Björn Scheib - Head of Investor Relations Dieter Zetsche - Chairman of Board of Management & Head of Mercedes-Benz Bodo Uebber - Head of Finance and Controlling, Daimler Financial Services Wolfgang Bernhard - Head of Daimler Trucks & Buses

Patrick Hummel - UBS Arndt Ellinghorst - Evercore ISI Michael Raab - Kepler Cheuvreux José Asumendi - J.P. Morgan Tim Rokossa - Deutsche Bank Horst Schneider - HSBC Philippe Houchois - Jefferies Stephen Reitman - Société Générale Harald Hendrikse - Morgan Stanley Stefan Burgstaller - Goldman Sachs Stuart Pearson - Exane BNP Paribas Björn Scheib: Good morning, ladies and gentlemen. This is Björn Scheib speaking. On behalf of Daimler, I would like to welcome you all here in Stuttgart as well as on the Internet to our Full-Year 2016 Investors and Analysts Conference. We are very happy to have with us today Dr. Dieter Zetsche, the Chairman of the Board of Management and Head of the Mercedes-Benz passenger cars, as well as Bodo Uebber, our CFO and Member of the Board of Management responsible for Finance and Controlling and the Financial Services; and Dr. Wolfgang Bernhard, Member of the Board of Management responsible for the Daimler Trucks & Buses. Yesterday at the Annual Press Conference, Dr. Zetsche and Bodo Uebber presented our financial figures for 2016 as well as the strategy in detail. All relevant materials and respective presentations can be found on the Daimler Investor Relations website. In order to give you maximum time for your questions on our today's conference, we will begin with a short introduction by Dr. Zetsche directly followed by Q&A where Dr. Bernhard and Bodo Uebber will be available to answer your questions. Having said this, I would like to remind you that this investors’ conference is governed by the Safe Harbor wording that you find on our published results documents. Please note that all of our presentations contain forward-looking statements that reflect management’s current view with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlining any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. Please be aware that this conference will be broadcasted, recorded, and then will be available for replay on our website. A few practical points for our Q&A session later on. Before asking your question, please identify yourself with your name and the name of the organization that you're representing. Please ask your question in English, and as a matter of fairness, please limit the amount of questions that you're about to raise to a maximum of one. Okay, accepted, two, so we have everybody with the chance to raise questions. Last but not least, please don't forget to switch off your mobile phones. With this, thank you very much and I would love to pass on to Dr. Zetsche.

First, switched off his mobile phone. Okay, good morning, ladies and gentlemen, and welcome to our Analyst Investor Conference. First things first. Daimler did better in sales, revenues and earnings than ever before. But equally important in the best year in our company's history, we also embarked on the greatest change at Daimler. Anyone who wants to shape the future of the car needs both financial strength and innovative power. In 2016, we proved that the combination of both factors stronger Daimler today than ever before. As investors and analysts, I know you've already gone through our numbers in detail, so I'd simply review the major highlights. Let's begin with Mercedes-Benz cars. We've already achieved our 2020 goal in 2016. Mercedes is on top of the premium segment. Our positive sales dynamic is largely the result of the strength and attractiveness of our products, including for example, the newly introduced E-Class for GLC Coupé. In total, Mercedes-Benz cars sold 2.2 million passenger vehicles, 10% more than in the previous year. We are able to gain market share in almost all regions, and we continued to move forward on a profitable path. Adjusted for special items, EBIT climbed 7% to €8.9 billion, and with a 10% return on sales, we hit our margin target. Higher sales along with improved pricing were key to the higher earnings. Expenditures for investments in new technologies were counter effects. Let's turn to Daimler Trucks. Our commercial vehicles were on difficult turn in 2016. We maintained our leadership in important markets, but overall sales declined by 17%. Positive impulses came from Europe while sales in Latin America sharply declined again, largely due to the recession in Brazil. Asia was also a mixed bag. Japan, we were able to slightly increase sales. In India and in the once again strongly declining Indonesian market, our sales decreased. In the NAFTA region, sales were significantly below the exceptionally high level of the previous year, but with a market share of 39%, we maintained our strong market leadership position in Classes 6 to 8. We have responded to the market changes in the NAFTA region and Brazil by taking steps to adjust our production capacity. As a consequence to the market-related sales declines, Daimler Trucks was unable to sustain its prior year's results. Adjusted for special items, EBIT fell from €2.7 billion to €2.1 billion. In view of the overall very difficult market environment, our Truck division achieved good results in 2016. We are aiming to bring Daimler Trucks up to its target level of profitability on a sustainable basis. To that end, we continue implementing measures to increase efficiency and optimize our fixed costs, especially at the Mercedes-Benz brand. Mercedes-Benz Vans also continued its success story, exceeding previous year’s sales by 12%. We will expand our van portfolio this year with the first premium pickup. Sales will start at the end of this year. Adjusted for special items, EBIT reached a new high of €1.3 billion, and with a 10.1% return on sales, we over-achieved our target of 9%. Those results were shaped by positive sales growth particularly in Europe, the NAFTA region and China, as well as efficiency improvements. Business developments at Daimler Buses were affected by difficult market conditions, especially in Latin America. Therefore sales declined by 7%. At the same time, we managed to increase our adjusted EBIT to €258 million. And with this 6.2% return on sales, we were above target. Daimler Financial Services had yet another very good year. 2016 new business grew by 7%. For the first time ever, we financed more than four million vehicles. Total contract volume is now at €133 billion. The acquisition of the leasing specialist Athlon contributed to the increase in contract volume. This strategic investment makes us a strong player in European fleet business. The increased contract volume and our disciplined risk management led to return on equity of 17.4% and earnings of €1.7 billion. That brings me to our 2016 fiscal year Group results. Group revenues increased by 3% to €153.3 billion. Group EBIT was €12.9 billion. Adjusted for special items, it was €14.2 billion. With that, we confirmed last year's guidance and were able to slightly increase our earnings by more than €400 million. Due to the fact that the decline in truck and bus markets alone had a negative earnings impact of around €1.6 billion in 2016, then our research and development activities increased by around €500 million. This is a remarkable result. Net profit reached €8.8 billion in 2016. Free cash flow from our industrial business amounted to €3.9 billion in 2016, slightly lower than in the previous year but above the 2016 dividend payment. To allow our shareholders to share in the success of our company, we will propose a dividend of €3.25 per share equivalent to the previous year’s dividend. It will bring the total dividend distribution to €3.5 billion. This is a dividend yield of more than 4.5%. In the current interest rate environment, this corresponds to a very attractive rate. So now to our outlook. Looking ahead, we’ll continue to work hard on the things that have made us successful today. We are making targeted investments in new products and services. We're focusing sales and production on global growth, and we continuously improve our efficiency. At the same time, we see several fundamental changes in the auto industry. Connectivity, autonomous driving, sharing and electric mobility, any one of these has the potential to set our industry on its head. At Daimler, we aim to lead in all four fields. In terms of electric mobility, we have flipped the switch. Daimler will invest €10 billion in electric vehicles and another €1 billion beyond that in our worldwide battery production. With our new Mercedes brand EQ, we are creating an entire electric ecosystem from inductive charging to private energy storage. By 2025, we will have introduced more than 10 new electric models to the market. By that time, we expect 15% to 25% of all newly registered cars from Mercedes to be powered by electric drive. But our understanding of cars goes far beyond the new drive system. We are convinced it's all about having the best overall package. At Mercedes, we are focusing on two strategic pillars. We will consistently optimize our core business and with our new unit CASE, we will approach to four future key topics at Mercedes in an integrated way. The same is true for Daimler as a whole. In all areas, we want to not only enhance to this business but also heavily invest in our future business. By the beginning of next decade, our first heavy-duty electric truck will be ready for production. Meanwhile 300 of our colleagues are working on new ideas on the connected trucks. Our Van division is transforming from a manufacturer to a provider of holistic logistic systems. Our Vision Van shows how we aim to connect the entire delivery process. To this end, we will invest around €0.5 billion in digitalization, automation and robotics by 2020. Our largely autonomous Future Bus shows how our public transit system could look in the future. In addition, we will launch our first electric bus in 2018. And beyond that, we are expanding our mobility services. In the long-term the greatest potential lies in combining the topics of connectivity, autonomous driving, sharing and in mobility. In order to drive this forward, we are also strengthening our cooperation with external partners. The most recent example is our announcement to join forces with Uber in terms of autonomous driving. At the same time, we are reinventing ourselves at Daimler. For this reason, we are further developing our corporate culture. So much for the outlook. Now what does all of this mean for our expectation and guidance for the year 2017? Global demand for passenger cars is expected to pick up by another 1% or 2% in 2017. The [Technical Difficulty] and busses we expect slight market growth across our core markets. Demand for trucks will likely remained challenging in the regions that are relevant to us. Spaces. We've set the following EBIT goals for individual business units: Cars, significantly above prior-year level; Trucks, slightly below prior-year level; Vans, significantly below prior-year level; Buses, slightly above prior-year level. Financial Services in the magnitude of the prior year. Overall [Technical Difficulty] EBIT in 2017 to again slight increase. In other words, Daimler will remain in the fast lane. Yesterday we’ve published the first success today is changed from the renewal of our products to our repositioning in China. The basis for our future success will be the even more fundamental changes we are making now. 2017, we continue with the implementation of a growth strategy with our work on the technologies of tomorrow with the transformation of our entire enterprise. The mobility of the future hold universe of opportunities for Daimler and we will take full advantage of them. And with that, ladies and gentlemen, I appreciate your attention and welcome your questions. Thank you. A - Björn Scheib: Thank you very much, Dieter. Now we are going to start the Q&A session. So we will start with Patrick, and then we take Arndt.

I hope you can hear me. Patrick from UBS. My two questions relate to R&D. First, you’re increasing your R&D budget for the coming years compared to what you spent last year and what you budgeted before for 2016/2017. Can you give us a better understanding where the incremental spend goes into? What has driven the decision to go even higher with the R&D spending, and what the time horizon is that we should expect to see returns on those investments? Is it all a very long-term nature when it comes to autonomous driving et cetera without any immediate returns, or is there something that also yields in the interim return? And the second question just links to the R&D budget to your expectations for profitability of Mercedes Car Group. Is it fair to say that you are doing this increase in the R&D budget as a result of your confidence that you can maintain 10% MCG margin anyway in 2017-18? Thank you.

Thank you. Thank you for this question. When we were in the financial crisis or the world was in financial crisis, we decided to maintain a relatively high level of spending in R&D and in CapEx. And there are good development. We took over the recent years is to quite some extent due to that positioning of ourselves that we do believe the long-term success of our company has to be our priority. We are now in a different situation. We are in a position of strength but we see lots of change driven by new technology opportunities ahead of us and we want to make sure that in this transition we are leading the change and are not driven by the change. And that's why we increase, [Technical Difficulty] let me say, start the other way around, in our, if you want, traditional field, our objective is to be ever increase our, if you want, traditional Mercedes Cars portfolio. We developed these vehicles, per vehicle ever more efficient and in combination at a flat rate. But on top of that, we are investing into the future and these are - were the acronym of CASE, the four main areas I don't have to explain here. And yes, of course when we talk for instance about sharing, I think nobody here would responsively tell you yes in 3.5 years, we get a return of 7.8% on the investment we are doing there. I think this would be totally unrealistic. And when I hear from some of the colleagues who say that with their services, mobility services that will have - that will make half of their profits in three years or something like five years or whatever, this can only be a statement about the remaining profits because nobody can tell at that point of time how this will develop. But we have to understand what's going on there. The potential disruptive nature of some of these fields we have to understand, and if they are disruptive, we have to be the disruptors. And we do believe that we are in a position of strength that we can afford to be sure we are ahead in these fields even if we then get criticism at the day of our reporting because we think the long-term future is more relevant. Clearly said, this does not mean that we are changing our strategic profitability targets. They are valid and they stay valid and we're working hard to make that happen.

Okay, thank you. It’s Arndt Ellinghorst from Evercore. Dr. Zetsche, I think it's fair to say the Mercedes-Benz turnaround product and brand-wise has been one of the most impressive ones in most German brands over the last year, so that's been really fantastic to see. The question I have is, in the past you talked about this year, next year, the coming years, the brand being on a bit of a plateau. With the knowledge you have today, do you think that's still fair or do you think you can further outgrow your peers, and more importantly, you can do it in a really profitable way? So for us to assess when we try to forecast your volume, mix and pricing momentum for the coming years, how would you describe that? And then for, Bodo, you've given guidance on the currency with more than €0.5 billion tailwind this year. How conservative is that assessment? And secondly, if you pitch in raw material headwinds, how would the balance look like? Thank you.

We had this discussion when we launched then new S-Class current generation that after the things might go south, whereas when we launched the C-Class and after that things might go south. Of course beyond the economic cycles, we have our product cycles. But as I said going from 30 to 40 products, of course this is much more stabilized now, plus it's pretty interesting that for instance if you take our compact cars, last year we were I think in the fifth year of the lifecycle of this generation, and in the fifth year, we were again selling more compact cars than the year before, which is not classical product cycle. So because of both reasons, one, that there is even in years where we are launching less new products, still a number of new products we launched. And secondly, because we see the same with our SUVs, the lifecycles, the classic lifecycles of starting a decline after the second year are by far not as pronounced, if at all, any more in many of our car lines. We have a much better feeling of our constant growth opportunity parallel to our target of profitability in the range of 10%. Yes, there are years where it's easier to get both growth and probability in the years where it's little more challenged, that is for instance when we change over our compact car, which meanwhile has pretty big part of our total business. The good news is new compact cars will be even more attractive, will be even more profitable, but yes, we have to go through this changeover, which at least as a capacity of our plans, is giving us some limitation in the growth we can do there. But overall, I'm very confident that this is not one-time nice event but then we are constantly growing at this level of profitability.

Onto your question of currencies, of course from the current point of views our best estimation, we can do to reflect the current environment of currencies, and as you have seen they are volatile. When you see the dollar development, last three months occurred - it strengthened on the last couple of two days of course the euro strengthened again a bit but on the lower level. So the volatility is highly, so it's our best estimation to keep in mind that we have also an exposure in the emerging markets, which gave us a big headache last year that should stabilize this year as the currencies stabilized somewhat movement [ph] for example. So our best estimation is more than €500 million for this year as a guidance tailwind. For the raw materials headwind of a couple of hundred million for Daimler. Björn Scheib: So next would be Michael and then it’s José.

Hi. Mike Raab, Kepler Cheuvreux right over here. I have two questions. First of all, when we look at your outlook, it's suggesting you’re yet bound for another year of earnings growth. A year ago with a fairly similar outlook, you flagged it with what we thought was positive dividend signaling. This time around you have the ‘16 dividend going sideways. I understand you’re facing, like the rest of the industry, a tsunami of upfront spending for future technologies. But besides this, is there any other reason why you kept the dividend flat year-over-year in ‘16? And then secondly, question to Dr. Bernhard. Could you please explain what exactly happened with the margins of the Truck division in the fourth quarter specifically? I'm asking because I think trend-wise that direction to be taken was to be expected, however we have one competitor out there who went exactly into the opposite direction. I'm just trying to understand the discrepancies here. Thank you.

Michael, with your question to dividends, last year when we were here I do think we did not know about a lot of headwinds in trucks on the market side, which we have pointed out is €1.6 billion but on top we had somewhat special reporting items which we reported, which we haven't had in mind [ph]. I'll remind you a little bit on the Takata development for example and others on legal proceedings, on top of course we tried also to offset this with a strengthening of the pension asset, as you know. So the flat development of the dividend from my point of view shows you the confidence in our business. Also for the future, as Dieter Zetsche pointed out, we're very confident to grow the company further and the dividend reflects this.

And of course we are sticking to our 40%, slightly above the 40% policy which shows you again that we are confident about the future. The earnings in the Truck division in the fourth quarter do not reflect any substantial changes in profit margins from products, so these things were primarily driven by things that always happen at the fourth quarter and some special items that we had to book. So there is no special development on the truck margins not in Europe, not in North America. These are basically flat.

In this context, if I may follow-up, could you remind me again what those items are that usually occur in the fourth quarter on the spending side? Just a few examples. Right over here.

Can you one more time please speak?

Yes, sure, of course. Since you mentioned there is a couple of things that usually occur in the fourth quarter, could you please refresh my memory what those items are that you spend on the fourth quarter and that led to this decline or contributed?

We always get in the fourth quarter, update on the final year closing with respect to Brazil for example, where things basically in the fourth quarter were even more difficult than we ever expected. And obviously then we adjust our forecast, our view on things like quality development and so on and so forth. So these are the things that we do very end of the year.

So in a way you have like provisioned additionally?

Yes.

To account for upcoming risk you proceed in ‘17 notably Latin America, perhaps also NAFTA?

No.

Okay. Thanks.

But maybe to give you some - there is a little bit of transparency from the fourth quarter in Trucks. Of course we are mainly hurt by the sales development in the fourth quarter. As you have seen, the decrease in sales was the major one we had in the fourth quarter on the one hand. On the other hand, our after-sales business always stays in the fourth quarter 30 days or 20 days of income, it closes roughly, I don’t know, midst of the months so to say and that is also a reflection which we have always in the fourth quarter.

Very helpful. Thank you.

On top to talk about the company all together on the car side, there are typically higher spending on dealer payments which they accrue and earn by their performance and therefore this is something which is not paid on a monthly basis but in quarterly and especially in the end of the year. José Asumendi: Thank you. José Asumendi, JP Morgan. Couple of questions, to start off with on Trucks, Wolfgang. So when I think about the structure improvement of the Truck division, I think I have got three buckets. So one, the work you are doing on components and the modules across different brands. Second, maybe the potential you have to reduce the vertical integration across - reduction of the vertical integration across some of the regions, and the third bucket, which is the reduction in fixed costs in Europe. Can you comment on those three opportunities you have and how much [indiscernible] since the Capital Markets Day last year? And then the second one is for Dr. Zetsche, please. As we think about the electric car and what it means for the supply chain and your production internally, can you comment on which compliments do you think are core for Daimler within the electric car, especially thinking about transmissions, battery technology and electric models? And then we'd love to get some comments on if you have decided which suppliers are going to be core and basically what it means for Daimler and also the workforce on Daimler. Thank you.

You're right. First of all, let me little bit talk about last year with respect to volumes. Obviously Dieter already said it that last year we had, in most of our markets, significant headwind starting with NAFTA but also Brazil that we thought cannot get lower, proved that it can get lower. And last year was, in most of the markets, in most of the areas, we had to work hard with respect to efficiency, so we reduced our workforce in Brazil by another 2,000 people and we are continuing since 2012 to work in all our plants. When you look at the numbers, you can see that the downfall of the markets in the truck accountant for roughly €1.6 billion of basically margin decrease, and we were able with €600 million, €700 million to counter that. These are basically due to all those programs that are running since 2012. What we do here is basically, in our plans in Europe, we are working hard to reduce our vertical integration. Here we are getting rid of parts manufacturing that we do not think are strategic and important where we can make a difference. And that we sold a foundry in South Africa. We reduced manufacturing areas where we do parts. This is ongoing stuff in our German plants as well as the plants in Brazil. Our new manufacturing in Brazil footprint will be like this. In Juiz de Fora, we will do only body and paint. In the main plant in São Paulo, we will do all the assembly. Most of the power trains that we do, axles, transmission and engines, we will get rid of the machining parts of those main components. We will maintain a strong hold doing our own engines. We will doing our own transmissions because we believe that we have a competitive edge there and we prove to have that in Europe and in the U.S. And these operations would be basically reduced to assembling the parts. On top of it, in the European plants, we are also streamlining our operation. We are getting rid of operations, let's say, logistics that we don't think we have to be in where we can make a big difference. We are also streamlining across all the plants. And when you put that together, that resulted in the €600 million that we have been able to - and other cost changes were we believe, we are able to counter those margin decreases. These efforts will continue through the next years, and on top of those efforts, there will be another effort which especially targeted with respect to Mercedes-Benz Trucks, that means in Europe and Brazil where we try to find another €400 million in efficiency improvements. For that we will reserve throughout this year, in the second half of this year, up to €500 million to make sure that any one-time cost that we might incur throughout the year that we are covered. We believe at the end of this exercise, not only the American but also the European and Brazilian business system will be much, much stronger and much more profitable than it is today. We will be then right-sized and perfectly prepared if those market might come back at any point of time. So this is what we are trying to do. That means our suppliers will play a much bigger role not only as part suppliers but also as service suppliers. And with that, we are maintaining our strategic competences at the same time.

As far as electric cars are concerned, reasons as well, we will design these cars in a way that we can produce them in our more and more flexible assembly, existing assembly lines. This is different for the components side of course for the power train. Here we do not only see that electric power train has less labor content than combustion engine power train, but we see as well that the chance for differentiation between electric motors for instance is much smaller than with combustion engines and this should be the guiding principle for us what we do in-house and what we don't, and therefore there is certainly not total agreement. We do believe that we will not increase our vertical integration in the declining power train business which obviously the labor representatives much prefer, but we do the opposite, which will compound the impact. The good part of the story is that we have time. It's a longer period, and that's why we are starting this adjustment by now. We do not hire any people with increasing sales volume for power train either, and we will use every opportunity of reduction there as early as possible, which means we see a responsibility to safeguard the future of the people on board but we do not see responsibility to safeguard the jobs that are on board. And that's where we are in a constructive discussion making our way forward. You might have noticed that their significant volume growth in recent years at Mercedes has not been paralleled by a similar or almost any headcount growth either, driven on the one hand by really satisfying improvements in productivity, and secondly, as Wolfgang just described on the truck side, parallel on the car side, continuous reduction of our vertical integration. Not with big items. Now we stopped doing axles, but with continuous reduction of all the parts, we’re doing underneath this assembly level across the board and this is a very effective way which we intend to continue. Björn Scheib: So the next is Tim and then it’s Horst.

Yes, Tim Rokossa at Deutsche Bank. Thank you for taking my questions. I would have two please. The first one refers to Trucks as well, Mr. Bernhard. When we think about the fourth quarter, you have underperformed Volvo in almost every region. First of all, I'd be curious to understand if we should read anything into this? Are you using your technological action or was this just a year-end impact or were there more price aggressive something like this? But more important, we have actually seen quite a good order intake from the European region particularly. You are guiding for slight decrease in the full-year. Might that be too conservative? Are we on an opposite position compared to early last year where you were relatively positive on Trucks and particularly on the earnings side of things turned out to be slightly worse. Now you appear to be a little bit more cautious. Maybe this year is the other way around. And then my second question just on the investment side coming back to then Mr. Zetsche, I think it is clear that you are impressively showing that you are at the forefront of technology for most mega trends whether this is autonomous driving or electrification, this obviously also comes at a cost. You're developing a lot of things at the same time. When do you think it is time to focus again? And maybe Mr. Uebber as well. You are printing new records earnings results but obviously your free cash flow while it is covering the dividend impressive considering all the investment cannot really be what you have in mind printing these sort of EBIT numbers? Will there be a point in time post ‘17 ‘18 maybe where we start to see an improvement in the conversion rate again and where you can focus beyond this? Thank you.

I would like - just to keep for everybody in mind what the outlook for the market is this year. We think that Europe was slightly decreased. Brazil is not going anywhere for this year, we just say a little bit uptick but no much. In the NAFTA region, we believe that it might be slightly down with the Class 8, even further down 10%. This is what we believe what's going to happen. Also Japan is slightly down, and Indonesia is basically around prior-year level. That basically means when you look into the future, we don't see great tailwind. We just see primarily headwind. You're right when you're saying that book-to-bill rates have been improving and we have started into this year quite promising. When I look at NAFTA, we see that our January order intake was very, very good, which surprised us to some extent. We don't know whether this is a one-timer, with this is - whether this is an industry thing or it's just us, we don't know yet. We will find out in a couple of days. Also the order intake in Europe has been good for the first in the January, so we are happy to say that the starting to this year has been positive and we are not starting with a deficit. Here is that we are having - we are basically having a little bit of a good start in this year. However I need to say there is a lot of work that needs to be done, especially when we look at Brazil, we still don't believe that where we are where we should be, and we have to continue to right-size the business. And also in Europe we see opportunities with respect to our fixed costs. As I said, this is where we have to work on. So is there a chance that the world will develop much better than we anticipate at this point of time? Yes, there is. Is there a chance that things might happen adversely? Yes, there is. So we don't know yet how it's going to be, but I can assure you that at this point of time that the start into this year has been promising.

And on Volvo perhaps for the trucks?

Normally we don't comment too much on our competitors in our press conference.

You have been asking when we start to focus again. I can tell you we are pretty focused and what we are doing we are doing consciously. Two years ago, there was some discussion going on if R&D rate of less than 5% would be sufficient and if we would not set the stage for another fallback against our competition. Now a year later, 5.3% is perhaps too high. I'm totally fine to discuss that. And of course turn rate on our cash flow side higher than the one we are having at that point of time is decided on the one hand. On the other hand, I think our task is to invest into the future, profitable future, and one problem of this road is that in many places people don't have ideas anymore how to invest into the future and we can print money now, and if nobody has an idea what to do with it to earn more money with it, this is part of our problem in the GDP development on the global basis. So we have, at least, proven in the recent history that the money we invested turned into growth and growth at a profitable level and the same is our intention going forward. I have to admit, and I said that before, that there are some areas where we cannot clearly define today the exact return and the timing of the return and this is mainly true for areas, as I mentioned, like mobility services and sharing things like that. But on the other areas we are knowing very well what we are doing and we do believe that we have a very high investment phase as far as R&D and CapEx is concerned, and that the ratio will get better again but we do not want to constrain us at that point of time because we think we have the strength to do that. From opportunities, we can plant the seed today and harvest tomorrow. But of course absolutely mandatory for us is that we pay an attractive dividend out of our cash flow and intend to, on top of that, maintain some cash, as we obviously did in the last year, and this gap can even grow is certainly a target we share.

It's Horst from HSBC. My questions would be, first of all, when we think yesterday to the market correction, we got in the share price, my suspicion was that [indiscernible] high et cetera. When I hear you talking this morning, it gets impression rather that the things could be eventually better than thought. So from today’s perspective would you say that there is - maybe the risk is more on the upside or rather on the downside? Maybe some indication would be helpful. And in that context also, last year you explained that H2 is going to be strong as in H1 in terms of earnings performance. It would be helpful to get such a statement also this year. My impression is that for Mercedes, for example, H1 going to be stronger than H2 just for lifecycle reasons. For Trucks, it is the opposite because you do more cost-cutting which could have an impact in H2? And last question is on volume structure net pricing. Q4 was a little bit weak, weaker than the quarters before, at Mercedes in particular. Is there any particular reason for that? And in that context, do you think that the net pricing can get at all any better than it was in 2016? Thank you.

Answering first about passenger cars, which of course covers a significant part of the Daimler piece all together, and then adding what can be added in the other areas. Of course, our objective is to give you a guidance which is - and we only know afterwards that as realistic as possible. Not positive, not conservative, not aggressive, but as realistic as possible. Again, afterwards we will see if that’s true or not. At the same time - and we have said that, the year is starting very good. Starting very good and certainly rather supporting an upside than a downside, but it's just one month, It’s 12th of the year and that’s what is already in the pocket. And on that basis, we do not see any developments which would be controversial to that start at that point of time whatever events might happen tomorrow. And therefore I think after January sales, our confidence into the year has certainly grown and not been reduced. I think that's a fair statement. On the Vans side, we have a special effect first of all that last year was unbelievably good, and secondly, that there are business of providing Volkswagen with almost entire vehicles for their brand has ended at the end of the year, plus whether starting their new pickup and the heavy investment phase in the next printer, we are - and in Vans, we still have pronounced sites [ph] because the lifecycles are much longer, and so the number of vehicles is much smaller we have a heavy spending year in 2017. So that is independent of the market where we are looking very optimistic into the future and impact on our earnings in 2017. Trucks, you can hear directly. I don't quite understand if I got you right why we had not so good fourth quarter on the passenger cars side.

Don't get me wrong, it was an excellent result. I just - when I just divide the earnings change coming from volume structure mix by the revenue change in Mercedes, it is a fairly low operating leverage compared to the quarters before. And when I see at the same time that the E-Class share has been never been higher than in Q4, I asked myself why is that?

To look at this ratio of course makes a lot of sense, perhaps not necessarily on a daily or a weekly or monthly or even quarterly basis. Of course we are looking - trying to understand very clearly what is our net pricing doing, and there again we were talking about fourth quarter effects. You look at your leasing book at the fourth quarter more severely than throughout the year. All of these things have an impact, which is not ongoing. Altogether, as you have mentioned, we had a positive net pricing in 2016 and we have striven for that in recent years. We are striving for that in 2017. There obviously the competition has made sure [ph] saying if ultimately we will accomplish there and we are looking very strongly at the mix of our sales, which is on the one hand product mix where we have higher margin lower margin products and which on the other hand a regional mix where we have higher margin regions, less high margin regions. We do not see negative developments in this regards going forward.

But at least you want to improve the net pricing in ‘17. That’s right, yes.

That's what we wanted to do in ‘15. We have accomplished it. That's what we wanted to do in ‘16. We have accomplished it. That's what we want to do in ‘17 and we’ll tell you in a year from now if we have accomplished it.

Of course but at least the aim is there.

We will see, both in Trucks and in Cars more seasonal developments. In 2017, Q1 will be not as pronounced in Cars as it was last year. We had a very weak Q1 in 2016. Other than this we have seasonal developments. As you know, in Trucks for example, the first quarter is always a weaker quarter but you have to be careful because we get this one-time gain from the sale of the premise in Japan which is roughly €250 million.

But we do not see the reverse of our first half second half pattern of recent years in this year.

Okay. Thank you. Björn Scheib: So the next would be Philippe and then Stephen.

Yes, good morning. Got two questions. The first one is on the border tax adjustments in the U.S. I'm assuming that you’ve done simulation about what the impact of that would be on your...

I can't understand you. Might be my ears…

I’ve got two questions. One is on border tax. First one is on border tax adjustment in the U.S. Trying to understand, I'm assuming you’ve done simulation of what the impact would be. I assume you're probably a gainer of that because you’re a slight net exporter. But I'm just wondering in the environment where the dollar would appreciate, which is what people are talking about in those adjustments, would that put at risk your strategy or be the net exporter out of the U.S., especially in terms of single sourcing, some of your SUVs are single-sourced out of the U.S. for export to world markets? Would that put your strategy at risk there? And the other question I had is on Financial Services. I know you're going to talk to us more about this in a couple of weeks. But for several years, we've seen - years ago, Financial Services business used to pay you dividend to the parent and then they stopped a few years ago because of the crisis and then because of having to retain cash for capital ratios. This year part of your cash came from the dividend from the Financial Services. Is that a trend that we are going to see going forward, or is it a one-off? Just trying to understand if the Financial Services will become maybe less capital intensive or if that was just a special situation for 2016? Thank you.

To your first question, I ask for your understanding that we do not discuss publicly the impacts of border tax and so on and so forth. We do our job internally. We are discussing things, and once we do have facts or alternatively facts, we will come up with something and make decisions of whatsoever, but please understand there is not a public discussion about it. Secondly in Financial Services, normally Financial Services - we get from Financial Services a dividend to the industry because we don't need the net profit totally to strengthen our equity ratio. So we might need half of it or so. We do special contributions for China for example, because it's fast-growing market in financial services business and the legal requirements are higher than in some other markets or for example the Mercedes-Benz Bank is regulated here in Germany, therefore we need to provide what's once in a while was capital contribution but normally we get dividends. Last year it was about €700 million, so we had roughly €900 million of dividends going to the industry and we put in €200 million in equity. So net €700 million that is - you see that in the net liquidity - strengthened the net liquidity of the industry. For 2017, I don't expect this amount of money. The equity ratio is currently 7.4% end of the year and we have €10 billion of equity in the Financial Services portfolio.

Thank you. Stephen Reitman, Société Générale in London. Question about capacity utilization in China and the United States. Obviously the growth that you’ve had in China has been phenomenal from a retail perspective and you must be bumping against the capacity limits you have in your production base in China. Can you talk about the utilization rates you have at the moment, and do you think you need to put in more capacity in China? And secondly, obviously in the United States, as the primary source of SUV to the rest of the world. I would guess also they must be running at very high utilization rates, and so it must be quite tempting to put an extra capacity there as well which will also be, I guess, well received by the new administration.

Talking about China, we have seen significant growth in China, and at the same time during last years, their percentage of sales being local we produced has grown as well. So obviously the production in China has almost exploded, probably not the right word. We are constantly adding capacity and even plans. We have the north plant. We have the south plant. We have all the activities in componentry there, and it's almost surprising how smooth this buildup of huge manufacturing unit is going, both in the sense of supply as much and that is as important in the sense of quality, and let's say, the last two years we are, on top of that, focusing on productivity. We are making huge strides forward in getting closer to levels of productivity we are having at other parts of the world. There is a very strong focus by today as well. I apologize because I just don’t know it that I can't give you a specific utilization rate. That is mostly due to the fact that both parameters are changing all the time, the existing capacity and their production. But of course at some point of time we have to even discuss if we would have to look at other location, an additional location. There is certainly some specialty in our case that our partner, the main shareholder of our partner is the municipality of Beijing which so far was certainly not to our disadvantage and we have a very, very positive collaboration with our partner and with our partner on the shareholder side. But having said that, we have to see to which extent we can further leverage that location if we have to wherever look for further locations as well. But this is not something which we would be deciding right now. Yes, we are obviously very successful with our SUV. We have all together a strategy of global production networks, where every car line - and yes, you’re right, the GLE is an exception from that. Typically it’s produced at different places in the world and we exchange. We cannot produce 40 cars at every place in every market but we are selling them but we are exchanging of course throughout this linked network which is very flexible in itself, and we develop our plans what to do where all the time. As far as the GLE is concerned, we are adding capacity all the time and this affects, of course, our plant in Tuscaloosa in a positive way. Björn Scheib: So next would be then Harald, and then after this, Stefan.

Just a quick question just again on the outlook. You’re investing significant amount of money into the new technologies doing the presentation last night. [Inaudible - Microphone Inaccessible].

That's what we're paid for. As far as your first part of your question is concerned, we are introducing a new generation of engines, which we internally call FAME [ph] and they are famous about their flexibility. So we finally are reaching a stage which we would have been nice if we had it earlier, where manufacturing-wise we have almost total flexibility between four-cylinders, six-cylinders, between gasoline and diesel engines. These are all cells where all of these things are produced and not huge transfer lines and we can almost without limits shift back and forth whatever the need be. At the same time, we are seeing, so far since September 2015, no significant change in the take rates of diesel in Europe, and this is European issue what we are talking about, and yes, we have sold very, very low volumes of diesel engines and we are talking about 200, 300 basis points in change in the take rate at almost 50% levels or over 50% levels. So this is marginal especially when you know that typically when you have low fuel prices, the ratio of diesel take rates goes down because it's an economical consideration at the end of the day. And while we had low for fuel prices, we still saw an almost flat development of diesel. So the customer so far doesn't care about the discussion which is going on. Is that true tomorrow or the day after tomorrow? I don't know. If my colleagues continue to tell the public all the time that tomorrow there might not do diesels anymore, we might end up in self-fulfilling prophecy. I don't understand that. But we see nothing of that, and at the same time, I think third-parties have confirmed that our new diesel engine OM 654 is an extremely clean engine, as far as NOx is concerned as well and whatever kind of definition for measurements you want to take. And it continues to be true that the diesel engine has 15% to 20% advance in CO2. And even though today the entire world talks about NOx, CO2 I think stays being relevant. That is what we are talking about climate change and the climate change what’s their COP 21 in Paris is all about. And we try to contribute in this regard, not just as a company but I think as economy and a society. It would be stupid to waste the benefit diesel can provide because of things which went wrong in one area which we are fixing all together as an industry. But ultimately will not be decided just by us. I can just say we base our future on the diesel engine in Europe as well and we just do not see a different direction from our custom base so far. As far as electric vehicles are concerned, it is our objective to put a vehicle like this while I'm sitting here aside of our combustion engine vehicles and making it a very hard choice for our customers ideally making them want to buy this vehicle no matter what because we do believe that is ultimately the direction we want to go and we have to go, and we do not want to go there because people mandated and don't allow us to sell gasoline or diesel engines but we want the customers to prefer these vehicles and that's what our all the 10 billion we are talking about are going towards [ph]. And how this will play out, it's very difficult to forecast and that's why we are talking about ranges and that's why we’re trying to put flexibility in our manufacturing facilities as I mentioned before. But our objective is to accelerate the ramp up of these vehicles as a percentage of the total sales, and as we told you, our current internal planning is something between 15% and 25% by ‘25, but it's not just dependent on us if that is the right range we're talking about.

Yes. Stefan Burgstaller of Goldman Sachs. Dr. Zetsche, you talked about strategic margin target of 10%. Most of us have come to learn that with the product age of your product portfolio and the mix, the margin has a certain cyclicality. Can you just share your thoughts how you think, everything else equal, let’s say a steady market environment, let's assume that the regulatory headwinds can be compensated for cost measures, how do you think about the margin spread as you walk through your aging process of the product portfolio?

Of course we were aware some time ago that relevant part of our growth would be driven by the compact segment and that's what was happening. And therefore on the one hand with our current generation, we have very attractive, especially family members, which commends pretty attractive margins, that is not true for all of them, and we have put very, very strong emphasis on the development of the next generation where objective was to improve the overall profitability of that family significantly over the current one. And we are still more than 12 months before the launch of the first product, but all we can see today is very encouraging. This does not mean that the new generation of compact vehicles will be on the upper side of our strategic margin, but the downside will be significantly reduced compared with our current family. So this is all about that we try to understand how our mix will develop and with this impact on the mix, how we can safeguard the 10% as our strategic target. And that's not an easy one. Well, that's why we are working every day and we are - so far we have made good progress. Björn Scheib: We take then the last question from Stuart and then…

Just one element. While the compacts are growing not just for us, it's true as well that on a global basis, the share of SUVs is growing, and that is, generally speaking, something which is not a burden on our margins.

Okay. Stuart Pearson from Exane BNP. So two questions. One, just following on maybe from the mix point, and I wonder how you would see that developing if and when we finally get to a rising interest rate world because if we look at the Financial Services’ balance sheet of with yourselves as the whole industry, it seems there has never been a time when the industrial business has been more dependent on Financial Services than it is today. So I just wonder what happens when interest rates start to happen, do we see consumers see start to get down-traded little bit in terms of mix. So wonder how you think about that on the Financial Services side? And that certainly set fully for the second question just on electric vehicles. There was a question earlier about where you see it being in the value chain and I think you said before you don't plan to be in cell manufacturing for instance. But I wonder what your strategy is in terms of securing a battery supplier that you and your peers would really need in five to 10 years’ time because clearly somebody has to pull off the capital risk here for some very uncertain volume forecast for EVs in five or 10 years. So I wonder what the strategy is there. Do you have to commit to some take-or-pay agreements with certain volumes in five or 10 years to convince the battery players to invest?

Let me start with the first question. When we exclude for a moment the Chinese market, which used to be a market where you felt ashamed when you didn't pay for your new car in cash and it’s developing in more normal pattern relatively rapidly over time. If you exclude that effect for a second, my best understanding - and Bodo can correct me immediately - is that our penetration is more or less flat over the time as it was in higher interest rates phases as it is now. And therefore I - of course the financing is very attractive today for good reasons, but of course somewhere else people get as attractive rates as well. I do not necessarily see a mixed impact on high interest rates, which certainly would be for the total system, an additional cost no doubt, which might have a total volume impact but it's the rate of financing, especially leasing, is more regionally different than from the car lines, to some extent as well but not so pronounced. And as you're more in-depth in our Financial Services business, Bodo, but I don't think that this would change our business system significantly. As far as our electric - where were we there? Electric car was the other point you made...

On the battery supply sourcing and what capital at risk that you might have to build commitments to...

Sorry. We are confronted with the situation where in spite of the starting growth in this field, we see excess capacity and we see an ever growing number of suppliers coming to us and are significant interesting reduction of price per or cost per kilowatt hour in that area. Many new competitors are adding now, coming to the game in China, and some of them being very capable already by today. So at that point of time, we have no visibility of shortfall in supply. As far as the cells are concerned, we ourselves, as you know, are investing in the batteries, which is not the cell but the entire - the assembly of the batteries including all the other parts beyond the cell. That's our part. But once again - eight years ago, this was the discussion and we set-up our own cell production because everyone said, you will be strangled by the Koreans or whomever who will not give you cells when you need them. The opposite is true. It was just a loss of money in that field and it only prevented us from picking the best supplier technologically and especially economically, and we are in this game today in a very favorable way and this development is encouraging.

So I don't have to correct Dieter, because he is right. What you said, there is no - not by definition but usually of course is a very knowledgeable in many things. But just to add a little bit when you go back 10 years or 15 years, we had interest rates developments up and down, because of business for a couple of years and normally what happens is that you pass over it to the customer after certain period of time, you lose three to six months in Financial Services to adapt to the situation. When we now, from my point of view, simulate rising interest rates, I do think that the GDP development will go in line with this and somewhat inflation also. So keep in mind the whole system might be different, and then of course in this, Dieter is right. The penetration rates are more or less the same, so for this I don't see a huge impact. On the other hand, I do think we are a well-run company. You know our rating is a very positive one and that helps also [Technical Difficulty] do a very good financing for our customers and you will get even good news during that day. There will be another announcement from another rating agency would. Björn Scheib: Ladies and gentlemen, thank you very much for your questions and being with us today. For the ones of you, who are listening via the Internet, thank you very much for joining in. Also big thank you to the management team for comprehensively answering all your questions. As a friendly reminder, you’re being informed that we are going to host Capital Markets Day on Financial Services mid-February in London. For ones of you who haven't signed up yet, make use of the opportunity you’ve seen today. There seems to be some interest on this business. And with this, have a lovely day. Safe trip travel being back to your homes. As always, I ask space at your disposal. Have a lovely day. Bye-bye.