KfW launches 5-year bonds exchangeable into shares of Deutsche Telekom AG

Frankfurt (ots) - Today KfW has announced the launch of an issue
of bonds (the "Exchangeable Bonds") exchangeable into ordinary shares
of Deutsche Telekom AG (the "Exchange Shares"). The transaction will
have a base size of EUR 3.0 billion. The issue may be increased by a
further EUR 0.3 billion through the exercise of a greenshoe option.
The issuance of the Exchangeable Bonds marks the continuation of the
successful privatisation strategy of Deutsche Telekom AG by both the
German government and KfW.

"Given the current share price of Deutsche Telekom KfW expects the
outstanding exchangeable bond for Deutsche Telekom shares due in
August to be redeemed in cash", Dr. Frank Czichowski, KfW Treasurer
explained and added: "We now wanted to send a clear signal to the
market that both the German ministry of Finance and KfW are committed
to continue the privatisation process of Deutsche Telekom with this
instrument."

The Exchangeable Bonds have a maturity of 5 years and 1 month, are
callable on or after the third coupon payment date after 3 years and
1 month, subject to a 130 % call threshold, and are redeemable at 100
% of par at maturity. The Exchangeable Bonds are marketed with a
coupon of 2.875 % to 3.375 % and a conversion premium of 25 % to 30
%. The applicable coupon and conversion premium will be set at
pricing. The amounts raised with the Exchangeable Bond are part of
KfW's announced funding programme for 2008 which is expected to
amount to approximately EUR 70 billion.

KfW and the German government currently hold a stake of 16.9 % and
14.8 %, respectively (approx. 1,382 million shares in total) in
Deutsche Telekom AG. The final number of Exchange Shares underlying
the Exchangeable Bonds will be determined at pricing. The reference
share price of Deutsche Telekom AG will be fixed on the basis of the
volume weighted average price (the "VWAP") of Deutsche Telekom AG's
share price during the bookbuilding period until pricing.

KfW has agreed to a 180-day lock-up period for its remaining stake
in Deutsche Telekom AG.

The Exchangeable Bonds will be placed exclusively with
institutional investors outside the US in reliance on Regulation S.
It is expected that the Exchangeable Bonds will be listed on the
regulated market of the Frankfurt Stock Exchange. Goldman Sachs
International and Morgan Stanley Bank AG are Joint Bookrunners and
Joint Lead Managers for the issue.

Simultaneously with the transaction and depending on market
conditions, KfW may purchase a portion of its outstanding EUR 5
billion bonds due August 2008 exchangeable into ordinary shares of
Deutsche Telekom AG.

In connection with the offering, Morgan Stanley Bank AG, by itself
or through its agents, will be acting as stabilisation manager and
may undertake measures aimed at supporting the stock exchange or
market price of the Exchangeable Bonds or any associated instruments
("Stabilisation Measures"). The stabilisation manager is under no
obligation to take Stabilisation Measures. Therefore, there is no
guarantee that any Stabilisation Measures will indeed be effected. If
Stabilisation Measures are taken, they may be terminated at any time
without prior notice. Such measures may be taken as from the date of
the pricing of the transaction and must be completed no later than
(i) 30 calendar days after the closing of the transaction or (ii) 60
calendar days after the allotment of the Exchangeable Bonds to
investors, whatever is earlier ("Stabilisation Period").
Stabilisation Measures may lead to the stock exchange or market price
of the Exchangeable Bonds or any associated instruments being higher
than it would have been without the impact of such measures. In
addition, such measures may result in a stock exchange or market
price at a level that is not sustainable over the long term.

DISCLAIMER

THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE IN THE
UNITED STATES. This announcement is not for distribution, directly or
indirectly, in or into the United States or to any US person (as
defined in Regulation S under the US Securities Act of 1933, as
amended). Neither the Exchangeable Bonds nor the Exchange Shares have
been or will be registered under the US Securities Act. The
Exchangeable Bonds and Exchange Shares may not be offered or sold in
the United States absent registration or an exemption from
registration under the US Securities Act. The Exchangeable Bonds and
Exchange Shares may therefore not be offered, sold or delivered
within the United States.

Goldman Sachs International and Morgan Stanley Bank AG are acting
for KfW and no one else in connection with the issue of the
Exchangeable Bonds and will not be responsible to any other person
for providing the protections afforded to their respective clients,
or for providing advice in relation to the proposed issue.

In relation to each Member State of the European Economic Area
whose national law sets out the requirement for KfW as an Issuer to
publish a prospectus prior to public offering of the Bonds (each a
"Relevant Member State"), each Manager has represented and agreed,,
that it has not made and will not make an offer of the Bonds to the
public in that Relevant Member State prior to the publication of a
prospectus in accordance with the applicable national laws and
regulations.

In the United Kingdom, this announcement is being distributed only
to, and is directed only at, qualified investors within the meaning
of Art. 2(1)(e) of the Prospectus Directive ("Qualified Investors")
(i) who have professional experience in matters relating to
investments falling within Article 19(5) of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005, as amended
(the "Order") and Qualified Investors falling within Article 49(2)(a)
to (d) of the Order, and (ii) to whom it may otherwise lawfully be
communicated (all such persons together being referred to as
"relevant persons"). This document must not be acted on or relied on
(i) in the United Kingdom, by persons who are not relevant persons,
and (ii) in any member state of the European Economic Area other than
the United Kingdom, by persons who are not Qualified Investors.

Originaltext: KfW
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Pressekontakt:
For further information please contact:
Alexander Mohanty
Tel.: +49 (69) 7431-4494
E-Mail: alexander.mohanty@kfw.de

KfW, Palmengartenstraße 5-9, 60325 Frankfurt
Kommunikation (KOM)
Tel. 069 7431-4400, Fax: 069 7431-3266,
E-Mail: presse@kfw.de, Internet: www.kfw.de