Operating lease liabilities

We have been a tenant at our current location in the EPFL Innovation Park in Ecublens/Lausanne since shortly after our inception in 2003. We lease our corporate, laboratory and other facilities under multiple operating leases that are month to month with no termination clause longer than a 12-month contractual notice period. Our lease agreements are structured such that we can exit these lease agreements without penalty provided we give the owner of our premises sufficient notice. As of 31 December 2018, total minimum liability for the remaining term was CHF 776 thousand.

Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events where it is more likely than not that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.

Critical judgments and accounting estimates

The preparation of financial statements in conformity with Swiss Code of Obligations requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The areas where AC Immune has had to make judgments, estimates and assumptions relate to (i) revenue recognition on collaboration and licensing agreements and (ii) clinical development accruals. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information relating to items on Balance Sheet and Income Statement

As at 31 December 2018 and 2017, the issued share capital amounted to CHF 1,350,138 and CHF 1,146,984 comprising of 67,506,879 common shares and 57,349,190 common shares, respectively, at a par value of CHF 0.02 per common share. The Company completed three follow-on offerings in 2018 raising gross proceeds of USD 117.5 (CHF 116.3) million and issuing 10,000,000 common shares.

The following table presents information on the allocation of shares and equity awards to executive officers, directors and employees in accordance with Article 959c, paragraph 2, number 11 Swiss Code of Obligations (CO) as at 31 December 2018:

Share values are based on the Company’s share price of $9.45 (CHF 9.40). Equity awards are comprised of options and non-vested stock (restricted shares and restricted share units) awards. The fair value of our options is determined using the Black-Scholes Morten Model and our non-vested stock awards are valued using a reasonable estimate of market value of the common stock on the date of the award. Total shares are derived from our transfer agent’s records as at 31 December 2018.

The table below presents beneficial ownership of executive officers and directors, including affiliated entities, if applicable, in accordance with Article 663c CO as at 31 December 2018:

On January 23, 2019, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired with regard to our license agreement with Eli Lilly and Company (“Lilly”), which we signed in December 2018. Under the terms of the license agreement, the Company will conduct initial Phase 1 development of Tau Morphomer small molecules. Lilly will fund and lead further clinical development and will receive global commercialization rights for all indications, including Alzheimer’s disease and other neurodegenerative diseases. The Company will retain certain development rights in orphan indications and co-development and co-promotion options in certain indications outside Alzheimer’s disease.

The agreement also allows for potential development of indications in Progressive Supranuclear Palsy and an exclusive license to Lilly of certain intellectual property related to this program.

The Company received CHF 80 million as an upfront payment in February 2019. The agreement also includes various conditional clinical, regulatory and commercialization milestone payments. In addition, the Company will receive royalties on sales of licensed products.

The agreement will terminate on the date on which all obligations between the parties with respect to the last payment of royalties for licensed products have passed or expired. Subject to the terms in the agreement, Lilly may terminate the agreement with three months’ written notice to the Company

We and Lilly also entered into a convertible note agreement in December 2018, which also became effective on January 23, 2019. As the convertible note was not effective as of December 31, 2018, there is no corresponding recognition in our financial statements. The Company received total consideration of USD 50.0 (CHF 50.3) million in January 2019. The convertible note is a senior unsecured obligation of the Company that bears interest at a rate of 0.75% per annum, which may be paid in cash or result in the accretion of the principal amount thereof, at our election.

Subject to the terms and conditions set forth in the convertible note agreement, the convertible note will automatically convert into the Company’s common shares on the 90th day after the effective date of the license agreement, at a conversion price equal to USD 13.83 per share, which would convert into approximately 3.6 million of our common shares.

On January 30, 2019, we announced that Roche, the parent of our collaboration partner Genentech, is discontinuing the CREAD 1 and CREAD 2 (BN29552 and BN29553) Phase III studies of crenezumab in people with prodromal to mild sporadic AD. The decision came after an interim analysis conducted by the IDMC indicated that crenezumab was unlikely to meet its primary endpoint of change from baseline in Clinical Dementia Rating-Sum of Boxes (CDR-SB) Score. This decision was not related to safety of the investigational product. No safety signals for crenezumab were observed in this analysis and the overall safety profile was similar to that seen in previous trials. 

Crenezumab continues to be studied in a preventive trial of cognitively healthy individuals in Colombia with an autosomal dominant mutation who are at risk of developing familial AD (fAD), under the Alzheimer’s Prevention Initiative (API), which began in 2013. This study will determine if treating people carrying this mutation with crenezumab prior to the onset of AD symptoms will slow or prevent the decline of cognitive and functional abilities. This study is in collaboration with the Banner Institute and is funded by the National Institute on Aging. 

In March 2019, the Company and Biogen decided not to extend their collaboration agreement into a fourth year per the contract and conclude in April 2019 within the original three-year term of the agreement.

Proposal of the Board of Directors to the annual Shareholders’ Meeting:

Proposal of the Board for the accumulated losses to be carried forward, subject to the approval of the Annual Shareholders’ Meeting

Exhibit 99.3

Report of the Statutory Auditor on the Compensation Report in Accordance with the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance)

Contents

Annex

Report of the statutory auditor on the remuneration report to the General Meeting of AC Immune SA

Ecublens

We have audited the accompanying remuneration report of AC Immune SA for the year ended 31 December 2018. The audit was limited to the information according to articles 14–16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance) contained in the tables 1.c., 2.c. and 3., and the information in sections 1.b. and 3. of the remuneration report.

Board of Directors’ responsibility

The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

Auditor’s responsibility

Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14–16 of the Ordinance.

An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the remuneration report of AC Immune SA for the year ended 31 December 2018 complies with Swiss law and articles 14–16 of the Ordinance.

Other matter

The remuneration report of AC Immune SA for the year ended 31 December 2017 was audited by another firm of auditors whose report, dated 20 March 2018, expressed an unmodified opinion on that report.

PricewaterhouseCoopers SA

Lausanne, 21 March 2019

This compensation report of AC Immune SA (the “Company”) has been prepared in accordance with the Federal Ordinance Against Excessive Compensation in Stock Exchange Listed Companies (“Ordinance”), effective January 1, 2014.

(1) – Elected April 27, 2018

(2) – Chairman for 2017 and through July 6, 2018

(3) – Appointed July 6, 2018

(4) – Elected July 6, 2018

Our Board of Directors is composed of seven directors, not including our Chief Executive Officer (CEO). Each director is elected for a one-year term. The current members of our board of directors were appointed at a shareholders’ meeting held on July 6, 2018 to serve until the 2019 shareholders’ meeting planned for June 2019.

Pursuant to NASDAQ Marketplace Rule 5615(a)(3), the Company follows Swiss rules in lieu of the NASDAQ exchange listing rules for rules regarding nominations committee, independent director oversight of executive officer compensation, majority independent board representation and the establishment of or amendments to equity-based compensation plans for employees. Swiss law does not require that a majority of our board of directors consist of independent directors. Taking into account any applicable committee independence standards, Martin Velasco, Detlev Riesner, Friedrich von Bohlen und Halbach, Peter Bollmann Thomas Graney, Douglas Williams and Werner Lanthaler are “independent directors”. In making such determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances our board of directors deemed relevant in determining the director’s independence, including the number of ordinary shares beneficially owned by the director and his or her affiliated entities, if any.

Board members are paid a fixed fee dependent on the function exercised. Such fees have been established in light of market practice. In addition to the fixed fee, Board members are awarded equity instruments under the Company’s equity incentive plans as described more fully in the annex to this report.

Commencing in July 2018, annual fixed fees were paid semi-annually in Swiss Francs (CHF) as follows:

For 2017, annual fixed fees were paid semi-annually in Swiss Francs as follows:

In 2018 and 2017, the total compensation of the members of the Board of Directors consists of Board fees, social charges and compensation paid in the form of equity instruments and is outlined below:

All amounts are in thousands of CHF

(1) – Compensation for Andrea Pfeifer is included in section 2 c below

(2) – Restricted Share Units were granted in 2018 and 2017 and are further described in Section 3 below. We estimate the fair value of Restricted Share Units using a reasonable estimate of market value of the common stock on the date of the award. Stock options granted are valued using the Black-Scholes model

(3) –Fair market value (FMV) excludes Swiss social security contributions

(4) – Includes CHF 16K gross cash compensation for fees in 2016

For the years ended December 31, 2018 and 2017, the Company granted no loans to members or former members of the Board of Directors. Additionally, as of December 31, 2018 and 2017, no such loans or credit payments existed to present or former members of the Board of Directors, or to related parties of present or former members of the Board of Directors.

For the years ended December 31, 2018 and 2017, no compensation was paid to related parties or former members of the Board of Directors.

The Executive Management during 2018 and 2017 was comprised of:

(1) – Mr. Jörg Hornstein was appointed Chief Financial Officer in November 2016 effective April 1, 2017

(2) – Dr. Andreas Muhs passed away on December 6, 2018, and is defined as a member of the current Executive Management for the purpose of this Report.

Each member of the Executive Management receives remuneration consisting of a base salary, incentive plan, social benefits and an equity incentive plan as described more fully in the annex to this report.

The total compensation of the Executive Management and the highest individual compensation of the members of the Executive Management for the years ended December 31, 2018 and 2017, respectively, are outlined below:

All amounts are in thousands of CHF

(1) – Amounts exclude social charges related to the exercise of options in the amount of CHF 24K and CHF 25K in the aggregate for Executive Management in 2018 and 2017 respectively.

(2) – Restricted Share Units were granted in 2018 and 2017 and are further described in Section 3 below. We estimate the fair value of Restricted Share Units using a reasonable estimate of market value of the common stock on the date of the award. Stock options granted are valued using the Black-Scholes model.

(3) – Fair market value (FMV) excludes Swiss social security contributions.

(4) – The Executive Management Compensation includes Dr. Andreas Muhs’ compensation for the period from January 1 through December 6, 2018, including death benefits, a portion of which will be paid to his estate in the first quarter of 2019, and reduced by payments by insurance.

For the years end December 31, 2018 and 2017 the Company granted no loans to members or former members of the Executive Management. Additionally, as of December 31, 2018 and 2017, no such loans or credit payments existed to present or former members of the Executive Management, or to related parties of present or former members of the Executive Management.

For the years ended December 31, 2018 and 2017 no compensation was paid to related parties of present or former members of the Executive Management.

Board of Directors and Executive Management Equity Incentive Plan Summary

The Members of the Board of Directors and Executive Management held the following equity instruments as of December 31, 2018 and 2017:

Investments held by members of the Board of Directors ⁽¹⁾

(1) – Excluding Andrea Pfeifer, CEO, whose holdings are listed under Executive Management

(2) – Includes shares held directly and indirectly through vehicles controlled by the Director

(3) – A portion of the shares correspond to preferred shares acquired directly by the member through the Company’s successive financial rounds (Series A, B, C and D) and cannot be assimilated to compensation in equity
(4) – These unvested Restricted Share Units were awarded in 2018 and 2017 and fully vest in 2019 and 2018, respectively

Investments held by members of the Executive Management

(1) – A portion of the shares correspond to preferred shares acquired directly by the member through the Company’s successive financial rounds (Series A, B, C and D) and cannot be assimilated to compensation in equity.

Compensation of Current and Former Members of the Board and Executive Management

In connection with RSUs settled and options exercised in 2018 and 2017 by current and former members of the Board and Executive Management, AC Immune paid social contributions, in accordance with applicable laws, on the gain resulting from the difference in exercise price and fair value of the shares at the time of the exercise. With regard to the former Board and Executive Management members, AC Immune paid a total of nil and CHF 63K in 2018 and 2017, respectively. With regard to the current Board and Executive Management members, AC Immune paid a total of CHF 37K and CHF 11K in 2018 and 2017, respectively.

Annex to the Report

Compensation Philosophy, Principles and Governance

AC Immune’s values as “A leader in AD Drug Development” are driven by passion to win, innovation, entrepreneurship, team spirit, modesty, communication and leadership. The Company aims to attract “world class” professionals and strives for growth, achievement and success. The Company’s values are an essential component of its strategy and key drivers of the Company’s performance.

AC Immune's compensation policy is designed to attract, motivate and retain talent in order to support the achievement of the Company’s financial and strategic objectives. The policy further aims at ensuring a fair and competitive compensation package. The Board believes that by combining short- and long-term incentive elements, the compensation system helps to align the interests of the Board members and management with the interests of the Company and its shareholders. In addition, compensation elements are focused on rewarding the delivery of outstanding and sustainable results without inappropriate risk-taking.

In each of the years from 2016 - 2018, the Company engaged a reputable compensation and performance expert firm to benchmark the compensation level and structure for the members of the Board and Executive Management. The analysis included compensation data of the comparable Pharma/Biopharma companies, including several U.S.-based companies. The Board came to the conclusion that adjustments to the compensation were required in order for AC Immune to remain a competitive employer.

Method of Determining Compensation

The Role and Powers of the Compensation, Nomination and Corporate Governance Committee “CNC”

The CNC consists of three (3) members, who are appointed by the Annual Shareholders' Meeting and the committee enacts its own charter.

Compensation Guidelines:

The CNC recommends guidelines for the compensation of the members of the Board of Directors, the CEO and the Executive Management, and submits these recommendations to the Board of Directors for approval.

The CNC provides an overall package for near- and long-term compensation, including variable compensation, that (1) is designed to attract, motivate and retain persons with the necessary skills and character, (2) is consistent with market conditions, and in the case of variable compensation, consistent with the Company’s and individual’s performance, and (3) aligns the interests of the members of the Board of Directors and the Executive Management with the interests of the Company. The CNC also periodically reviews the Company’s compensation policies for its employees who are not members of the Executive Management.

The CNC meets at least four times a year and informs the Board of Directors of its recommendation and resolutions after each meeting.

Approval of Compensation by the Annual Shareholders' Meeting

Swiss law requires a binding approval of the maximum compensation for the Board and the Executive Management. Each year, the Annual Shareholders' Meeting separately approves the total maximum amounts proposed by the Board of Directors pursuant to Articles 32 and 33 of the Articles of Association for:

The respective total compensation amounts include social security and occupational pension contributions for the benefit of the members of the Board of Directors, the Executive Management and the Company.

If the Annual Shareholders' Meeting refuses to approve a respective motion by the Board of Directors, the Board of Directors may either submit a new motion at the same meeting or determine a maximum total remuneration or several maximum partial remunerations, subject to the relevant principles of the compensation, or submit a new motion to the next Annual Shareholders' Meeting for approval. The Company may pay remunerations within the framework of the maximum total or partial remuneration and subject to the approval by the Annual Shareholders' Meeting.

Compensation of the Board of Directors

The CNC reviews and proposes to the Board of Directors the resolution to be submitted to the Ordinary Annual Shareholders' Meeting for the maximum total compensation of the Board of Directors. The CNC will also request approval by the Board of Directors of the individual compensation packages to be paid to members of the Board of Directors.

The compensation for members of the Board typically consists of:

Both components do not depend on the achievement of corporate goals or the individual performance of a Board member. Additionally, the Company pays the employer’s social security contributions due on these amounts. Board members do not receive any variable compensation.

Compensation of the Executive Management

The CNC evaluates annually the performance of the CEO and the Executive Management and submits such evaluation for review and discussion by the Board of Directors, in each case in executive session without the presence of the CEO or the Executive Management.

Subject to and within the bounds of the maximum compensation approved by the Ordinary Annual Shareholders' Meeting, the CNC reviews and recommends for approval by the Board of Directors the annual base salary, incentive compensation (bonus) and equity compensation of the CEO, and in consultation with the CEO, of the Executive Management, and the overall compensation of the CEO and the Executive Management. The CNC also requests approval by the Board of Directors regarding the determination of the compensation-related targets for the Executive Management and requests approval by the Board of Directors of the individual compensation packages to be paid to members of the Executive Management.

Elements of Compensation for 2018 and 2017

Base Salary

Base salaries are highly competitive in order to attract, motivate, and retain persons with the necessary skills and character. The salary level is based on the scope of the position and market conditions and the individual’s profile in terms of experience and skills. The fixed compensation for the Executive Management members includes base salary, social security contributions and payments to the pension fund by the Company. Base salaries are reviewed annually by the CNC, taking into account individual performance and the results of the external benchmarking.

Incentive Plan (Bonus)

The CNC proposes to the Board of Directors an incentive compensation plan providing for variable compensation of the members of the Executive Management based on the achievement of the Company’s corporate goals and in relation to the Executive Management based on the individuals’ performance, and

approve any changes to such plan as may be proposed by the CEO from time to time. The CNC reviews and approves any employment contracts, severance contracts, or other agreements that the Company proposes to enter into with any present, future or former members of the Executive Management; provided that the key terms of such contracts shall be submitted for approval by the Board of Directors and shall be within the bounds of the maximum compensation approved by the Ordinary Annual Shareholders' Meeting.

The annual cash bonus for 2018 and 2017 was based on the achievement of Company and individual goals. The target bonus, i.e. cash bonus to be paid if 100% of corporate and individual objectives are met, is determined individually for each member of the executive management as a fixed amount, ranging from approximately 25% (20% in 2017) to 65% (90% in 2017) of the base salary. According to the external benchmarking, the target bonuses continued to be in the lower range of the peer group. The 2018 corporate goals included (i) completion of a follow-on financing of at least USD 75M, (ii) formation of a strategic partnership clinical program, and (iii) fulfillment of various R&D project milestones. The 2017 corporate goals included (i) fulfillment of various R&D project milestones, and (ii) meeting the standards of a NASDAQ listed company with particular emphasis on the financial organization. The weightings of the corporate and individual goals are defined for each executive management member and vary depending on the position. In general, the higher the position of an employee, the more weight is put on the achievement of corporate goals rather than on individual goals. The Board determined that the actual target achievement of the 2018 and 2017 corporate goals was 120% and 102%, respectively.

Pension Plan and Social Charges

Pension Plan

The Company participates in a collective foundation covering all of its employees including its executive officers. In addition to retirement benefits, the plan provides death or long-term disability benefits. Contributions paid to the plan are computed as a percentage of salary, adjusted for the age of the employee and shared approximately 47% (47% in 2017) and 53% (53% in 2017) by employee and employer, respectively. This plan is governed by the Swiss Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG), which requires contributions to be made to a separately administered fund. The fund has the legal form of a foundation and it is governed by the Board of Trustees, which consists of an equal number of employer’s and employee’s representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.

Social Charges

The Company pays old age and survivors’ insurance (AHV), Disability insurance (IV), and Income replacement scheme (EO) as required by Federal Swiss law.

Equity Incentive Plans

Current Plan

The 2016 Option and Incentive Plan as amended and restated as of May 19, 2017 (the “2016 Plan”) was established for the officers, employees, non-employee directors and consultants of AC Immune SA.  The 2016 Plan provides for a variety of award types, including stock options, restricted share awards, restricted share units, unrestricted share awards, and performance based awards.  Vesting  and performance based conditions vary by grant and are determined by the plan administrator, which is the Compensation Committee of the Board of Directors, (or in its absence the Board of Directors) or the Chief Executive Officer under specified delegation limitations granted by the Board of Directors.  However, option awards with an “Exercise Price” shall be determined at the time of grant by the plan administrator, but shall not be less than 100 percent of fair market value on the date of grant.  Further, awards with an “Option Term” may not exceed 10 years.  In 2018 and 2017, awards were granted to members of the Executive Management and Board of Directors and

are disclosed in Section 3 of this report. According to the external benchmarking, the equity awards continued to be in the lower range of the peer group.

Prior Plans

Since our inception in 2003, we have had four separate Prior Plans: Plan A, which was established in 2004 and amended in June 2015 and June 2017; Plan B, which was established in 2005; Plan C1, which was established in 2006; and Plan C2, which was also established in 2006 and was intended specifically for members of our board of directors to purchase our common shares. Options granted under the C1 Plan prior to 2013 were taxed at grant and options granted from 2013 and thereafter were taxed upon exercise instead of at grant due to a change in taxation rules.  The options granted under Plan A vested immediately but were subject to a four-year lockup period. The options granted under Plan B and Plan C1 vested over a four year period with 25% of these options vesting each year. Under Plan C2, options were immediately exercisable.

Our Board of Directors has the authority to amend each of the Prior Plans.

2016 Option and Incentive Plans

“Directors and Executive Consideration”

For the fiscal years ended December 31, 2018 and 2017, we have granted our directors and executive management, in the aggregate, options for the right to acquire 280,848 and 257,916 shares, respectively at an exercise price ranging from US$ 8.51 to US$ 9.50 per share in 2018 and CHF 9.53 per share in 2017, that vest over a four year period with vesting to occur quarterly. In addition to the stock options granted, for the fiscal years ended December 31, 2018 and 2017, the Company also granted 69,371 and 125,332 restricted share units, respectively to its directors and executive officers. The restricted share units granted to directors total 54,489 and 29,375 in 2018 and 2017, respectively and vest at the end of a one-year period. The remaining 14,882 and 95,957 restricted share units were granted to executives and have a four year vesting life to be vested quarterly. Upon the death of our CSO, non-vested options and non-vested-restricted share units were cancelled; such amounts aggregated 22,800 options of the 2018 grant (23,561 in 2017) and 9,966 restricted share units of the 2018 grant (15,707 in 2017).

Other

Employment Contracts

The Executive Management of the Company is employed under employment contracts of unlimited duration with a notice period of six months for the Chief Executive Officer, twelve months for the Chief Financial Officer, and three months for the Chief Scientific Officer and the Chief Administrative Officer. Executive members are not contractually entitled to termination payments other than the vested portions of the stock options.