Ladies and Gentlemen,

The company posted the best operating result in its history in fiscal 2016. EBIT grew by 27.1 % to reach € 34.2 million (2015: € 26.9 million), well above the previous year’s level. Consolidated revenues also increased markedly, rising by 12.7 % to € 210.7 million (previous year: € 186.9 million). Thanks to its steady growth, the International Business segment accounted for 36.3 % (previous year: 35.6 %) of consolidated revenues.

Developing digital solutions has been a key focus of Aareon’s R & D activities for many years now, and we have always striven to expand our digitalisation expertise on an ongoing basis. Our first innovative internet-based solution, the Mareon service portal, celebrated its 15th anniversary in 2016. This was followed by solutions supporting mobile handover of rental units, mobile inventory data management, digital archiving and digital invoicing, together with customer portals for tenants and owners, which were all combined in the Aareon Smart World digital ecosystem in 2015. This system enables property companies to link up with customers, employees and business partners and to interconnect technical devices, both in individual apartments and entire buildings. It also allows processes to be redesigned and optimised. The digital solutions help to reduce costs, while creating new business models and promoting more comfort and transparency in communication by interlinking all the main players. We have set the benchmark for digitalisation in the property industry and raised the bar in terms of stakeholder networking. As a company with international reach, we systematically promote the transfer of know-how between our experts at the various locations and can consequently benefit from each country’s distinct focal points when it comes to digitalisation. Our international development teams can then re-engineer solutions that have already proved themselves in one country for use in other markets. We invested € 9.6 million in research and development in 2016. Aareon takes the design thinking approach when collaborating with property companies and their tenants. This user-centric, problem-solving concept is the methodical basis underpinning Aareon’s DesignLab, which opened at the company’s head office in Mainz in 2016. The DesignLab has met with a very positive response from those customers who have already had the opportunity to use it.

As digitalisation progresses, the trend towards using Aareon’s solutions as a service from the exclusive Aareon Cloud continues unabated. Data is stored in the Aareon IT Service Centre in Germany and at a backup location. Data protection and data security are extremely important to us and are certified on a regular basis.

In order to add even more value for customers and to provide integrated solutions from a single source, we analyse and engage in dialogue with the PropTech start-up market. An outcome of these activities was the sales cooperation agreement we entered into with the Berlin-based start-up KIWI.KI in October 2016. It has enabled us to add the intelligent keyless door access system KIWI to our Aareon Smart World offering for smart home customers.

We have succeeded in further expanding business volumes for country-specific ERP solutions produced by the Aareon Group. By the end of 2016, some 840 customers had already opted for the Wodis Sigma ERP solution in Germany – including, as intended, many GES customers. As a result, Wodis Sigma has become the leading ERP solution in the German property industry. Licensing-fee business for SAP® solutions and Blue Eagle has also been flourishing thanks to renewals and the acquisition of new customers.

Business in digital solutions was also gratifying. In Germany, there was particular demand for the Mareon service portal, Aareon Archiv kompakt, Aareon CRM, Aareon Immoblue Plus and Mobile Services. Customers were particularly interested in Mobile Services, and some 150 of them have already signed up. In the Netherlands, Mareon, Aareon Archiv kompakt, Aareon CRM, the tenant app, call-centre functionality, and the Trace & Treasury solution were in high demand, while tenant portals, invoicing services, solutions for mobile handover of rental units, and Mareon were most sought-after in France. In terms of digital transformation, the UK is already a very mature market, especially when it comes to mobile solutions. Our British subsidiary 1st Touch is paving the way with a host of new functions and innovative design concepts in its 360° Tenant Portal and 360° Field Worker solutions, which have attracted plenty of attention from customers.

What’s more, the purchase by Aareon Nederland of the remaining 50 % stake in SG2ALL B.V. and its ICT Residenz brand has strengthened our presence in the Dutch market, providing further evidence of Aareon’s expansion of its international outsourcing expertise.

Aareon regards digital transformation as an holistic process that extends to the working environment, too. Our focus here is on the employee as an individual. In recent years, we have taken account of this transformation by providing flexible working arrangements in the form of part-time and teleworking models, mobile end devices for employees, and the use of modern, digital forms of communication for meetings and presentations, all of which are now part and parcel of working life at Aareon. We also want to help our employees achieve a healthy work-life balance throughout their lives, taking an individual’s personal performance potential into consideration. In order to manage this process systematically, Aareon was among the first 100 pilot companies to receive certification in the context of the INQA audit (INQA = Initiative Neue Qualität der Arbeit [New Quality of Work Initiative]). The “Aareon’s got Talent” project was launched in 2015 with the aim of making greater use of employees’ ideas in product and service development, and of harnessing the existing creativity pool. The initiative fell on very fertile ground and we have already been able to implement several innovations.

In order to pursue our growth strategy systematically and sustainably, we devised the “Aareon Flight Plan” strategy programme in 2016. The overarching aim here is to position Aareon as a trailblazing partner for digitalisation in the property industry. Key areas of growth include digital solutions, ERP systems, and the development of new markets connected to the property industry. We intend to expand and enhance Aareon Smart World by adding solutions such as Aareon Smart World Cockpit for the field staff of housing companies, and an app for owners and tenants in Germany. We will also be introducing a change management solution for power utilities. And we shall, of course, continue to invest heavily in R & D. In this context, we plan to appoint additional digitalisation specialists. In order to nurture growth in PropTech companies, we have been supporting the PropTech Accelerator initiative since January 2017.

In 2017, Aareon will be 60 years old. Over the decades, it has drawn on its innovation potential time and again and displayed the courage required for change. We have always appreciated the constructive dialogue we have enjoyed with our customers and would like to extend our special thanks to them. Our customers are at the heart of all we do: consulting, solutions and services are all designed to add value and support them during the digital transformation process.

Kind regards,

Dr. Manfred Alflen

Sabine Fischer

Dr. André Rasquin

Christian M. Schmahl

---

Management Board

Dr. Manfred Alflen
Chairman of the Management Board
International Business Development; Human Resources & Organisation; Legal, Risk Management & Compliance; Data Protection & Data Security; Internal Audit; Corporate Marketing & Communications; International Business; Chair of the Supervisory Boards of Aareon Deutschland GmbH and BauSecura GmbH (3^rd from left)

Sabine Fischer
Chief Operating Officer
Aareon ERP systems (Wodis Sigma, SAP® Solutions/Blue Eagle, GES) and Aareon Smart World Digital Solutions; Data, Hosting and IT Services; Consulting Organisation incl. phi-Consulting GmbH (2^nd from left)

Dr. André Rasquin
Chief Sales Officer
Central Sales; Regional Sales; Solution Sales & Sales Management; Advisory Board work; Strategic Product Marketing for the BauSecura product (4^th from left)

Christian M. Schmahl
Chief Financial Officer
International Finance; Controlling; Accounting; Contract & Receivables Management; Central Purchasing; Facility Management (1^st from left)