santander investment bolsa, sociedad de valores, …...the company’s financial statements,...

SANTANDER INVESTMENT BOLSA, SOCIEDAD DEVALORES, S.A., SOLE-SHAREHOLDER COMPANY

Independent auditor’s report,financial statements and Directors’ Reportfor the year ended 31 December 2016

This version of our report is a free translation of the original, which was prepared in Spanish. All possiblecare has been taken to ensure that the translation is an accurate representation of the original. However, inall matters of interpretation of information, views or opinions, the original language version of our report

takes precedence over this translation.

PricewaterhouseCoopers Auditores, S.L., Torre PwC, Pº de la Castellana 259 B, 28046 Madrid, EspañaTel.: +34 915 684 400 / +34 902 021 111, Fax: +34 915 685 400, www.pwc.es 1

R. M. Madrid, hoja 87.250-1, folio 75, tomo 9.267, libro 8.054, sección 3ªInscrita en el R.O.A.C. con el número S0242 - CIF: B-79 031290

INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS

To the Sole-Shareholder of Santander Investment Bolsa, Sociedad de Valores, S.A., Sole-ShareholderCompany:

Report on financial statements

We have audited the accompanying financial statements of the company Santander Investment Bolsa,Sociedad de Valores, S.A., Sole-Shareholder Company, which comprise the balance sheet as atDecember 31, 2016, the statement of profit or loss, the statement of changes in equity, the statement ofcash flows and related notes for the year then ended.

Director’s Responsibility for the financial statements

The company’s Directors are responsible for the preparation of these financial statements, so thatpresent fairly the equity, financial position and financial performance of Santander Investment Bolsa,Sociedad de Valores, S.A., Sole-Shareholder Company, in accordance with the financial reportingframework applicable to the entity in Spain, as identified in Note 1 to the accompanying financialstatements, and for such internal control that is determined to be necessary to enable the preparationof financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with legislation governing the audit practice in Spain. Thislegislation requires that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor's judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to theCompany preparation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity's internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as well asevaluating the presentation of the financial statements taken as a whole.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

This version of our report is a free translation of the original, which was prepared in Spanish. Allpossible care has been taken to ensure that the translation is an accurate representation of the original.

However, in all matters of interpretation of information, views or opinions, the original languageversion of our report takes precedence over this translation.

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Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, theequity and financial position of Santander Investment Bolsa, Sociedad de Valores, S.A., Sole-Shareholder Company, as at December 31, 2016, and its financial performance and its cash flowsfor the year then ended in accordance with the applicable financial reporting framework and, inparticular, with the accounting principles and criteria included therein.

Emphasis of matter

We draw attention to what is stated in Notes 1 and 19 of the accompanying financial statements,which indicates that significant balances and transactions of Santander Investment Bolsa, Sociedadde Valores, S.A., Sole-Shareholder Company, during the year 2016 have corresponded totransactions with companies in the Santander Group. Our opinion is not modified in respect of thismatter.

Other Matter

The Company’s financial statements, corresponding to the year ended December 31, 2015, wereaudited by other auditor that expressed an unmodified opinion on those financial statements onApril 25, 2016.

Report on other legal and regulatory requirements

The accompanying directors’ report for 2016 contains the explanations which the Directorsconsider appropriate regarding the company’s situation, the development of its business and othermatters and does not form an integral part of the financial statements. We have verified that theaccounting information contained in the directors’ report is in agreement with that of the financialstatements for 2016. Our work as auditors is limited to checking the directors’ report in accordancewith the scope mentioned in this paragraph and does not include a review of information otherthan that obtained from the company’s accounting records.

PricewaterhouseCoopers Auditores, S.L.

Original in Spanish signed by:Gema Mª Ramos Pascual

April 28, 2017

SANTANDER INVESTMENT BOLSA,

SOCIEDAD DE VALORES, S.A., SOLE-SHAREHOLDER COMPANY

Financial Statements and Director’s Reportfor the year ended 31 December 2016

Translation of financial statements originally issued in Spanish and prepared in accordance with

the regulatory financial reporting framework applicable to the Company in Spain. In the event of

discrepancy, the Spanish version prevails.

SANTANDER INVESTMENT BOLSA, SOCIEDAD DE VALORES, S.A., SOLE-SHAREHOLDERCOMPANY

BALANCE SHEET AT 31 DECEMBER 2016(Thousand of Euros)

Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory

financial reporting framework applicable to the Company in Spain. In the event of discrepancy, the Spanish

version prevails.

ASSETS Note 2016 2015

Cash - -Financial assets held for trading - -

Debt instruments - -Equity instruments - -Trading derivatives - -Other financial assets - -Memorandum item: Loaned or advanced as collateral - -

Other financial assets at fair value through profit or loss - -

Debt instruments - -Equity instruments - -Other financial assets - -Memorandum item: Loaned or advanced as collateral - -

Available-for-sale financial assets 6 7 7Debt instruments - -Equity instruments 7 7Memorandum item: Loaned or advanced as collateral - -

Loans and receivables 159,192 355,574

Loans and advances to financial intermediaries 5 158,534 355,391Loans and advances to individuals 7 658 183Other financial assets - -

Held-to-maturity investments - -Memorandum item: Loaned or advanced as collateral - -

Hedging derivatives - -Non-current assets held for sale - -

Debt instruments - -Equity instruments - -Tangible assets - -Other - -

Investments - -

Group companies - -Jointly controlled entities - -Associates - -

Insurance contracts linked to pensions - -Tangible assets 8 42 44

Property, plant and equipment 42 44Investment property - -

Intangible assets 9 - -

Goodwill - -Other intangible assets - -

Tax assets 14 2,639 3,070

Current 3 3Deferred 2,636 3,067

Other assets 10 48,456 3,657

TOTAL ASSETS 210,336 362,352





version prevails.

LIABILITIES AND EQUITY Note 2016 2015

Financial liabilities held for trading - -Other financial liabilities at fair value through profit or loss - -Financial liabilities at amortised cost 11 7,425 13,569

Payable to financial intermediaries 7,425 13,569Payable to individuals - -Borrowing and subordinated liabilities - -Other financial liabilities - -

Hedging derivatives - -Liabilities associated with non-current assets held for sale - -Provisions 12 3,645 3,550

Provisions for pensions and similar obligations 3,645 3,546Provisions for taxes and other legal contingencies - -Other provisions - 4

Tax liabilities 14 338 5,711

Current 266 5,639Deferred 72 72

Other liabilities 10 6,982 150,981

TOTAL LIABILITIES 18,390 173,811

Shareholders’ equity 192,049 188,610

Share capital 13 24,882 24,882Registered 24,882 24,882

Less: Uncalled capital - -Share premium 13 51,196 51,196Reserves 13 112,532 99,519Other equity instruments - -Less: Treasury shares - -Profit of the year 3,439 13,013Less: Dividends and remuneration - -

Valuation adjustments (103) (69)

Available-for-sale financial assets - -Cash flow hedges - -Hedges of net investments in foreign operations - -Exchange differences - -Other valuation adjustments 12 (103) (69)

GRANTS, DONATIONS AND LEGACIES RECEIVED - -

TOTAL EQUITY 191,946 188,541

TOTAL LIABILITIES AND EQUITY 210,336 362,352





version prevails.

MEMORANDUM ITEMS Note 2016 2015

Guarantees and indemnities provided 30,000 7,141

Other contingent liabilities - -

Commitments to buy and sell futures - -

Securities lent on loan - -

Disbursements committed by emission assurance - -

Financial derivatives - -

Other contingency and commitment accounts 3,871 880

TOTAL CONTINGENCY AND COMMITMENT ACCOUNTS 18 33,871 8,021

Not available on demand at credit institutions 162 330

Client purchase orders for securities pending settlement 101,007 311,211

Client sell orders for securities pending settlement 56,352 272,445

Settled suspended assets 569 569

Other memorandum items - -

TOTAL OTHER MEMORANDUM ITEMS 18 158,090 584,555


INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016(Thousand of Euros)



version prevails.

Note 2016 2015

Interest and similar income 21 36 494Interest expense and similar charges 22 (290) (219)

NET INTEREST INCOME (254) 275

Income from equity instruments 23 - 5

Fee and commission income 24 55,007 59,052

Fee and commission expense 25 (19,585) (14,132)

Gain/ (Losses) on financial assets and liabilities (net) 31 (602)

Held for trading 26 31 (602)Other financial instruments at fair value through profit or loss - -Financial instruments not measured at fair value through profitor loss - -

Other - -Exchange differences (net) (113) 4Other operating income - -Other operating expenses 1 (93) (55)

GROSS INCOME 34,993 44,547

Staff costs 27 (11,725) (9,269)General expenses 28 (17,826) (16,488)Depreciation and amortization charge 8 (3) (3)Provisions (net) 12 (472) 47Impairment losses on financial assets (net) (6) (2)Loans and receivables 7 (6) (2)Other financial instruments not measured at fair valuethrough profit or loss - -

PROFIT FROM OPERATIONS 4,961 18,832

Impairment losses on other assets (net) - -Tangible assets - -Intangible assets - -Other - -

Gains / (Losses) on disposal of assets not classified as non-current assets held (42) (35)Gains from bargain purchases arising in business combinations - -Gains / (Losses) on non-current assets held for sale not classifiedas discontinued operations - -

PROFIT BEFORE TAX 4,919 18,797

Income tax 14 (1,480) (5,784)

PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 3,439 13,013

Profit / Loss from discontinued operations (net)

PROFIT FOR THE YEAR 3,439 13,013

EARNINGS PER SHARE 83.07 314.32

Basic 83.07 314.32Diluted 83.07 314.82


STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016(Thousand of Euros)



version prevails.

a) STATEMENT OF RECOGNISED INCOME AND EXPENSE(Thousand of Euros)

2016 2015

PROFIT FOR THE YEAR 3,439 13,013

OTHER RECOGNISED INCOME / EXPENSE (34) (18)

Available-for-sale financial assets - -

Revaluation gains / (losses) - -Amounts transferred to income statement - -Other reclassifications - -

Cash flow hedges - -Revaluation gains / (losses) - -Amounts transferred to income statement - -Amounts transferred to initial carrying amount of hedge items - -Other reclassifications - -

Hedges of net investments in foreign operations - -Revaluation gains / (losses) - -Amounts transferred to income statement - -Other reclassifications - -

Exchange differences - -Revaluation gains / (losses) - -Amounts transferred to income statement - -Other reclassifications - -

Non-current assets held for sale - -

Revaluation gains / (losses) - -Amounts transferred to income statement - -Other reclassifications - -

Actuarial gains / (losses) on pension plans (49) (26)

Other recognised income and expense - -

Income tax 15 8

TOTAL RECOGNISED INCOME AND EXPENSE 3,405 12,995

SANTANDER INVESTMENT BOLSA, SOCIEDAD DE VALORES, S.A., SOLE-SHAREHOLDER COMPANY

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016(Thousands of Euros)

Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework

applicable to the Company in Spain. In the event of discrepancy, the Spanish version prevails.

b) STATEMENT OF CHANGES IN TOTAL EQUITY(Thousand of Euros)


STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016(Thousand of Euros)



version prevails.

2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES (221,600) 14,906

Profit for the year 3,439 13,013Adjustments made to obtain the cash flows from operating

activities 2,061 5,869Depreciation and amortization charge 3 3Net impairment losses 6 2Net additions to provisions for contingencies 572 80Gains / (Losses) on disposal of non-financial assets - -Gains / (Losses) on disposal of investments - -Other items 1,480 5,764

Adjusted profit 5,500 18,882

Net increase / decrease in operating assets (70,044) 7,872Loans and receivables (25,238) (3,941)Financial assets held for trading - -Available-for-sale financial assets - -Other operating assets (44,806) 11,813

Net increase /decrease in operating liabilities (151,398) (11,182)Financial liabilities at amortised cost (6,130) (8,646)Financial liabilities held for trading - -Other operating liabilities (145,268) (2,536)

Income tax recovered / paid (5,658) (666)

CASH FLOWS FROM INVESTING ACTIVITIES A (1) (3)

Payments (1) (3)Tangible assets (1) (3)Intangible assets - -

Proceeds (+) - -CASH FLOWS FROM FINANCING ACTIVITIES - -

Payments (-) - -Proceeds (+) - -Dividends paid and return on other equity instruments(-) - -

Effect on foreign exchange rates changes on cash and cashequivalents - -

NET INCREASE / DECREASE IN CASH AND CASH EQUIVALENTS (221,601) 14,903

Cash and cash equivalents at beginning of year (*) 339,922 325,019Cash and cash equivalents at end of year (*) 118,321 339,922

(*) Considered as cash and cash equivalents (Note 5):

Demand accounts 118,321 339,922


Notes to the Financial Statements for the year ended 31 December 2016

Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial

reporting framework applicable to the Company in Spain. In the event of discrepancy, the Spanish version prevails.

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1. Description of the Company, basis of presentation of the financial statements and other information

Santander Investment Bolsa, Sociedad de Valores, S.A., Sole-Shareholder Company (“the Company”) wasincorporated on 6 July 1989, under the name of BSN, S.A., Sociedad de Valores y Bolsa. The public deed of themerger by absorption of BCH Bolsa, Sociedad de Valores, S.A. into BSN, S.A., Sociedad de Valores y Bolsa andthe change in the name of the post-merger company BSCH Bolsa, Sociedad de Valores, S.A. was registered inthe Mercantile Register on 3 September 1999. On 12 April 2000, the shareholders at the Annual General Meetingresolved to change the Company’s name to Santander Central Hispano Bolsa, Sociedad de Valores, S.A. On 28January 2005, the shareholders at the Annual General Meeting resolved to change the Company’s name toSantander Investment Bolsa, S.A. Lastly, on 26 July 2013 the declaration of the Company’s sole-shareholdercompany status was executed in public deed and the Company’s name was changed to its current name.

Its business activities are subject to the Royal Legislative Decree 4/2015, 23 October, approving the RestatedText of the Securities Market, to Royal Decree 217/2008, 15 February, about legal regimen of investmentservices companies and other entities rendering investment services and its successive amendment thereto andthe legislation issued by the Spanish National Securities Market Commission (C.N.M.V.).

The Company is registered under number 31 in the Register of Securities Brokers and Dealers of the C.N.M.V. Itsregistered office is located at Avenida de Cantabria, s/n, Boadilla del Monte, Madrid.

The Company forms part of the Santander Group (Note 13), the parent of which is Banco Santander, S.A., withregistered office at Paseo de Pereda 9-12, Santander, which prepares consolidated financial statements. Theconsolidated financial statements of the Santander Group are deposited at the Santander Mercantile Registry andare authorised for issue by the legally established deadline. The consolidated financial statements of theSantander, S.A. Group for 2016 were authorised for issue by the director of Banco Santander, S.A. at the Boardof Directors Meeting held 21 February 2017.

As defined in the Company’s programme of activities, authorised by the C.N.M.V., a detailed list of the servicesthat the Company may provide is shown below:

1.Provision of the following investment services:

a. Receipt and transmittal of customer orders in relation to one or more financial instruments.b. Execution of the aforementioned orders for the account of customers.c. Trading for own account.d. Underwriting of financial instruments or of placements of financial instuments based on a solid

commitment.e. Investment advisory services as defined in Article 5.1.g) of Royal Decree 217/2008, 15 February, on the

legal regime of investment services companies.





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2. Performance of the following ancillary services:

a. Business counselling on capital structure, industrial strategy and related issues and counselling andother services related to corporate mergers and acquisitions.

b. Preparation of investment reports and financial analyses or other types of general recommendationsrelating to financial instrument transactions.

The investment services and, where applicable, any supplementary activities will be performed in respect of thefinancial instruments referred to in the Article 2 of the Restated Text of the Securities Market approved by theRoyal Legislative Decree 4/2015 of 23 October and specifically for the following instruments:

a. The marketable securities issued by public or private persons or entities and grouped in issues asdefined in Article 2.1 of the Restated Text of the Securities Market approved by the Royal LegislativeDecree 4/2015, of 23 October.

b. Options and futures, swaps, forward rate agreements and other financial derivative agreements relatedto securities, currencies, interest rates or returns or other financial derivative instruments, financialindices or indicators that may be settled in kind or in cash.

The Company’s main business activity in 2016 and 2015 was the provision of brokerage service for customertransactions in domestic and international primary and secondary markets, for which it received the relatedbrokerage fees.

At 31 December 2016 and 2015, the Company has no operating branch abroad.

Basis of presentation of the financial statements

a) Regulatory financial reporting framework applicable to the Company

The Company’s financial statements, which were obtained from its accounting records, were formally prepared inaccordance with the regulatory financial reporting framework applicable to the Company, which consists of:

a) The Spanish Commercial Code and all other Spanish corporate law.b) Spanish National Securities Market Commission (C.N.M.V.) Circular 7/2008, of 26 November, and

other mandatory rules approved by the C.N.M.V. and, for matters not provided for therein, the SpanishNational Chart of Accounts approved by Royal Decree 1514/2007, Bank of Spain Circular 4/2004, of22 December, and the International Financial Reporting Standards adopted as Regulations of theEuropean Commission in force, provided that they do not contravene the previous standards.

c) The mandatory rules approved by the Spanish Accounting and Audit Institute in order to implement theSpanish National Chart of Accounts and the relevant secondary legislation.

d) All other applicable Spanish accounting legislation.





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b) Fair presentation

The accompanying financial statements, which were prepared from the Company’s accounting records, arepresented in accordance with the regulatory financial reporting framework applicable to the Company and, inparticular, with the accounting principles and rules contained therein and, accordingly, present fairly theCompany’s equity, financial position, results of operations and cash flows for the related exercise. These financialstatements, which were formally prepared by the Company’s directors (at the Board of Directors Meeting held on31 March 2017), will be submitted to the sole-shareholder for approval, and are expected to be approved withoutamendment.

In view of the magnitude of the amounts presented in these financial statements, the Directors have preparedthem in thousands of euros.

c) Accounting principles

The financial statements were prepared taking into account all the generally accepted accounting principles andmeasurement bases described in Note 2. All mandatory accounting principles and measurements bases with asignificant effect on the financial statements were applied in preparing them. No non-mandatory accountingprinciples and measurement bases were applied.

d) Key issues in relation to the measurement and estimation of uncertainty

The Company’s results and the calculation of equity are affected by the accounting principles and policies,measurement bases and estimates used by the Company’s Directors in the preparation of the financialstatements. The main accounting policies and measurement bases are set forth Note 2.

In preparing the accompanying financial statements estimates were occasionally made by the Company’sDirectors in order to quantify certain of the assets, liabilities, income, expenses and obligations reported herein.These estimates relate basically to the following:

The assessment of possible impairment losses on certain assets. The useful life of the tangible and intangible assets. The fair value of certain financial instruments. The calculation of provisions. The recoverability of deferred tax assets.

Although these estimates were made on the basis of the best information available at 2016 year-end, events thattake place in the future might make it necessary to change these estimates (upwards or downwards) in comingyears. Pursuant to C.N.M.V. Circular 3/2016, of 22 October, which modifies Circular 7/2008, of 26 November,changes in accounting estimates would be applied prospectively, and the effects of any changes in estimates thatmight arise would be recognised in the related income statement.





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e) Changes in accounting policies

During 2016 there were no significant changes in accounting policies in relation to those applied in 2015.

f) Comparative information

The information relating to 2015 contained in these notes to the financial statements is presented with theinformation relating to 2016 for comparison purposes only and, therefore, does not constitute the Company’sfinancial statements for 2015.

g) Grouping of items

Certain items in the balance sheet, income statement, statement of changes in equity and statement of cashflows are grouped together to facilitate their understanding; however, whenever the amounts involved arematerial, the information is broken down in the related notes to the financial statements.

h) Investment Guarantee Fund and Fund for the Orderly Bank Restructuring

The Company is a member of the Investment Guarantee Fund. The contributions made to this Fund amounted toEUR 40 thousand in 2016 and 2015 and the related expenses was recognised under “Other operating expenses”in the income statement. Additionally, the balance recorded under this item in the income statement for 2016 and2015 include 13 thousand and 15 thousand respectively, which correspond to the contributions made by theCompany, during such period, to the Fund for Orderly Bank Restructuring.

i) Minimum capital requirements and liquidity ratio

Directive 2013/36, of 26 June 2013, of the European Parliament and of the European Council, on access to theactivity of credit institutions and the prudential supervision of credit institutions and investment firms, andRegulation 575/2013, of the European Parliament and of the European Council, of 26 June, on prudentialrequirements for credit institutions and investment firms, govern the access to the activity, the supervisoryframework and the prudential rules for credit institutions and investment firms, as well as the minimum capital to beheld by such entities, the method for determining capital and the internal capital adequacy assessment processesand reporting that entities should have in place. In this regard, C.N.M.V. Circular 2/2014, of 23 June, on theexercise of various regulatory options in relation to capital adequacy for investment services firms and theirconsolidated groups, came into force on 29 June 2014, repealing C.N.M.V. 12/2008, of 30 December, on thecapital adequacy of investment services firms and their consolidated groups, the previous applicable regulation oncapital (Note 17). At 31 December 2016 and 2015, the Company met the capital requirements provided in thisCircular.

Also, in accordance, with current legislation, securities broker-dealers must maintain a liquidity ratio equal to 10%of their total eligible liabilities in the form of low-risk, highly liquid assets. At 31 December 2016 and 2015, theCompany met this ratio.





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j) Events after the reporting period

From the end of the reporting period to the date on which these financial statements were authorised for issuethere were no events significantly affecting them additional to those included in these financial statements.

k) Environmental impact

In view of the business activities carried on by the Company, it does not have any environmental liability,expenses, assets, provisions or contingencies that might be material with respect to its equity, financial positionsor results. Therefore, no specific disclosures relating to environmental issues are included in these notes to thefinancial statements.

2. Accounting policies

The principal accounting policies and rules and measurement bases used by the Company in preparing itsfinancial statements, in accordance with C.N.M.V. Circular 7/2008, of 26 November, were as follows:

a) Definitions and classification of financial instruments

i. Definitions

A “financial instrument” is a contract that gives rise to a financial asset of one entity and a financial liability orequity instrument of another entity.

An "equity instrument" is any contract that evidences a residual interest in the assets of the issuing entity afterdeducting all of its liabilities.

A "financial derivative" is a financial instrument whose value changes in response to the change in anobservable market variable (such as an interest rate, foreign exchange rate, financial instrument price or marketindex), whose initial investment is very small compared with other financial instruments with a similar responseto changes in market factors, and which is generally settled at a future date.

Rights and obligations under employee benefit plans are not treated for accounting purposes as financialinstruments.

ii. Classification of financial assets for measurement purposes

In the balance sheet, financial assets are initially classified into the various categories used for managementand measurement purposes, unless they have to be presented as "Non-Current Assets Held for Sale" or theyrelate to "Cash", "Hedging Derivatives" or "Investments", which are reported separately.





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Financial assets are included for measurement purposes in the following categories:

- Financial assets held for trading (at fair value through profit or loss): this category includes the financialassets acquired for the purpose of generating a profit at short term from fluctuations in their prices.

- Available-for-sale financial assets: this category includes debt instruments not classified as "Held-to-MaturityInvestments", as "Financial Assets Held for Trading" or as "Other Financial Assets at Fair Value ThroughProfit or Loss", and equity instruments issued by entities other than subsidiaries, associates and jointlycontrolled entities, provided that such instruments have not been classified as "Held for Trading" or as"Other Financial Assets at Fair Value Through Profit or Loss".

- Loans and receivables: this category includes financial assets that are not quoted in an active market, do nothave to be measured at fair value, and have fixed or determinable cash flows through which the Companywill recover all of its initial investment, other than losses because of credit deterioration. Therefore, thiscategory consists of unquoted debt instruments, financing granted to third parties arising from theCompany's ordinary activities, and receivables from the users of its services and investments of theCompany's capital held in (demand) deposits and reverse repos.

iii. Classification of financial assets for presentation purposes

Financial assets are classified by nature into the following items in the balance sheet:

- Loans and advances to financial intermediaries: loans and advances of any type to financial intermediaries,excluding those instrumented in such a way that they become marketable.

- Loans and advances to individuals: balances receivable relating to all credit and loans granted by theCompany, excluding those instrumented as marketable securities and those granted to credit institutions.

- Other equity instruments: financial instruments issued by other entities, such as shares and non-votingequity units or shares and units of investment funds and collective investment undertakings, which have thenature of equity instruments for the issuer, other than investments in subsidiaries, jointly controlled entitiesor associates.

iv. Classification of financial liabilities for measurement purposes

In the balance sheet, financial liabilities are initially classified into the various categories used for managementand measurement purposes, unless they have to be presented as "Liabilities Associated with Non-Current AssetsHeld for Sale" or they relate to "Hedging Derivatives", which are reported separately.





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Financial liabilities are included for measurement purposes in the following categories:

Financial liabilities at amortised cost: this category includes, irrespective of their instrumentation andmaturity, the financial liabilities not included under any other item in the balance sheet which arise fromfinancing activities carried on.

v. Classification of financial liabilities for presentation purposes

Financial liabilities are classified by nature into the following items:

- Payable to financial intermediaries: credit balances arising from payment obligations to financialintermediaries, such as loans and credits received, repurchase agreements, advances to execute securitypurchases, cash deposits received as collateral for transactions, balances payable to clearing houses andsettlement agencies, temporary balances arising from securities transactions for the account of customers,payments outstanding on the underwriting of securities and other similar debts, excluding thoseinstrumented in marketable securities.

Other financial liabilities: includes the amount of payment obligations having the substance of financialliabilities not included under any other item.

b) Measurement of financial assets and liabilities

In general, financial assets and liabilities are initially recognised at fair value which, in the absence of evidence tothe contrary, is deemed to be the transaction price. This amount is adjusted by the transaction costs that aredirectly attributable to the acquisition of the financial asset or to the issue of the financial liability, except forfinancial instruments included in the "at fair value through profit or loss" category. Financial assets and liabilitiesare subsequently measured at each year-end as follows:

i. Measurement of financial assets

Financial assets (except for loans and receivables and equity instruments whose fair value cannot be determinedin a sufficiently objective manner) are measured at fair value, without any deduction for transaction costs that maybe incurred on their sale or other disposal.

The fair value of a financial instrument on a given date is taken to be the amount for which it could be bought orsold on that date by two knowledgeable, willing parties in an arm's length transaction. Fair value is determinedwithout any deduction for transaction costs that may be incurred on disposal. The most objective and commonreference for the fair value of a financial instrument is the price that would be paid for it on an organised,transparent and deep market ("quoted price" or "market price").





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If there is no market price for a given financial instrument, its fair value is estimated on the basis of the priceestablished in recent transactions involving similar instruments and, in the absence thereof, of valuationtechniques commonly used by the international financial community, taking into account the specific features ofthe instrument to be measured and, particularly, the various types of risk associated with it. However, the inherentlimitations of the valuation techniques used and the possible inaccuracies of the assumptions made under thesetechniques may result in a fair value of a financial instrument which does not exactly coincide with the price atwhich the instrument could be bought or sold at the date of measurement.

Equity instruments of other entities whose fair value cannot be determined in a sufficiently objective manner aremeasured at acquisition cost adjusted, where appropriate, by any related impairment loss.

"Loans and Receivables" are measured at amortised cost using the effective interest method. Amortised cost isunderstood to be the acquisition cost of a financial asset or liability plus or minus, as appropriate, the principalrepayments and the cumulative amortisation (taken to the income statement) of the difference between the initialcost and the maturity amount. In the case of financial assets, amortised cost furthermore includes any reductionsfor impairment or uncollectibility.

The "effective interest rate" is the discount rate that exactly matches the carrying amount of a financialinstrument to all its estimated cash flows of all kinds over its remaining life. For fixed rate financial instruments,the effective interest rate coincides with the contractual interest rate established on the acquisition date plus,where applicable, the fees that, because of their nature, can be equated with a rate of interest. In the case offloating rate financial instruments, the effective interest rate, if any, coincides with the rate of return prevailing inall connections until the next benchmark interest reset date.

The amounts at which the financial assets are recognised represent, in all material respects, the Company'smaximum exposure to credit risk at each reporting date.

ii. Measurement of financial liabilities

In general, financial liabilities are measured at amortised cost, as defined above, except for those included under"Financial Liabilities Held for Trading", "Other Financial Liabilities at Fair Value through Profit or Loss" and"Financial Liabilities at Fair Value through Equity", which are measured at fair value.

iii. Valuation techniques

The financial assets available for sale at 31 December 2015 and 2014 (Note 6) have been recognised atacquisition costs, given that fair value could not be determined in a sufficient objective manner.





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iv. Recognition of fair value changes

As a general rule, changes in the carrying amount of financial assets and liabilities are recognised in the incomestatement. A distinction is made between the changes resulting from the accrual of interest and similar items,which are recognised under "interest and Similar Income" or "interest Expense and Similar Charges", asappropriate; the adjustments arising from the impairment of assets, which are recognised under "impairmentLosses on Financial Assets"; and those arising for other reasons, which are recognised at their net amount under"Gains/Losses on Financial Assets and Liabilities (Net)".

Adjustments due to changes in fair value arising from "Available-for-Sale Financial Assets" are recognisedtemporarily under "Valuation Adjustments - Available-for-Sale Financial Assets", unless they relate to exchangedifferences on monetary financial assets, in which case they are recognised under "Exchange Differences" in theincome statement. Items charged or credited to "Valuation Adjustments - Available-for-Sale Financial Assets"remain in the Company's equity until the asset giving rise to them is derecognised, at which time they are taken toprofit or loss.

c) Derecognition of financial assets and liabilities

Financial assets are only derecognised when the cash flows they generate have been extinguished or whensubstantially all the inherent risks and rewards have been transferred to third parties. Similarly, financial liabilitiesare only derecognised when the obligations they generate have been extinguished or when they are acquired(with the intention either to cancel them or to resell them).

d) Offsetting

Asset and liability balances are offset, i.e. reported in the balance sheet at their net amount, when, and onlywhen, they arise from transactions in which a contractual or legal right of set-off exists and the Company intendsto settle them on a net basis, or to realise the asset and settle the liability simultaneously, and one of thecontracting parties is a financial institution.

The balances of transactions yet to be settled with a single settlement or clearing house or system in an activemarket or stock exchange may also be offset, provided that they take place at the same time and aredenominated in the same currency.





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e) Impairment of financial assets

i. Definitions

A financial asset is considered to be impaired -and therefore its carrying amount is adjusted to reflect the effect ofimpairment- when there is objective evidence that events have occurred which:

In the case of debt instruments (loans and debt securities), give rise to an adverse impact on the future cashflows that were estimated at the transaction date. In the case of equity instruments, mean that their carrying amount may not be fully recovered.

As a general rule, the carrying amount of impaired financial instruments is adjusted with a charge to theincome statement for the period in which the impairment becomes evident, and the reversal, if any, ofpreviously recognised impairment losses is recognised in the income statement for the period in which theimpairment is reversed or reduced.

Interest accrual will be suspended for all the individually or collectively assessed assets on which impairmentlosses have been recognised and which have payments more than three months past due.

ii. Debt instruments carried at amortised cost

The amount of an individually or collectively assessed impairment loss incurred on a debt instrument carried atamortised cost is equal to the negative difference between its carrying amount and the present value of itsestimated future cash flows and is presented as a reduction of the balance of the asset adjusted.

Impairment losses on these assets are assessed as follows:

Individually, for all significant debt instruments.

Collectively: the Company classifies transactions on the basis of the nature of the obligors, theconditions of the countries in which they reside, transaction status, type of collateral or guarantee,age of past-due amounts, etc. The impairment loss of an asset group is the difference betweenthe carrying amount of all the financial assets in the group and the present value of theirestimated future cash flows.

In order to calculate impairment losses, formulas based on default schedules are used which take into accountthe time value of money, expected cash flows and the age of the balances.





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iii. Available-for-sale financial instruments

The amount of the impairment losses on these instruments is the positive difference between their acquisitioncost (net of any principal repayment or amortisation, in the case of debt instruments) and their fair value less anyimpairment loss previously recognised in the income statement.

When there is objective evidence that the losses arising on measurement of these assets are due toimpairment, they are removed from the equity item "Valuation Adjustments" and are recognised, for theircumulative amount, in the income statement. If all or part of the impairment losses are subsequentlyreversed, the reversed amount is recognised in the income statement for the period in which the reversaloccurs (under "Valuation Adjustments" in the balance sheet in the case of equity instruments).

iv. Equity instruments carried at cost

The amount of the impairment losses on these instruments is the positive difference between their carryingamount and their recoverable amount, which is deemed to be the higher of fair value less costs to sell and thepresent value of expected future cash flows. Unless there is better evidence of the recoverable amount, it isbased on the value of the equity (consolidated, as the case may be) of the investee, adjusted by the amountof the unrealised gains existing at the date of measurement.

Impairment losses are recognised in the income statement for the period in which they arise as a directreduction of the cost of the instrument. These losses can only be reversed subsequently if the related assetsare sold.

f) Repurchase agreements and reverse repurchase agreements

Purchases (sales) of financial assets under a non-optional resale (repurchase) agreement at a fixed price("repos") are recognised in the balance sheet as financing granted (received) based on the nature of thedebtor (creditor), under "Loans and Advances to Financial Intermediaries" or "Loans and Advances toIndividuals" ("Payable to Financial Intermediaries" or "Payable to Individuals").

Differences between the purchase and sale prices are recognised as interest over the contract term.

g) Tangible assets

"Tangible Assets" includes the amount of furniture, fixtures and computer hardware owned by the Companywhich, in view of their use, are all classified as "Property, Plant and Equipment for Own Use".

Property, plant and equipment for own use (which basically includes tangible assets intended to be held forcontinuing use), are presented at acquisition cost, less the related accumulated depreciation and any impairmentlosses (carrying amount higher than recoverable amount).





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Depreciation is calculated, using the straight-line method, on the basis of the acquisition cost of the assets lesstheir residual value. The land on which the buildings and other structures stand has an indefinite life and,therefore, is not depreciated.

The period tangible asset depreciation charge is recognised under "Depreciation and Amortisation Charge" in theincome statement and is calculated using basically the following depreciation rates (based on the average yearsof estimated useful life of the various assets):

Annual Rate

FurnitureComputer hardware

10%25%

The Company assesses at the reporting date whether there is any indication that an asset may be impaired(i.e. its carrying amount exceeds its recoverable amount). If this is the case, the carrying amount of theasset is reduced to its recoverable amount and future depreciation charges are adjusted in proportion to therevised carrying amount and to the new remaining useful life (if the useful life has to be re-estimated).

Similarly, if there is an indication of a recovery in the value of a tangible asset, the Company recognises thereversal of the impairment loss recognised in prior periods and adjusts the future depreciation chargesaccordingly. In no circumstances may the reversal of an impairment loss on an asset raise its carryingamount above that which it would have if no impairment losses had been recognised in prior years.

The Company recognises any impairment loss on the carrying amount of its tangible assets under "impairmentLosses on Other Assets - Tangible Assets" in the income statement.

The estimated useful lives, residual values and depreciation methods of the items of property, plant andequipment for own use are reviewed at least at the end of the reporting period with a view to detectingsignificant changes therein. If changes are detected, the related adjustments are made by correcting thedepreciation charge to be recognised in the income statement in future years on the basis of the new usefullives.

Upkeep and maintenance expenses relating to property, plant and equipment for own use are recognised asan expense in the period in which they are incurred. However, the costs of improvements leading toincreased capacity or efficiency or to a lengthening of the useful lives of the assets are capitalised.

There were no impairment losses on these assets at 31 December 2016 or 2015.

At 31 December 2016 and 2015, the Company did not have any assets acquired or leased out under a financelease or any assets classified as investment property.





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h) Intangible assets

Intangible assets are identifiable non-monetary assets (separable from other assets) without physicalsubstance which arise as a result of a legal transaction or which are developed internally by the Company.Only intangible assets whose cost can be estimated reliably and from which the Company considers itprobable that future economic benefits will be generated are recognised.

Intangible assets are recognised initially at acquisition or production cost and are subsequently measured at costless any accumulated amortisation and any accumulated impairment losses.

i. Other intangible assets

Substantially all the "Other Intangible Assets" (all with finite useful lives) held by the Company at 31 December2016 and 2015 related to computer software acquired for consideration.

These intangible assets are amortised over their finite useful life (three years) using methods similar tothose used to depreciate tangible assets. The average annual amortisation rate applied for computersoftware is 33%.

The intangible asset amortisation charge is recognised under "Depreciation and Amortisation Charge" in theincome statement.

The Company recognises any impairment loss on the carrying amount of intangible assets with a charge to"impairment Losses on Other Assets - Intangible Assets" in the income statement. The criteria used to recognisethe impairment losses on these assets and, where applicable, the reversal) of impairment losses recognised inprior years are similar to those used for tangible assets.

i) Accounting for operating leases

The Company acts as the lessee in certain operating leases. In such cases, lease expenses, including anyincentives granted by the lessor, are charged to "General Expenses" in the income statement on a straight-linebasis (Note 28).

j) Tax assets and liabilities

"Tax Assets" and "Tax Liabilities" in the balance sheet include the amount of all tax assets and liabilities arisingfrom income tax, which are broken down into "Current" (amounts of tax to be recovered or paid within the nexttwelve months) and "Deferred" (amounts of tax to be recovered or paid in future years, including any arising fromunused tax loss and tax credit carry forwards).





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k) Other assets and liabilities

"Other Assets" includes the amount of assets not recorded in other items, including guarantees provided assecurity for financial transactions, loans and advances to employees and other assets.

"Other Liabilities" includes the payment obligations having the substance of financial liabilities not included in anyother category.

The two line items include the balances relating to prepayments and accrued income, and accrued expenses anddeferred income, respectively, excluding accrued interest, which is recognised in the same item as the financialinstruments giving rise to it.

l) Provisions and contingent liabilities

Provisions are present obligations arising from past events which are clearly specified as to theír nature at thereporting date but are uncertain as to their amount or timing, the settlement of which on maturity is expected toresult in an outflow from the Company of resources embodying economic benefits.

Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmedonly by the occurrence or non-occurrence of one or more future events not wholly within the control of theCompany. They include present obligations when it is not probable that an outflow of resources embodyingeconomic benefits will be required to settle them or when their amount cannot be quantified in a sufficientlyreliable manner.

The financial statements include all the material provisions with respect to which it is considered that it is morelikely than not that the obligation will have to be settled. Contingent liabilities are not recognised in the financialstatements, but rather are disclosed in the notes lo the financial statements.

Provisions, which are quantified on the basis of the best information available on the consequences of the eventgiving rise to them and are reviewed and adjusted at the end of each year, are used to cater for the specificobligations for which they were originally recognised. Provisions are fully or partially reversed when suchobligations cease to exist or are reduced.

m) Equity instruments

An equity instrument is a contract that evidences a residual interest in the assets of the Company after deductingall of its liabilities.





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Equity instruments issued by the Company are recognised in equity at the proceeds received, net of issue costs.Treasury shares acquired by the Company during the year are recognised, as appropriate, at the value of theconsideration paid and are deducted directly from equity. Gains and losses on the acquisition, sale, issue orretirement of treasury shares are recognised directly in equity and in no case are they recognised in the incomestatement.

n) Recognition of income and expenses

The most significant criteria used by the Company to recognise its income and expenses are summarised asfollows:

i. Interest income, interest expenses and similar items

Interest income and similar items and interest expenses and similar charges are generally recognised on anaccrual basis, using the effective interest method, under "Interest and Similar Income" and "Interest Expense andSimilar Charges", respectively, in the income statement. Dividends received from other companies are recognisedas income under "Income from Equity Instruments" in the income statement when the Company's right to receivethem arises. Interest and dividends accrued prior to the acquisition date are not recognised in the incomestatement and the related asset is derecognised when collected.

ii. Commissions, fees and similar items

Fee and commission income and expenses are recognised in the income statement using criteria that varyaccording to their nature. The main criteria are as follows:

Those arising from transactions or services that are performed over a period of time are recognised overthe life of these transactions or services.

This category includes the amounts paid by the Company in respect of clearing and settlement systemmembership fees and renewal of Stock Exchange membership, which are recognised over the related period.

Those relating to services provided in a single act are recognised when the single act is carried out.

Within this category, fee and commission income arising from the brokerage of fixed-income securities, equitysecurities and derivatives is included under "Fee and Commission Income" in the accompanying incomestatement (Note 24).

iii. Non-finance income and expenses

These are recognised for accounting purposes on an accrual basis.





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o) Finance costs

Finance costs are recognised under "Interest Expense and Similar Charges" in the income statement for theperiod in which they are incurred, unless they are directly attributable to the acquisition, production or constructionof qualifying assets, in which case they are capitalised.

p) Securities deposited

The Company recognises the market value of own and third-party securities and other financial instruments, if itassumes the related custody risk, under "Other Memorandum Items - Securities Deposited - Securities and OtherFinancial Instruments Deposited". If the Company does not bear the custody risk, the market value of own andthird-party securities and other financial instruments is recognised under "Other Memorandum Items - SecuritiesDeposited - Own and Third-Party Securities and Other Financial Instruments Held by Other Entities" (Note 18). At31 December 2016 and 2015 the Company held no securities in the aforementioned company.

q) Pension and other post-employment benefit obligations

The collective agreement provides for a bonus for early retirement taken by mutual agreement between theCompany and the employees, which ranges from EUR 56,480 to EUR 26,505, if retirement is taken between theages of 60 and 64, and an indemnity payment of EUR 19,533 for retirement requested by the employee or theCompany at age 65. This retirement bonus is considered to be a defined benefit post-employment obligation.

The Company also guarantees that it will deliver Christmas hampers (cost per item in 2015: EUR 100 for eachemployee) to retired employees who were in the Company's employ at 31 December 2006, as a life-time benefittransferable to the employee's spouse. This Christmas hamper is considered to be a defined benefit post-employment obligation.

In 2001, 2005, 2007, 2008, 2009, 2014 and 2016 the Company implemented a pre-retirement plan under which itundertook to pay annuity payments to certain employees until they reach retirement age. These payments aretreated as other long-term employee obligations.

Also, the company has taken a policy Group Insurance Joint ensuring certain employees of the Company for thecontingencies of retirement, disability or death. This commitment is considered a post-employment defined as acontribution commitment.

The Company's post-employment obligations to its employees are deemed to be "defined contribution plans"when the Company makes pre-determined contributions to a separate entity and will have no legal or effectiveobligation to make further contributions if the separate entity cannot pay the employee benefits relating to theservice rendered in the current and prior periods. Post-employment obligations that do not meet theaforementioned conditions are classified as "defined benefit plans".





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Defined contribution plans

In 2016 the Company made contributions amounting to EUR 272 thousand (EUR 271 thousand in 2015) whichare recognised under "Staff Costs- Allocations to defined contribution plans" in the income statement (Note 27).

Defined benefit plans

The Company recognises under "Provisions - Provisions for Pensions and Similar Obligations" on the liability sideof the balance sheet the present value of its defined benefit post-employment obligations, net of the fair value ofthe plan assets.

"Plan assets" are defined as those that will be used directly to settle obligations and that meet the followingconditions:

- They are not owned by the Company, but by a legally separate third party that is not a party related to theCompany.

- They can only be used to pay or finance post-employment benefits and are not available to theCompany's creditors, even in the event of bankruptcy. They cannot be returned to the Companyunless the assets remaining in the plan are sufficient to meet all obligations of the plan and of theCompany relating to benefits for current or former employees, or to reimburse employee benefitsalready paid by the Company.

- When the assets are held by a long-term post-employment employee benefit entity (or fund), they are notnon-transferable financial instruments issued by the Company.

If the Company can look to an insurer to pay part or all of the expenditure required to settle a defined benefitobligation, and it is practically certain that said insurer will reimburse some or all of the expenditure requiredto settle that obligation, but the insurance policy does not qualify as a plan asset, the Company recognisesits right to reimbursement, which in all other respects is treated as a plan asset, under "Insurance ContractsLinked to Pensions".

"Actuarial Gains and Losses" are defined as those arising from differences between the previous actuarialassumptions and what has actually occurred and from the effects of changes in actuarial assumptions. TheCompany recognises actuarial gains and losses immediately under "Valuation Adjustments".





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Pre-retirements

Obligations to pre-retirees -defined as those who have ceased to render services at the Company but who,without being legally retired, continue to have economic rights until they acquire the legal status of retiree- aretreated for accounting purposes, where applicable, as discussed above for defined benefit post-employmentplans, except that all the past service cost and the actuarial gains and losses are recognised immediately inthe income statement.

As of 31 December 2016 and 2015, the Company had recognised an in-house provision of EUR 2,994 and 2,835thousand, respectively, under "Provisions for Pensions and Similar Obligations" on the liability side of the balancesheet to cover the accrued liability for these obligations (Note 12).

The value of the obligations was determined by an independent actuary using the following actuarialtechniques:

1. Valuation method: projected unit credit method, which sees each period of service as giving rise to anadditional unit of benefit entitlement and measures each unit separately.

2. Actuarial assumptions used: unbiased and mutually compatible. Specifically, the most significant actuarialassumptions used in the calculations were as follows:

2016 2015

Annual discount rate 1% 1,5%Mortality tables PERM/F2000 PERM/F2000Cumulative annual CPI growth 1% 1%Benefit growth rate (pre-retirees) 0 - 1% 0 - 1,5%Benefit growth rate (Christmas hampers) 1% 1%Growth rate (retirement bonus) 1% 1%Annual social security pension increase rate 1% 1%Annual social security contribution base increase rate 1% 1%

Changes in the main assumptions might affect the calculation of the obligations. A 50 bp increase or decrease inthe discount rate would have given rise to an increase of EUR 110 thousand or decrease of EUR 88 thousand,respectively, in the income statement and an increase of EUR 57 thousand or decrease of EUR 53 thousand,respectively, in valuation adjustments.

3. The estimated retirement age of each employee is the first at which the employee is entitled to retire or theagreed-upon age, as appropriate.





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r) Termination benefits

Under current legislation, the Company is required to pay termination benefits to employees terminated undercertain conditions. The Company recognised under "Staff Costs" the termination benefits paid to employeeswhose employment was terminated in 2016 (Note 27). In the opinion of the Company's Directors, at 31 December2016 and 2015 there were no reasons for recognising any additional provisions in this connection at these dates.

s) Income tax

The Company files consolidated income tax returns as part of consolidated tax group 17/89, the parent of which isBanco Santander, S.A. (Note 14).

The tax group's policy in connection with the allocation of consolidated income tax is as follows: the parent of thetax group settles the related consolidated income tax and passes on to the various companies composing the taxgroup the tax charge resulting from applying the percentages defined by it, on the basis of the relative contributionof each company in the tax group. As a result, the Company recognises the intra-group fax receivables andpayables communicated by the parent. Any tax losses arising at certain Group companies that are offset by theother consolidated Group companies are recognised by recording a reciprocal) account receivable and payablebetween the companies that reported the losses and the companies that offset them. If there is a tax loss thatcannot be offset by the other consolidated Group companies, these tax loss carry forwards are recognised asdeferred tax assets in accordance with the criteria established for recognition as such and the tax group isconsidered to be the taxpayer.

The current income tax expense is calculated as the fax payable with respect to the taxable profit for the year,alter considering the amount of any changes in the year in the assets and liabilities recognised as a result oftemporary differences and fax credit and fax loss carry forwards.

A temporary difference exists when there is a difference between the carrying amount of an asset or liabilityand its tax base. The tax base of an asset or liability is the amount attributed to that asset or liability for taxpurposes. A taxable temporary difference is one that will generate a future obligation for the Company tomake a payment to the related fax authorities. A deductible temporary difference is one that will generate aright for the Company to a refund or a reduction in its tax charge in the future.

Tax credit and tax loss carry forwards are amounts that, after performance of the activity or obtainment ofthe profit or loss giving entitlement to them, are not used for tax purposes in the related tax return until theconditions for doing so established in the tax regulations are met and the Group considers it probable thatthey will be used in future periods.

The tax benefit relating to double taxation fax credits, fax relief and investment tax credits is treated as areduction of the amount of income tax payable in each year. Entitlement to these tax credits is conditionalupon compliance with the current regulatory requirements.





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Current tax assets and liabilities are the taxes that are expected to be recoverable from or payable to therelated tax authorities within twelve months from the date they are recognised. Deferred tax assets andliabilities are the taxes that are expected to be recoverable from or payable to, respectively, the related taxauthorities in future years.

Deferred tax liabilities are recognised for all significant taxable temporary differences. The Company onlyrecognises deferred tax assets arising from deductible temporary differences and from tax credit and tax losscarry forwards when certain conditions are met.

Deferred tax assets and liabilities are not recognised if they arise from the initial recognition of an asset orliability (other than in a business combination) that at the time of recognition affects neither accounting profitnor taxable profit.

The deferred tax assets and liabilities recognised are reassessed each year in order to ascertain whetherthey still exist, and the appropriate adjustments are made on the basis of the findings of the analysesperformed.

The article 29.6 of Law 27/2014, of November, on personal income tax established a standard income taxrate of 30%.

t) Residual maturity periods and average interest rates

Note 15 provides a breakdown, by maturity and average applicable interest rate, of the items composing thebalances of certain fixed-rate financial instruments in the balance sheets and the average interest rates at 31December 2016 and 2015.

u) Statement of cash flows

The following terms are used in the statement of cash flows:

Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquidinvestments that are subject to an insignificant risk of changes in value. The reverse repo agreementsand demand accounts recognised under "Loans and Advances to Financial Intermediaries" in the balancesheet are considered to be cash equivalents.

Operating activities: the principal revenue-producing activities of the Company and other activities that are notinvesting or financing activities.

Investment activities: the acquisition and disposal of long-term assets and other investments not included incash and cash equivalents.





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Financing activities: activities that result in changes in the size and composition of the equity and funds

borrowed by the Company that are not operating activities.

v) Statements of changes in equity

The statements of changes in equity presented in these financial statements show the total changes in equity inthe year. This information is in turn presented in two statements: the statement of recognised income andexpense and the statement of changes in total equity. The main characteristics of the information contained in thetwo parts of the statement are explained below:

Statements of recognised income and expense

This part of the statements of changes in equity presents the income and expenses generated by the Companyas a result of its business activity in the year, and a distinction is made between the income and expensesrecognised in the income statement for the year and the other income and expenses recognised, in accordancewith current regulations, directly in equity.

Accordingly, these statements present:

a) Profit for the year.

b) The net amount of the income and expenses recognised temporarily in equity under "ValuationAdjustments".

c) The net amount of the income and expenses recognised definitively in equity, if any.

d) The income tax incurred in respect of the items indicated in b) and c) above.

e) Total recognised income and expense, calculated as the sum of a) to d) above.

The changes in income and expenses recognised in equity under "Valuation Adjustments" are broken down asfollows:

a) Revaluation gains (losses): includes the amount of the income, net of the expenses incurred in theyear, recognised directly in equity.

b) Amounts transferred to income statement: includes the amount of the revaluation gains and lossespreviously recognised in equity, albeit in the same year, which are recognised in the incomestatement.

c) Other reclassifications: includes, where appropriate, the amount of the transfers made in the yearbetween valuation adjustment items in accordance with current regulations.





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The amounts of these items are presented gross and the related tax effect, if any, is recognised under "IncomeTax" in this statement.

Statements of changes in total equity

This part of the statements of changes in equity presents all the changes in equity, including those arisingfrom changes in accounting policies and from the correction of errors, if any. Accordingly, this statementpresents a reconciliation of the carrying amount at the beginning and end of the year of all the equity items,and the changes are grouped together on the basis of their nature into the following items:

a) Adjustments due to changes in accounting policies and to errors: include any changes in equityarising as a result of the retrospective restatement of the balances in the financial statements due tochanges in accounting policies or to the correction of errors.

b) Income and expense recognised in the year: includes, in aggregate form, the total of theaforementioned items recognised in the statement of recognised income and expense.

c) Other changes in equity: includes the remaining items recognised in equity, including, inter alia,distribution of profit, transactions involving own equity instruments, equity-instrument-basedpayments, transfers between equity items and any other increases or decreases in equity.

w) Foreign currency transactions

The Company's functional currency is the euro. Therefore, all balances and transactions denominated incurrencies other than the euro are deemed to be denominated in "foreign currency".

The equivalent value in thousands of euros of the total assets and liabilities in foreign currency held by theCompany at 31 December 2016 and 2015 amounted to EUR 9 and 5,957 thousand; and to EUR 9 and 1,112thousand respectively (Notes 5 and 11). The exchange rates generally used in translating the foreigncurrency balances to euros were the closing rates published by the European Central Bank.

The exchange differences arising on the translation of foreign currency balances to the functional currencyare generally recognised at their net amount under "Exchange Differences (Net)" in the income statement,except for exchange differences, if any, arising on financial instruments at fair value through profit or loss,which are recognised in the income statement without distinguishing them from other changes in the fairvalue of these instruments, and for exchange differences arising on instruments classified as available-for-sale financial assets, which are recognised in equity.





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x) Related party transactions

Related party transactions are deemed to be all the transactions performed between the Company andentities or individuals meeting the requirements set forth in Rule 54.1 of C.N.M.V. Circular 7/2008, of 26November.

The Company performs all its transactions with related parties on an arm's length basis. Also, the transfer pricesare adequately supported and, therefore, the Company's directors consider that there are no material risks in thisconnection that might give rise to significant liabilities in the future (Note 19).

a) Distribution of the Company’s profit

The distribution of the net profit for 2016 that the Company's Board of Directors will propose for the approval bythe sole-shareholder at the Annual General Meeting is as follows:

Thousands of Euros

Profit of the year 3,439

3,439Allocation:Voluntary reserves 3,439

3,439

4. Remuneration and other benefits paid to the Company’s directors and senior executives

At 31 December 2016 and 2015, there were no advances or loans or pension, benefit or life insurance obligationsto former or current members of the Board of Directors. Also, at 31 December 2016 and 2015, the Company hadnot recognised any item in relation to target-based share plans for the members of the Board of Directors.

During 2016 and 2015, the remuneration earned by the Company’s executives amounted EUR 1,225 and 1,410thousand, respectively, of which EUR 17 and 19 thousand, respectively, related to life and health insurance, andEUR 105 and 215 thousand, respectively, related to other remuneration in kind.

Information regarding situations of conflict of interest involving the directors

At 31 December 2016, the Company’s Boards of Directors is formed by 5 men.

As of 31 December 2016, the Company’s Directors and their related persons, as defined in Article 231 of theConsolidated Spanish Limited Liability Companies Law, declare that they have no conflict of interest that must bereported in these notes, pursuant to Article 229 of the aforementioned Law.





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As regards the other information required by Article 260 of the Consolidated Spanish Limited Liability CompaniesLaw and not included in these notes to the financial statements, it should be noted that the circumstancesenvisaged in that article do not apply to the Company.

5. Loans and advances to financial intermediaries

The detail, by classification, type and currency, of "Loans and Advances to Financial Intermediaries" on the assetside of the balance sheets at 31 December 2016 and 2015 is as follows:

Thousands of Euros2016 2015

Classification:Loans and receivables 158,534 355,391

158,534 355,391Type:

Demand accounts (Note 19) 118,321 339,922

Unsettled transactions 1,445 12,455

Other receivables 38,768 3,014

158,534 355,391Geographic Area:

Spain 158,534 355,391

158,534 355,391Currency:

Euro 158,525 355,382

Other currencies 9 9

158,534 355,391

"Demand Accounts" in the table above, includes mainly the balances of the current accounts held by the Companyin Banco Santander, S.A., Santander Securities, S.A. and Openbank, S.A. The current accounts earn interest atmarket rates. The interest earned on demand accounts amounted to EUR 36 and 494, respectively, and wasrecognised under "Interest and Similar Income" in the income statement (Note 21).





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The heading “Other receivables” at 31 December 2016 and 2015 breaks down as it is shown below:

Thousands of Euros

2016 2015

GuaranteesForeign Market - EuroCCP, N.V. 3,000 3,014Own account – Variable income 30,000 -

33,000 3,014

Other receivablesSecurities lending 5,768 -

38,768 3,014

The amount included under "Guarantees- Own-account – Variable income" in the previous detail corresponds tothe amounts deposited in BME Clearing as extraordinary guarantees calculated on the basis of the operationscarried out by the Company.

The "Other Receivables – Securities lending" caption at 31 December 2016 includes the amount corresponding tothree collateral deposited by three customers of the Company in connection with the loan operations of lastresort, amounting to 5,768 thousand euros. During 2016, these loans accrued interests amounting to EUR 13thousand, recorded under "Interest expense and similar charges" in the accompanying income statement (Note22).

The unsettled balances for own account relate, at 2016 and 2015 year end, to securities sold by the Company butnot yet settled, mainly, with lberclear as a result of the time-lag between the deal date and the settlement date.These items were settled in the first few days of 2017 and 2016, respectively.

Note 15, “Residual maturity periods and average interest rates” contains a detail, by maturity, of the balances ofthis item in the balance sheet, and of the related average interest rates, disregarding valuation adjustments.





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6. Available-for-sale financial assets

The detail, by classification, listing status, currency and type, of the balance of "Available-for-Sale FinancialAssets' at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

ClassificationOther equity instruments 7 7

7 7Listing status:Unlisted 7 7

7 7Currency:Euro 7 7

7 7Type:Share of Spanish companies 7 7

7 7

The Company’s investment in unlisted shares, at 31 December 2016 and 2015, relates to its ownershipinterests in Sociedad Promotora Bilbao Plaza Financiera S.A., consisting of 886 shares amounting to EUR 5thousand, in both periods, and in Sociedad Gestora del Fondo de Garantía de Inversiones, S.A., valued atacquisition cost and amounting to EUR 2 thousand, consisting of 7 shares (200 EUR face value) in bothperiods.

In 2016 and 2015 there was no evidence of impairment losses on “Other equity instruments”.

The adjustments due to changes in fair value of available-for-sale financial assets are recognised, net of therelated tax effect, in equity under “Valuation Adjustments”.

During 2016 and 2015 there were no “Valuation Adjustments – Available-for-sale financial assets”.





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7. Loans and advances to individuals

The detail, by classification, loan type and status, geographical area of residence and interest rate formula, of"Loans and Advances to Individuals" at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Classification:Loans and receivables 658 183

658 183

Loand type and status:Receivable on demand and other 645 181Doubtful assets 21 4Valuation adjustment – Impairment losses (8) (2)

658 183

Geographical area:Spain 658 183

658 183

At 31 December 2016 and 2015, the balance of this heading relates mainly to invoices receivable and to loans toemployees, respectively.

The changes in 2016 and 2015 in the impairment losses on the assets included under “Loans and receivables –Loans and advances to individuals” in the balance sheets at 31 December 2016 and 2015 were as follow:

Thousands of Euros2016 2015

Balance at beginning of the year 2 -

Net impairment losses for the year charged income 6 2

Reduction due to derecognition of assets - -

Balance at the end of the year 8 2





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8. Tangible assets

The changes in 2016 and 2015 in “Tangible assets” in the balance sheet, which consisted in full of property, plantand equipment for own use, were as follows:

Thousands of Euros

31.12.15 Additions Disposals 31.12.16

CostFurniture, fixtures and other 390 - - 390IT and communication equipment 7,698 1 - 7,699

8,088 1 - 8,089

Accumulated depreciationFurniture, fixtures and other (352) - - (352)IT and communication equipment (7,692) (3) - (7,695)

(8,044) (3) - (8,047)

Net tangible assets 44 (2) - 42

Thousands of Euros


CostFurniture, fixtures and other 390 - - 390IT and communication equipment 7,695 3 - 7,698

8,085 3 - 8,088

Accumulated depreciationFurniture, fixtures and other (352) - - (352)IT and communication equipment (7,689) (3) - (7,692)

(8,041) (3) - (8,044)

Net tangible assets 44 - - 44

At 31 December 2016 and 2015, the Company had fully depreciated assets still in use amounting to EUR 7,355and 7,436 thousand, respectively.

There were no impairment losses in 2016 and 2015.





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9. Intangible assets

In 2016 and 2015 there were no changes on "Intangible assets" on the asset side of the balance sheet, whichconsists in full of computer software acquired by the Company. The Company had fully amortised intangibleassets still in use amounting to EUR 2,586 thousand in both periods.

There were no impairment losses in 2016 and 2015 on intangible assets.

10. Other assets and liabilities

The detail of "Other Assets" and "Other Liabilities" at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Assets Liabilities Assets Liabilities

Guarantees and indemnities provided (Note 19) 74 - 63 -Other liabilities - 1,085 - 145,412Fees and commissions receivable (Note 24) 1,049 - 342 -Accrued expenses and deferred income - 5,897 - 5,569Other assets 47,333 - 3,252 -

48,456 6,982 3,657 150,981

The asset item "Fees and Commissions Receivable" in the foregoing table includes mainly equity brokerage feesearned but not yet received. The heading “Fee and commission income” of the income statement, relates to thecommissions accrued during the year ended at 31 December 2016 and 2015 respectively (Note 24).

"Accrued Expenses and Deferred Income", reflects, among other concepts, at 31 December 2016 and 2015 EUR3,299 and 2,997 thousand, respectively, the provision for the bonus for 2016 and 2015, which was paid toemployees in the first few months of 2017 and 2016, respectively. From the provision provided in 2015, EUR2,563 thousand have been paid for the bonus, and the excess has been regularized during 2016. Moreover, as of31 December 2016, the Company had EUR 1,120 thousand in stock exchange fees and, at 31 December 2015,EUR 282 thousand to pay severance indemnities. As of 31 December 2016, the Company does not maintain anyprovision for severance pay.

Moreover, the " Accrued expenses and deferred income" caption, at 31 December 2016 and 2015, includesprovisions made by the Company in the form of general expense invoices pending receipt at the close of eachyear, mainly associated with supplies, amounting to EUR 811 thousand and 1,527 thousand, respectively, as wellas provisions for accrued rates of C.N.M.V. outstanding for the last quarter of each year, amounting to EUR 550thousand and 523 thousand, respectively.





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"Other Liabilities" in the foregoing table at 31 December 2016 and 2015 includes mainly the cumulative amountsof income tax settlements payable to the Group for prior years amounting to EUR 1,023 and 145,055 thousand,respectively (Note 19). In 2016, the Company canceled the cumulative balance of the liability with the Grouprelated to income tax settlements accumulated in previous years.

"Other Assets" at 31 December 2016 and 2015 includes mainly the unsettled amounts arising from the financialintermediation activity carried on by the Company. As a result of the modification in the Capital Markets Lawthrough the enforcement of the Royal Legislative Decree 4/2015, of 23 October, at 31 December 2016, theoutstanding customer transaction related to transaction in the domestic variable income market should beregistered in the asset side of the balance sheet, which generates a significant variation regarding that heading at31 December 2015.

11. Payable to financial intermediaries

The detail, by classification, type, geographical area and currency, of "Payable to Financial Intermediaries" at 31December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Classification:

Financial liabilities at amortised cost 7,425 13,569

7,425 13,569

Type:

Borrowings 5,957 1,112

Unsettled balances for own account 1,444 12,454

Other borrowings 24 3

7,425 13,569

Geographical area:

Spain 7,425 13,569

7,425 13,569

Currency:

Euro 1,468 12,457

Other currencies 5,957 1,112

7,425 13,569

"Borrowings" in the foregoing table at 31 December 2016 and 2015 includes overdrafts on current accountsamounting to EUR 5,957 and 1,112 thousand respectively.





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The interest accrued in 2016 and 2015 on payables to financial intermediaries, amounting to EUR 227 and148 thousand, respectively, is recognised under "interest Expense and Similar Charges" in the incomestatement (Note 22).

The unsettled balances for own account mainly relate to securities purchased by the Company but not yet settledwith lberclear as a result of the time-lag between the deal date and the settlement date. These items were settledin the first few days of 2017 and 2016, respectively.

Note 15, "Residual maturity periods and average interest rates", contains a detail, by maturity and averageinterest rate, of the fixed interest-rate balances of this item in the balance sheet and the related averagerates, disregarding valuation adjustments.

At 31 December 2016 and 2015, EUR 5,958 and 1,129 thousand, respectively, relate to the intercompanybalance.

12. Provisions

The detail of the special provisions recognised by the Company at 31 December 2016 and 2015 is asfollows:

Thousands of Euros

2016 2015

Provisions for pensions and similar obligations:

Provision for retirement bonuses 560 625

Provision for pre-retirements 2,995 2,835

Provision for Christmas hamper to employees 88 86Provision for actuarial losses 2 -

3,645 3,546

Other provisions - 4

Balance at the end of year 3,645 3,550

i. Provisions for pensions and similar obligations

In 2016 and 2015, EUR 572 and 80 thousand were recognized, respectively, in the income statement in relationto these obligations. Said commitment is included within the net amount of provisions and for risk recoveries.





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The amounts recognized in 2016 and 2015 in the income statement in respect of pensions and similarobligations were as follows:

Christmas hampers Thousands of Euros

2016 2015

Current service cost (Note 27) 3 2Net interest cost (Note 22) 1 2

Pre-retirement cost (*) 1 -

Cost provision for services received in previous years (*) - (5)

Total 5 (1)(*) Losses / (Gains) in this connection are recognised under “Provisions (net)” in the accompanying income statement.

Retirement bonuses Thousands of Euros

2016 2015

Current service cost (Note 27) 51 53Net interest cost (Note 22) 10 12Cost provision for services received in previous years (*) (181) (80)

Total (120) (15)

(*)Losses / (Gains) in this connection are recognised under “Provisions (net)” in the accompanying income statement.

Pre-retirees Thousands of Euros

2016 2015

Pre-retirement cost (*) 828 -Interest cost (Note 22) 39 57Cost provision for services received in previous years (*) (176) -Actuarial (gains) / losses recognised in the year(*) - 39

Total 691 96

(*)Losses / (Gains) in this connection are recognised under “Provisions (net)” in the accompanying income statement.





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The amounts of pension obligations recognised in valuation adjustments are as follows:

Christmas hampers and pre-retirement awards Thousands of Euros

2016 2015

Actuarial loss for the year (50) (26)Prior year’s actuarial losses (98) (72)Total actuarial loss (148) (98)

Tax effect 45 29

Net amount recognised in valuation adjustments (103) (69)

The changes in the present value of the aforementioned accrued obligations were as follows:

Christmas hampers and retirement bonus Thousands of Euros

2016 2015

Present value of the obligations at beginning of the year 807 790Current service cost (Note 27) 54 55Interest cost 11 14Actuarial (gains)/losses 55 34Recovery retirement insurance (181) (85)Benefit and other payments (1) (1)

Present value of the obligations at the end of the year 745 807


2016 2015

Present value of the obligations at beginning of the year 2,835 3,274Current service cost (Note 27) 39 57

Interest cost - 39

Actuarial (gains)/losses 829 -

Recovery retirement insurance (176) -

Benefit and other payments (532) (535)

Present value of the obligations at the end of the year 2,995 2,835





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The changes in the fair value of the plan assets relating to defined benefit obligations are as follows:

Retirement bonuses

Thousands of Euros

2016 2015

Fair value at beginning of the year 95 78Expected return 2 1Actuarial gains/losses 6 7Primes paid (6) 9Effect of curtailment/settlement - -

Fair value at the end of the year 97 95

Following is a reconciliation of the present value of the defined benefit obligation and the fair value of the planassets to the assets and liabilities recognised in the balance sheet:

Christmas hampers Thousands of Euros

2016 2015

Present value of the obligations 88 86Fair value of plan assets - -

Provisions – Provisions for pensions 88 86

Retirement bonus Thousands of Euros

2016 2015

Present value of the obligations 657 720

Fair value of plan assets (97) (95)

Provisions – Provisions for pensions 560 625





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2016 2015

Present value of the obligations 2,995 2,835

Pre-retirees 2,995 2,835

Provisions – Provisions for pensions 2,995 2,835

ii. Other provisions

At 31 December 2015, the Company had recognised EUR 4 thousand under "Other Provisions" on the liabilityside of the accompanying balance sheet to cover restructuring. At 31 December 2016, the Company had noprovision registered related to this concept.

The detail of "Other provisions" during 2016 and 2015 is as follows:

Thousands of euros

Balance at 1 January 2015 4Net provisions charged to income (*) -Amounts used -Other changes -

Balance at 31 December 2015 4Net provisions charged to income (*) -Amounts used -Other changes (4)

Balance at 31 December 2016 -

(*) (Losses) / Gains in this connection are recognised under “Provisions (net)” in the accompanying income statement. The existingprovision at 31 December 2015, has been reverted during 2016 having an impact on the income statement.

13. Equity

a) Movement

The statement of changes in total equity contains a detall of the Company's shareholders' equity in 2016 and2015 and of the changes therein.





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b) Share capital

At 31 December 2016 and 2015, the Company's share capital consisted of 41,400 fully subscribed and paidshares of EUR 601.01 par value each.

c) Shareholders

At 31 December 2016 and 2015 the detail of the Company’s shareholders is shown below:

Number of sharesShare

Percentage

Santander Investment, S.A. 41,400 100%

41,400 100%

d) Share premium

There were no changes "Share Premium" in 2016 and 2015.

The Royal Legislative Decree 1/2010, 2 July, (LSC) expressly permits the use of the share premium accountbalance to increase capital and does not establish any specific restrictions as to its use.

e) Reserves

The detail of "Reserves" at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Legal reserve 4,976 4,976

Other reserves 71,986 58,973

Merger Premium 35,570 35,570

112,532 99,519





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i. Legal reserve

Under Spanish Limited Liability Companies Law, 10% of net profit for each year must be transferred to thelegal reserve until the balance of this reserve reaches at least 20% of the share capital, except whenaccumulated losses reduce the Company's equity to below the share capital amount, in which case the profitwill be used to offset these losses and 10% of the remaining profit will be transferred to the legal reserve.

The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below10% of the increased share capital amount. Except as mentioned above, until the legal reserve exceeds 20% ofshare capital, it can only be used to offset losses, provided that sufficient other reserves are not available for thispurpose. At 31 December 2016 and 2015, the legal reserve had reached 20% of share capital.

ii. Other reserves

The balance of "Other Reserves" includes the amount of unrestricted reserves.

iii. Merger premium

The balance of "Merger Premium" in the balance sheet includes the amount included in the Company’s equity asa result of the merger by absorption of Banesto Bolsa, S.A.U., Sociedad de Valores carried out in 2013.

14. Tax matters

a) Income tax

The Company chose the tax regime of the Groups of Companies provided for in Chapter VII of Title VII of RoyalLegislative Decree 4/2004, of March 5, which approves the Consolidated Text of the Corporate Income Tax Law.Parent company of the corresponding consolidated tax group Banco Santander, S.A., being obliged before thetax authorities to the presentation and settlement of the Tax. Also, on December 26, 2006, the Company joinedthe Santander Group to make value added tax contributions under the special scheme of the group of entities.

Coming into force the Law 27/2014, of November 27, on Corporate Income Tax, as amended by Royal DecreeLaw 3/2016, of December 2, which adopts measures in the tax area aimed at consolidation of public finances andother urgent social measures, the general tax rate was reduced from 30% to 28% in 2015 and to 25% in 2016.However, the Law establishes that the Credit Entities and their Consolidation Groups Tax rate of 30%. Likewise,the Law eliminates the temporary limitation for offsetting the negative tax bases in the following tax periods.

The profits, determined in accordance with the tax legislation, are subject in 2016 to a tax of 30% on the tax base.Certain deductions may be made from the resulting quota.





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The reconciliation of the difference between the gain/loss balance of the year of the Company for the years 2016and 2015 and the taxable income tax base is as follows:

Thousands of Euros

2016

Income StatementIncome and loss recognised in

equity Total

Additions Disposals Additions Disposals

Income and expense balance of the year 4,919 - - - 4,919

Tax income:Permanent differences - - - - -Timing differences:- arising in the year- arising in previous years

-846

-(2,355)

--

--

-(1,509)

Tax-loss carry forwards -

Taxable profit 3,410

Thousands of Euros

2015

Income StatementIncome and loss recognised in

equity Total

Additions Disposals Additions Disposals

Income and expense balance of the year 18,797 - - - 18,797

Tax income:Permanent differences - - - - -Timing differences:- arising in the year- arising in previous years

-788

-(3,201)

--

--

-(2,413)

Tax-loss carry forwards -

Taxable profit 16,384





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The reconciliation of the income and expense to the taxable profit for income tax purposes for 2016 and 2015 isas follows:

Thousands of Euros

2016 2015

Accounting profit for the year before tax 4,919 18,797

Timing differences (1,509) (2,413)

Taxable profit 3,410 16,384

Tax charge (30 %) (*)Gross tax payable (Notes 10 and 19) 1,023 4,915

Net changes in assets and liabilities for temporary differences 453 724

Adjustments (**) 4 145

Expense/ (Profit) for income tax 1,480 5,784(*)Calculated as the tax result adjusted by the applicable corporate income tax rate (30%), recorded under "Other liabilities" in thebalance sheet as of 31 December 2016 and 2015, respectively (Note 10).

(**)On 16 July 2015, the Company received the notification of the Tax Inspection Act of Corporate Tax for the years 2005 to 2007 of theTax Group 17/89 which the Company belongs to. As a result of the tax adjustments carried out by the Tax Inspectorate in respect ofwhich the Group has complied, EUR 145 thousand have been recorded in 2015 under the heading "Taxes on profits" of theaccompanying income statement. In 2016, the adjustment corresponds to adjustments of the provision made initially.

The deferred tax assets were registered in the Company’s balance sheet as the Directors considered that,regarding the best estimation of the Company’s future earnings, including certain tax planning measures, it islikely that these assets will be redeemed.

The detail of “Tax assets – deferred” at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Provisions for pre-retirements 1,079 1,196

Provisions for indemnity payments - 84

Unused tax credits and other 1,513 1,758

Actuarial losses of pension plans 44 29

Total 2,636 3,067





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The changes in deferred tax assets in 2016 and 2015 are as follows:

Thousands of Euros


Provisions for pre-retirements 1,196 222 (339) 1,079Provisions for indemnity payments 84 - (84) -Unused tax credits and other 1,758 632 (877) 1,513Actuarial losses of pension plans 29 15 - 44

Total 3,067 869 (1,300) 2,636

Thousands of Euros


Provisions for pre-retirements 1,021 296 (121) 1,196Provisions for indemnity payments 121 - (37) 84Unused tax credits and other 1,865 1,084 (1,191) 1,758Actuarial losses of pension plans - 29 - 29

Total 3,007 1,409 (1,349) 3,067

The detail of “Tax liabilities - deferred” at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Other 72 72

72 72

The changes in deferred tax liabilities in 2016 and 2015 are as follows:

Thousands of Euros

2016 2015

Balance at beginning of the year 72 51

Other - 21

Total 72 72





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The detail of the taxes recognised directly in equity is as follows:

Thousands of Euros

2016 2015

Deferred taxes 44 29

Arising in the yearActuarial gains/losses on pension plans (15) (8)

Total 44 29

b) Current tax receivables and payables

The detail of the current balances is as follows:

Current Tax Assets

Thousands of Euros

2016 2015

VAT refundable 3 3

3 3

Current Tax Liabilities

Thousands of Euros

2016 2015

PIT payable 244 259VAT payable 22 21

266 280

c) Years open for review and tax audits

Under current legislation, faxes cannot be deemed to have been definitively settled until the tax returns filed havebeen reviewed by the tax authorities or until the four-year statute-of-limitations period has expired.





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In 2016 Banco Santander, S.A, as head of the Consolidated Tax Group, received notification of the final agreed paymentsrelating to the assessments arising from the outcome of the tax audit of the years 2005 to 2007 of the consolidated tax groupto which the Company belongs, which were signed partly on an uncontested basis and partly on a contested basis. Also, in2014 an audit by the tax authorities was initiated at the Consolidated Tax Group and at the Company in relation to the yearsup to 2011, and the Consolidated Tax Group has the years subject to that audit and the subsequent years up to andincluding 2015 open for review in relation to the main taxes applicable to it

With regard to the aforementioned tax assessments and the other years open for review, the Company's directors considerthat the tax returns for the aforementioned taxes have been filed correctly and, therefore, even in the event of discrepancies inthe interpretation of current tax legislation in relation to the tax treatment afforded to the transactions, such liabilities as mightarise would not have a material effect on these financial statements.



Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the

Company in Spain. In the event of discrepancy, the Spanish version prevails.

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15. Residual maturity periods and average interest rates

Following is a detail, by maturity, of the balances of certain financial instrument line items with agreed-upon interest rates in the balance sheets at31 December 2016 and 2015, and of the average interest rates applicable:

At 31 December 2016:Thousands of Euros

AverageInterest

RateOn

demand

Lessthan 1month

1 to 3months

3 to 12months

1 to 5years

After 5years

Undetermined Total

Financial assets: Loans andreceivables- 155,547 - 507 3,004 90 44 - 159,192 0.03%

155,547 - 507 3,004 90 44 - 159,192

Financial liabilities: Payable tofinancial intermediaries 7,425 - - - - - - 7,425 0.03%

7,425 - - - - - - 7,425

At 31 December 2015:Thousands of Euros

AverageInterest

RateOn

demand

Lessthan 1month

1 to 3months

3 to 12months

1 to 5years

After 5years

Undetermined Total

Financial assets: Loans andreceivables- 352,394 - - 3,012 110 58 - 355,574 0.2%

352,394 - - 3,012 110 58 - 355,574

Financial liabilities: Payable tofinancial intermediaries 13,569 - - - - - - 13,569 0.2%

13,569 - - - - - - 13,569





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16. Risk management

Risk management at the Company is governed by a set of general rules and principles, approved by the Board ofDirectors of the Santander Group and reviewed periodically, which are integrated into the various policyframeworks relating to the various types of significant risk. This is the groundwork for the risk managementstructure of the Company.

The Company’s Board of Directors is the management, control and representation body. Its main aim is tosupervise and to exert the responsibilities from this body derived.

Therefore, the Board of Directors has a Control and Compliance Unit which carries out procedures to ensure thatthe policies, procedures and systems for risk assessment, control, monitoring and management are compliedwith, sufficient and controls the periodicity of the information referred to the Company’s Board of Directors andSenior Executives.

The Control and Compliance Unit is responsible for ensuring that the Company's objectives and policies areimplemented and communicated, that they are enforced through periodic reviews, and that corrective measuresare proposed for possible non-compliance.

Moreover, it should be emphasised that the Company is exempt from the obligation to set up the risk committeeconsidering it is entirely owned by a credit institution and that said committee is formed at group level.

Risk corporate culture: general principles of risk management

The Company's main aim is to determine policies for the management of the various risks to which it is exposed,as well as the provision of the necessary resources and efforts so that these risks are properly identified,measured, valued, managed, controlled and, if possible, mitigated.

The basic and general principles applicable to risk management in the Santander Group's General RiskFramework, to which the Company is affiliated, are presented below, even though the structure of the riskfunction will be proportional to the nature, scale and complexity of the activities of each of the Group's units:

- Integration of risk culture: The promotion of a strong risk culture that extends to all its units andemployees and covers all types of risks, is a basic factor for the proper risk management.

- Involvement of Senior Executives: In the development and implementation of such a risk culture as wellas in the management and risk control, it is essential the direct participation of the management bodies.

- Independence of the risk function: The risk function will develop its activities independently of otherfunctions, covering all risks and providing an adequate distinction between the risk generating areas andthose in charge of their control and supervision.





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It should also have sufficient authority and direct access to management and government bodies,responsible for setting and monitoring risk strategy and policies. The way of assembling independencebetween management units and control functions may vary according to the risk type and the specificlocal requirements.

- Risk appetite formulation: It determines the amount and type of risk that it is considered reasonable toassume in the execution of its business strategy. This will be drawn up in accordance with the definition,process and calculation methodology established by the Santander Group, in order to ensure its fit intothe Group's risk appetite.

- Comprehensive risk consideration: Identification and evaluation of all risks that may have an impact onthe income statement or equity position are basic premises to enable its management and control. Riskactivity and processes must cover all activities and businesses, avoiding any of them from beingexcluded from risk management and control mechanisms.

- Anticipation and predictability: The risk assessment has an eminently anticipatory vocation, in order toestimate the evolution of risks in different scenarios and time periods. Therefore, it should focus on thefuture projection of all those variables that determine the Company's results.

- Common management instruments: A key element in the implementation of risk activity in the Company,adjusted to best practices and regulatory requirements, is the use of common management tools, inspite of their adaptation to regulations, supervisory requirements and the advance of each unit. Minimumessential instruments for the adequate exercise of the risk activity are the following:

i. A regular process of identification and evaluation of all risks.ii. A regular process of simulation of the evolution of the relevant risk elements and their impact on

both capital and results.iii. A uniform framework (in spite of the necessary local adaptations) of risk information, with

common or comparable formats and metrics ("Risk Information Framework").iv. Regular capital planning and liquidity processes.v. Regular contingency plans (technological and operational) and business continuity.vi. Regular feasibility and, if appropriate, resolution plans.

- Decision in collegiate bodies: The decision-making through collegiate bodies is an effective instrument tofacilitate an adequate analysis and different perspectives to consider in the risk management.

- Organizational structure: All risks, in their various manifestations, must have control officers andmanagers. The organizational structure of a unit must preserve the principle of independence related tothe activities of the second line of defense, as established in the section “roles and responsibilities”, andensure lines of communication that are clear and consistent with the structure of the Company. Likewise,the structure of the risk function will be proportional to the nature, scale and complexity of the activities ofeach of the units.





46

- Faculties and responsibility: For each of the generating units and risk managers, their businesses andactivities will be identified, as well as the risk type and level they may incur into. Regarding thisidentification, its scope of decision and responsibility in terms of risks will be delineated, through amechanism of allocation of powers.

- Risk limitation: All financial risks incurred must be subject to objective limits, testable and consistent withrisk appetite, in terms of risk types admissible and not, as well as in their quantitative levels. The limitswill be assigned for the different risk types, the different activities and businesses.

- Payment: The payment and evaluation schemes should promote the implementation of the Group's riskculture, the responsible exercise of the attributions granted for the risk management and compliancewith the policies, procedures and risk limits in force at the time.

- Efficient information and escalation channels: The risk activity requires the establishment of channelsand risk systems that cover all the relevant risks that the Company faces, as well as information on thepolicies and evolution of the risks, which as well its aggregation and consolidated vision.

In addition, the Santander Group has a General Behaving Code, which applies to both the management and thebusiness area of the Company, both of which have the obligation to know and comply with it, as well as tofacilitate its implementation and notify the Group's Compliance Department of any breach thereof. In addition, theCompany applies the Code of Conduct in securities markets.

Due to the fact that the Company has a financial nature and the Group to which it belongs (Santander Group), thecompany is exempt by the C.N.M.V. from the Risks Committee and payment.

The areas of global risk management and control are structured into three lines of defense that perform threedifferent functions:

i. Risk management since its generation.ii. Control and risk consolidation, supervising their management.iii. Independent review of risk activity.

Moreover, the three lines of defense must have a separation level and independence enough to not compromisethe effectiveness of the general scheme.

First line of defense: Risk management

The generation of risks in the first line of defense must be in accordance with the appetite and the limits set. Inorder to fulfill its function, the first line of defense must have the means to identify, measure, manage and reportthe risks assumed.





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Second line of defense: Control and risk supervision

This line is made up of teams specialised in risk control and supervision. It must ensure the effective risk controlas well as the fact that they are managed in accordance with the risk appetite level defined by the seniormanagement of the Company or, if applicable, the Group.

This line of defense is ultimately responsible for the identification, measurement and reporting of assumed risks.

In addition, it may be structured differently for each risk type, regarding the location of the first line, the relevanceof the potential or assumed risks and the degree of specialisation required for their management.

It should also promote the development of a common risk culture, provide guidance, advice and expert judgmenton all risk-related matters, as the Company's benchmark for these issues, and propose methodologies formeasurement and analysis.

Third line of defense: Internal audit

As described later in this document, the internal audit function should be to regularly assess that policies,methods and procedures are adequate and to ensure that they are effectively implemented in management.

Risk exposure

Fair value of financial instruments

The Company has valued its financial instruments as indicated in Note 2.b.

Most of the financial assets and liabilities with maturity that the Company has as of 31 December 2016 and 2015have less than one year maturity and, therefore, their market value as a result of variations in market interestrates is not significantly different from that recorded in the balance sheet (Note 15).





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The book value of the financial instruments represents, in all material respects, the maximum level of exposure tothe credit risk of the Company as of 31 December 2016 and 2015. Besides the instruments classified as"available-for-sale", which are valued at fair value and are stated at amortised cost. Their fair value is very similarto their amortized cost due to the fact that these are balances at sight and that there is no risk of change in value:

Thousands of Euros

2016 2015

Book Fair Book Fair

value value value value

AssetsCredit investments 159,192 159,192 355,574 355,574

LiabilitiesLiabilities with financial intermediaries 7,425 7,425 13,569 13,569

As of 31 December 2016 and 2015, the Company did not have significant positions in the trading portfolio and,therefore, did not have derivative positions that would mitigate the risk of the aforementioned portfolio.

Credit and concentration risk

Credit risk is the present or potential risk on profits and capital arising from the failure of a debtor to comply withthe terms of any contract with the institution or the agreed conditions.

Concentration risk, as part of credit risk, includes large exposures linked between individuals and significantexposures in counterparty groups which probability of breach is driven by common underlying factors, e.g. sector,economy, geographical location or type of instrument.

Due to the Stock Market Reform during 2016, the Securities Company has increased its exposure to this risk, dueto the exposure generated by pending clearing transactions and the exposure generated by the guarantees/collateral received by the Company that are in its custodian.

Banco Santander's Risk Department is the department in charge of credit risk control, setting the DVP limits foreach client.

Based on the analysis made, the Company considers that its profile for credit and concentration risk is low.

Market risk

Market risk is the present or potential risk on profits and capital arising from adverse variations in bonds prices,assets, commodities and exchange rates. This risk includes exchange rate risk, defined as present or potentialrisk on profits and capital, arising from adverse exchange rate variations on the Company's portfolio.





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The Company has set policies for its own portfolio generated by errors in the contracting or liquidation oftransactions, so that the positions acquired by the Company as a result should be undone, regardless of the gainsor losses that may arise, as soon as possible.

The Risk Department of Banco Santander manages the control of market risk of the Company's own portfolio.

The Company develops active management of market risk by continually reviewing the limits and exposure of theportfolio. In this context, the market risk profile in relation to the Company's turnover is considered medium-low.

Operational risk

Operational risk is the risk of loss due to inadequacy or failure of procedures, personnel and internal systems, orexternal events. This risk includes legal and compliance risk.

The Company has an effective system of operational controls set, and its procedures system rests on a strictsegregation of functions, considering the different processes that are developed continuously within the business.

The ORI (Operational Risk Indicators) are those measurement scales that the Company uses to monitor theoperational risk over time and are also used for the early detection of major risk events and changes in the riskprofile. The responsible for its preparation and monitoring is operational risk of the Global Wholesale BankingDepartment that reports on trends, anomalies and the evolution of the relevant Operational Risk profile.

The Company believes that it has adequate human and technical resources to mitigate the operational risk arisingfrom the development of its activity. Nevertheless, the Company considers that its exposure to operational risk ishigh.

Liquidity risk

It is the present or potential risk on profits and capital arising from the inability of the Company to meet its

liabilities on their expiration date.

The Company has a set of internal processes for the management, measurement and control of liquidity risk, so

that it always has sufficient resources to meet its payment obligations in a timely manner.

As of 31 December 2016, the Company has a liquidity GAP of a month, positive, amounting to EUR 117,160

thousand, which allows it to face with guarantees the cancellation of its liabilities.

The financial department controls the Company’s liquidity risk and regularly reports to the Board of Directors.





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Other risks

The Company also considers other risks within the framework of its management and control such as reputationalrisk or strategic risk.

Reputational risk is the present or potential risk on the profits and capital arising from an adverse perception ofthe image of the financial institution by customers, counterparties, shareholders, investors or regulators.

Strategic risk, on the other hand, is the present or potential risk on the profits and capital arising from changes inthe business environment and from adverse business decisions or inadequate changes to the businessenvironment.

The Company does not have mechanisms for managing and controlling these risks as well as for the rest of therisks to which it is exposed, insofar as it does not consider that they significantly affect its solvency and incomestatement. Therefore, the Company considers that its profile for other risks is medium-low.

Interest rate risk

The Company does not concede loans or loans to investors, and does not collect deposits from the individuals,given the nature of the activities carried out. Therefore, the exposure to such risk is not relevant enough to beconsidered in the analysis.

Accordingly, the Company does not actively manage interest rate risk, since the impact of adverse movements ofmarket interest rates on the economic value and the intermediation margin is not significant.

Overall assessment of risk management

As a whole, and considering the nature, scale and complexity of its activity, the Company considers that it hasadequate systems for management and control of the different risks assumed. In addition, it has been developinga series of processes and controls that allow the proper traceability, monitoring, control and supervision of therisks to which it is exposed by the mere fact of the activity that it develops.

Nowadays, the Company has more than enough resources to develop the activities it carries out, as it is noticedin the ratio between regulatory capital resources and computable equity, which stands at around 87.4 %, wellabove the 8% required by law, as a minimum percentage. This indicates that the Company maintains large levelsof capital over the minimum regulatory requirements.

The Company's solvency position and adequate risk management mean that it is not necessary in the short termto draw up an "action plan", since there are no significant shortcomings or weaknesses.

The Company publishes annually the Solvency Report on the Company's website, where it is possible to extendthe information described above.





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17. Capital management

Directive 2013/36, of 26 June 2013, of the European Parliament and of the Council, on access to the activity ofcredit institutions and the prudential supervision of credit institutions and investment firms, and Regulation575/2013, of the European Parliament and of the Council, of 26 June 2013, on prudential requirements forcredit institutions and investment firms, govern the access to the activity, the supervisory framework and theprudential rules for credit institutions and investment firms, as well as the minimum capital to be held by suchentities, the method for determining capital and the infernal capital adequacy assessment processes andreporting that entities should have in place. In this regard, CNMV Circular 2/2014, of 23 June, on the exerciseof various regulatory options in relation to capital adequacy for investment services companies and theirconsolidated groups, came into force on 23 June, abolishing CNMV Circular 12/2008, of 30 December, on thecapital adequacy of investment services companies and their consolidated groups, the previous applicableregulation on capital.

The minimum capital requirements established by the regulation are calculated by reference to the Company'sexposure to market, credit, liquidity, operational and other risks that might arise from its business operations.

The Company's capital management strategy is to maintain at all times a cushion with respect to the capitalrequirements established in current legislation. In order to ensure risk compliance, the Company and itsconsolidated Group supervise on an ongoing basis the risks profile and the established control environment, inorder to disclose any weaknesses in the risk control and management policies, and in IT tools and systems,which could result in greater capital requirements.

Directive 2013/36, on access to the activity of credit institutions and the prudential supervision of creditinstitutions and investment firms, contains provisions relating to access to the activity of the entities, theforms of their governance and their supervisory framework, including the provisions governing theauthorisation of the business, the acquisition of qualifying holdings, the exercise of the freedom ofestablishment and of the freedom to provide services, the powers of supervisory authorities of home andhost Member States in this regard and the provisions governing the initial capital and the supervisory reviewof the entities.

Regulation 575/2013 on prudential requirements of credit institutions and investment firms contains, interalia, prudential requirements for institutions that relate strictly to the functioning of banking and financialservices markets and are meant to ensure the financial stability of the operators on those markets as well asa high level of protection of investors and depositors. This new legislative package, inter alia, aims to:

a) Increase the quantity, quality, consistency and transparency of the European Banking System'scapital.

b) Limit its leverage.c) Prevent and reduce macroprudential and systemic risks.





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d) Develop a system of liquidity buffers to ensure that the institutions have a diversified reserve of sufficientliquid assets to meet their Iiquidity needs in a short-term liquidity crisis.

e) Develop a regulatory framework designed to ensure that the institutions have a stable, long-termfinancing structure.

f) Reinforce the institutions' corporate governance practices, thereby improving market discipline.

The results of the aforementioned ongoing supervision are set out in the annual internal capital adequacyassessment report and the capital adequacy report approved by the Board of Directors.

Requirements relating to regulatory minimum capital requirements

The Company is registered under number 31 in the Broker-Dealers Register of the C.N.M.V.

Broker-dealers are regulated by the Royal Legislative Decree 4/2015 of October 23, and subsequentamendments, in particular, Law 47/2007, of 19 December, the objective of which is to transpose intoSpanish law, among other directives, Directive 2004/39/EC of the European Parliament and of the Council,of 21 April 2004, on markets in financial instruments.

They are also regulated by Royal Decree 217/2008, of 15 February, on the legal system applicable toinvestment services companies, which revokes Royal Decree 867/2001, of 20 July, and was amended byRoyal Decree 358/2015, of 8 May, which in turn amends Royal Decree 217/2008, of 15 February, on thelegal system for investment services companies and other entities providing investment services, whichpartially amends Collective Investment Undertakings Law 35/2003, of 4 November, approved by Royaldecree 1309/2005, of 4 November. This legislation establishes, inter alia, the minimum capital requirementsnecessary to obtain and preserve authorisation as a broker-dealer. Pursuant to the aforementioned RoyalDecree, broker-dealers must have share capital of no less than EUR 730,000, which is the minimum amountapplicable for the Company.The detail of the Company's capital requirements at 31 December 2016, in accordance with the minimum capitalrequirements under C.N.M.V. Circular 2/2014, is as follows:

Thousands of Euros

2016 2015

Total structure of risk exposure 215,604 167,491

At 31 December 2016, the Company had a capital ratio of 87%, which is significantly higher than theregulatory minimum ratio of 4.5% for Common Equity Tier 1 capital, 6% for Tier 1 capital and 8% for total capital.





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Thousands of Euros

2016 2015

Eligible capital (a) 188,507 175,528Total risk exposure (b) 215,604 167,491Capital ratio (a)/ (b) 87% 104.80%

Greater detail on the available capital in regulatory terms is as follows:

Thousands of Euros

2016 2015

Share capital 24,882 24,882Share premium 51,196 51,196Retained earnings 112,532 99,519Other retained global result (103) (69)Other reserves - -Funds for general banking risks and other - -Total capital of level 1 ordinary (A) 188,507 175,528Capital instruments of level 1 additional (B) - -Total capital of level 1 (A) + (B) 188,507 175,528Total capital of level 2 (C) - -

Total equity (A) + (B) + (C) 188,507 175,528

Capital planning

Nowadays, the Company has more than sufficient capital as shown by the ratio of regulatory capital resources toeligible capital, which stands at around 87%.

This means that the Company maintains levels of capital that comfortably exceed minimum regulatoryrequirements and, therefore, if the current business and strategy conditions continue, the Company does notforesee undertaking any specific capital planning activities.

However, the Company monitors this capital ratio on a periodic basis so that if it were to fall significantly, theBoard of Directors would be responsible for drawing up a capital plan for the future and analysing the mostappropriate way to achieve a ratio it considers to be adequate.





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18. Memorandum items

"Memorandum items" includes balances representing rights, obligations and other legal situations that in thefuture may have an impact on net assets, as well as any other balances needed to reflect all transactions enteredinto by the Company although they may not compromise its net assets.

i. Contingency and commitment accounts

The detail at 31 December 2016 and 2016 of this heading is as follows:

Thousands of Euros

2016 2015

Guarantees and indemnities provided 30,000 7,141Other contingent liabilities:Pension obligations 3,871 880

33,871 8,021

At 31 December 2016 and 2015, "Guarantees and indemnities provided" in the foregoing table includes theCompany's balances deposited in BME Clearing related to special guarantees calculated on the basis of the dailytransactions (Note 5).

At 31 December 2016 and 2015, the Company did not hold any swaps, futures or options on securities orindices.

ii. Other memorandum items

The detail of “Other memorandum items” at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Unsettled customer orders 157,359 583,656Available in accounts receivable (Note 19) 162 330Other memorandum items 569 569

158,090 584,555





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19. Related party transactions

The Company belongs to the Santander Group (Note 13).

a) Transactions with Group companies and with Company’s shareholders

The detail of related party transaction at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Group Group

Assets:Loans and advances to financial intermediaries (Note 5) 118,321 339,566Long-term guarantees (Note 10) 74 63

Liabilities:

Payable to financial intermediaries (Note 11) 5,958 1,129Other liabilities – Income tax payable (Note 10) 1,023 145,055

Income statement:ExpensesIncome tax (Note 14) 1,023 4,915Interest expense and similar charges (Note 22) 83 92Fee and commission expense (Note 25) 5,375 2,225Other general administrative expenses (Note 28) 10,910 9,216

Income-Interest and similar income (Note 21) 36 494Fee and commission income (Note 24) 2,006 2,263

Memorandum items-Drawable on credit accounts (Note 18) 162 330

Agreements with the sole-shareholder

There were no agreements between the sole-shareholder and the Company during 2016 and 2015.

b) Transactions with members of the Board of Directors and senior executives

Note 4 contains a detail of the information on the various remuneration items earned by the Company's directorsand senior executives and of the balance of direct lending transactions to them.





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c) Transactions with other related parties

At 31 December 2016 and 2015, certain individuals and legal entities falling within the definition of related partiesperformed with the Company, under market or employee conditions, as appropriate, transactions characteristic ofa normal commercial relationship with a financial institution, for amounts which are not material.

20. Customer care department

Pursuant to Ministry of Economy Order ECO/734/2004, of 11 March, on customer care departments and servicesand customer ombudsmen of financial institutions, implementing Law 44/2002, of 22 November, on FinancialSystem Reform Measures, the Company created Customer Care Department, for which it established systematicand comprehensive operating rules, thereby guaranteeing easy customer access to the claims system andensuring that customers' complaints and claims are handled and resolved swiftly.

On 1 February 2017, the Customer Care Department submitted to the Company's Board of Directors a reportexplaining the functions performed by it in 2016. This report states that 6 customer claims were received in 2016,of which 4 were solved in a favourable manner and 2 unfavourable. During 2015 four customer claims werereceived, all of which were related to securities transactions and were resolved during the year in a favourablemanner to the Company.

21. Interest and similar income

"Interest and similar income" in the income statement comprises the interest accruing in the year on all financialassets with an implicit or explicit return, calculated by applying the effective interest rate, irrespective ofmeasurement at fair value. Interest is recognised gross, without deducting any tax withheld at source.

The detail of the main items of interest and similar income earned by the Company in 2016 and 2015 is asfollows:

Thousands of Euros

2016 2015

Loans and advances to financial intermediaries (Notes 5 and 19) 36 494

36 494

22. Interest expense and similar charges

"Interest Expense and Similar Charges" in the income statement includes the interest accruing in the year on allfinancial liabilities with an implicit or explicit return, calculated by applying the effective interest rate, irrespective ofmeasurement at fair value.





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The detail of "Interest Expense and Similar Charges" in the income statements at 31 December 2016 and 2015 isas follows:

Thousands of Euros

2016 2015

Interest accrued on payables to financial intermediaries (Note 11) 227 148Loans interest (Note 5) 13 -Cost attributable to pension and similar obligations (Nota 12) 50 71

290 219

From total interest and similar charges at 31 December 2016 and 2015, EUR 83 and 92 thousand, respectively,correspond to related party transactions (Note 19).

23. Income from equity instruments

"Income from equity instruments" includes the dividends and payments on equity instruments out of profitsgenerated by investees after the acquisition of the equity interest.

The detail, by portfolio and type of financial instrument, of "Income from Equity Instruments" in the incomestatements at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Equity instruments classified as financial assets held for trading - 5

- 5

Equity instruments having the substance of equity - 5

- 5

24. Fee and commission income

"Fee and Commission income" comprises the amount of all fees and commissions accruing in favour of theCompany in the year, except those that form an integral part of the effective interest rate on financial instruments.





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The detail of "Fee and Commission Income" in the income statements for 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Handling and execution of securities purchase/sale orders 49,748 54,719Fees for investment reporting and financial analysis 3,776 2,057Other fees and commissions 1,483 2,276

55,007 59,052

The balance of "Handling and Execution of Securities Purchase/Sale Orders" relates to fees and commissionsreceived for the brokerage of fixed-income and equities transactions and derivative financial products in bothSpanish and international markets.

From total fee and commission income at 31 December 2016 and 2015, EUR 2,006 and 2,263 thousand,respectively, correspond to related party transactions (Note 19).

At 31 December 2016 and 2015, the balances receivables amount to EUR 1,049 and 342 thousand, respectively(Note 10).

25. Fee and commission expense

The detail of "Fee and Commission Expense" in the accompanying income statements for 2016 and 2015 isas follows:

Thousands of Euros

2016 2015

Securities transactions 14,145 12,499Fees paid to clearing and settlement systems and markets 290 644Collateral relating to the collective market guarantee 8 38Fees and commissions assigned to agents and other entities 131 949Other fees and commissions 5,011 2

19,585 14,132

"Fees and Commissions Assigned to Agents and Other Entities" includes mainly fees and commissions assignedfor securities custody and administration services and brokerage services in securities market transactions.

The balance of "Other Fees and Commissions" at 31 December 2016 and 2015, includes mainly the fees andcommissions paid by the Company to international custodians for the deposit, settlement and custody ofinternational financial instruments.





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On 1 January 2016, the Company signed a contract with Santander Investment Securities Inc. to introduce a newclients’ portfolio for the execution of securities transactions in European markets. The former contract includes thefixed annual payment and an additional service fee of 11.02% and 5.91% per year of the costs incurred by Frontand Back offices for commissions of intermediation services with customers.

From total fees and commission charged at 31 December 2016 and 2015, EUR 5,375 and 2,225 thousand,respectively, correspond to related party transactions (Note 19).

26. Gains/losses on financial assets and liabilities net

"Gains/Losses on Financial Assets and Liabilities (Net)" includes the amount of the valuation adjustments offinancial instruments (except those attributable to interest accrued because of application of the effective interestmethod and to allowances) and the gains or losses obtained from the sale and purchase thereof.

The detail, by origin and type, of "Gains/Losses on financial assets and liabilities (net)" in the accompanyingincome statements for the years ended 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Financial instruments held for trading 31 (602)

OriginDerivatives 31 (602)

31 (602)





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27. Staff costs

The detail of "Staff Costs" at 31 December 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Wages and salaries 7,924 7,738Social security costs 790 869Allocations to pension provisions (Note 12) 54 55Allocations to defined contribution plans (Note 2) 272 271Compensation based on equity instruments (Note 27.b) 75 14Other staff costs 141 322Compensations for dismissal 2,469 -

11,725 9,269

The pending payments at the end of 2016 and 2015, in concept of staff costs, mainly variable remuneration, areregister in "other liabilities - other liabilities” in the balance sheet (Note 10).

a) Number of employees

The average number of employees at the Company in 2016 and 2015, by professional category, was as follows:

Number of employees

2016 2015

Directors 4 5Technical personnel 55 61

59 66





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The number of employees at the Company at the end of 2016 and 2015, by professional category and gender,was as follows:

Number of employees

2016 2015

Men Women Men Women

Directors 3 - 4 1Technical personnel 36 14 42 17

39 14 46 18

As of 31 December 2016 and 2015, the company has no employees with disabilities greater or equal to 33%.

b) Compensation based on equity instruments

From 2011 to 2015, the bonds corresponding to the Executive Directors and certain executives (includingDirectors) and employees who take risks, that exert control functions or who perceive global compensation thatincludes them in the same scale of remuneration of Directors and employees who take risks (all of them arereferred to as the identified collective), were approved by the Board of Directors and implemented respectively,through different cycles of the deferred and conditional variable compensation plan. The application of thesecycles, insofar as it entails the delivery of shares to beneficiaries of the plan, was authorized by the respectivegeneral meetings of shareholders.

The purpose of these plans is to defer a portion of the bonus's beneficiaries (60% in the case of ExecutiveDirectors) for a period of five years (three in the plans approved until 2014) for your subscription, if any, cash andSantander shares, paying equally at the beginning the other part of the bonus in cash and Santander shares, inaccordance with the rules outlined below.

The accrual of deferred compensation is conditioned, in addition to the permanence of the beneficiary in theSantander Group, in opinion of the board of directors, at the proposal of the remuneration committee, that none ofthe following circumstances in relation to the Corresponding period during the period prior to each of thedeliveries:

i. Deficient performance (performance) financial of the Group;ii. Non-compliance by the beneficiary of the internal regulations, including in particular the relative risks;iii. Material restatement of the financial statements of the group, except when it is related to a change ofaccounting rules; oriv. Significant variations of the economic capital and the risk profile of the group. All this, in each case,according to the regulations of the corresponding plan.





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In each payment will be paid to the beneficiaries an amount in cash equal to the dividends paid by the amountdeferred in shares and interest on the amount that differs in cash. In cases of application of the Santanderdividend election program, will be pay the price offered by the Bank for the free allocation rights corresponding tosay shares.

The maximum number of shares to be deliver is calculate by taking into account the weighted average dailyvolume of weighted average quotes for the fifteen trading sessions prior to the date on which the board decidesthe bonus for the executive directors of the Bank Each of the exercises.

This plan and the Performance Shares Plan (ILP) described below have been included in the deferred variablecompensation plan linked to multiyear objectives, in the terms approved by the General Shareholders' Meetingheld on March 18, 2016.

The accrual of the ILP and its amount are conditioned to the behaviour of certain metrics of Banco Santanderbetween 2015 and 2017, for ILP 2015 and 2014 to 2017 for ILP 2014, as well as compliance with the remainingconditions of the plan until the end of the accrual period (December 31, 2018) thus, the year 2017 ended, couldbe determinate the amount which in each case, corresponds to receive for each Executive Director in relation tothe ILP of 2015 (the ILP accrued amount) subject to compliance with the remaining conditions. In the case of the2014 ILP, after the completion of each of the years 2015, 2016 and 2017, the annual amount will be determined,if applicable, by each executive director applying to the third of the agreed amount of ILP the percentage resultingfrom the corresponding metrics. For the accrual of 2016, the reference RTA is the accumulated between January1, 2014 and December 31, 2015. In this exercise, a position in the RTA ranking has not been reach thatdetermine the accrual of the first third, so it has been extinguish.

The delivery of shares to be paid in 2019 (in respect of the ILP of 2015), or on each ILP payment date (for 2014)to Executive Directors and Management, depending on the fulfilment of the corresponding multiannual objective,falls Conditioned, in addition to the permanence of the beneficiary in the Group, with the exceptions contained inthe plan's regulations, in the opinion of the board, at the proposal of the remuneration committee, none of thefollowing circumstances during the previous period To delivery as a result of actions carried out in the year towhich the plan corresponds:deficient performance (performance) financial of the Group:

i. Deficient performance (performance) financial of the Group;ii. Non-compliance by the beneficiary of the internal regulations, including in particular the relative risks;iii. Material restatement of the financial statements of the group, except when it is related to a change ofaccounting rules; oriv. Significant variations of the economic capital and the risk profile of the group.

As of 31 December 2016 and 2015, the number of employees of the Company included in the previous planamounts to 7 and 2, respectively, with a maximum number of shares to receive of 62,037 and 12,609,respectively.





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In connection with these plans, Banco Santander, S.A, has reached an agreement with the Companyguaranteeing the delivery of the shares corresponding at the time in exchange for a fixed non-refundablepremium. The Company, records the total cost of the plans (maximum number of shares to be deliver valued atthe cost of the premium indicated above) over the accrual period - three years from the approval of each one. Forthe plans in force - under "Staff Cost", at 31 December 2016 and 2015, amounting to EUR 75 thousand and EUR14 thousand, respectively.

Deferred variable compensation plan linked to multiannual objectives

In 2016, with the objective of simplifying the remuneration structure, improving risk adjustment before the eventand increasing the incidence of long-term objectives, the bonus have been integrated into a single plan (deferredand conditioned variable compensation plan) and the ILP. The variable remuneration of Executive Directors andcertain Directors (including Management) have been approve by the board of Directors and implemented throughthe first cycle of the deferred variable remuneration plan linked to multiannual objectives. The general meeting ofshareholders, insofar as it entails the delivery of shares to the beneficiaries of the plan, authorized the applicationof the plan.

The 60% of the variable remuneration amount was defer for five years (three years for certain beneficiaries, notincluding executive directors), to be pay by fifth parties, provide that the conditions of permanence in the Groupand non-concurrence of the clauses, according to the following accrual scheme:

• The accrual of the first and second parts (payment in 2018 and 2019) is not subject to the fulfilment of long-term objectives.

• The accrual of the third, fourth and fifth parts is related to the fulfilment of certain objectives related to theperiod 2016-2018 and the metrics and scales associated to the objectives. These objectives are:

a) Growth Consolidated earnings per share in 2018 vs. 2015;b) The relative performance of the Bank's total shareholder return (RTA) in the period 2016-2018 In

relation to the weighted RTAs of a reference group of 35 credit institutions;c) Compliance with the fully loaded ordinary level 1 capital objective for fiscal year 2018;d) The fulfilment of the objective of growth of the ordinary profitability on risk-weighted assets for the year

2018 measured against the 2015 exercise.

The degree of compliance with the above objectives determines the percentage to be apply to the deferredamount in these three annuities, the maximum amount determined at the close of the 2016 financial year.

Both parts, the immediate (or short-term) and the deferred (long-term and conditioned) are paid 50% in cash andthe remaining 50% in Santander shares.





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The accrual of deferred compensation linked to the multiannual objectives of the Executive Directors (and ofManagement) is conditioned, in addition to the permanence of the beneficiary in the Santander Group, in theopinion of the Board of Directors, Proposal of the remuneration committee, none of the following circumstances inrelation to the corresponding period during the period prior to each of the deliveries: (i) deficient performance ofthe Group, (ii) breach by the beneficiary of the internal regulations, including in particular that relating to risks; (iii)Material restatement of the Group's financial statements, except where appropriate under a change in theaccounting regulations, or (iv) significant variations in the Group's economic capital or risk profile. All this, in eachcase, with the exceptions and according to the provisions of the regulation of the plan.

In addition, the amounts paid under this plan are subject to recovery or claw back clauses in the event that thecircumstances set forth in the current policy are meet. The application of claw back will be supplement by that ofmalus, so that it will occur when it are consider insufficient to collect the effects that the event must have on theassigned variable remuneration. The application of claw back will be decide by the board of directors on theproposal of the remuneration committee and cannot be propose once the last payment in cash or sharescorresponding to the plan is made in 2022.

The maximum number of shares to be deliverer is calculate by taking into account the weighted average dailyvolume of the weighted average quotes for the fifteen trading sessions prior to the previous Friday (excluded) onthe date on which the board agrees to the bonus for the Executive directors of the Bank.

28. General Expenses

a) Breakdown

The detail of "General Expenses" in the income statements for 2016 and 2015 is as follows:

Thousands of Euros

2016 2015

Property and fixture rental 963 1,047Communications 464 581IT Systems 855 1,381Supplies and repairs 4 9Advertising and publicity 339 477Representation and displacement 1,243 1,491Other Independence professional services 13,028 10,706Contribution and taxes 925 796Other expenses 5 -

17,826 16,488





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On 23 February 2009, the Company entered into a sublease of property for use other than residential use withSantander Global Facilities, S.A., for the offices used to carry on the Company's business and the related parkingspaces. The expenses relating to the lease of the offices where the Company's registered office is located areincluded under "Property and Fixture Rental".

The balance of "IT Systems" includes mainly the maintenance and repair costs relating to the Company'scomputer software.

"Other Independent Professional Services" includes mainly expenses relating to outsourced employees andinformation providers.

"Contributions and Taxes" includes mainly fees paid to C.N.M.V.

From total general expenses at 31 December 2016 and 2015, ERU 10,910 and 9,216 thousand, respectively,correspond to related party transactions (Note 19).

The amounts payable at year-end in relation to all these items are recognised under "Other Liabilities - Other" inthe balance sheet (Note 10).

b) Other information

The balance of "Other Independent Professional Services" includes the fees paid by the Company to its auditorsfor the audit of its financial statements, which amounted to EUR 48 thousands in 2016 (2015, EUR 57thousands). These services complied with the independence requirements established in Law 44/2002, of 22November, on Financial System Reform Measures and with the Sarbanes-Oxley Act of 2002 as adopted by theSecurities Exchange Commission (SEC) and, accordingly, they were not incompatible with the audit function.Finally, during 2015 auditors have provided other services, which amount to 6 thousand Euros.

c) Disclosures on the average period of payment to suppliers. Additional Provision Three. "Disclosureobligation" provided for in Law 15/2010, of 5 July.

Below is the information required by the Disposal End Second Law 31/2014, of 3 December, which modifies thetext revised of the Law Societies of Capital for the improvement of the corporate governance and the Law15/2010 of 5 July, amending the Law 3/2004 of 29 December. The directors of the company have prepared thisinformation by applying the Resolution of the Institute of Accountancy and Audit of Accounts of date of January29, 2016.





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Year 2016 Year 2015Days Days

Average period of payment to suppliers 10.70 21.70Ratio of paid transactions 10.60 21.70Ratio of pending payment transactions 31.30 -

Ejercicio 2016 Ejercicio 2015Miles de Euros Miles de Euros

Total Payments 25,539 17,257Total Pending Payments 72 2

In accordance with the ICAC Resolution, the average period of payment to suppliers was calculated by taking intoaccount the commercial transactions relating to the supply of goods or services for which payment has accruedsince the date of entry into force of Law 31/2014, of 3 December. For the sole purpose of the disclosuresprovided for in the Resolution, suppliers are considered to be the trade creditors for the supply of goods orservices included in "Other Liabilities" under current liabilities in the balance sheet.

"Average period of payment to suppliers" is taken to be the period that elapses from the delivery of the goods orthe provision of the services by the supplier to the effective payment of the transaction.


Director’s Report for 2016



version prevails.

1

Registered name

Santander Investment Bolsa, Sociedad de Valores, S.A., Sole-Shareholder Company (“the Company”) wasincorporated on 6 July 1989, under the name of BSN, S.A., Sociedad de Valores y Bolsa. The public deed ofthe merger by absorption of BCH Bolsa, Sociedad de Valores, S.A. into BSN, S.A., Sociedad de Valores yBolsa and the change in the name of the post-merger company BSCH Bolsa, Sociedad de Valores, S.A. wasregistered in the Mercantile Register on 3 September 1999. On 12 April 2000, the shareholders at the AnnualGeneral Meeting resolved to change the Company’s name to Santander Central Hispano Bolsa, Sociedad deValores, S.A. On 28 January 2005, the shareholders at the Annual General Meeting resolved to change theCompany’s name to Santander Investment Bolsa, S.A. Lastly, on 26 July 2013 the declaration of theCompany’s sole-shareholder company status was executed in public deed and the Company’s name waschanged to its current name.

The Company is registered under number 31 in the Register of Securities Brokers and Dealers of theC.N.M.V., and is a shareholder of the Promotora Bilbao Plaza Financiera, and the Investment Guarantee Fund(FOGAIN). Its registered office is located at Avenida de Cantabria, s/n, Boadilla del Monte, Madrid.

The corporate purpose is exclusive, in particular, the provision of certain investment services and ancillaryservices provided for in articles 140 to 142 of Royal Legislative Decree 4/2015, of October 23, which approvesthe consolidated text of the Law of the Stock Market and its subsequent modifications. The Company'sprogram of activities, in which the investment services are detailed, as well as the ancillary services it providesand the financial instruments in which it invests, is registered in the Official Registers of the CNMV, where theycan be consulted by the public on the web www.cnmv.es.

As defined in the Program of Activities, authorized by C.N.M.V., below are detailed the investment services,the auxiliary services that the Company can provide and carry out, as well as the financial instruments inwhich it can invest:

1. Provision of the following investment services:

• Receipt and transmittal of customer orders in relation to one or more financial instruments.• Execution of the aforementioned orders for the account of customers.• Trading for own account.• Underwriting of financial instruments or of placements of financial instruments based on a solid

commitment.• Investment advisory services as defined in Article 5.1.g) of Royal Decree 217/2008, 15 February, on

the legal regime of investment services companies.





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2. Performance of the following ancillary services:

• Business counselling on capital structure, industrial strategy and related issues and counselling andother services related to corporate mergers and acquisitions.

• Preparation of investment reports and financial analyses or other types of general recommendationsrelating to financial instrument transactions.

3. Investment in the following financial instruments:

• The marketable securities issued by public or private persons or entities and grouped in issues asdefined in Article 2.1 of the Restated Text of the Securities Market approved by the Royal LegislativeDecree 4/2015, of 23 October.

• Options and futures, swaps, forward rate agreements and other financial derivative agreementsrelated to securities, currencies, interest rates or returns or other financial derivative instruments,financial indices or indicators that may be settled in kind or in cash.

Events after closing date

From the closing of the year ended 31 December 2016 up to the date of this Director’s Report, there havebeen no subsequent events of special relevance that are not mentioned in the report.

Market Development and Company’s performance in 2016

2016 was a tumultuous year for markets. The first part of the year was characterized by historically low oilprices triggered in part by initial fears of a slowdown in China's economic growth, leading to a significantdecline in the commodities market.

During the second part of the year different situations of electoral nature took place, which also had a greatimpact in the markets. The unanticipated vote in favor of Brexit, together with a decrease of the pound sterlingand the consequent uncertainty in the European picture. Skepticism and doubts about the continuity or not offree trade agreements. The debate on "hard" Brexit or "soft" Brexit and its economic readings. After the Britishfright came the American election and Trump's victory that turned the markets around with their protectionistpolicies, impact on inflation, and their electoral promises on major changes in both taxation and regulation,announcements of major investments in infrastructure etc.

To close the year we had the Italian referendum and the resignation of Italian Prime Minister Matteo Renzi,which also added volatility and uncertainty.





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The evolution of the Spanish stock market throughout 2016 was distraught by the situation of politicaluncertainty. The double elections and the extensive negotiations to form government, put a brake to manyoperations stock. The investor's risk appetite dropped substantially. The volumes of the Spanish stock marketfell around 35%.

Thus the European index rose by a mere 4.02% on the part of the Eurostoxx 50. The Italian stock exchangemarket fell 7.23%. The DAX and the CAC 40, respectively, registered increases of + 11.65% and + 7.51% in2016. The IBEX 35 closed 2016 with a slight increase of 0.42%, ballasted by the high weight of the banks,severely penalized by interest rates close to 0.

Taking into consideration this background, the Company's business was impacted enormously, althoughintermediate volumes fell less than the market did, the impact on results was remarkable.

Risk management

The management and control of the exposure to the different types of risk of the Company are carried out inthe different Divisions of the Santander Group, to which it belongs.

The exposure of its own portfolio to market risk is controlled by the Market Risks area of the SantanderGroup's Risk Division, which uses the VaR calculator for historical simulation.

The Corporate Risk Operational Area controls the operational risk, including the technological risk.

The Control and Compliance Unit of the entity is responsible for identifying the risks and controls designedand implemented to manage such risks, as well as the content and regularity of the information sent to theBoard of Directors and Senior Executives. The compliance function covers all matters relating to regulatorycompliance, prevention of money laundering and terrorist financing, product governance and consumerprotection and reputational risk.

The company has set in the General Intervention Division the precise controls to avoid errors in theaccounting, which ensure the relevance and reliability of its financial statements.

The Group's Risk Area monitors the Credit Risk to which the entity is exposed by the customer operations.

The interest rate risk is not relevant due to the operations performed by the Company.

All previous policies, methodologies and controls are regularly monitored by the Group's Internal Audit, whichis in charge of validating the entire general risk framework approved by the Board of Directors of BancoSantander in July 2014.





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Foreseeable evolution of the Company during 2017

2017 has begun with a very different tone at European and Spanish level. Emerging markets are experiencinga rebound followed by a rebound in crude oil prices and better prospects around the interest rate curve.

As mentioned, Trump's policies are having a very positive impact on both European and American stockmarkets and, finally, Spanish political stability accompanied by macroeconomic data of strong growthexpected for 2017 of GDP of 3%, after A 3.2% in 2016.

R&D and Environmental Expenditure

During the 2016 financial year there has been no research and development activity.

In the accounts of the Company corresponding to the financial statements for the year ended 31 December2016 there is no item that should be included in the document other than environmental information.

Treasury shares

In 2016 and 2015 there have been purchases and sales of shares of Banco Santander, S.A., the parentcompany. The summary of the movements of shares of Banco Santander is as follows:

Nº of Nº ofshares 2016 shares 2015

Balance at 1 January - -Purchases 16,495,991 23,339,721Sales (16,495,991) (23,339,721)

Balance at 31 December - -

Payments to suppliers

During 2016, the Company has not made payments that accrued deferrals higher than those legallyestablished other than those described in the financial statements. Likewise, at the end of 2016, the Companyhas no remaining outstanding balance with a deferment in excess of the legal deadline established. Theaverage period of payment to suppliers in 2016 is detailed in the notes to the financial statements.

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