Payout Practice

The first of Santander’s four aspirations is to be the largest bank in Brazil in terms of value generation to shareholders. In line with this objective, Santander intends to remunerate its shareholders by distributing 50% of its annual net income, adjusted and calculated in accordance with Brazilian accounting standards. Such percentage is higher than the minimum legally required percentage of 25% of profits. This profit distribution is decided and approved annually at the Ordinary Shareholders’ Meeting (OSM). The distribution of profits, however, depends on several factors, such as cash flow, investment plans and the overall macroeconomic scenario. Santander’s Management proposal is to remunerate shareholders according to the calculation of the results obtained during the fiscal year. Therefore, it has proposed, for deliberation by the Board of Directors, the payment of dividends (interest on equity and/or dividends), calculated in accordance with the applicable legislation. These amounts are attributable to mandatory minimum dividends.

The distribution of a company’s profits to its shareholders is made in proportion to the number of shares that each shareholder owns. This can be done in two ways:

• Dividends: calculated on top of the company’s net income, after taxes. Therefore, they are tax-free to shareholders.
• Interest on Equity: essentially, this is a type of dividend except that, instead of being calculated on top of results for the period, it is calculated on top of capital profit reserves (from results of previous years that were retained by the company). Another difference is that this amount is before taxes since it is calculated prior to the company’s income tax payments. Therefore, the net amount paid to shareholders includes deductions for income taxes.

Important: your dividends will be automatically deposited in the bank account that appears on your files with your broker. For this reason, be sure to maintain your data up to date. Distribution of earnings

The Brazilian Corporations Law defines net income as the result for the fiscal year in question, excluding amounts related to provisions for losses, income taxes and social contributions for the period, as well as any accumulated losses from previous years and other amounts destined towards share payments to employees and statutory administrators