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SANTANDER INTERNATIONAL FUND SICAV Société d'investissement à Capital Variable R.C.S. Luxembourg B ANNUAL REPORT INCLUDING AUDITED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2016 Subscriptions cannot
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SANTANDER INTERNATIONAL FUND SICAV Société d'investissement à Capital Variable R.C.S. Luxembourg B ANNUAL REPORT INCLUDING AUDITED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2016 Subscriptions cannot be received on the basis of annual and semi-annual reports. Subscriptions are valid only if made on the basis of the current prospectus and the Key Investor Information Document ( KIID ), supplemented by the last annual report including audited financial statements and the most recent semi-annual report if published thereafter. TABLE OF CONTENTS DIRECTORS AND ADMINISTRATION... 4 INFORMATION TO THE SHAREHOLDERS... 6 NET ASSET VALUE PER SHARE... 7 REPORT ON THE ACTIVITIES OF THE SICAV... 8 REPORT OF THE REVISEUR D'ENTREPRISES AGREE COMBINED STATEMENT OF NET ASSETS COMBINED STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS SANTANDER MIXTO EUROPA STATEMENT OF NET ASSETS STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS STATISTICAL INFORMATION CHANGES IN THE NUMBER OF SHARES, OF NET ASSETS AND OF NET ASSET VALUE PER SHARE FUTURES CONTRACTS TAXES AND EXPENSES PAYABLE STATEMENT OF INVESTMENTS IN SECURITIES AND OTHER NET ASSETS GEOGRAPHICAL CLASSIFICATION OF THE INVESTMENTS IN SECURITIES ECONOMIC CLASSIFICATION OF THE INVESTMENTS IN SECURITIES MAJUELO STATEMENT OF NET ASSETS STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS STATISTICAL INFORMATION CHANGES IN THE NUMBER OF SHARES, OF NET ASSETS AND OF NET ASSET VALUE PER SHARE NOTES TO THE FINANCIAL STATEMENTS APPENDIX : UNAUDITED ADDITIONAL DISCLOSURES DIRECTORS AND ADMINISTRATION BOARD OF DIRECTORS OF THE SICAV CHAIRMAN Mr Carlo MONTAGNA (since June 7, 2016) Independant Director 21st Century Building 19, rue de Bitburg L-1273 Luxembourg-Hamm, LUXEMBOURG DIRECTORS Mrs Dolores YBARRA CASTAŇO Global Chief Executive Officer of SANTANDER ASSET MANAGEMENT S.G.I.I.C., S.A. (formerly Chairman of the Board of Directors of the SICAV and appointed Director since June 7, 2016) Calle Serrano, 69 E Madrid, SPAIN Mr Ettore GOTTI TEDESCHI (until June 7, 2016) Senior Country Head of SANTANDER CONSUMER BANK Via Arrigo Boito, 10 I Milan, ITALY Mr Grant Mitchell SESSIONS (until June 7, 2016) General Manager of BANCO SANTANDER, S.A. (London Branch) Santander HOUSE 100 Ludgate Hill EC4M London, UNITED KINGDOM Mr Luis CAVERO (since June 7, 2016) General Manager of ALLFUNDS BANK INTERNATIONAL S.A. 30 Boulevard Royal L-2449 Luxembourg, LUXEMBOURG REGISTERED OFFICE MANAGEMENT COMPANY INVESTMENT MANAGER DEPOSITARY BANK AND PAYING AGENT ADMINISTRATIVE, REGISTRAR, CORPORATE AND DOMICILIARY AGENT 6, route de Trèves L-2633 Senningerberg, LUXEMBOURG SANTANDER ASSET MANAGEMENT LUXEMBOURG S.A. 6, route de Trèves L-2633 Senningerberg, LUXEMBOURG SANTANDER ASSET MANAGEMENT S.A. S.G.I.I.C., Calle Serrano, 69 E Madrid, SPAIN J.P. MORGAN BANK LUXEMBOURG S.A. 6, route de Trèves L-2633 Senningerberg, LUXEMBOURG J.P. MORGAN BANK LUXEMBOURG S.A. 6, routes de Trèves L-2633 Senningerberg, LUXEMBOURG 4 DIRECTORS AND ADMINISTRATION (Continued) DISTRIBUTOR MAIN NOMINEE CABINET DE REVISION AGREE/ INDEPENDENT AUDITOR OF THE SICAV LEGAL ADVISER BANCO SANTANDER S.A. 9-12, Paseo de Pereda E Santander, SPAIN ALLFUNDS BANK S.A. Plaza de la Fuente La Moraleja, Edificio 1, planta 1 E Alcobendas, Madrid, SPAIN DELOITTE AUDIT Société à responsabilité limitée 560, rue de Neudorf L-2220 Luxembourg, LUXEMBOURG ELVINGER HOSS PRUSSEN 2, place Winston Churchill L-1340 Luxembourg, LUXEMBOURG 5 INFORMATION TO THE SHAREHOLDERS SANTANDER INTERNATIONAL FUND SICAV (the SICAV ) shall make available to the Shareholders within 4 months after the year-end an annual report including audited financial statements describing the assets, operations and results of the SICAV and of each of its Sub-Funds, and, after the end of the first semi-annual period of each financial year, it shall make available to the Shareholders within 2 months an unaudited semi-annual report describing the net assets and operations of the SICAV during such period. The Net Asset Value, the issue price and the redemption and conversion price is available on each bank business day in Luxembourg at the registered office of the SICAV. The annual report including audited financial statements and all other periodical reports of the SICAV are made available to the Shareholders at the registered office of the Administrative, corporate and domiciliary agent of the SICAV. Shareholders' meetings are convened in accordance with Luxembourg law. The annual general meeting of Shareholders is held on the first Tuesday in June of each year at 2:00 p.m. A detailed schedule of changes in the portfolio of each Sub-Fund is available free of charge upon request at the registered office of the SICAV. As at December 31, 2016, the Share Class SANTANDER MIXTO EUROPA C was listed on the Luxembourg Stock Exchange. 6 NET ASSET VALUE PER SHARE Net Asset Value per share is determined on each bank business day in Luxembourg. For reporting purposes, however, if the last day of the SICAV's financial year or of the half year is not a bank business day in Luxembourg, the reported Net Asset Value will be the Net Asset Value calculated the last day of the year or of the half year on the basis of the last price known for the year or for the half year. 7 2016 Review Economics REPORT ON THE ACTIVITIES OF THE SICAV 2016 will primarily be remembered for great political upheaval in Western democracies. The results of the US presidential election and the Brexit referendum showed investors that in the Anglo Saxon world, democratic arrangements are not always a force for continuity. The Italian referendum which ejected Matteo Renzi showed that Europeans have been facing this reality for some time. The overall pattern of economic growth came in surprisingly close to our 2016 projections. The US continued to deliver enough growth to tighten the labour market, keep wages on the increase, and support a continuation of tighter monetary policy from the Fed. Forecasts for above-trend growth in Europe and policy stimulus taking effect in China were also borne out. However, 2016 felt like anything but a smooth acceleration. The first quarter of the year saw growth worries on the back of dollar strength, slowing activity in China, and the Fed s forecast of four interest rate rises during the year. At first the policy response seemed to confirm the threat. The Fed shelved their earlier rate rise plan, while China engaged in RMB devaluation and combined monetary-fiscal stimulus. By Q2, though, policy support combined with small signs of manufacturing recovery across most regions. By the time of the Brexit vote, the global economy was in the middle of a cyclical upswing forecast by many in January but few in March. The Brexit vote passed without serious interruption of the recovery even in the UK though most of the terms of exit remain unresolved. Similarly, while the US presidential election introduced an economic and geo-political wild card, the year ended with evidence of continued expansion in Europe, the US and China, tentative recovery in global trade, and the prospect that the new Administration would look to fuel demand growth still further. Two themes were more persistent through Emerging economies remained under pressure, with Brazil and Russia spending most of the year in deep recession. Second, the global post-crisis deflation wave seemed to ebb, thanks to a tighter US labour market and weaker currencies in Europe. The Federal Reserve responded, finally, by resuming their tightening cycle with a 25bp increase in the Fed Funds rate in December. The ECB and Bank of Japan, by contrast, ended the year with commitments to maintain easy policy through While equities ultimately outperformed bonds in 2016, in line with our year-ago outlook, the ride was bumpy. The first six weeks of the year saw global equities underperform sovereign bonds by over 15% - a gap which was not closed again until mid-november. Given the macro backdrop of improving growth and accumulating inflation, one could see this as surprising. Volatility and middling returns are easier to understand, though, in the context of elevated valuations a theme of recent years for us. Weak investor conviction has also played a part, though equities calm response to the December rise in US interest rates was a positive development. Relative performance within equities did not see the rotation towards Europe and Japan which we had anticipated. The US market handsomely outperformed in both local and common currency terms, while Emerging Markets seemed set for even better performance until the Trump election and Federal Reserve tightening brought performance back into line with developed markets. Despite high valuations, the US benefited from continued investor nervousness about the durability of the global economic recovery. Global government bonds performed much more strongly than expected during the first half of the year but began to decline from August to end the year little changed in USD unhedged terms a 20% round trip. Again, high valuations both limited gains and caused volatility, though much of the latter was currency-driven: for a euro-based investor, local government bonds peaked at +6% before ending +3%. Global corporate bonds faced the offsetting forces of tighter spreads and rising government yields to end the year up around 3.5% in unhedged USD. High yield recovered from a poor 2015 to deliver over 13% in unhedged USD, while European HY added 9% in local FX. Past performance is not an indicator of current or future returns. 8 REPORT ON THE ACTIVITIES OF THE SICAV (continued) The opportunity cost of holding cash was largely driven by geography in 2016: the return of currency volatility was a key theme of the year, with Sterling underperforming the dollar by over 16% while the Japanese Yen appreciated by 3%. Consequently international investments handsomely outperformed Sterling cash, but the picture was more mixed for dollar holders. Despite dire economic performance, Russia and Brazil saw their currencies gain over 20% against USD. Absolute return funds struggled with the sharp changes in market direction and delivered mixed returns versus cash Outlook The underlying improvement in the global economy in late 2016 is a trend which we expect to continue. This is driven less by expectations of the new Trump Administration, and more by the evidence of solid corporate and household confidence at the turn of the year. It is hard to be sure what effect the changes in Washington will have on global economic currents, given the huge range of pledges made during campaigning and the lack of specifics offered since. Our assessment is that many measures will evolve too slowly to affect the economy in 2017 expectations of aggressive infrastructure spending are particularly vulnerable given the time lags involved but there is likely to be a consensus inside the Beltway for reductions in corporate taxation and regulation. This should provide a marginal boost to the private sector, but the benefits are likely to accrue disproportionately to US company profit margins. Whether and how this affects companies willingness to invest is a key question for the year ahead. The resolution will have a major impact on the international economy. Europe, Japan and many Emerging Markets remain sensitive to corporate investment demand weakness here has held back growth in recent years. If, as we expect, investment spillovers outweigh protectionist rhetoric, the scene is finally set for better performance in these economies. Europe should benefit additionally from improving domestic consumer confidence and bank health, while China should see relatively stable activity even as stimulus wanes. As the year unfolds, the economy may encounter some speed limits. Growth in the US has come largely through greater use of resources, including labour, rather than through improved productivity, with implications for inflation and interest rates this year. The Federal Reserve s latest 2017 forecasts are for inflation to remain below target and for three interest rate hikes. We see risks to both of these as slightly tilted to the upside. Outside the US, inflation and policy should be more benign, but these regions will not be immune to signs of accelerated US tightening. Politics, especially in Europe, could prove a risk factor with elections in the Netherlands, France and Germany. We expect Emerging Markets to remain most vulnerable to any inflation-interest rate shock in the US via higher funding costs. April 24, 2017 THE BOARD OF DIRECTORS OF THE SICAV Past performance is not an indicator of current or future returns. 9 Deloitte Audit Société à responsabilité limitée 560, rue de Neudorf L-2220 Luxembourg BP 1173 L-1011 Luxembourg Tel: REPORT OF THE RÉVISEUR D ENTREPRISES AGRÉÉ To the Shareholders of SANTANDER INTERNATIONAL FUND SICAV (Société d'investissement à Capital Variable) 6, route de Trèves L-2633 Senningerberg Following our appointment of the annual general meeting of the Shareholders, we have audited the accompanying financial statements of SANTANDER INTERNATIONAL FUND SICAV (the SICAV ) and of each of its sub-funds, which comprise the statement of net assets and the statement of investments in securities and other net assets as at December 31, 2016, the statement of operations and changes in net assets for the year then ended and a summary of significant accounting policies and other explanatory notes to the audited financial statements. Responsibility of the Board of Directors of the SICAV for the financial statements The Board of Directors of the SICAV is responsible for the preparation and fair presentation of these financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements and for such internal control as the Board of Directors of the SICAV determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Responsibility of the réviseur d entreprises agréé Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the réviseur d entreprises agréé s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the réviseur d entreprises agréé considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors of the SICAV, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Société à responsabilité limitée au capital de RCS Luxembourg B Autorisation d établissement Deloitte. Opinion REPORT OF THE REVISEUR D'ENTREPRISES AGREE (continued) In our opinion, the financial statements give a true and fair view of the financial position of SANTANDER INTERNATIONAL FUND SICAV and of each of its sub-funds as at December 31, 2016, and of the results of their operations and changes in their net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements. Other information The Board of Directors of the SICAV is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our report of reviseur d'entreprises agree thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard. For Deloitte Emma nu Partner eur d'entreprises agree April 24, , rue de Neu L-2220 Luxembour 11 COMBINED STATEMENT OF NET ASSETS December 31, 2016 (in EUR) ASSETS Portfolio (note 2.b) Cost 13,070, Net unrealised result 311, ,382, Cash Cash at Bank (note 2.b) 285, Cash at Broker (note 2.b) 596, Other assets Interest and dividends receivable, net 51, Prepaid expenses 1, Other receivable 43, ,361, LIABILITIES Other liabilities Net unrealised loss on futures contracts (note 2.d) 103, Taxes and expenses payable 44, Other payable 4, , TOTAL NET ASSETS 14,208, COMBINED STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS For the year ended December 31, 2016 (in EUR) NET ASSETS AT THE BEGINNING OF THE YEAR 53,369, INCOME Income from investments Dividends, net (note 2.g) 569, Bond interest, net (note 2.g) 169, Other income 9, , EXPENSES Fees Management fee (note 3) 349, Depositary fees (note 7) 3, Transaction costs (note 6) Registrar and transfer agent fees (note 7) 2, Other expenses Bank interest, net 24, Annual tax (note 5) 15, Audit and legal fees 26, Printing and publishing expenses 1, Administration and other expenses (note 7) 19, , NET RESULT OF INVESTMENTS 304, Net realised result on: Sales of Investments (note 2.e) 261, Foreign exchange (note 2.c) 41, Futures contracts (note 2.d) 707, Options contracts (note 2.f) 28, NET REALISED RESULT 1,039, Change in net unrealised appreciation/(depreciation) on: Sales of Investments (note 2.e) (1,142,275.92) Foreign exchange (note 2.c) (28,943.49) Futures contracts (note 2.d) 171, INCREASE IN NET ASSETS AS A RESULT OF OPERATIONS 344, MOVEMENTS IN CAPITAL Subscriptions of Shares 64, Redemptions of Shares (39,569,616.30) (39,505,329.81) NET ASSETS AT THE END OF THE YEAR 14,208, SANTANDER MIXTO EUROPA STATEMENT OF NET ASSETS December 31, 2016 (in EUR) ASSETS Portfolio (note 2.b) Cost 13,070, Net unrealised result 311, ,382, Cash Cash at Bank (note 2.b) 279, Cash at Broker (note 2.b) 596, Other assets Interest and dividends receivable, net 51, Prepaid expenses 1, Other receivable 43, ,355, LIABILITIES Other liabilities Net unrealised loss on futures contracts (note 2.d) 103, Taxes and expenses payable 43, , TOTAL NET ASSETS 14,208, Total net assets Share Class C 14,208, Shares outstanding 13, Net asset value per Share 1, SANTANDER MIXTO EUROPA STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS For the year ended December 31, 2016 (in EUR) NET ASSETS AT THE BEGINNING OF THE YEAR 16,391, INCOME Income from investments Dividends, net (note 2.g) 332, Bond interest, net (note 2.g) 15, , EXPENSES Fees Management fee (note 3) 237, Depositary fees (note 7) 1, Transaction costs (note 6) Registrar and transfer agent fees (note 7) 2, Other expenses Bank interest, net 5, Annual tax (note 5) 7, Audit and legal fees 9, Printing and publishing expenses Administration and other expenses (note 7) 18, , NET RESULT OF
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