Report of the Audit Committee

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Dr. Clemens Börsig, Chairman of the Audit Committee

Dear Shareholders,

As Chairman of the Audit Committee, I am very pleased to report to you on the tasks and activities performed by that body in financial year 2018.

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, financial reporting and non-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 the compliance management system. 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. The Audit Committee also commissions the external auditors to carry out a voluntary review of the non-financial report within the framework of a limited assurance engagement.

Equal representation

Audit Committee Chairman Dr. Clemens Börsig and Joe Kaeser served as the shareholder representatives on the Audit Committee in financial year 2018. Both are independent and have expertise in the field of financial reporting, as well as special knowledge of and experience in the auditing of financial statements and the application of methods of internal control. During financial year 2018, the employees were represented on the Audit Committee by Michael Brecht as the Deputy Chairman of the Committee and by Ergun Lümali.

Meetings and participants

The Audit Committee met six times in financial year 2018. All of these meetings were also attended by the Chairman of the Supervisory Board, Dr. Manfred Bischoff, as a permanent guest. The other permanent participants at the meetings were 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 Accounting, Internal Auditing, Group Compliance and Legal were also present to report on individual items of the agenda.

In addition, the Chairman of the Audit Committee held regular individual discussions, for example with the aforementioned members of the Board of Management, the external auditors and, if required, the heads of the relevant 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 2018

In the meeting held on January 31, 2018, the Audit Committee dealt with the preliminary figures of the annual financial statements and the annual consolidated financial statements for the year 2017, 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 were to be made to their proposed publication. The Committee further recommended that the Supervisory Board, which met immediately thereafter, adopt the same view. The preliminary key figures and the proposal on the appropriation of profits were announced at the Annual Press Conference on February 1, 2018.

In another meeting held on February 9, 2018, the Audit Committee dealt with the annual financial statements, the consolidated financial statements and the combined management report for Daimler AG and the Daimler Group for the financial year 2017, each of 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. During the meeting, the Audit Committee focused in particular on the key audit matters described in each audit opinion and on the audit approach applied in each case, including the conclusions drawn. The Audit Committee also reviewed and discussed the non-financial report, which was prepared for the first time. The external auditors reported on the results of their audit and on the voluntary review of the non-financial report within the framework of a limited assurance engagement, and were also available to answer supplementary questions and to provide additional information. The audit reports on the annual company and consolidated financial statements (including the combined management report) and the internal control system (ICS), the report concerning the non-financial report, and important issues related to accounting were discussed with the external auditors. In addition, the Audit Committee also discussed the risk management system (RMS). Following an in-depth review and discussion, the Audit Committee recommended that the Supervisory Board approve the financial statements, the combined management report, the non-financial report, the proposal on the appropriation of profits, and the recommendation of the Board of Management to pay a dividend of €3.65 per share entitled to a dividend. Furthermore, the Audit Committee approved the Report of the Audit Committee for the financial year 2017.

In this meeting, the Audit Committee also discussed the report on the total fees paid to the external auditors in financial year 2017 for auditing and non-auditing services and defined the framework of approval for engaging the external auditors to provide non-audit services during the period January 1, 2018 to February 15, 2019. In this context, the Audit Committee also reviewed the authorized external auditor services in accordance with the appendix to the Audit Committee’s rules of procedure and adopted a resolution to update the appendix. The Audit Committee also decided to recommend to the Supervisory Board, and subsequently to the Annual Shareholders’ Meeting, that KPMG AG Wirtschaftsprüfungsgesellschaft be engaged to conduct the annual external audit and the external auditors’ review of interim financial reports for financial year 2018 and also to conduct the external auditor’s review of interim financial reports for financial year 2019 in the period leading up to the Annual Shareholders’ Meeting in 2019. The Audit Committee based this recommendation on the quality of the annual audit and the results of the independence review, for which no indications of partiality or a threat to independence were found. Subject to the election of the proposed external auditors by the Annual Shareholders’ Meeting, the Audit Committee also discussed the proposal to be made regarding the fees to be agreed upon with the external auditors for financial year 2018. Finally, within the framework of its responsibility, the Audit Committee dealt with the draft agenda for the 2018 Annual Shareholders’ Meeting and the annual audit plan for 2018 of the Internal Auditing department.

In the meetings during 2018 related 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 auditor’s review of interim financial statements. In addition, the Committee received reports from the Internal Auditing, Group Compliance and Legal departments. The Board of Management reported regularly to the Audit Committee on the current status of the main legal proceedings, including the inquiries, investigations, proceedings and administrative orders in connection with diesel exhaust emissions. In addition, the Audit Committee regularly dealt with notifications concerning possible violations of rules submitted by employees and third parties to the Group’s own whistleblower system BPO (Business Practices Office).

The meeting of the Audit Committee in April 2018 took place within the framework of the Supervisory Board meeting that was held abroad in Budapest. Along with the interim financial report for the first quarter of 2018, the Audit Committee also dealt with the quarterly reports from the Group Compliance, Legal and Internal Auditing departments. In addition, as a result of changes made to the scope of responsibility of the BPO, the Audit Committee dealt with amendments to be made to its rules of procedure with regard to the regular report that must be submitted to it. The Audit Committee also approved the fees agreed upon with the external auditors for financial year 2018 after the Annual Shareholders’ Meeting made its decision on April 5, 2018 regarding the election of the proposed external auditors for the annual financial statements and the consolidated financial statements.

In its meeting in June 2018, the Audit Committee was informed about recent measures taken in connection with the administrative order issued by the German Federal Motor Transport Authority for the recall of the Vito OM622 and about the discussions held in May and June 2018 at the German Federal Ministry of Transport and Digital Infrastructure. The Audit Committee then discussed aspects of 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 includes the internal auditing function and the compliance management system. In addition, the Committee was informed about the Group’s legal system and the Group’s legal risk reporting. In this meeting, the Committee also defined planning measures and the key audit issues for the external audit of financial year 2018. The meeting was also used to discuss the results of the internal quality analysis of the external audit for financial year 2017.

In the same meeting in June 2018, the Audit Committee addressed current financial accounting issues in detail, in particular new regulations for financial reporting in accordance with IFRS 16 (Leases), the draft paper from the European Securities and Markets Authority (ESMA) regarding central electronic reporting and its implications for Daimler AG and accounting procedures for research and development costs. The Committee also discussed the approach to be taken for the creation and examination of the non-financial report for 2018. Finally, the Audit Committee took note of a report on pension-, refinancing- and tax-risk management and also discussed with the Board of Management the annual report produced by the Group’s Data Protection Officer.

In the meeting held in July 2018, the Audit Committee dealt mainly with the second-quarter results, the risk report and the quarterly reports from the Group Compliance, Legal and Internal Auditing departments.

In the meeting held in October 2018, the Audit Committee dealt with the interim financial report for the third quarter of 2018 and the quarterly reports from the Group Compliance and Legal departments. In addition, the Committee conducted its annual review of the authorized external auditor services in accordance with the appendix to the Audit Committee’s rules of procedure and also adopted a resolution to retain for financial year 2019 the catalog updated at the beginning of 2018. Finally, the Audit Committee agreed to raise the framework of approval for engaging the external auditors to provide non-audit services during the period January 1, 2018 to February 15, 2019.

Company and consolidated financial statements 2018

In the meeting held on February 5, 2019, the Audit Committee dealt with the preliminary figures of the annual financial statements and the annual consolidated financial statements for the year 2018, 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 were to be made to their proposed publication. The Committee further recommended that the Supervisory Board, which met immediately thereafter, adopt the same view. The preliminary key figures and the proposal on the appropriation of profits were announced at the Annual Press Conference on February 6, 2019.

In another meeting on February 13, 2019, the Audit Committee reviewed and discussed in detail the annual financial statements, the consolidated financial statements and the combined management report for Daimler AG and the Daimler Group for financial year 2018, 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 and the non-financial report, which was issued with a report in accordance with ISAE 3000. At the meeting, the external auditors reported on the results of their audit and focused in particular on the key audit matters and on the audit approach applied in each case, including the conclusions drawn. They also reported on the voluntary review of the non-financial report within the framework of a limited assurance engagement and were available to answer supplementary questions and to provide additional information. The audit reports on the annual financial statements and consolidated financial statements (including the key audit matters in the audit opinions) and on the internal control system (ICS), the report concerning the non-financial report for 2018 and important issues related to financial reporting were discussed with the external auditors. The Audit Committee also discussed the risk management system (RMS). Following an in-depth review and discussion, the Audit Committee recommended that the Supervisory Board approve the financial statements, the combined management report, the declaration on corporate governance included in the corporate governance report, the non-financial report and 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 financial year 2018.

Efficiency review

As in previous years, the Audit Committee conducted a self-evaluation of its own activities also in 2018 on the basis of an extensive company-specific questionnaire. The results of this efficiency review were once again very positive and were presented and discussed in the meeting on February 13, 2019. 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 2019

The Audit Committee

HIER UNTERSCHRIFT EINFÜGEN

Dr. Clemens Börsig
Chairman

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