We operate our IT systems consultancy and rela- ted advisory services for the institutional housing sector through Aareon AG, which can boast more than 50 years experience. Aareon offers its cus- tomers software products, support and IT services, as well as advisory and training facilities. Aareal Bank operates automated mass payments systems for its institutional housing clients, which are integrated into their administrative processes. The settlement of payment transactions via Aareal Bank generates client deposits that also contribute to the funding mix of the entire Group. Company management Sustained company development is at the core of Aareal Bank Group's management concept, where the standard is to create continued added value for our shareholders, for our clients, and for our staff. Aareal Bank Group is managed on the basis of various economic indicators. Besides the economic indicators and the management of operational risks, conservative risk policy and liquidity management are the key tools of our company management. Specific key indicators are also used for each seg- ment. These comprise for example, risk-adjusted return on equity, the risk indicators (see Risk Report), the cost/income ratio and the lending policies for the Structured Property Financing segment. The credit standards for each country are defined by product in the lending policies. The indicators used in the management of the Consulting/Services segment depend on the characteristics of the individual subsidiaries; these characteristics comprise mainly EBIT and EBIT margin, plus key indicators for the advisory and other IT services, such as customer satisfaction with the project work and utilisation ratios in Con- sulting. Group Structure of Aareal Bank Macroeconomic and industry-specific environment Global business environment The environment of the 2008 financial year was defined by a significant economic downturn, heightened by the crisis affecting financial markets, and which saw the recession deepening in many economic regions. Crisis affecting financial markets What started as a crisis associated with the so- called sub-prime loans on the American housing market gave rise to a global financial crisis in 2007, which gathered pace even further in 2008. The crisis was triggered by distortions on the housing market in the USA. The fall in house prices that started in the second half of 2006 in the USA led to an increase in sub-prime loan defaults in the months that followed. These defaults had already spread to Europe by mid-2007, via the securitised products that had been sold worldwide. Aareal Bank AG as at 31 December 2008 Structured Property Financing Consulting / Services Aareal Bank Asia Limited Singapore Aareal Capital Corporation New York Aareal Estate AG Wiesbaden Aareal Financial Service spol. s r.o., Prague Aareal Valuation GmbH Wiesbaden Innovative Banking Solutions AG, Wiesbaden Deutsche Bau- und Grundstücks-AG, Berlin Aareal First Financial Solutions AG, Wiesbaden Aareon AG Mainz Aareal Bank France S. A. Paris 55Aareal Bank Group ­ Annual Report 2008 | Group Management Report