Mercedes Benz : Remuneration Report 2023

Remuneration Report 2023

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Dear Shareholders,

On behalf of the Board of Management and Supervisory Board, I am pleased to present the 2023 Mercedes- Benz Group AG Remuneration Report.

2023 was a significant year for remuneration at Mercedes-Benz Group AG, as the Annual General Meeting on May 3, 2023 approved changes to the remuneration system for the Executive Board with an approval rate of 91.00% and for the Supervisory Board with an approval rate of 98.16%.

The aim is to ensure a comprehensive and clear system and hence in the following I would like to highlight the main components of the remuneration system, as well as touch on the key points that affected the target achievement for the financial year 2023.

New remuneration system for the Board of Management

The remuneration system was adjusted in 2023 with the aim of reducing complexity, improving transparency and ensuring anchoring of sustainability goals.

Per the previous system, the main components are: base salary (plus fringe benefits and pension commit- ments), annual bonus and long-term incentive.

Significant changes to the new remuneration system will affect the transformation targets in the annual bonus from the 2023 financial year, which can have an impact on the level of target achievement of the annual

bonus with an increase/discount of up to 25% points. In addition, the payment amount from the annual bonus is paid out in full after the past financial year and is no longer 50% in the form of a deferral. In the Performance Phantom Share Plan (PPSP), in addition to the relative return on sales and the relative stock performance, ESG goals (environmental/social/governance) are also taken into account as performance criteria. As part of the Stock Ownership Guidelines (SOG), board members are obliged to hold Mercedes-Benz Group shares for up to two years after the end of their employment relation- ship.

Pay for performance in the financial year 2023 For the Supervisory Board, the concrete link between the remuneration of the members of the Board of Management and performance is of great importance. Performance is measured using financial and strategic tar- gets. Despite the ongoing worldwide

economic challenges, 2023 was a year in which the Group continued on its profitable growth path and made substantial achievements in the implementation of its strategic goals.

Annual bonus 2023

The annual bonus overall target is calculated by target achievement across three categories: Financial performance criteria, non-financial performance criteria and transformation targets. If the overall target is achieved, 100% of the base salary is awarded as an annual bonus. The target can also be underachieved or overachieved; it is possible for the annual bonus to be between 0% and 200% of the base salary.

Despite tough headwinds such as inflation and continued global uncertainty in 2023, strong company performance led to a outstanding EBIT and free cash flow and hence a financial target achievement of 184%.

The targets for the non-financial performance criteria focus on corporate cultural and customer-related aspects. An increased focus on employee satisfaction and general integrity within the company was seen in the past year. The target achievement in 2023 is 4% (of a maximum of 10% points).

The transformation targets are especially important against the background of the accelerated switch to becoming more sustainable. The company achievement thus far in this area is demonstrated by the improved sustainability along the value chain - from product development, to production, to remanufacturing and recycling. In the financial year 2023, the efforts of the Board of Management led to a target achievement of 15%.

The Supervisory Board assessed whether there was a need for discretionary target adjustment to account for external factors outside of the normal course of busi- ness. There was not deemed to be any reason to intervene with the Board of Management target achieve- ment.

With an overall target achievement of 200%, the annual bonus awarded reflects the exceptionally good results of the past financial year.

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Long-term incentive (PPSP 2019)

The LTI rewards long-term company success and is designed in the form of a Performance Phantom Share Plan (PPSP) with a term of four years. The LTI accounts for the largest portion of the Board of Management remuneration, helping to ensure alignment of Board of Management remuneration with shareholders' interests.

Board of Management members receive a preliminary number of shares at the start of the term, which is multiplied by a performance factor at the end of the three- year performance term to define a final number of phantom shares. This factor is based on the company's relative return on sales against its peer group, the relative share performance against the peer group and - from the 2023 grant onwards - specific ESG criteria, and is capped at 200%. The final number of phantom shares is then multiplied by the applicable share price to determine the final PPSP payout.

Compared to its peer group, Mercedes-Benz Group performed exceptionally well with regard to its long-term targets and this is reflected in the PPSP performance factor. The target achievement of the LTI granted in 2019 was 186%.

Revised remuneration system for the Supervisory Board

The revised remuneration system for the supervisory board is intended to reduce complexity, reflect the current trends of a global company and appeal to highly qualified candidates. The changes have resulted in a remuneration system that is transparent and simplifies

the management of global tax and social security regu- lations; this is particularly important given the international composition of the Supervisory Board.

Significant changes to the compensation system for the Supervisory Board relate to the consideration of several higher-paid functions. Since the financial year 2023, remuneration will only be based on the highest paid function. In addition, attendance fees for supervisory board and committee meetings were canceled.

On behalf of the Supervisory Board, I would like to thank the teams who have worked hard throughout the year to ensure a fair, appropriate and suitable remuneration system, as well as our shareholders for their commitment to this issue.

Remuneration will continue to be a central topic on the agenda of the Supervisory Board and the Executive Committee in the 2024 financial year.

Yours sincerely,

Dr Bernd Pischetsrieder

Chairman of the

Supervisory Board

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According to the requirements of Section 162 of the German Stock Corporation Act (Aktiengesetz, AktG), the Remuneration Report explains the application of the remuneration system for the members of the Board of Management and the Supervisory Board of Mercedes Benz Group AG. Furthermore, it describes the amount and structure of the individual remuneration awarded and due for the current and former members of the Board of Management and Supervisory Board in financial year 2023. The remuneration system furthermore complies with the recommendations and suggestions of the German Corporate Governance Code (Deutsche Corporate Governance Kodex, DCGK), as amended on April 28, 2022.

2022 was presented to the Annual Shareholders' Meeting for approval pursuant to Section 120a Subsection 4 AktG on May 3, 2023, and was approved with an approval rate of 86.23%. The high approval result encourages the Executive Board and the Supervisory Board in their approach to transparent reporting.

The Remuneration Report 2023 was audited by KPMG AG Wirtschaftsprüfungsgesellschaft, exceeding the requirements of Section 162 Subsection 3 AktG according to both formal and substantial criteria. The auditor's opinion is enclosed with the Remuneration Report 2023.

sustainable development of the company. It incentivizes the achievement of our strategic goals and provides effective incentives for the long-term,value-creating development of the company in the interests of all stakeholders: customers, investors, employees, business partners and society as a whole. Given the central importance of the topics of sustainability, integrity and diversity, which form the basis of the Mercedes-Benz Group's actions, in addition to financial performance criteria, ESG goals are also taken into account to a considerable extent within the variable remuneration.

In the opinion of the Supervisory Board, ensuring the appropriateness of the remuneration with regard to the

The remuneration system for members of the Board of Management is from the point of view of the Supervisory Board aligned with the business strategy as well as the sustainable and long-term growth of the company and was approved by the Annual Shareholders' Meeting according to Section 120a Subsection 1 AktG on May 3, 2023 with an approval rate of 91.00%. It can be accessed on the company's website atwhttps://group.mercedes-benz.com/company/corporate-governance/board-of-management/remuneration/. Remuneration of the Supervisory Board as well as the corresponding amendment to the Articles of Incorporation were approved at the Annual Shareholders' Meeting according to Section 113 Subsection 3 AktG on May 3, 2023, with an approval rate of 98.16%. The remuneration system of the Supervisory Board can be accessed on the company's website atwhttps://group.mercedes-benz.com/company/corporate-governance/superviso-ry-board/remuneration.html. The Remuneration Report

Principles of Board of Management remuneration

The automotive industry is in the midst of the greatest transformation in its history. Sustainability and especially environmental and climate protection are among the most pressing issues of the time. As the inventor of the automobile, Mercedes-Benz Group AG also wants to set standards for sustainable mobility. It has set itself the goal of making the accelerated transformation into a fully electric and software-driven future profitable and has therefore placed a particular focus on profitable growth with its corporate strategy geared towards sustainability and luxury.

From the company's point of view, the Executive Board's remuneration system makes a significant contribution to promoting the business strategy and the long-term and

performance of the Executive Board members is achieved, on the one hand, through a high proportion of variable remuneration components and, on the other hand, through ambitiously set targets in the performance criteria for the variable remuneration components. In addition, standard market practice is used, taking into account the size, complexity and economic situation of the company.

Remuneration guidelines

• The remuneration system as a whole contributes significantly to promoting the business strategy.
• The remuneration system and the performance criteria for its varia- ble components incentivise the Group's long-term and sustainable development.
• The remuneration system is an important factor in linking the interests of the shareholders, customers, employees and other stakeholders.
• The performance of the Board of Management members is appropri- ately taken into account in the variable remuneration components by adequately and ambitiously set performance targets (pay for performance).

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Review and determination of Board of Management remuneration

For each upcoming financial year, the Presidential Committee prepares the review of the remuneration system and the individual remuneration amount set by the Supervisory Board and, where necessary, prepares suggestions for changes. In the process, the Presidential Committee and the Supervisory Board make use of the advice of external remuneration experts. This was also done in the reporting period.

Based on the approved remuneration system and the recommendations of the Presidential Committee, the Supervisory Board determines the amount of the target total remuneration of the individual members of the Board of Management for each upcoming financial year. It shall be set in an adequate proportion to the responsibilities and performance of each member of the Board of Management and to the situation of the company. In addition, the Supervisory Board ensures that the target total remuneration is in line with the market. For this purpose, it uses a horizontal as well as a vertical com- parison. For the horizontal - external - comparison of the target total remuneration, with regard to the market position of the company (in particular sector, size and country), the DAX and a group of international competitors consisting of listed automotive manufacturers are used. The composition of the international comparison group for the horizontal comparison corresponds to the group of competitors considered for the performance criteria for the long-term variable remuneration component (Performance Phantom Share Plan).

In addition to the horizontal comparison, the Supervisory Board takes into account the development of the Board of Management remuneration in a vertical - internal - comparison with the remuneration of the senior executives and the total workforce (collective and non-collectivepay-scale employees, including senior executives) of the Group in Germany. This is done by comparing the ratio of the remuneration of the Board of Management with the remuneration of the defined groups of employees, including its development. In addition, a market comparison is carried out of the ratio of the remuneration of the Board of Management to that of the total workforce compared with the DAX companies. For this purpose, the Supervisory Board has defined the group of senior executives as follows: It consists of the two management levels below the Board of Management at Mercedes-Benz Group AG within the Group in Germany. In the event of significant shifts in the horizontal comparison or significant changes of the ratio between the remuneration of the Board of Management and the vertical comparison groups, the Supervisory Board examines the causes and, in the absence of objective reasons, adjusts the remuneration of the Board of Management if necessary.

Overview of the components of the remuneration system

The remuneration system, which was approved by the Annual General Meeting on May 3, 2023, applies to all components of remuneration. Only the PPSP tranches allocated in the past are still measured exclusively on the basis of financial performance criteria based on the remuneration system valid in 2019. Furthermore, the deferred medium-term portion of the 2021 annual bonus ('Deferral 2021') is subject to the the 2020 remuneration system. The remuneration system basically consists of fixed non-performance-related and variable performance-related remuneration components, the sum of which determines the total remuneration of a member of the Management Board.

The fixed non-performance-related remuneration consists of the base salary, the fringe benefits (pecuniary benefits, mainly expenses assumed by the company for security services and the provision of company cars), which may vary each year based on individual and certain events, and the annual amounts for pension commitments of each member of the Board of Management.

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The variable performance-related remuneration is divided into a short-term variable remuneration (annual bonus) and a long-term variable remuneration (PPSP). The annual bonus is paid out after the end of the financial year. Previously (up until Financial Year 2022), 50% of the annual bonus was paid out after the end of the financial year and 50% after the end of a further year (deferral), linked to relative share price performance. This was discontinued at the end of the 2022 financial year. The last payout from the deferral will therefore take place in 2024. The amount to be paid out for the long-term variable remuneration component (PPSP) is determined and paid out after the end of the four-year plan period.

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	Base salary	- A fixed contractually agreed remuneration that is paid in twelve monthly installments
	Fringe benefits	- Mainly expenses for security precautions and the provision of company cars
Fixed remuneration
Pension commitment/	- An annual contribution in the amount of 15% of the sum of the base salary and the total annual bonus as determined at the end
	of the reporting period
	pension compensation
	- Option to grant a pension compensation instead of a pension commitment
		Type	-	Annual bonus
			-	Financial performance criteria
				- 50% EBIT
				- 50% free cash flow (FCF) of the industrial business
	Short-term variable remuneration	Performance		- Range of possible target achievement: 0% - 200%
	criteria	-	Non-financial performance criteria
	(annual bonus)
			- Range of possible target achievement: -10% - +10%
			-	Transformation targets
				- Range of possible target achievement: -25% - +25%
Variable
Cap	-	200 % of the target amount
remuneration
Payout	-	After the financial year
		Type	-	Virtual performance share plan ("Performance Phantom Share Plan")
		Term	-	Four years (three-year performance period and one-year holding period)
	Long-term	Performance	-	40% relative return on sales
	variable	-	40% relative share performance
	criteria
	remuneration	-	20% ESG criteria
		Cap	-	250% of the grant value
		Payout	-	After three-year performance period and one-year holding period
Malus / Clawback	- Reduction or complete abolishment/reclaim of the variable remuneration is possible
		- The number of the shares to be held up to two years after the end of service relationship is set between 20,000 and 75,000 shares

Stock Ownership Guidelines (SOG)	- Up to 25% of the gross remuneration out of each PPSP is generally to be used to acquire ordinary shares

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Structure and term of the target remuneration

		in %	€ amounts in thousands			Term
			CBM1: 2,717		Performance Phantom Share Plan		Performance Phantom
	approx. 40 %			Share Plan
	OMBM2: 1,358			3-year performance period
						1-year holding period
Target			CBM: 1,770	Annual bonus
approx. 30 %	Pay out after the financial
remuneration	OMBM: 885-904
		year
	approx. 30 %	CBM: 1,770	Base salary
	OMBM: 885-904
		Payout, performance or	Fringe benefits
		Pension commitment
			commitment date
			Year 1		Year 2		Year 3	Year 4
1 CBM: Chair of the Board of Management	2 OMBM: Ordinary Member of the Board of Management

Structure of the target total remuneration of the members of the Board of Management

The base salary and the short-term variable remuneration (annual bonus) each comprise approximately 30% of the target remuneration (excluding the pension commitments and fringe benefits), while the long-term variable remuneration (PPSP) makes up approximately 40% of the target remuneration. Thus, the long-term variable remuneration component exceeds the short-term variable component, so that the focus is on the long-term and sustainable development of the company without neglecting the operational annual targets. Both the annual bonus and the long-term variable remuneration from the PPSP with its link to additional, in the view of the Supervisory Board, ambitious comparative parameters and to the share price reflect the recommendations of the DCGK, which stipulates that the variable

remuneration that results from the achievement of long-term targets should exceed that from short-term targets.

Remuneration structure

Target remuneration consists of non-performance-related and performance-related components:

approx.	approx.
30%	30%

base salary (non-performance-related)

short-termperformance-related components

long-term performance-

approx.related components 40%

The pension contribution to the respective pension commitment of the members of the Board of Management is currently calculated as 15% of the sum of the base salary and the total annual bonus as determined at the end of the reporting period.

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Target total remuneration of the members of the Board of Management for the financial year 2023 The Supervisory Board has set the following target total remuneration for members of the Board of Management in the financial year 2023, calculated from

• the 2023 base salary;
• the taxable non-cash benefits and other fringe bene- fits in the financial year 2023;
• the annual bonus for 2023 payable in the financial year 2024 at the value for target achievement
  of 100%;
• the allocation value (this corresponds to the target value) of the long-term variable remuneration (PPSP tranche 2023-2026) at the time when granted in the financial year 2023 (payable in financial year 2027); and
• the pension expense in the financial year 2023 (ser- vice costs for the financial year 2023).

The target remuneration was increased by the Supervisory board within the framework of the current remuneration system effective from the second half of the financial year 2023. Half of the target remuneration for the 2023 financial year is therefore based on the previous target remuneration and half on the new target remuneration. In the past years - in contrast to the employees - no adjustments were made to the target remuneration. In the opinion of the Supervisory Board,

the increase in remuneration is appropriate due to the extraordinarily good performance of the Board of Management in the transformation process and the associated positive economic development. The increase is reflected in the target remuneration table.

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Target remuneration

		Ola Källenius		Dr Jörg Burzer1	Renata Jungo Brüngger
		Chair of the	Production, Quality & Supply	Integrity, Governance &
	Board of Management	Chain Management		Sustainability
	2023	2022	2023	2022	2023	2022
	in k€	in k€	in k€	in k€	in k€	in k€
Base salary	1,770	1,664	885	832	885	832
Taxable non-cash benefits and fringe benefits	85	70	406	261	82	93
Sum fixed remuneration	1.855	1,734	1,291	1,093	967	925
Short-term variable remuneration
One-year variable remuneration 2023
(100% of annual bonus 2023)	1,770	-	885	-	885	-
One-year variable remuneration 2022
(50% of annual bonus 2022)	-	832	-	416	-	416
Mid-term variable remuneration
Deferral 2022
(50% of annual bonus 2022)	-	832	-	416	-	416
Long-term variable remuneration
PPSP tranche 2023	2,717	-	1,358		1,358	-
PPSP tranche 2022	-	2,200	-	1,100	-	1,100
Sum variable remuneration	4,487	3,864	2,243	1,932	2,243	1,932
Pension expense (service costs)	507	510	285	288	250	250
Target total remuneration	6,849	6,108	3,819	3,313	3,460	3,107

1 Dr Jörg Burzer was appointed to the Board of Management effective December 1, 2021. Fringe benefits accordingly include in 2022 and 2023 one-time expenses. In particular, this applies to safety-related modifications to Dr Burzer's residential property.