Declaration of Compliance (section 161 AktG) - History

As at December 2007

The Management Board and Supervisory Board of Aareal Bank AG declare, in accordance with section 161 of the AktG, that:

Aareal Bank AG has complied with the recommendations of the Government Commission “German Corporate Governance Code” (as amended on 12 June 2006 and, with effect from 14 June 2007, as amended on that date) since the last Declaration of Compliance was issued in December 2006; in each case, except for the following recommendations:

Section 3.8 of the German Corporate Governance Code recommends that a suitable deductible be agreed if the company takes out a D&O (directors and officers' liability insurance) policy for the Management Board and Supervisory Board. 

The D&O insurance policy taken out by Aareal Bank AG for the members of its Management Board and Supervisory Board does not provide for a deductible. Since it goes without saying that all members of the executive bodies of Aareal Bank AG have a duty to act responsibly, no deductible is required.

Section 4.2.2 of the Code recommends that the full Supervisory Board discusses and regularly reviews the structure of the Management Board compensation system at the proposal of the committee dealing with Management Board contracts. 

The Supervisory Board of Aareal Bank AG has transferred responsibility for matters relating to the remuneration of the Management Board to the Executive Committee, which deals with, and makes decisions on these matters independently. This procedure has proven to be effective over many years of practice. The Executive Committee regularly reviews the level and structure of Management Board compensation and reports to the full Supervisory Board on its deliberations. 

The newly added section 5.3.3 contains the recommendation that the Supervisory Board shall form a nomination committee composed exclusively of shareholder representatives which proposes suitable candidates to the Supervisory Board for recommendation to the Annual General Meeting.

The immediate implementation of this provision is currently not imperative. The Supervisory Board of the Aareal Bank has only existed with its momentary composition for about one year, so that no nominations are required at this time. A review of whether this arrangement will be accepted in the market or not is planned for 2008.

In the coming fiscal year, Aareal Bank AG will continue to comply with the recommendations of the German Corporate Governance Code (as amended on 14 June 2007) except with respect to sections 3.8, 4.2.2 and 5.3.3 as set out above.

Furthermore, Aareal Bank AG adopted its own Corporate Governance Code as early as 1999. The bank’s Code has been adapted to incorporate amendments to the German Corporate Governance Code; it goes beyond the recommendation of the Government Commission. 

Wiesbaden, December 2007

The Management Board

Dr. Schumacher  Kickum  Merkens  Ortmanns

For the Supervisory Board

Hans W. Reich

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