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31. Contingencies and other financial commitments

Contingent liabilities relate to potential future events which, although regarded as improbable on the reporting date, cannot be ruled out and would create an obligation if they occurred.

Contingent liabilities result entirely from commitments entered into on behalf of third parties and comprise:

	Dec. 31, 2007	Dec. 31, 2008
	€ million	€ million
Issuance and endorsement of bills	10	-
Warranties	51	114
Miscellaneous	82	591
Total	143	705

As of the reporting date, there was an unpaid portion of the effective initial fund of Bayer-Pensionskasse amounting to €490 million, which could result in further payments by Bayer AG in future years.

Under the German Transformation Act, Bayer AG and Lanxess AG are jointly and severally liable for all obligations of Bayer AG that existed on January 28, 2005. To the extent that certain obligations were not assigned to Bayer AG under the Spin-off and Acquisition Agreement, dated September 22, 2004, between Bayer AG and Lanxess AG, Bayer AG ceases to be liable for such obligations after a five-year period. The Master Agreement, entered into between the same parties contemporaneously with the Spin-Off and Acquisition Agreement, includes corresponding indemnification obligations of Bayer AG and Lanxess AG. It also contains provisions dealing with the apportionment of liabilities arising from product liability claims, environmental claims and antitrust violations as between the contracting parties.

In addition to provisions, other liabilities and contingent liabilities, there are also other financial commitments. These mainly relate to leasing agreements and long-term rentals.

Minimum non-discounted future payments relating to operating leases total €685 million (2007: €479 million). The respective payment obligations mature as follows:

Maturing in	Dec. 31, 2007	Maturing in	Dec. 31, 2008
	€ million		€ million
2008	124	2009	205
2009	104	2010	145
2010	81	2011	113
2011	63	2012	81
2012	52	2013	65
2013 and later	55	2014 and later	76
Total	479	Total	685

Financial commitments resulting from orders already placed under purchase agreements related to planned or ongoing capital expenditure projects total €300 million (2007: €256 million).

In addition, the Group has entered into research agreements with a number of third parties under which Bayer has agreed to fund various research projects or has assumed other commitments based on the achievement of certain milestones or other specific conditions. The total amount of such funding and other commitments is €915 million (2007: €932 million). At December 31, 2008, the remaining payments expected to be made to these parties, assuming the milestones or other conditions are met, were as follows:

Maturing in	Dec. 31, 2007	Maturing in	Dec. 31, 2008
	€ million		€ million
2008	159	2009	127
2009	181	2010	93
2010	59	2011	110
2011	83	2012	133
2012	69	2013	71
2013 and later	381	2014 and later	381
Total	932	Total	915