Report of the Audit Committee

Dear Shareholders,

As Chairman of the Audit Committee, I am pleased to report to you on the tasks and activities performed by that body in financial year 2015.

Responsibility

On the basis of applicable law, the German Corporate Governance Code and the Rules of Procedure of the Supervisory Board and its committees, the Audit Committee deals primarily with questions of accounting and financial reporting. In addition, it deals with the annual audit and reviews the qualifications and independence of the external auditors. Furthermore, it discusses the effectiveness and functional capabilities of the risk management system, the internal control system, the internal auditing system and compliance management. After the external auditors are elected by the Annual Shareholders’ Meeting, the Audit Committee engages the external auditors to conduct the annual audit and the auditors’ review of interim financial statements, determines the important audit issues and negotiates the audit fees with the external auditors.

Equal representation

Following several personnel changes that occurred in the prior year, the makeup of the four-member Audit Committee remained unchanged in 2015. Audit Committee Chairman Dr. Clemens Börsig and Joe Kaeser served as the shareholder representatives. Both are independent and have expertise in the field of financial reporting, as well as special knowledge and experience in the application of methods of internal control. During financial year 2015, the employees were represented on the Audit Committee by Michael Brecht as the Deputy Chairman of the Committee and by Dr. Sabine Maaßen.

Meetings and participants

The Audit Committee met six times in financial year 2015. All of those meetings were also attended by the Chairman of the Supervisory Board, Dr. Manfred Bischoff, as a permanent guest. The meetings were also attended by the Chairman of the Board of Management, the members of the Board of Management responsible for Finance and Controlling and for Integrity and Legal Affairs, and the external auditors. The heads of specialist departments such as those for accounting, auditing, compliance and law, as well as other experts, were also present for the appropriate items of the agenda. In addition, the Chairman of the Audit Committee held regular individual discussions, for example with the external auditors, the members of the Board of Management responsible for Finance and Controlling and for Integrity and Legal Affairs, and, if required, the heads of the specialist departments. Such individual discussions were mainly held to prepare for the next committee meetings.

Reporting to the Supervisory Board

The Chairman of the Audit Committee informed the Supervisory Board about the activities of the Committee and about the contents of its meetings and discussions in the following Supervisory Board meetings.

Topics in 2015

In a meeting on February 4, 2015, the Audit Committee dealt with the preliminary figures of the annual company financial statements and the annual consolidated financial statements for the year 2014, as well as with the proposal on the appropriation of profits made by the Board of Management. Following an in-depth review, the Audit Committee took positive note of the presented figures and determined that no objections could be made to their proposed publication. The Committee further recommended that the Supervisory Board adopt the same view. The preliminary key figures for financial year 2014 and the proposal on the appropriation of profits were published at the Annual Press Conference on the next day (February 5, 2015).

In another meeting held on February 13, 2015, the Audit Committee dealt with the annual company financial statements, the annual consolidated financial statements and the combined management report for Daimler AG and the Daimler Group for the year 2014, which had been issued with an unqualified auditor’s opinion by the external auditors, as well as with the proposal on the appropriation of profits. At the meeting, the external auditors reported on the results of their audit and were available to answer supplementary questions and to provide additional information. The audit reports on the company and consolidated financial statements and on the internal control system (ICS), the report on the risk management system for the year 2014, the Annual Report 2014 and important issues related to financial reporting were discussed with the external auditors. Following an intensive review and discussion, the Audit Committee recommended that the Supervisory Board approve the annual financial statements and the combined management report, and on this basis adopt the recommendation of the Board of Management to pay a dividend of €2.45 per share entitled to a dividend. Furthermore, the Audit Committee approved the Report of the Audit Committee for the year 2014.

Also in this meeting, the Audit Committee discussed the report on the fees paid to the external auditors in the year 2014 for auditing and non-auditing services. Taking into consideration the results of the independence review, the Audit Committee decided to recommend to the Supervisory Board, and subsequently to the Annual Shareholders’ Meeting, that KPMG be engaged to conduct the annual external audit and the external auditors’ review of interim financial reports for financial year 2015. Among other things, the Audit Committee based this recommendation on the very good results of the analysis of the quality of the external audit of financial year 2013 carried out by the Audit Committee in May 2014. Subject to the election of the proposed external auditors by the Annual Shareholders’ Meeting, the Committee discussed the proposal for the fees to be agreed upon with the external auditors for financial year 2015. Finally, within the framework of its responsibility, the Audit Committee dealt with the draft agenda for the 2015 Annual Shareholders’ Meeting and the annual audit plan for 2015 of the Corporate Auditing department.

In the meetings during 2015 relating to the quarterly results, the Audit Committee discussed the interim financial reports before their publication with the Board of Management and with the external auditors engaged to carry out the auditors’ review of interim financial statements. In addition, the Committee received reports from the Compliance, Legal and Corporate Audit departments. In this connection, the Audit Committee dealt, for example, with the current status of pending legal proceedings and with measures taken by the Company to prevent money laundering and to ensure a review of sanction lists. In addition, the Audit Committee dealt with notifications concerning possible violations of rules submitted by employees and third parties to the Company’s own whistleblower system, the BPO (Business Practices Office).

In its meeting on June 18, 2015, the Audit Committee discussed the Group’s risk management system, and dealt in particular with its changes and further development. It also discussed the methods and processes of, and possible changes to, the internal control system, which along with accounting also encompasses the internal auditing and compliance management functions. Furthermore, the Committee received a report on the non-auditing services provided by the external auditors. In this meeting, the important audit issues for the external audit of the reporting period and the framework of approval for engaging the external auditors to provide non-audit services were also determined. In addition, this meeting was used to discuss the results of the internal quality analysis of the external audit for the year 2014.

Also in the meeting on June 18, 2015, the Audit Committee dealt with new developments in accounting and financial reporting and other audit-relevant areas. Furthermore, the Committee was informed in detail about the Group Legal System and Group Legal Risk Reporting. Finally, the Committee was informed in detail about the leasing business model and also discussed with the Board of Management and the representatives of the specialist departments issues related to residual-value management and associated accounting processes.

In the meeting held on July 22, 2015, the Audit Committee received the annual report from the Group’s Data Protection Officer and was informed about the main topics and current developments in the field of data protection. Here, the members of the Committee addressed, for example, the data protection principles for connected vehicles and data protection at the Mercedes me online platform, which is designed to reconcile the needs of data security and customer-friendly operation.

In the meeting held on October 21, 2015, the Committee dealt with, among other things, current activities in the Compliance department and was informed in particular about measures designed to ensure the permanent establishment of the elements of the Compliance Management System and the improvement of specific processes.

Topics in 2016

In a meeting held on February 3, 2016, the Audit Committee dealt with the preliminary figures of the annual company financial statements and the annual consolidated financial statements for the year 2015, as well as with the proposal on the appropriation of profits made by the Board of Management. Following an in-depth review, the Audit Committee took positive note of the presented figures and determined that no objections could be made to their proposed publication. The Committee further recommended that the Supervisory Board adopt the same view. The preliminary key figures and the proposal on the appropriation of profits were published at the Annual Press Conference on February 4, 2016.

In another meeting on February 16, 2016, the Audit Committee reviewed and discussed in detail the annual company financial statements, the annual consolidated financial statements and the combined management report for Daimler AG and the Daimler Group for the year 2015, each of which had been issued with an unqualified auditor’s opinion by the external auditors, as well as the proposal on the appropriation of profits. At the meeting, the external auditors reported on the results of their audit and were available to answer supplementary questions and to provide additional information. The audit reports on the company and consolidated financial statements and on the internal control system (ICS), the report on the risk management system for the year 2015, the Annual Report 2015 and important issues related to financial reporting were discussed with the external auditors. Following an intensive review and discussion, the Audit Committee recommended that the Supervisory Board approve the annual financial statements and the combined management report, and on this basis adopt the recommendation of the Board of Management to pay a dividend of € 3.25 per share entitled to a dividend. Furthermore, the Audit Committee approved the Report of the Audit Committee for the year 2015.

Also in this meeting, the Audit Committee discussed the report on the total fees paid to the external auditors in the year 2015. The Audit Committee also decided to recommend to the Supervisory Board, and subsequently to the Annual Shareholders’ Meeting, that KPMG be engaged to conduct the annual external audit and the external auditors’ review of interim financial reports for financial year 2016; the results of the independence review and the discussion of the quality of the external audit were taken into consideration. Subject to the outcome of voting by the Annual Shareholders’ Meeting, the Committee also discussed the proposal for the fees to be agreed upon with the external auditors for financial year 2016. Finally, within the framework of its responsibility, the Audit Committee dealt with the draft agenda for the 2016 Annual Shareholders’ Meeting and the annual audit plan for 2016 of the Internal Auditing department.

Efficiency review

As in previous years, the Audit Committee once again conducted a self-evaluation of its own activities in 2015. The very positive results of this efficiency review were presented and discussed in the meeting in mid-February 2016. This did not result in any need for action with regard to the Committee’s tasks, or with regard to the content, frequency or procedure of its meetings.

Stuttgart, February 2016

The Audit Committee

Dr. Clemens Börsig
Chairman

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