1.2 2 KCV s Earnings Position HGB

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1 Klöckner & Co SE Management Board Report on the Control and Profit and Loss Transfer Agreement with kloeckner.v GmbH of July 28, 2015 pursuant to Section 293a of the German Stock Corporation Act (Aktiengesetz, AktG) (analogously) Recitals (A) (B) (C) Klöckner & Co SE, with registered office in Duisburg, registered in the commercial register of the Duisburg District Court under HRB 20486, (hereinafter referred to as Klöckner & Co ) as the controlling company and kloeckner.v GmbH, with registered office in Berlin, registered in the commercial register of the Charlottenburg District Court under HRB B, (hereinafter referred to as KCV ), as the controlled company entered into a Control and Profit and Loss Transfer Agreement (hereinafter referred to as the Agreement ) on July 28, The Agreement shall be presented for approval to the Annual General Meeting of Klöckner & Co on May 13, 2016 under agenda item 7 pursuant to Section 293 (1) of the German Stock Corporation Act (Aktiengesetz; hereinafter referred to as AktG ). The Shareholders Meeting of KCV already approved the Agreement on August 4, The Agreement shall become effective subject to the approval of the Annual General Meeting of Klöckner & Co and the registration of the Agreement in the commercial register of KCV (Section 294 (2) of the AktG). To inform the shareholders of Klöckner & Co and to prepare them for their resolution pursuant to Section 293a of the AktG, the Management Board of Klöckner & Co hereby issues the following report about the Agreement: 1 Contracting Parties 1.1 kloeckner.v GmbH KCV has been found on April 13, The share capital of KCV amounts to EUR 100, Klöckner & Co is the sole shareholder. KCV is engaged in the acquisition and disposal of direct and indirect (funds) shareholdings in other companies as well as the management of such shareholdings.

2 The Managing Directors of KCV are Gisbert Rühl and Dr Jan Liersch. They are authorized to represent the company either jointly or individually together with a proxy. 1.2 Klöckner & Co SE Klöckner & Co has a share capital in the amount of EUR 249,375, and acts as the controlling company of the Klöckner & Co Group. 2 KCV s Earnings Position KCV, whose fiscal year corresponds to the calendar year, in the past short fiscal year had an annual deficit of EUR 50, (after taxes according to the individual financial statements pursuant to the German Commercial Code (Handelsgesetzbuch, hereinafter referred to as HGB ). 3 Legal and Financial Reasons for Entering into the Control and Profit and Loss Transfer Agreement 3.1 Control Agreement Entering into a control agreement is the best way to bring about and ensure the uniform management of KCV and the associated integration in the Klöckner & Co Group. In particular, the control agreement enables the Management Board of Klöckner & Co to give instructions to KCV s management due to the overriding interests of the Klöckner & Co Group. Such instructions go beyond the instructions given by the Shareholders Meeting and thus ensure uniform operations within the Group. Pursuant to the control agreement, the management can be given instructions that are in the interest of the controlling company or other Group companies, even though they may be disadvantageous for KCV. Should the implementation of an instruction turn out to be impermissible in an individual case, the management may not follow it. Impermissible instructions may arise, for example, due to a violation of mandatory laws or KCV s Articles of Association or in cases where compliance would result in liability for destruction of the company s existence. In addition, unlike in the case of instructions issued by the Shareholders Meeting, no formal resolution is necessary to give instructions under a control agreement, which in turn simplifies the issuance of instructions in practice and ensures the uniform management of the Group companies. The right to give instructions may only be exercised as of the effective date of the Agreement and, in particular, may not be exercised retroactively. 2

3 3.2. Profit and Loss Transfer Agreement Upon the simultaneous conclusion of a profit and loss transfer agreement, a consolidated group for corporate and trade tax purposes pursuant to Sections 14 and 17 of the German Corporation Tax Act (Körperschaftsteuergesetz, KStG), Section 2 (2), Sentence 2 of the German Trade Tax Act (Gewerbesteuergesetz, GewStG) will be formed between Klöckner & Co and KCV. The effect of the consolidated group for corporate and trade tax purposes is the joint taxation of KCV as the subsidiary and Klöckner & Co as the parent company. This has the advantage that KCV s positive or negative results can be offset simultaneously against the negative or positive results of Klöckner & Co and other companies within the consolidated group. As a result, the group tax cash flow and group tax expenses can be optimized. In addition, this helps to avoid KCV s profit distributions to Klöckner & Co being subject to taxation, to a certain extent, as non-deductible operating expenses. The amount of economic benefits flowing to the consolidated group also depends on KCV s future income, which cannot be predicted with certainty. There is no other financially reasonable alternative to entering into the Agreement. In particular, the targeted consolidated group for corporate and trade tax purposes cannot be achieved by entering into another affiliation agreement within the meaning of Section 292 of the AktG or an operating agreement. 4 Explanation regarding the Control and Profit and Loss Transfer Agreement The Agreement contains the customary provisions on the formation of a control relationship and a consolidated group for corporate and trade tax purposes. The material provisions of the Agreement are explained below: 4.1 Management Control, 1 Pursuant to Section 1, KCV shall relinquish the management of its company to Klöckner & Co. The leadership authority will thus be transferred to Klöckner & Co in order to ensure the uniform management of the Klöckner & Co Group. This relinquishment of leadership authority will, however, not change the fact that KCV s management and representation will continue to be the responsibility of KCV s management. Unless Klöckner & Co gives instructions to KCV s management, KCV s management will act on its own responsibility. Further, pursuant to Section 299 of the AktG, Klöckner & Co may not instruct KCV s management to modify, maintain or terminate this Agreement. 4.2 Profit Transfer, 2 Section 2 governs KCV s typical obligations relating to a profit and loss transfer agreement to transfer its annual net profit to Klöckner & Co. The scope of profit transfer is governed by Section 301 of the AktG, as amended from time to time. According to the current wording of Section 301 of the AktG this means that the annual net profit, after deduction of any losses carried forward, any amount to be allocated to the statutory reserves and any amount excluded from distribution pursuant to Section 268 (8) of the HGB is to be transferred to Klöckner & Co. With the consent of Klöckner & Co, KCV may allocate parts of the annual net profit to other retained earnings (Section 272 (3) of the HGB), insofar as this is permitted under 3

4 commercial law and is financially justified based on reasonable commercial judgment. Klöckner & Co may demand that the retained earnings formed during the term of the Agreement be released and transferred as profit. The right to profit transfer shall arise for the first time in the fiscal year in which this Agreement becomes effective and with respect to the entire profits generated during the fiscal year. The right to profit transfer shall arise as of the applicable balance sheet date and shall become due on the same date. It shall be subject to a 5% interest rate p.a. 4.3 Assumption of Loss, 3 Section 3 governs the obligation of Klöckner & Co pursuant to Section 302 of the AktG, as amended from time to time, to compensate any loss that arises on the part of KCV. According to the current wording of Section 302 (1) of the AktG this means that Klöckner & Co is obliged to compensate any loss that arises on the part of KCV during the term of the Agreement, disregarding the obligation of Klöckner & Co to offset losses, insofar as this deficit cannot be compensated by a withdrawal from other retained earnings that were allocated thereto during the term of the Agreement. The obligation for assumption of losses shall arise for the first time in the fiscal year in which the Agreement becomes effective. The right shall arise as of the respective balance sheet date and shall become due on the same date. It shall be subject to a 5% interest rate p.a. as of that date. 4.4 Effectiveness and Term, 4 Pursuant to Section 4 (1), to become effective, the Agreement requires the approval of the Shareholders Meeting of KCV, which was granted on August 4, 2015, as well as the approval of the Annual General Meeting of Klöckner & Co. If the Agreement is registered in the commercial register of KCV as planned during the course of the fiscal year 2016, then it shall apply, with the exception of the right to give instructions pursuant to Section 1, retroactively as of January 1, Otherwise, it shall apply retroactively for the period starting at the beginning of the fiscal year of the effective date. The right to give instructions pursuant to Section 1, however, shall only apply as of the date of the registration of the Agreement in the commercial register of KCV. Pursuant to Section 4 (2), the Agreement is entered into for an indefinite period. It may be terminated for the first time as of the end of the fiscal year of KCV by which the minimum fiscal term for the consolidated group for corporate and trade tax purposes to be formed by this Agreement is met (five years pursuant to the current legal situation, Section 14 para. 1 sentence 1 no. 3 of the German Corporate Tax Act (KStG), Section 2 para. 2 sentence 2 of the German Trade Tax Act (GewStG)). The minimum period is necessary due to tax requirements for the recognition of a consolidated group for corporate and trade tax purposes. Section 4 (3) clarifies that the extraordinary termination right pursuant to Section 297 (1) of the AktG remains unaffected. The limitations on the extraordinary termination right pursuant to Section 297 (2) of the AktG is meaningless in the present case since KCV has no outside shareholders. Section 4 (3), Sentence 2 allows for termination by Klöckner & Co in the event the latter no longer holds the majority of voting rights resulting from the shares in KCV, and also refers to Section 60 (6) of the German Income Tax Rules (Körperschaftsteuer-Richtlinien, KStR) of 2004 that governs premature contract termination that is irrelevant for tax purposes. 4

5 4.5 No requirement to adopt provisions on guaranteed dividend (Ausgleich) and compensation (Abfindung) There was no requirement to adopt provisions on guaranteed dividend and compensation pursuant to Sections 304 and 305 of the AktG since KCV does not and will not have any outside shareholders. Klöckner & Co is the sole shareholder of KCV. The corporate structure was in place at the time the Agreement was entered into and will remain unchanged at the time of the Annual General Meeting of Klöckner & Co on May 13, No review of the Agreement Since presently Klöckner & Co directly holds all shares in KCV, there is no requirement for a review of the Agreement by one or several expert auditors (contract auditors) pursuant to Section 293 b (1) of the AktG. 5. Documents As of the date of the convocation of the Annual General Meeting of Klöckner & Co, the following documents will be available for inspection at the business premises of Klöckner & Co, Am Silberpalais 1, Duisburg, and will be available for download on the Internet under The Control and Profit and Loss Transfer Agreement between Klöckner & Co SE and kloeckner.v GmbH Annual financial statements, consolidated financial statements and combined management reports of Klöckner & Co SE and the Group for fiscal years 2013, 2014 and 2015 Annual financial statements of kloeckner.v GmbH for incomplete fiscal year 2015 This report on the Agreement by the Management Board of Klöckner & Co The documents will also be available in the meeting room during the Annual General Meeting of Klöckner & Co SE on May 13,

6 Duisburg, March 2016 Gisbert Rühl Marcus A. Ketter Karsten Lork William A. Partalis Klöckner & Co SE The Management Board * * * * * * * 6