Declaration of Compliance (section 161 AktG) - History

As at December 2020

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

1. Aareal Bank AG has complied with the recommendations of the Government Commission "German Corporate Governance Code" in the version published in the German Federal Gazette on 24 April 2017 since Aareal Bank AG's last Declaration of Compliance was issued in December 2019, with the exception of the restriction set out below:
   
   Pursuant to section 25d of the German Banking Act (Kreditwesengesetz – "KWG"), the Executive and Nomination Committee of Aareal Bank AG's Supervisory Board is required to assume additional tasks which are not supposed to be prepared by shareholder representatives on the Supervisory Board alone. Consequently, the Executive and Nomination Committee also includes employee representative members, contrary to the recommendation in section 5.3.3 of the German Corporate Governance Code (the “Code”). However, the Committee ensures that the nomination of candidates for election by the Annual General Meeting is determined exclusively by the shareholder representatives on the Committee.
    
2. Since 20 March 2020, Aareal Bank AG has complied with the recommendations of the Government Commission "German Corporate Governance Code" in the version published in the German Federal Gazette on 20 March 2020 and will continue to do so, with the exception in both cases of the restriction set out below:
   
   Recommendation G. 10 sentence 2 states that granted long-term variable remuneration components shall be accessible to Management Board members only after a period of four years. In contrast to the draft version dated 22 May 2019, the Government Commission's final version does not provide a definition of the term "long-term variable remuneration".
   
   According to the definition provided in the version dated 22 May 2019, typical performance criteria for long-term variable remuneration included "long-term financial success (profitability and growth with multiple-year measurement basis), non-financial success as prerequisite for subsequent financial success […], implementation of the corporate strategy [etc.]".   
   
   All targets in Aareal Bank's remuneration system are derived from the Bank's strategy and are measured over three years. Under the definition provided in the draft version published on 22 May 2019 quoted above, Aareal Bank's entire variable remuneration would count as long-term. A notional amount is determined based on the three-year period for calculating the targets; only 20% of this is paid out directly. The remaining 80% is paid out in different tranches over a total of six years.
   
   This means that the large majority of the long-term variable remuneration as defined by the draft Code is available at the earliest four years and up to nine years later. However, since the definition was not included in the final version of the Code and the recommendation is therefore imprecise, it is not clear whether the way in which Aareal Bank's system is designed meets the Code's expectations. We are therefore declaring a departure from the recommendation set out in section G. 10 sentence 2 as a precautionary measure.

                                               Wiesbaden, December 2020

                                                   The Management Board

            Thomas Ortmanns                     Marc Heß                 Dagmar Knopek

                      Christiane Kunisch-Wolff       Christof Winkelmann

 

                                                  For the Supervisory Board

                                                          Marija Korsch
                                                             (Chairman)