[4-7] General and operating expenses

[4] Payroll and related costs

An analysis of the Group's payroll and related costs is presented below, including industrial ones classified as part of the cost of sales, and those relating to directly operated stores classified as part of general and operating expenses.

2009

2008

Industrial payroll costs are lower as a result of the current reorganization process, particularly in the textile segment, while non-industrial costs reflect the higher average headcount in 2009.

The number of employees is analyzed by category below:

Stock options plan

The “Supplementary information” section of the Directors’ report details the stock options plan approved by the Group’s Shareholders’ Meeting in September 2004. The estimated fair value of each share option granted by the plan is of Euro 1.874 (weighted average price).

The fair value was calculated using the Black & Scholes option price valuation method. The data considered for modeling purposes was as follows:

(*) Cancelled on 09.21.2006.

Further details on the stock options plan are given below:

Options outstanding at December 31, 2009 have a remaining average weighted life of 3.7 years.

Key senior management

The following persons have been identified as key senior managers of the Group in 2009:

(A)Giovanni Di Vaio resigned at the end of January 2010; his duties have been temporarily allocated to the Chief Executive Officer.

(B)Adolfo Pastorelli left the Group during 2009, his duties were taken over by Aldo Chiaradia.

The following table summarizes the total remuneration of key senior managers:

(A) Included in "Other expenses/(income)".

[5] Advertising and promotion

Advertising and promotion costs amount to Euro 52,585 thousand (Euro 60,922 thousand in 2008) and reflect the costs incurred for developing advertising campaigns; the reduction is due to the Group's policy of sharpening the focus of advertising campaigns while retaining high brand visibility.

[6] Depreciation and amortization

The Group's depreciation and amortization charges for the period, including the industrial ones reported in the cost of sales, are analyzed as follows:

2009

2008

The useful life of certain categories of assets classified in "Furniture, fittings and electronic devices" has been revised during 2009. The increase in depreciation and amortization is mostly due to investments made in the prior year which entered service in 2009. In fact, review of the frequency with which the fittings in the Group's stores are renewed, except for specific stores in particularly strategic locations, has revealed the need to revise their useful life from 4 to 6 years. This revision has reduced the depreciation charge by around Euro 5 million in 2009.

[7] Other expenses and income

Details of these amounts are provided in the following tables.

Non-industrial general costs

Non-industrial general costs have decreased by Euro 16,461 thousand, having particularly benefited from cost containment measures introduced at the start of 2009, which have generated savings in almost every line item of non-industrial general costs. Particularly significant reductions were reported for:

-consulting and advisory fees, which had been particularly high in 2008 because of specific projects to develop competitive structure in strategic markets;

-rental and hire costs, because of the combined effect of renegotiating contracts with certain service suppliers and of using fewer external services.

The following table reports all the remuneration, in whatever form, approved and/or earned in 2009 in respect of each individual member of the Parent Company's Board of Directors and Board of Statutory Auditors.

(*) Until approval of the financial statements.

Other operating expenses/(income)

Additions to provisions

Other expenses/(income)

As already discussed in the Directors’ report, there has been a significant increase in impairment recognized in 2009 following the adjustment to recoverable amount of certain commercial properties, particularly in the United States , Lithuania , Austria and Portugal .

The out-of-period income recognized in 2009 mainly refers to the release of agent commissions and employee bonuses, accrued in prior years, but no longer owed by the Group.

The non-recurring income and expenses included in this heading are detailed in the paragraph entitled "Other information – Non-recurring events and significant transactions".