Receive newly issued Santander ADRs (the Default Option ) (Spanish withholding tax DOES NOT apply to this option)

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1 September 2015 Banco Santander, S.A. - Domicilio Social: Paseo de Pereda, SANTANDER - R.M. de Santander, Hoja 286, Folio 64, Libro 5 de Sociedades, Inscripción 1 a. C.I.F.A Dear ADR Holder: Santander will offer a scrip dividend for its upcoming November 2015 dividend, providing ADR holders with the opportunity to choose from among three payment options: Option 1 Option 2 Option 3 Receive newly issued Santander ADRs (the Default Option ) (Spanish withholding tax DOES NOT apply to this option) Receive dollar equivalent of Euro cash proceeds from the sale of rights in the open market (Spanish withholding tax DOES NOT apply to this option) Receive dollar equivalent of fixed Euro cash amount (Spanish tax withheld at a rate of 19.5%) 1 This letter is accompanied by an election form if J.P. Morgan, as Depositary, does not have a previous election on file for you (including any election by default). If you are receiving an election form and you want to receive newly issued Santander ADRs, no action is required by you. If you wish to choose one of the other two options (Option 2 or Option 3 as set forth above), your properly completed election form must be returned to and received by J.P. Morgan no later than 12:00 noon U.S. central time on October 27, If you do not return an election form and have not previously made an affirmative election, you will receive the Default Option for this and future scrip dividends. However, if you choose to receive newly issued Santander ADRs or such option is applicable to you by default, but you have not submitted to J.P. Morgan your IRS form W-8 or W-9, as applicable, or otherwise established an exemption from U.S. backup withholding, you will be deemed to have elected Option 3 (in which case U.S. backup withholding may apply). If you are not receiving an election form together with this letter and you wish to change a previously made election, please contact the Depositary at , as soon as possible, to obtain a new election form. Please note that your election form will take approximately 3-4 business days to arrive and must be received by the Depositary no later than 12:00 noon U.S. central time on October 27, Registered holders who participate in J.P. Morgan s Dividend Reinvestment Plan should note that the Dividend Reinvestment Plan does not apply to Santander scrip dividends. Please note your election, including an election made by default, will apply to any future Scrip Dividend unless J.P. Morgan is notified of an instruction to change an election. 1 A reduced tax rate may apply under an applicable tax treaty. Santander Shareholder Relations US 75 State Street, Boston, MA Tel: (617)

2 IMPORTANT TAX CONSIDERATION Your election will have important tax consequences. As stated above, no Spanish tax will be withheld from your payment if you choose Option 1 or Option 2 as set forth above. Spanish tax at the rate of 19.5% will be withheld from your payment if you choose Option 3 1. For U.S. federal income tax purposes, each of the three options described above will give rise to a taxable dividend (including in the case of the Default Option to receive new ADSs, where no cash will be paid other than cash in lieu of fractional ADSs). For a description of certain Spanish and U.S. federal income tax considerations see Taxation in the attached information document. Below, please find a detailed description of our scrip dividend structure. We urge you to read this letter in its entirety. If you have any questions or need assistance regarding the November scrip dividend, please call our Information Agent, D.F. King & Co., Inc., at (toll free) or (call collect). Please do not hesitate to contact us at shareholders@santander.us or, if you prefer, visit us online at Thank you for your cooperation and support. Susana Moraleja Director, U.S. Shareholder Relations 1 A reduced tax rate may apply under an applicable tax treaty.

3 I. Overview Santander has decided, subject only to final approval by its Executive Committee, to implement a scrip dividend structure for shareholders for the upcoming November 2015 dividend similar to that implemented with respect to the May 2015 dividend. As a result of this structure, ADR holders will have the opportunity to decide whether they prefer to receive the compensation equivalent to their upcoming November dividend (and, absent a change in election, future dividends structured in the same manner) in cash or newly issued Santander ADRs. This initiative provides flexibility by enabling ADR holders to choose their preferred payment option. Under this dividend structure, holders of our shares, including the Custodian for Santander s ADR program, will receive free of charge one free subscription right for every share held. ADR holders will be able to instruct J.P. Morgan to act with respect to the rights underlying their American depositary shares ( ADSs ) according to one of three options: 1 Receive new ADSs. ADR holders may elect to receive newly issued ADSs. The number of new ADSs they receive will depend upon the number of ADSs they hold at the time of the November dividend record date and the Conversion Ratio (i.e. the number of rights that are needed to receive one new ADS). Cash will be paid in lieu of fractional ADSs (through a sale in the market of rights exercisable into fractional ADSs ( fractional rights ) on terms equivalent to those set forth in the second bullet point below). This option gives rise to no Spanish withholding tax. ADR holders will be charged a fee of $0.035 per new ADS issued. For a description of the manner in which the Conversion Ratio will be calculated please see Calculation of Conversion Ratio and Fixed Price below. Sell rights in the market. 2 ADR holders may request that J.P. Morgan sell such rights in the open market in Spain. The proceeds they receive from such sale will depend upon market prices and the euro/dollar exchange rate. J.P. Morgan will begin selling such rights on October 30, 2015 and may continue such sales through November 3, Regardless of when such rights are sold, all ADR holders electing open market sales of their rights will receive the same amount of consideration per right, which will equal the average net price per right sold (including fractional rights sold as described in the paragraph above) minus a fee of $ per right sold. This option gives rise to no Spanish withholding tax. For holders of ADRs that are not resident in Spain for Spanish income tax purposes, without a permanent establishment in Spain, the cash consideration will reduce the tax basis of the ADRs held; if the consideration exceeds such tax basis, the excess may be subject to Spanish capital gain tax, but beneficial owners of ADRs that are eligible for the benefits of the U.S.-Spain income tax treaty will generally be exempt from such tax. We cannot guarantee the price that an ADR holder will receive for the sale of such rights in the market in Spain. The amount that a holder receives per right may be more, less or the same as the Fixed Price (as described below), and ADR holders will not be able to approve the price at which such rights are sold. Receive a fixed cash payment. ADR holders can instruct J.P. Morgan to sell the rights corresponding to the shares underlying the holders ADSs to us at a fixed price in Euros, which we refer to herein as the Fixed Price Option and the Fixed Price, respectively. J.P. Morgan will convert the proceeds of this sale into 1 All explanations and calculations herein have been made without giving effect to any non-spanish taxes, and they do not purport to be a complete analysis of all tax considerations relating to the upcoming November dividend. Please consult your own tax advisor for Spanish and non-spanish tax advice. 2 If you choose to sell your rights in the market in Spain, there are some aspects of the operation of the November dividend in the Spanish market of which you should be aware. Holders of rights in the Spanish market will have until the close of business on October 29, 2015 to sell their rights to Santander pursuant to the Fixed Price Option, and holders of rights in the Spanish market who do not sell their rights, either to Santander pursuant to the Fixed Price Option or otherwise, will have their rights converted into Santander shares rather than cash at the Fixed Price. In addition, the option in Spain to sell rights to Santander pursuant to the Fixed Price Option will be offered only to shareholders of record as of October 19, 2015 and only with regard to the rights granted on such date. Consequently, rights acquired on the Spanish market may not be tendered pursuant to the Fixed Price Option. The foregoing may materially and adversely affect the market price of the rights. 3

4 U.S. dollars, as would be the case with any Santander cash dividend, with the result that the amount you receive will depend on the euro/dollar exchange rate. This option will have the same Spanish tax treatment as an ordinary cash dividend, with Spanish tax withheld at a rate of 19.5% in ADR holders will also be charged a fee of $ per ADS. For the calculation of the Fixed Price, see Calculation of Conversion Ratio and Fixed Price below. Dividend Reinvestment Plan options will be suspended for the November dividend. Dividend Reinvestment Plan participants who desire to receive new ADSs as part of the November dividend and have not previously made an affirmative election to receive cash need take no action as they will automatically receive new ADSs pursuant to the scrip dividend unless they affirmatively request otherwise. Participants who have previously made an affirmative election to receive cash and now wish to receive ADSs must affirmatively elect to receive ADSs. The options set forth above have important tax consequences in addition to the Spanish tax consequences summarized above. For example, each of the transactions described in the three options set forth above will give rise to a taxable dividend for U.S. federal income tax purposes (including in the case of the default option to receive new ADSs, where no cash will be paid other than cash in lieu of fractional ADSs). Please see Taxation below. II. Default Option ADR holders who do not have a prior election in place with respect to any of the three options set forth above and do not make an election in connection with the May scrip dividend will be deemed to have elected to receive new ADSs pursuant to the first option described above. Notwithstanding the preceding sentence, those ADR holders who have not submitted to the Depositary a duly executed applicable IRS form W-9 or W-8 or otherwise established an exemption from U.S. backup withholding will receive cash payments pursuant to the Fixed Price Option subject to U.S. backup withholding. Your election in connection with this scrip dividend (or unless J.P. Morgan is informed by you of a change in election, the election that applied in connection with the previous scrip dividend), including, in each case, any election by default, will govern the form of compensation you receive under this dividend as well as any future dividends governed by terms similar to the November dividend structure. III. Timeline In order for you to make a valid election, (i) you must be a holder of record on October 19, 2015, the record date and (ii) you must provide an executed election form to J.P. Morgan no later than 12:00 noon U.S. central time on October 27, Below, please find some important dates with respect to the November dividend: October 16, 2015 October 19, 2015 October 27, 2015 October 30, 2015 Week of November 16, 2015 The size of the dividend, the Conversion Ratio and the Fixed Price will be announced on Santander s website at and on ADR record date Registered holder deadline to provide election forms 12:00 noon U.S. central time J.P. Morgan will begin selling fractional rights as well as the rights of each ADR holder electing for sale in market Expected period for J.P. Morgan to remit net cash proceeds, and mail to registered holders electing to receive new ADSs their ADS statements 3 A reduced tax rate may apply under an applicable tax treaty. ADR holders should consult their tax advisers regarding their eligibility for treaty benefits and their entitlement to refunds of taxes withheld in excess of any applicable treaty rate. 4

5 IV. Calculation of Conversion Ratio and Fixed Price The Conversion Ratio will equal the number of our outstanding shares on October 16, 2015, which we refer to herein as the Share Count, divided by the number of Provisional Shares (as defined below) to be issued in the November dividend, rounded up to the nearest whole number. The number of Provisional Shares will equal the size of the November dividend divided by the average of the volume-weighted average price of Santander shares on the Spanish Stock Exchange in the 5 business days prior to October 16, 2015, rounded up or down to the nearest Euro thousandth and, in the case of a half Euro thousandth, rounded up to the nearest Euro thousandth, which price we refer to herein as the Santander Stock Price. The number of Provisional Shares is used to calculate the Conversion Ratio, and does not equal the number of Shares that will actually be issued in the November dividend. The Fixed Price will equal the Santander Stock Price divided by the sum of the Conversion Ratio and 1, rounded up or down to the nearest Euro thousandth and, in the case of a half Euro thousandth, rounded up to the nearest Euro thousandth. V. Example The following example has been provided solely for the purposes of facilitating understanding of the November dividend. The example is qualified in all respects by the formulas described in Calculation of Conversion Ratio and Fixed Price above and is not intended to predict the compensation that holders of ADRs can expect. The following example is based on the following assumptions: Share Count: 14,316,632,805 Dividend size: 720,000,000 Santander Stock Price: 6.5 Number of ADSs held: 260 The number of Provisional Shares equals 720,000,000/ 6.5 = 110,769, The Conversion Ratio equals 14,316,632,805/110,769, = rounded up to the nearest whole number, or 130. The Fixed Price equals 6.5/(130+1) = 6.5/131 = Options: A. Receive new ADSs (default option): The investor will have 262 ADSs: the 260 original ADSs, plus the 2 new ADS received (number of ADSs held (260)/Conversion Ratio (130)). This option gives rise to no Spanish withholding tax. Additionally, the investor will be charged a fee of $0.035 per new ADS issued. In this example, the sale of a fractional right would not be applicable, as the holder s rights divide evenly into the Conversion Ratio. B. Sell rights in the market: The investor will still have 260 ADSs and will receive an amount in cash that depends upon the market price of the rights (as calculated pursuant to I. Overview Sell rights in the market ) and the currency exchange rate. This option gives rise to no Spanish withholding tax, but the investor will be charged a fee of $ per ADS. C. Receive Fixed Price: The investor will still have 260 ADSs and will receive an amount in U.S. dollars, which will depend upon currency exchange rates, obtained from the conversion of 13 (260 rights x 0.050) less applicable Spanish tax withheld and a fee of $ per ADS. Using the foreign exchange rate of 1.00 = $ as of August 31, 2015 and assuming the statutory Spanish dividend withholding tax of 19.5% in 2015, the investor could expect a payment of $ per ADS. The above example does not take into account any non-spanish taxes. Please consult your own tax advisor for Spanish and non-spanish tax advice. Holders should also refer to important information contained in Taxation below. 5

6 VI. Taxation A. Spanish Tax The Spanish tax regime applicable in respect of the November dividend to a holder of ADSs that is not a resident of Spain for Spanish income tax purposes, and that does not act with respect to the ADSs through a permanent establishment in Spain, will be as follows: The delivery of the shares issued in the November dividend will be considered a delivery of fully paid-up bonus shares and, hence, will not be considered income for purposes of the Non-Resident Income Tax, which we refer to herein as the NRIT. The acquisition value, both of the new shares received in the November dividend and of the shares from which they arise, will be the result of dividing the total original cost of the shareholder s portfolio by the number of shares, both old and new. The acquisition date of the new shares will be that of the shares from which they arise. If ADS holders sell their rights on the market (including fractional rights, as defined above), for purposes of the NRIT, the amount obtained from the sale of rights will be deducted from the acquisition value of the shares from which the rights arose. If the amount obtained from such sale is higher than the acquisition value of the shares from which the rights arose, the excess amount will be treated as a capital gain for the seller on the fiscal year in which the transfer takes place. Such capital gain will generally be subject to Spanish tax at a rate of 19.5% in However, beneficial owners of ADSs who are eligible for the benefits of the current comprehensive income tax treaty between the United States and Spain (the Treaty ) will generally be exempt from capital gains tax under the NRIT. In the event that the holders of the rights accept the Fixed Price Option, the tax regime applicable to the amounts received will be that applicable to cash dividends and, therefore, the dividend will be subject to Spanish withholding tax at a rate of 19.5% in Under the Treaty, the applicable tax rate is generally 15%. U.S. beneficial owners of ADSs should consult their tax advisors regarding their eligibility for benefits under the Treaty and, if so, the procedure for obtaining a refund of any amounts withheld for Spanish taxes in excess of the Treaty rate. B. U.S. Tax The following is a general summary of certain U.S. federal income tax consequences of receiving the November dividend for a person or entity subject to U.S. federal income taxation on a net income basis who is a beneficial owner of Santander s ADSs, who is eligible for benefits under the Treaty and who holds ADSs as capital assets for U.S. federal income tax purposes (a U.S. Holder ). However, the consequences to any particular U.S. Holder will depend on the personal circumstances of such holder. U.S. Holders should consult their tax advisors regarding the U.S. federal income tax consequences of the distribution of the November dividend. A U.S. Holder who does not receive the November dividend from Santander pursuant to the Fixed Price Option should recognize ordinary dividend income, in an amount equal to the U.S. dollar value of the rights (including fractional rights, as defined above) as of the date of distribution. A U.S. Holder who elects to have J.P. Morgan sell its rights on the market (and a U.S. Holder whose fractional rights are sold by J.P. Morgan on the market and who receives cash in lieu of fractional ADSs) should realize shortterm capital gain or loss in an amount equal to the difference between the U.S. Holder s tax basis in the rights or fractional rights and the amount realized on the disposition (each as determined in U.S. dollars). The U.S. Holder s tax basis in the rights or fractional rights should be equal to their U.S. dollar value as of the date of distribution (that is, the amount includible in income as ordinary dividend income with respect to the rights or fractional rights, as described above). November dividends paid in cash (pursuant to the Fixed Price Option) should be included in a U.S. Holder s income on the date of J.P. Morgan s receipt of the dividend. The amount of includible dividend income for a dividend paid in Euros should be the U.S. dollar equivalent of the Euro dividend, calculated by reference to the 6

7 exchange rate in effect on the date of J.P. Morgan s receipt of the dividend, regardless of whether the payment is in fact converted into U.S. dollars on that date. If the cash dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may recognize foreign currency gain or loss if the cash dividend is converted into U.S. dollars after the date of receipt. In general, any foreign currency gain or loss will be treated as U.S. source ordinary income or loss. Subject to applicable limitations that vary depending upon a U.S. Holder s circumstances, a U.S. Holder will be entitled to a credit against its U.S. federal income tax liability, or a deduction in computing its U.S. federal taxable income, for any Spanish taxes withheld in respect of a cash dividend in an amount not in excess of any applicable rate under the Treaty. A U.S. Holder may use foreign tax credits to offset only the portion of its U.S. federal income tax liability attributable to foreign-source income. This limitation on foreign taxes eligible for credit is calculated separately with respect to two different classes of income, passive income and general income. The rules governing foreign tax credits are complex and, therefore, U.S. Holders should consult their tax advisors regarding the availability of foreign tax credits in their particular circumstances. Subject to applicable limitations, the November dividends paid to certain non-corporate U.S. Holders may be taxable at rates that are lower than the rates applicable to ordinary income. U.S. Holders should consult their tax advisors regarding the availability of the reduced tax rates on dividends in their particular circumstances. Payments of November dividends that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the Internal Revenue Service. This summary is not exhaustive, and does not describe all of the tax considerations that may be relevant to a U.S. Holder. Each U.S. Holder is advised to consult his/her own tax advisor regarding the overall tax consequences, including the consequences under U.S. federal, state, local or foreign tax laws, of receiving the November dividend. 7