ANNUAL REPORT - JSSREM · BDO SA Liquidator since 01.02.2019 Yves Cachemaille Lausanne Martin-Paul...

ANNUAL REPORT2018N° ISIN: CH0258245064 / SIX Symbol VALRES

CONTENTS

2Introduction

3Organisation

4Message from the Fund management company

5Management report for the financial year 2018

6Statement of net assets

7Statement of income

8Mortgages and mortgage-backed liabilities

9Compensation rates

10List of purchases and sales of assets during the financial year

11Inventory of properties

14Indices calculated according to SFAMA guidelines

14Dividends

15Valuation principles and basis for the calculation of the net asset value

18Acquisitions Overview

19Changes to the Fund contract

21Other Informations

24Report of the audit company

VSRF Annual Report 2018 1

INTRODUCTION

The Valres Suisse Romande Fonds (VSRF) has been established, under Swiss law, as acontractual investment fund of the "real estate investment fund" category in accordance withthe Swiss Federal Act on Collective Investment Schemes of 23 June, 2006. The fund contracthas been established by Valres Fund Management SA, as the fund management company, withthe approval of Bank J. Safra SA in Basel, as the custodian bank, and subject to the FederalFinancial Market Supervisory Authority (FINMA) as authorised by the latter for the first time on15 October 2014.

The real estate investment fund is based on a collective investment scheme (the fund contract)under which the fund management company undertakes to have the investors participate inthe real estate investment fund on a pro rata basis in relation to the units they have acquired,autonomously and in their own name. The custodian bank is a party to the fund contract, inaccordance with the tasks entrusted to it by law and by the fund contract.

Investor eligibility is not restricted. The VSRF fund is listed on the SIX Swiss Exchange sinceDecember 11, 2017.

The real estate investment fund is not divided into unit classes. VSRF's objective is to preservethe capital on the longer term and to ensure the distribution of an appropriate income.

The fund management company of the real estate investment fund shall invest the assets ofthe investment fund in real estate securities in Switzerland and shall ensure that 80% of thefund's assets at least are invested in French-speaking Switzerland.

This real estate fund invests mainly in residential buildings and properties used for commercialpurposes, as well as other in permitted assets pursuant to the fund contract.

Fund DirectionValres Fund Management SA, in liquidationPlace du Molard 51204 Geneva

Custodian bankBank J. Safra Sarasin SAElisabethenstrasse 624051 Basel

2 VSRF Annual Report 2018

Raffaele Rossetti President (until 01.02.2019)

Edgar Brandt President

Philippe Beckers Vice-president (until 01.02.2019)

Gerhard Niggli Vice-president

Ralph Kattan Delegated Administrator (Administrator without signing authority since26.09.2018 and until 01.02.2019)

Paul-André Roux Administrator (until 01.02.2019)

Ralph Kattan CEO / Delegated Administrator (until 26.09.2018)

Johny Rodrigues CEO since 01.11.2018 (COO until 26.09.2018 and CEO ad interim until31.10.2018)

Philippe Frossard Real Estate Director / Fund Manager (until 31.10.2018)

Giovanna Bray Real Estate Director / Fund Manager since 01.11.2018

Boris Vetsch Director / CFRO (until 31.10.2018)

Urs Markwalder Director / CFRO since 01.11.2018

Philippe Beckers Delegated Administrator since 01.11.2018 until 01.02.2019, thenmember of the direction since 01.02.2019

BDO SA Liquidator since 01.02.2019

Yves Cachemaille Lausanne

Martin-Paul Broennimann Geneva

François Thorens Neuchâtel

Victorine van Zanten Fribourg

Léon Ly Wüest Partner SA in Zürich and Geneva

Hervé Froidevaux Wüest Partner SA, in Zürich and Geneva

ORGANISATION

Valres Fund Management SA, in liquidationPlace du Molard 5, 1204 Geneva

Bank J. Safra Sarasin SA, Basel,

PricewaterhouseCoopers SA, Geneva

Since 18.12.2018 :

Naef Immobilier SA, Geneva/ Neuchâtel

Moser Vernet & Cie SA,Geneva

M3 Real Estate, Geneva

RS Servim Sàrl, Vaud

Rosset SA et Régie Rosset& Cie, Fribourg / Geneva

Bernard Nicod SA, Vaud

Régie Marmillod SA, Vaud

Fidimmobil AgenceImmobilière &Commerciale SA, Neuchâtel

Gerama SA, Fribourg

*Burnier & Cie SA, *VaudPétignat & Amor

immobilier SA, Vaud (terminated

on 31.12.2018)

Régie du Rhône SA, Geneva(terminated on 31.12.2018)

Direction

Custodian bank

Audit company

Board of Directors

Direction

Permanent Experts

Real estate agencies


MESSAGE FROM THE FUND MANAGEMENT COMPANY

The 2018 financial year will be remembered as a stableyear for the real estate fund in specific circumstances.

The management has broadened the fund's investmentpolicy in commercial matters, with the objective ofgenerating a substantial volume of funds and offeringinvestors optimal segmentation over Western Switzerland.

In this process, the real estate fund changed name, goingfrom Valres Swiss Residential Fund to Valres SuisseRomande Fonds on 18 October 2018.

Following the CHF 157 million capital increase completed atthe end of 2017, investments were carried out through 8acquisitions, including 2 construction projects, notably acommercial complex in Vernier (West Park, underconstruction), a residential building with apartmentownership in Geneva, and a housing building in the Jura.The fund's listing on the SIX Swiss Exchange since the endof 2017 closed at CHF 115.90 at the end of December2018.

On 26 September 2018, enforcement proceedings wereopened by Finma against the fund management company,as well as against Mr Ralph Kattan, at the time the CEO ofValres Fund Management SA, leading to the appointment ofan investigation officer.

In this context and following the departures of Mr Boris

Vetsch (CFRO), on 31 October 2018, and Mr PhilippeFrossard (Real Estate Director), on 31 December 2018, thecompany was reorganised with, in particular, the arrival ofMrs Giovanna Bray (Real Estate Director) and Mr UrsMarkwalder (CFRO) on the management team on 1November 2018, as well as the appointment of Mr JohnyRodrigues as CEO, and Mr Philippe Beckers as DelegatedAdministrator and member of the Direction on 1 February2019.

The new Executive Committee, as well as the entire ValresFund Management SA team, continues the management ofVSRF in the best interests of investors.

In 2019, a new important step will be taken: following theliquidation of the current fund management company,Valres Fund Management SA, it is planned that theadministration and management of the fund will betransferred, as from 1 June 2019, to a new fundmanagement company, JSS Real Estate Management SAwith its headquarters in Geneva, in order to further developthe fund.

Valres Fund Management SA wishes to thank bothinvestors and partners for their trust.

Johny Rodrigues, CEO Valres Fund Management SA since

01.11.2018


MANAGEMENT REPORT FOR THE FINANCIAL YEAR 2018

ResultsAs of 31 December 2018, Valres Suisse Romande Fonds’ netincome amounts to CHF 6,041,002.61.

The fund's net assets are stable compared to the previous yearand amount to CHF 302,326,123 (CHF 303,292,218 at31.12.2017) and the debt ratio is 20.99% (19.96% at31.12.2017).

Thus, the net asset value (NAV) is CHF 112.65 compared toCHF 111.49 on 30 June 2018 and CHF 113.01 the previousyear.

In view of these results, the fund will distribute a dividend ofCHF 2.46 per share as detailed on page 14 of this report.

Indices analysisThe rent default rate is increasing (9.39%). This is due to theacquisition of buildings with vacancy and the inclusion of aprovision for doubtful debts as well as a change inmethodology applied during the renovation of theapartments.

The operating profit margin (EBIT) also remained stable at70.53% compared to 71.96% at the end of 2017.

Another positive point is that the TER (GAV) has decreasedsignificantly from 0.84% (2017) to 0.75% in 2018.

Return on equity is 1.27%, down from 2017 (4.38%) and ROICis 1.23%. Finally, the return on investment amounts to 2.68%(8.34% in 2017).

Acquisitions and salesThe fund acquired four new properties, two constructionprojects and two residential buildings during the period underreview. The presentation of these acquisitions is presented onpage 18 of this report.

In addition, commitments were entered into at the beginningof 2018 to acquire a shopping centre in Geneva, which becameeffective in the first quarter of 2019.

Finally, no sales were recorded in 2018, but the fund is carefully

studying the possibility of certain sales in the first half of 2019in order to take advantage of market opportunities.

Review of the past financial yearFor the first year without a capital increase since its launch, thefund has continued to invest in a few acquisitions, but hasmostly completed construction projects.

"Les Côteaux de Satigny", a major project for the fund,progresses well and delivery is planned in two stages in thefirst half of 2019.

The Challex 4/6 Townhouses project was completed in autumn2018 and is now fully leased. Regarding the Bosquets 14/16site, the delivery has had to be postponed until the first quarterof 2019.

Work on the two construction projects acquired in Vernier isalso progressing according to schedule and are due fordelivery in late 2019/early 2020.

In addition to these projects, the fund also renovatedapproximately 50 apartments in the real estate portfolio,thanks in particular to a proactive approach to its tenants.

Prospects for the futureIn 2019, the fund entered a new phase. The objective is toconsolidate the gains based on the solid portfolio of more than40 buildings with interesting development opportunities. Thus,after three consecutive years of major acquisitions, 2019 willenable the fund to consolidate its development strategy overthe medium term while buying and selling propertiesaccording to market opportunities.

Over the long term, the objective is to continue the growth ofthe fund.

Finally, following the liquidation of the current fundmanagement company, Valres Fund Management SA, and asmentioned in the press release of 24 April 2019, theadministration and management of the fund will betransferred as from 1 June 2019 to a new fund managementcompany, JSS Real Estate Management SA based in Geneva, inorder to continue the fund's development.


STATEMENT OF NET ASSETS

CHF 31.12.2018 31.12.2017

AssetsCash holdings, balances on postal and bank accounts at sight 4’116’818.19 56’097’395.53PropertiesDevelopment land, properties under construction 66’462’385.00 23’503’980.00Residential properties 152’090’000.00 129’312’070.00Commercial properties 106’370’000.00 112’990’000.00Mixed-use properties 61’154’000.00 57’060’000.00Total properties 386’076’385.00 322’866’050.00Other assets 17’391’376.40 7’895’457.45Total assets 407’584’579.59 386’858’902.98

Liabilities

Short-term liabilitiesShort-term interest-bearing mortgages and other mortgage-backed liabilities 25’501’500.00 18’267’500.00Other short-term liabilities 10’202’439.57 8’555’899.00

Long-term liabilitiesLong-term interest-bearing mortgages and other mortgage-backed liabilities 55’531’207.00 46’160’807.00Other long-term liabilities 82’478.74 82’478.74Total liabilities 91’317’625.31 73’066’684.74

Fund’s net assets before estimated liquidation taxes 316’266’954.28 313’792’218.24Estimated liquidation taxes – 13’940’830.30 – 10’500’000.00Net assets of the fund 302’326’123.98 303’292’218.24

Change in the net assetsFund’s net assets at beginning of the financial year 303’292’218.24 146’283’807.98Distribution – 4’830’825.60 – 4’294’067.20Interim distribution — – 2’012’844.00Balance from sales and purchases of units — 150’318’429.00Total income of the financial year 3’864’731.34 12’996’892.46Fund’s net assets at end of the financial year 302’326’123.98 303’292’218.24

Change in the number of units (redeemed and issued)Statement at beginning of the financial year 2’683’792.00 1’341’896.00Units issued — 1’341’896.00Units redeemed — —Number of units in circulation 2’683’792.00 2’683’792.00Net asset value per unit 112.65 113.01

Additional information (annex 3 Art. 95 CISO-FINMA)Value of properties depreciation account — —Value of reserves account for future repairs — —Balance on account of earnings retained for reinvestment — —Number of units due to be redeemed at end of next financial year — —


STATEMENT OF INCOME

CHF 01.01 - 31.12.2018 01.01 - 31.12.2017

IncomeRevenue from postal and bank accounts 15’103.93 7.80Rental income (gross income generated) 14’163’897.55 9’820’535.55Interim interest capitalised 1’469’401.90 515’130.40Other income 90’914.75 429’178.21Current income paid in by new subscribers — 2’943’763.15Total income 15’739’318.13 13’708’615.11

ExpensesMortgage interest and interest on mortgage-backed liabilities 982’958.02 1’031’591.71Other interest due 28’013.05 74’544.97Maintenance and repairs 945’329.92 475’862.91Management of propertiesProperty-related costs 2’216’163.78 1’186’302.89Management expenses 959’138.70 596’000.75Valuation and auditing expenses 160’253.88 186’425.00Direct taxes 2’535’743.44 1’681’112.19Banking fees 32’497.98 6’696.75Cost of publishing, printing, other 23’029.55 15’845.60Remuneration as per fund regulations for the fund management company 1’487’287.20 1’070’127.35Remuneration as per fund regulations for the custodian bank 180’283.25 78’236.43Other expenses 147’616.75 82’190.65Total expenses 9’698’315.52 6’484’937.20

Net income 6’041’002.61 7’223’677.91Realised capital gains and losses — —

Realised income 6’041’002.61 7’223’677.91Unrealised capital gains and losses, including liquidation taxes (variation) – 2’176’271.27 5’773’214.55Total income 3’864’731.34 12’996’892.46

Appropriation of the net incomeRealised income 6’041’002.61 7’223’677.91Capital gain carried forward from the previous financial year — —Ordinary income carried forward from the previous financial year 584’060.64 204’052.33Net income available for distribution 6’625’063.25 7’427’730.24Capital distribution — —Income distribution 6’602’128.32 6’843’669.60Retained earnings 22’934.93 584’060.64


MORTGAGES AND MORTGAGE-BACKED LIABILITIES

Detail of the mortgages and mortgage-backed liabilities

Type CHF Rate From Maturity

Short-term debtLibor 1 month 2’472’500.00 1.05 % 30.12.2018 30.01.2019Libor 1 month 724’000.00 1.05 % 20.12.2018 20.01.2019Flex Roll-Over 5’805’000.00 1.00 % 30.09.2017 31.03.2019Flex Roll-Over 1’500’000.00 1.00 % 30.09.2017 31.03.2019FRA 5’000’000.00 0.65 % 26.11.2018 26.02.2019Fixed 2’000’000.00 1.35 % 30.09.2014 30.09.2019Fixed 3’000’000.00 1.07 % 30.09.2016 30.09.2019FRA 5’000’000.00 0.90 % 11.09.2018 03.03.2019Total short-term debt 25’501’500.00

Long-term debtFixed 1’100’000.00 1.95 % 06.03.2013 06.03.2020Fixed 2’230’000.00 2.15 % 31.01.2014 06.03.2020Fixed 2’200’000.00 1.15 % 01.03.2017 30.06.2020Fixed 400’000.00 1.41 % 07.10.2014 07.10.2020Fixed 649’057.00 1.05 % 21.11.2016 21.11.2020Fixed 7’550’000.00 1.25 % 16.12.2017 16.12.2020Fixed 885’000.00 3.00 % 27.12.2010 27.12.2020Fixed 1’425’000.00 1.00 % 02.10.2016 02.10.2021Fixed 4’440’000.00 0.94 % 30.11.2016 31.12.2021FRA 4’800’000.00 1.15 % 21.07.2017 21.07.2022FRA 3’477’400.00 0.92 % 27.09.2018 27.09.2020Fixed 5’586’000.00 0.88 % 14.09.2018 14.09.2023Fixed 1’995’000.00 0.88 % 14.09.2018 14.09.2023Fixed 6’125’000.00 2.13 % 15.07.2014 15.07.2023Fixed 2’298’750.00 1.85 % 31.01.2013 31.01.2023Total long-term debt from 1 to 5years 45’161’207.00

Fixed 2’597’000.00 2.39 % 25.02.2014 25.02.2024Fixed 1’000’000.00 1.90 % 07.10.2014 07.10.2024Fixed 1’430’000.00 2.27 % 30.11.2015 30.11.2024Fixed 1’080’000.00 2.27 % 30.11.2015 30.11.2024Fixed 475’000.00 1.80 % 13.03.2015 13.03.2025Fixed 1’894’000.00 1.32 % 29.06.2018 08.10.2025Fixed 1’894’000.00 1.34 % 29.06.2018 08.10.2025Total long-term debt 5 years andlonger 10’370’000.00

Total long-term debt 55’531’207.00

Total 81’032’707.00 1.30 %Weighted

average rate


COMPENSATION RATES

Information on rates applied in accordance with the fund contractMaximum rate per year as

per sales prospectus Applied rate

Payments to the Fund management company

Management fee 1.00 % ¹ 0.49 %

Issuing commission 5.00 % 0.00 %

Compensation for activities involving the purchase or the sale ofproperties 3.00 % 3.00 %

Fee for activities when carrying out feasibility studies andacting on behalf of the Project owner 3.00 % 3.00 %

Fee for activities when carrying out the project development andmonitoring

fee usuallyapplied by thearchitects (SIA) max. 5.00 %

Compensation for the management of properties 6.00 % 6.00 %

Commission for the distribution of income (on the amount paid) 0.50 % 0.50 %

Payments to the Custodian bankFee for the administration, the handling of payment transactions,the supervision of the fund management company 0.06 % 0.06 %

1 Includes a waiver of CHF 500,000 for the first half of 2018

Transparency of the management feesThe fund management company may pay to distributors, from the management fee, commissions as reimbursements inrespect of distribution activities, for the sale and the intermediation of fund's units (Fund Contract § 20).

The fund management company does not grant rebates within the meaning of SFAMA's transparency guidelines dated 12June 2014.


LIST OF PURCHASES AND SALES OF ASSETS DURING THE FINANCIAL YEAR

PurchasesCanton Commune Address Type Date of purchase Purchase price CHF

GE Vernier Route de Peney / Ch. Mouille-Galand 3 "A" ¹ Under construction 14.01.2018 4’200’000.00

GE Geneva Av. de Pictet-de-Rochemont 29 ²Residential floorproperty 08.02.2018 9’100’000.00

JU Porrentruy Rue des Tilleuls 31-33 ³ Residential 26.07.2018 5’600’000.00

GE Vernier Route de Peney / Ch. Mouille-Galand 3 "B" Under construction 13.08.2018 5’300’000.00

Total purchases 24’200’000.00

1 sales agreement signed on 19.12.2017 / entry into possession of the land and start of work on 14.01.2018

2 indirect acquisition / sales agreement signed on 08.02.2018 / entry into possession on 27.06.2018

3 sale agreement signed on 26.07.2018 / entry into possession on 01.07.2018

SalesNo transaction during the period from 1 January to 31 December 2018.


INVENTORY OF PROPERTIES

Canton Commune Address Type Cost Market value Rental income

GE Aïre Route Aïre 162-164-166 ¹ Residential 3’551’193.70 3’791’000.00 181’638.00GE Chêne-Bougeries Rue de Chêne-Bougeries 17 Mixed 2’545’319.30 2’490’000.00 120’849.00

GE Chêne-BougeriesRue de Chêne-Bougeries 19/Chemin de la Fontaine 3-5 Mixed 5’058’282.14 5’020’000.00 226’059.00

GE Chêne-Bougeries Chemin du Pont-de-Ville 18 Commercial 381’278.70 390’000.00 1’730.00GE Geneva Place du Bourg-de-Four 33 Mixed 2’746’836.00 3’234’000.00 118’379.00GE Geneva Boulevard des Philosophes 7 ¹ Mixed 9’504’551.11 13’270’000.00 543’896.00GE Geneva Rue Rothschild 21 ¹ Residential 5’906’733.72 6’259’000.00 268’772.00GE Geneva Avenue Théodore-Weber 9 ¹ Residential 9’766’639.42 11’490’000.00 504’474.40GE Geneva Rue de Lyon 71 ¹ Residential 12’342’022.46 14’630’000.00 634’530.00GE Geneva Boulevard des Tranchées 4 Mixed 10’008’716.13 10’190’000.00 331’233.50

GE Geneva Avenue Pictet-de-Rochemont 29 ¹Residential floorproperty 9’432’429.40 11’720’000.00 218’290.50

GE La Plaine/Dardagny Route de Challex 4-6 Residential 11’494’282.16 11’950’000.00 432’289.00GE Meyrin Route du Mandement 17 Residential 8’148’548.31 8’540’000.00 390’755.00GE Meyrin Rue des Lattes 41 Residential 3’542’575.00 3’690’000.00 176’194.00GE Onex Rue du Vieux-Moulin 5 ² Residential 14’633’063.03 14’670’000.00 641’297.55GE Satigny Route du Mandement 191 ¹ Under construction 32’026’684.18 30’342’385.00 —GE Versoix Avenue Théodore Vernes 12-14 ¹ Residential 9’242’413.00 9’490’000.00 462’741.00

GE VernierRoute de Peney / Ch. Mouille-Galand5 ² Under construction 16’497’286.20 20’330’000.00 —

GE VernierRoute de Peney / Ch. Mouille-Galand3 ² Under construction 11’734’431.20 15’790’000.00 —

VD Clarens Rue du Lac 54 Mixed 4’838’780.65 5’660’000.00 245’061.20VD Lausanne Place Grand-Saint-Jean 2 Commercial 11’465’983.20 12’550’000.00 551’911.00VD Lausanne Place du Tunnel 13-14 ¹ Mixed 5’964’894.10 6’500’000.00 319’090.00

VD LausanneChemin de Renens 55/57 -Av. Morges 92 ¹ Mixed 3’666’480.00 3’930’000.00 191’396.00

VD Le Sentier Rue des Bruyères 1 Mixed 2’225’935.00 2’550’000.00 85’060.30

VD Lonay Chemin des Mouettes 1 ⁴CommercialFloor property 4’086’947.00 4’070’000.00 253’001.60

VD Montreux Chemin du Réchon 7 ¹ Residential 2’068’350.82 1’650’000.00 80’940.00VD Nyon Chemin de la Redoute 14-22 Residential 29’866’748.20 29’270’000.00 1’303’421.50VD Payerne Rue du Chaumont 3-5 ¹ Residential 1’940’900.00 2’040’000.00 136’064.00VD Prangins Route de l'Aérodrome 73-75 Commercial 3’278’732.25 3’600’000.00 171’500.00VD Renens Avenue de Préfaully 28-30 Commercial 7’459’201.00 6’740’000.00 395’655.00VD Vevey Rue des Bosquets 14-15 ³ Mixed 3’344’591.79 3’350’000.00 —


Canton Commune Address Type Cost Market value Rental income

FR Bulle Rue de Gruyères 56 Mixed 2’678’333.94 2’450’000.00 112’050.00

FR BulleRue des Agges/Rte des Granges ¹ Mixed 2’626’794.50 2’510’000.00 156’525.00

FR Fribourg Rue de Romont 3 Commercial 3’807’419.87 4’620’000.00 236’850.00

FR FribourgRoute des Arsenaux 9 -Rue du Simplon 13 Commercial 24’806’958.95 21’900’000.00 1’167’571.25

FR Fribourg Rue du Varis 20 Residential 2’435’555.25 2’470’000.00 94’940.00FR Fribourg Rue Saint-Pierre 6 Commercial 27’576’421.70 27’690’000.00 1’380’545.20FR Granges-Paccot Route de Chamblioux 37 ¹ Residential 4’063’486.25 4’120’000.00 197’294.50FR Granges-Paccot Route de Chantemerle 3 Commercial 3’689’459.00 3’790’000.00 185’720.00NE Colombier Chemin des Uttins 2 Residential 3’682’217.30 3’930’481.28 140’136.40NE Colombier Chemin des Uttins 6-8 Residential 6’307’333.00 6’569’518.72 228’210.70

NE Neuchâtel Rue de Maillefer 11b / 11cCommercialFloor property 5’298’481.15 5’770’000.00 461’344.00

JU Delémont Rue des Moulins 28 Commercial 14’606’021.40 15’250’000.00 671’146.95JU Porrentruy Rue des Tilleuls 31-33 Residential 5’929’875.05 5’810’000.00 145’335.00Total 366’279’186.53 386’076’385.00 14’163’897.55

1 Indirect holding

2 Land under construction

3 Building under renovation

4 Indirect holding, except plot 8 which is directly held

Recap

Type Cost Market value Rental incomeDevelopment land and constructions 60’258’401.58 66’462’385.00 —Residential properties 134’921’936.67 140’370’000.00 6’019’033.05Residential properties in condominium ownership (PPE) 9’432’429.40 11’720’000.00 218’290.50Commercial properties in condominium ownership 9’385’428.15 9’840’000.00 714’345.60Mixed-use properties 55’209’514.66 61’154’000.00 2’449’599.00Commercial properties 97’071’476.07 96’530’000.00 4’762’629.40Total 366’279’186.53 386’076’385.00 14’163’897.55

In accordance with Article 84 paragraph 2 CISO-FINMA, the investment fund's properties are classified in the valuationcategory of investments whose value cannot be based on market-observed parameters and are valued using appropriatevaluation models, taking account of the current market circumstances.


INDICES CALCULATED ACCORDING TO SFAMA GUIDELINES

2018 2017

Rent default rate 9.39 % 3.97 %Borrowing ratio 20.99 % 19.96 %Operating profit margin (EBIT margin) 70.53 % 71.96 %Operating expense ratio (TER REF GAV) 0.75 % 0.84 %Operating expense ratio (TER REF MV) 0.90 % 1.14 %Return on Equity (ROE) 1.27 % 4.38 %Return on Invested Capital (ROIC) 1.23 % 4.60 %Distribution yield 2.12 % 2.54 %Payout ratio 109.29 % 94.74 %Agio/Disagio 2.89 % 15.03 %Return on investment 2.68 % 8.34 %

Fund's performance

2018 2017 Since fund creation

Valres Suisse Romande Fonds -9.61 % 13.70 % 16.14 %SXI Real Estate Funds® TR ® -5.32 % 6.60 % 12.30 %

Reference to past performance and results is not necessarily a reliable indicator of current of future performance andresults.

Performance and return data do not take account of the commissions and fees incurred on the issue and redemption ofunits and are calculated considering that gross dividend has been reinvested immediately in the investment fund.

DIVIDEND

The total distribution for the financial year ending 31 December 2018 is CHF 6,602,128.32, which represents a dividend ofCHF 2.46 gross per share. Coupons 7 and 8 will be cashable by 10.05.2019 at the latest.

Coupons CHF per unit

Coupon n° 7 return paid on property assets directly owned net 1.53

Coupon n° 8 return paid on property assets indirectly owned under withholdingtax gross 0.93

Total gross 2.46


VALUATION PRINCIPLES AND BASIS FOR THE CALCULATION OF THENET ASSET VALUE

Valuation principles and basis for the calculation ofthe net asset valueIn accordance with applicable provisions of the legislationand with the guidelines of the Swiss Funds & AssetManagement Association (SFAMA) on real estateinvestment funds dated 2 April 2008 (as per 13.09.2016),the fund properties (including development land andproperties under construction) were valued byindependent valuation experts using the “Discounted CashFlow" (DCF) method. This valuation was based on thepotential of return for each property and consists inprojected future income and expense on a given period.The net cash flows, calculated in this way, are discountedand the sum of these amounts and the residual value ofthe property make it possible to obtain the market value.This is the fair market value of the property at the time ofvaluation.

Each expert appreciates the evolution of the propertiesindependently, models the DCF calculation according toparameters that are specific to it and determines thediscount rate. The properties are valued at their marketvalue. This value is the amount that could be obtainedwhen a property is sold under normal market conditions.On a case by case basis, especially when buying and sellingproperties, potential opportunities are exploited at best inthe interest of the Investment fund. It can therefore resultin differences from evaluations.

The net asset value of the Investment fund is calculatedannually and at each issue of units. The net asset value of aunit is determined by the market value of the fund’s assets,minus all the investment fund’s liabilities, divided by thenumber of units in circulation. The statement of net assetsand the statement of income are established in accordancewith Article 95 CISO-FINMA as well as with applicableself-regulatory rules.

Wüest Partner SA

Wüest Partner uses the two-period Discounted Cash Flow(DCF) model, where cash flows are estimated explicitly overa time horizon of ten years and as perpetual annuities forthe second phase (infinite time horizon) in the form of an‘output value’. The output value, or theoretical sale value, isobtained based on a capitalisation of the perpetual annuity(also called "terminal value" or "residual value"). The marketvalue is calculated by discounting, at the date of valuation,the net cash flows for the periods 1 to 10 and the outputvalue. Furthermore, cash flows projections are presented inreal terms, which has the advantage of offering betterreadability of the forecasts. As revenue is concerned, therental status of each building is analysed in detail at thelevel of individual objects, taking into account the currentsituation and potential rents in the market (leases andrents). The lease review permits the type and terms of theleases to also be taken into account and to specify theexistence or not of incidental or development costs to beborne by the tenant and/or the lessor, free rents, etc. Inaddition, a structural vacancy rate according to differentassignments is admitted. As far as costs are concerned,these are based on the exploitation rate for previous years.This data is complemented by Wüest Partner benchmarksand with the assessment of the state of each building. Inparticular, renovation needs, or restoration costs areestimated based on a split of the building’s replacementvalue according to the different elements of constructionand their life expectancy. The determination of theapplicable discount rate reflects an estimate of the riskinherent to the building concerned. To set this value, WüestPartner takes into account both the specific characteristicsof the building as well as factors related to the location andthe market. The market-adapted discount rate is adjustedaccording to risk, thanks to regular follow-up of the returnrequired by investors during transactions. It is definedbased on the free-risk rate (long-term Confederation bond),of premiums for real estate general risk (liquidity riskpremium, market risk) and for specific risks related to thebuilding itself (micro - situation, form of ownership, qualityof the object, etc.). The weighted average net discount ratefor the year under review is 3.24% and the discount ratesused to value the properties vary from 3.10% to 3.40%.


Mr. Martin-Paul Broennimann's method

This valuation was based on the potential of return for eachproperty and consists in projected future income andexpense on a 10-year period. The net income determinedaccording to this method is reduced by provisions forfuture work estimated applying the formula of Ross. In theformula of Ross, the amount of future work is thecumulative depreciation of a property, establishedaccording to the economic age, and is determinedaccording to a kind of “calculation of the speed of falling.The initial speed of depreciation of a property increasesgradually over its useful life. Thereafter, the net cash flowsare discounted and the sum of these amounts and theresidual value of the property make it possible to obtain themarket value. The abovementioned provisions for futurework being calculated on the basis of the economic age ofthe property, these are generally higher than the provisionsestablished according to other dynamic methods valuingperformance. As abovementioned specifics are taken intoaccount when determining the discount rate, net discountrates determined using the method described above aregenerally lower than those established according to otherdynamic methods valuing performance. The weightedaverage net discount rate for the year under review is3.46% and the discount rates used to value the propertiesvary from 3.29% to 3.71%.

Mr. Yves Cachemaille's method

The method used is a DCF method applied over 10 yearswith a final value in year 11. The discount rate is based onthe weighted average cost of capital which is composed, forforeign capital, of the ten-year rate applied by the Cantonalbanks (with a minimum of 2.40%, considering that a lowermoney price represents an economical bias that should notbe sustainable and corresponds to the fact that most of therental leases were not revised downwards), and, for theshareholders' equity, of the expected return for the Fund,i.e. 5%. The rental statement is categorised based on theuse type (apartments/commercial/parking). The growthrates applied correspond to the level of rents and to theirpotential compared with the local market. The rents takeninto account in the cash flow of the final value arecalculated according to the works implemented and inaccordance with the Fracheboud method. The expenses ofthe property are the average of current maintenancepositions as they are shown in the property's accounts ofthe past 3 years.

The obsolescence is estimated based on the EPIQR methodwhen the assignment of the object allows this. These worksare fully integrated in year 10, adding the increase ofobsolescence observed between year n (= estimate EPIQR)and year n+9, and deducting any emergency workaccounted for in previous years. The weighted average netdiscount rate for the year under review is 3.97% and thediscount rates used to value the properties vary from3.37% to 4.19%.


Mr. Francois Thorens' method

The return properties were valued using the DiscountedCash Flow (DCF) method applied over 10 to 30 years,period over which the works can be better spread. Themain element is therefore the rental statement that mustbe appreciated in its present and future reality. Distinctionis made between commercial properties and residentialproperties (legal provisions applying to apartments).Another distinction is made in terms of chargesproportional to rents (administrative expenses, vacancy andrental risk) and those that are not (current expenses andmaintenance work). The life of a building being limited, it isnecessary to make provisions that take into account thestate of obsolescence, technical or legal obsolescence(changes in legislation). Cash flows realized throughout thecalculation period are discounted and a simulation is madeon the sale of the property at the selected date bycapitalizing the net return. As far as rates are concerned,the first step is a split between own funds and foreignfunds with a 50/50 ratio, so as not to create a risk for debt.The base rate of reference is bond yield (risk free), taking anaverage over the past five or six years. Additional points areadded to take into account the nature of the object,non-liquidity, even the economic situation or the location.For foreign funds, reference is made to their costs over areference period of at least 10 years. The weighted averagenet discount rate for the year under review is 3.04% andthe rates applied for individual property valuations fallwithin a range of 2.48% to 4.05%.

Ms. Victorine van Zanten

The period of the mathematical model is 10 years with anexit value in 11th year. The discount rate is composed ofthe weighted average cost of capital which may varyaccording to market conditions but not below 2% forforeign capital (borrowed) in order to avoid a short-termspeculative approach. The rate is supplemented by a returnof 5.5% on equity, which is included in the weighting, due tomarket requirements and even if this rate of return doesnot respect the tenancy law. The discount rate is furthercorrected by a risk rate related to the local real estatecontext. The actual rental statement serves as the startingpoint for the estimate. The growth potential is aligned withthe rents already practiced in the building. It is thenassumed that 100% of the potential is reached in 10 years,and a linear average increase is introduced in the DCFmodel annually. Operating and maintenance expenses aretaken into account according to the statements sent to theowner provided that such statements cover a 12 monthperiod. Otherwise, operating and maintenance costs perm2 are estimated: at least 45.– fr./m2/year, the maximumloads to be defined per building according to itsmaintenance. Reported or estimated renovation work forthe next 10 years compensates for the obsolescence. Theweighted average net discount rate for the year underreview is 3.95% and the rates applied for individualproperty valuations fall within a range of 3.70% to 4.05%.


ACQUISITIONS OVERVIEW

Porrentruy, Tilleuls 31-332 Properties (gf. + 3), 33 accommodationsSurface: 2159m²Year of construction: 1955Purchase price: CHF 5'600'000Market value: CHF 5'810'000

The acquisition of these two buildings presents an attractive return for thefund with a low rental risk, due to the average rental price being below themarket price. The apartments are luminous and are located in a quietenvironment.

Genève, Pictet-de-Rochemont 291 property, 11 accommodationsSurface: 1270m²Year of construction: end of the 1950Purchase price: CHF 9'100'000Market Value: CHF 11'720'000

This property located in the center of Geneva was acquired through a realestate company. The building consists of two commercial areas on theground floor and five floors of accommodations.

Genève, West Park B1 commercial propertySurface: approx. 5000m²Under constructionPurchase price: CHF 5'300'000Market Value: CHF 15'790'000

This commercial building offers ground-floor commercial areas and officeson the upper levels.

Genève, West Park A1 property (aparthotel)Surface: plus de 4000m²Under constructionPurchase price: CHF 4'200'000Market value: CHF 20'330'000

This aparthotel, whose tenant has just signed a long-term lease, will offer 80rooms for rent.


INFORMATION ON SPECIFIC ECONOMIC OR LEGAL MATTERS

Changes to the fund contract, prospectus and simplified prospectus

During 2018, Valres Fund Management SA, the manager funds Valres Suisse Romande Fonds (the ‘Fund’) and Bank J. SafraSarasin SA, as the Fund's custodian bank, informed investors of the following changes made to the prospectus andintegrated Fund contract, as well as to the simplified prospectus:

1. The Fund management changed its address at the beginning of 2018. The new address is: 5, Place of Molard,1204 Geneva. (Publication in the SOGC of the 06.02.2018).The Simplified Prospectus, the Prospectus and the Fund contract had to be modified accordingly.

2. The name of the Fund has changed. Valres Swiss Residential Fund became Valres Suisse Romande Fonds toreflect the change in investment policy.The Simplified Prospectus, the Prospectus and the Fund contract had to be modified accordingly.

3. The investment rule under which Fund assets were principally to be invested in residential buildings wasremoved. References to this rule were deleted in the Simplified Prospectus, Prospectus and Fund contract.

4. A reference to FATCA was added to the Prospectus (see § 1.4 of the Prospectus, p. 4).

5. The principle for the assessment of undeveloped land was modified in line with the latest SFAMA model.Undeveloped land assessment is now carried out according to the principle of market value, as is also the casefor buildings under construction.(Release of 15 August 2018 on Swissfunddata.ch, approval by FINMA 12 October 2018)

6. Mr. Ralph Kattan left his post within the Directorate, while remaining on the Board but without a right ofsignature. Mr. Kattan is not part of the most recently appointed Board.

7. Mr. Philippe Beckers replaced Mr. Kattan in the Directorate as a Managing Director.

8. Mr. Boris Vetsch (CFO/CRO) and Mr. Philippe Frossard (real estate Director) left the VALRES Directorate on 1November 2018. Mr. Frossard continued to be employed at a part-time rate of 50% until 31 December 2018.

9. Mr. Urs Markwalder replaced Mr. Vetsch and Ms. Giovanna Bray replaced Mr. Frossard.

10. Mr. Johny Rodrigues, COO, became CEO.

11. Risk control was delegated to the company ASMA Asset Management Audit & Compliance SA, in Geneva, with Mr.Samuel Bardi and Mr. Glen Millar responsible for it.Due to the enforcement proceedings at the time, FINMA only took note of these changes, without formallyapproving them.

12. The Geneva branch of the company Wuest & Partner was named as the new valuation expert, with Mr. Léon Lyand Mr. Hervé Froidevaux responsible. A paragraph detailing the experience of this company in real estatevaluations was added at the request of FINMA.(The amendment was published on 17 December and approved by the FINMA on 18 December)

13. The term for the publication by the Fund management of the (unaudited) semi-annual report was shortenedfrom four months to two months from the end of the six months of the fiscal year.(The amendment was published on 17 December 2018 and it entered into force on 21 December 2018)


Element post financial year 2018

On 24 April 2019, Valres Fund Mangement, in liquidation, has released the following annoucement:

Valres Suisse Romande Fonds – Changes of Management Company, Auditor and Name of the Fund

Geneva, April 24, 2019 – In the press releases of February 1, 2019 and of March 1, 2019, Valres Fund Management SA, inliquidation announced that the administration and management of the Valres Suisse Romande Fonds would be transferredto another fund management company.

By the present press release, Valres Fund Management SA, in liquidation announces that the change of the fundmanagement will be made in favour of JSS Real Estate Management SA effective as of May 31, 2019 subject to FINMA’sformal approval.

As soon as FINMA has issued this approval, the name of Valres Suisse Romande Fonds will be changed to « SuisseRomande Property Fund » and Valres Fund Management SA, in liquidation will not publish any further information about it,in particular on the website www.valres.ch. In addition, the Auditor of the Suisse Romande Property Fund will be DeloitteSA.

Besides these amendments, the prospectus with integrated fund contract of Valres Suisse Romande Fonds does notcontain any other material amendment, in particular with regard to the investment policy. These amendments can beconsulted as of today on the website www.swissfunddata.ch, the publication organ of the fund. JSS Real EstateManagement SA, with head office in Geneva, has been authorised by FINMA, on April 18, 2019, as a fund managementcompany within the meaning of the Federal Act on Collective Investment Schemes (CISA).

Valres Fund Management SA, in liquidation has decided to issue this press release in order to ensure equal treatment of allinvestors in Valres Suisse Romande Fonds, whose shares are listed on the SIX.

Valres Fund Management SA, in liquidationPlace du Molard 5 – 1204 GenevaTél. +41 22 436 37 60 – fax +41 22 436 37 61


FURTHER INFORMATION

List of tenants representing more 5% of the rental income

No tenant has a rental income equal to or greater than 5% of the total rental income.

Information on derivatives

The investment fund does not include derivative financial instruments.

Consolidation of the real estate companies

During the year under review, the Fund acquired a new real estate company up to 100%. This companiy is globallyintegrated in the Investment fund's accounts and close its accounts on 31 December. All real estate companies (includingthose acquired during the financial year) were merged into Capital Real Estate SA, a company held by the fund since 2016.

List of the real estate companies and their property ownership• Property Rue des Philosophes 7, Geneva• Property Rue du Réchon 7 in Montreux• Property Rue Rothschild 21, Geneva• Property Avenue Théodore-Weber 9, Geneva• Property Rue de Lyon 71, Geneva• Property Avenue de Morges 92/Chemin de Renens 55/57, Lausanne• Property Rue du Chaumont 3–5, Payerne• Property Place du Tunnel 13–14, Lausanne• Property Chemin des Mouettes 1, Lonay• Property Route des Granges/Rue des Agges, Bulle• Property Route de Chamblioux, Granges-Paccot• Property Route d'Aïre 162–164–166, Aïre• Property Avenue Théodore vernes 12–14, Versoix• Property Avenue Pictet-de-Rochemont 29, Geneva


Geneva 51%Vaud 21%Fribourg 18%Neuchâtel 4%Jura 5%

Regional breakdown

Residential 44%Commercial 39%Mixed 17%Constructions 0%

Distribution by Type

DISTRIBUTION OF BUILDINGS

Geographical location of buildings


Jean-Sebastien Lassonde

Expert AuditorLead Auditor

Marc-Olivier Cadoche

Expert Auditor

REPORT OF THE AUDIT COMPANY

Summary report of the audit company under the Swiss Collective InvestmentSchemes Act concerning Valres Suisse Romande Fonds'annual accounts

As audit company under the Federal Act on CollectiveInvestment Schemes, we have audited the accompanyingannual accounts of the investment fund Valres SuisseRomande Fonds which comprises the statement of netassets and the statement of income, the statement of theappropriation of available earnings and the disclosure ofthe total costs as well as the supplemental disclosures inaccordance with Art. 89 paragraph 1 lit. b–h and Art. 90 ofthe Swiss Collective Investment Schemes Act (CISA), for theperiod from 1 January 2018 to 31 December 2018 (pages 3,6 to 22).

Responsibility of the Board of Directors of the FundManagement CompanyThe Board of Directors of the Fund Management Companyis responsible for the preparation of the annual accounts inaccordance with the requirements of the Swiss CollectiveInvestment Schemes Act, the related ordinances as well asthe fund contract and the sales prospectus. Thisresponsibility includes designing, implementing andmaintaining an internal control system relevant to thepreparation of annual accounts that are free from materialmisstatement, whether due to fraud or error. The Board ofDirectors of the fund management company is furtherresponsible for selecting and applying appropriateaccounting policies and making reasonable accountingestimates.

Responsibility of the audit company according to theSwiss Collective Investment Schemes ActOur responsibility is to express an opinion on these annualaccounts based on our audit. We conducted our audit inaccordance with Swiss law and Swiss Auditing Standards.Those standards require that we plan and perform theaudit to obtain reasonable assurance whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtain auditevidence about the amounts and disclosures in the annualaccounts. The procedures selected depend on the auditor’sjudgement, including the assessment of the risks ofmaterial misstatement of the annual accounts, whether due

to fraud or error. In making those risk assessments, theauditor considers the internal control system relevant tothe preparation of the annual accounts in order to designaudit procedures that are appropriate in thecircumstances, but not for the purpose of expressing anopinion on the existence and effectiveness of the internalcontrol system. An audit also includes evaluating theappropriateness of the accounting policies used and thereasonableness of accounting estimates made, as well asevaluating the overall presentation of the annual accounts.We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our auditopinion.

Audit OpinionIn our opinion, the financial statements for the period from1 January 2018 to 31 December 2018 comply with theSwiss Collective Investment Schemes Act, the relatedordinances as well as the fund contract and the salesprospectus.

Report on other legal requirementsWe confirm that we meet the legal requirements onlicensing according to the Auditor Oversight Act (AOA) aswell as the legal requirements on independence (Art. 11AOA) and that there are no circumstances incompatiblewith our independence.

PricewaterhouseCoopers SA

Geneva, 30 April 2019

The French version of the annual report has been subject to an audit by the audit company. Consequently, the short form report of the audit company refers exclusively to this version.


Valres Fund Management SAPlace du Molard 51204 GenevaT +41 22 436 37 60F +41 22 436 37 [email protected]

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