment supported by accredited evidence which cannot adjust the quantitative result by more than 25% upwards or downwards. An exceptional adjustment that must be supported by substantiated evidence and that may result in amendments deriving from deficiencies in control and/or risks, negative assessments from supervisors or unexpected material events. (en) propuestas de acuerdos jgo 2016 (2) 75/123