EUR 1000.00 For Business Accounts Only

Deutsche Lufthansa – EGM 25 June 2020

General: The EGM is to be held in the form of a virtual AGM in accordance with the
German Law to Mitigate the Consequences of the COVID-19 Pandemic. The physical
presence of shareholders or their authorised proxies is not possible. The voting rights
may therefore be exercised solely by postal vote or by granting authority to the proxies
designated by the Company.
Item 1: The Management Board and the Supervisory Board propose that the following
stabilisation measures under the German Stabilisation Fund Act for the recapitalisation
of the Company be adopted: i) a capital increase by EUR 306,044,326.40 against
contributions in cash with shareholders' subscription rights excluded pursuant to the
German Economic Stabilisation Acceleration Act, ii) the granting of a conversion right in
favour of the Economic Stabilisation Fund for the Silent Participation II-A, a conditional
increase of the share capital pursuant to the German Economic Stabilisation
Acceleration Act (Conditional Capital 2020/II) and related amendments of the Articles of
Association as well as iii) the granting of a conversion right in favour of the Economic
Stabilisation Fund for the Silent Participation II-B, a conditional increase of the share
capital pursuant to the German Economic Stabilisation Acceleration Act (Conditional
Capital 2020/III) and related amendments of the Articles of Association. Given the
Company's reasoning that the capital requirement of up to EUR 9bn required for the
solvency of the Company cannot be covered on the capital market or by other forms of
external financing, we consider the dilutive effect of 25% of the share capital by way of
the proposed direct capital increase against contributions in cash to be necessary and
acceptable, even if it provides for a blocking minority and exceeds our guidelines. ECGS
considers that the likely result, if the stabilisation measures would not be granted by the
Economic Stabilisation Fund or not be approved by the EGM, will in fact be the
insolvency of the Company with the consequence of an almost complete loss for the
shareholders. We note that in the case of a so-called Takeover Event, the dilutive effect
may increase to 33.33% of the current share capital in total by way of the conversion of
the Economic Stabilisation Fund's Silent Participation II-A in new shares from the newly
created Conditional Capital 2020/II. The measures contained in the framework
agreement between the Economic Stabilisation Fund and the Company in order to limit
the political and/or state influence on the Company are considered to be suitable. We
welcome that the Economic Stabilisation Fund has committed not to exercise its voting
rights regarding various agenda items and that Board members' remuneration will be
impacted by the agreement, too. Given the current composition of the Supervisory
Board, the two shareholder representatives of the Federal Republic of Germany which
shall be nominated in consultation with the Economic Stabilisation Fund would result in
an independent representation according to ECGS guidelines of at least 40%, which
would still meet our requirement of at least 33% for co-determined Boards. The
restrictions on dividend payments and share repurchases provided by the framework
agreement are also considered to be acceptable. In view of the recent events relating to
COVID-19, ECGS is generally in favour of postponing decisions on the dividend,
reductions or suspensions that would allow companies to avoid liquidity risks or not
generate risk for their survival and also considers that it is not the right moment to
proceed with any share buyback programme. We note that the agreed interest rate on
the Silent Participations, which amounts to 4% for 2020 and 2021 and will progressively
rise to 9.5% for 2027 and beyond, may be considered excessive but provides for an
additional incentive to repay the Silent Participations as soon as possible. Concluding,
even if it requires shareholders to make substantial contributions to stabilising the
Company, we recommend shareholders to approve the stabilisation measures pursuant
to the German Stabilisation Act for the recapitalisation of the Company.