Financial liabilities comprise the following:

The maturities of financial liabilities were as follows:

Financial liabilities included EUR 29 million (2004: EUR 27 million) to non-consolidated subsidiaries. As in the previous year, there were no financial liabilities to associates or other affiliated companies.

U.S. dollar-denominated financial liabilities amounted to EUR 1.3 billion (2004: EUR 2.0 billion) and account for 15.0 percent (2004: 21.8 percent) of total financial liabilities. No assets of the Group are pledged against financial liabilities.
 
Short-term borrowings (excluding the short-term portion of debentures) amounted to EUR 1.4 billion (2004: EUR 1.8 billion) with a weighted average interest rate of 7.7 percent (2004: 7.9 percent). The Bayer Group’s financial liabilities are primarily unsecured and of equal priority.

Further information on the accounting for liabilities from derivative financial instruments is given in Note [33].

Debentures include the following:

In April 2002 Bayer AG launched two Eurobond issues under its EUR 8 billion European Medium Term Note (EMTN) program. One of these issues, with an original nominal volume of EUR 3 billion, carries a 5.375% coupon and has a term of 5 years, maturing in 2007. Interest is payable annually in arrears. The issue price was 99.402%. In July 2005 Bayer AG made a public tender offer to the holders of these bonds to repurchase a maximum principal amount of EUR 1 billion. Bonds with a face value of EUR 863 million were tendered and repurchased at a price of 104.957% plus accumulated interest. The volume of the remaining 5.375% bonds outstanding is EUR 2,137 million. The other Eurobond issue has a nominal volume of
EUR 2 billion and a term of 10 years, so it matures in 2012. The bonds carry a 6% coupon. Again, all interest is payable annually in arrears. The issue price was 99.45%.

In July 2005 Bayer AG issued a 100-year subordinated hybrid bond with an issue volume of EUR 1.3 billion. This issue matures in 2105 and has a fixed coupon of 5% in the first ten years. Thereafter, interest is calculated quarterly at a floating rate (3-month EURIBOR plus 280 basis points). After the first 10 years, Bayer AG has a quarterly option to redeem the bonds at face value. The issue price was 98.812% and interest is paid in arrears. The proceeds of this 100-year subordinated bond issue were mainly used to finance the repurchase of part of the 5.375% bond issued by Bayer AG and due in 2007. The nature of this hybrid bond means that rating agencies generally attribute it predominantly to stockholders’ equity when calculating debt ratios and therefore subtract it from liabilities.

Bayer AG also issued bonds under its EMTN program in the form of private placements. A nominal issue of EUR 250 million was made in four tranches in 2003 maturing in 2006 with variable interest rates. Interest is payable quarterly; the issue prices were 99.80%, 100.5412%, 100.67% and 102.1547%. A EUR 15 million bond issued in 2003 and maturing in 2005 carries a fixed coupon of 3.5% payable annually; the issue price was 100%. A EUR 50 million bond issued in 2004 and maturing in 2006 carries a floating rate. Interest is payable quarterly and the issue price was 99.94%. A EUR 25 million bond issued in 2004 and maturing in 2005 has a fixed coupon of 2.47% payable annually; issue price 100%. Further, a EUR 20 million issue made in 2004 and maturing in 2008 has a fixed coupon of 3.49% payable annually; the issue price was 99.947%. Finally, a JPY 5 billion issue was made in 2005 maturing in 2006, with a fixed coupon of 0.16%, payable upon maturity.

In October 1995, Bayer Corporation issued USD 200 million of 7.125 % Notes to qualified institutional buyers. The Notes have a term of 20 years and mature in 2015. Interest is paid semi-annually in April and October.

In February 1998, Bayer Corporation issued USD 350 million of 6.65% Notes to qualified institutional buyers. The Notes have a term of 30 years and mature in February 2028. Interest is paid semi-annually in August and February. The Notes will be redeemable, in whole or in part, at the option of Bayer Corporation at any time, upon not less than 30 but not more than 60 days’ notice, at a redemption price equal to the greater of (i) 100% of the principal amount or (ii) as determined by an independent investment banker.

In February 1998, Bayer Corporation issued USD 250 million of 6.20% Notes to qualified institutional buyers. The bonds have combined call and put options giving the lead manager the right to repurchase them, and the investors the right to cash them, after 10 years. At that time the lead manager can reset the interest rate and remarket the bonds for a further period of 20 years such that they would mature in 2028. If the lead manager does not exercise its call option and the investors exercise their put option, the bonds will be redeemed in 2008. Interest is paid semi-annually in August and February. The redemption provision on the 1998 6.65% Notes also applies for these bonds.

In January 2004 Bayer Corporation repurchased entirely USD 500 million of Money Market Puttable Reset Securities issued in 2001 and all related options. This repurchase transaction was funded by the issue of a bond with a nominal value of EUR 460 million and a coupon of 3.75%. The bond was swapped into USD.

In April 2000, Bayer Ltd., Japan, issued CHF 400 million of 3.75% bonds in Switzerland. The bonds had a term of 5 years and matured in April 2005. The bonds were swapped into Yen at a variable interest rate.

At December 31, 2005, the Group had approximately EUR 5.4 billion (2004: EUR 5.3 billion) of total lines of credit, of which EUR 0.7 billion (2004: EUR 0.5 billion) was used and EUR 4.7 billion (2004: EUR 4.8 billion) was unused and thus available for borrowing on an unsecured basis.

Liabilities under finance leases are recognized as financial liabilities if the leased assets are capitalized under property, plant and equipment. They are stated at the present values of the minimum future lease payments. Lease payments totaling EUR 596 million (2004: EUR 548 million), including EUR 128 million (2004: EUR 129 million) in interest, are to be made to the respective lessors in future years.

The liabilities associated with finance leases mature as follows:

Lease payments under operating leases in 2005 amounted to EUR 122 million (2004: EUR 119 million).

31. Trade accounts payable
Trade accounts are payable mainly to third parties. An amount of EUR 1,973 million (2004: EUR 1,758 million) is due within one year. Of the total, EUR 3 million (2004: EUR 9 million) is payable to non-consolidated subsidiaries, EUR 26 million (2004: EUR 38 million) to associates, EUR 0 million (2004: EUR 0 million) to other affiliated companies and EUR 1,945 million (2004: EUR 1,712 million) to other suppliers.

32. Miscellaneous liabilities
Miscellaneous liabilities are comprised as follows:

The total amount includes EUR 424 million (2004: EUR 292 million) in accrued interest, representing expenses attributable to the fiscal year but not due to be paid until after the closing date.

Liabilities for social expenses include, in particular, social insurance contributions that had not been paid by the closing date.

Deferred income as of December 31, 2005 includes EUR 59 million (2004: EUR 65 million) in grants and subsidies received from government. The amount reversed and recognized in income was EUR 12 million (2004: EUR 17 million).

Under IAS 32, financial instruments are only classified as equity if there is no conditional or unconditional contractual obligation to deliver cash or other financial assets to the issuer. A shareholder’s right to put its shares back to the issuer at any time for a consideration must be recognized as a liability of the issuer even if the legal form of the shares gives the holder the right to a residual interest in the issuer’s assets. Where this is the case, minority shareholdings in consolidated subsidiaries are therefore recognized as liabilities in the Group statements. Long-term capital contributions of minority stockholders primarily comprise LANXESS’s 40 percent share – amounting to EUR 39 million – of the capital of Bayer Industry Services GmbH & Co. OHG.
Further information on the accounting for receivables from derivative financial instruments is given in Note [33].

Miscellaneous liabilities include EUR 10 million (2004: EUR 13 million) to non-consolidated subsidiaries. As in the previous year, there were no liabilities to associates or other affiliated companies.

Liabilities of EUR 313 million (2004: EUR 388 million) were secured, including EUR 7 million (2004: EUR 7 million) by mortgages.

The other miscellaneous liabilities mainly comprise guarantees, commissions to customers, and expense reimbursements.