37 Operating expenses

Services included brokerage fees related to the Engineering & Construction segment for €5 million (€12 million and €6 million in 2011 and 2012, respectively).

Costs incurred in connection with research and development activity recognized in profit and loss, as they did not meet the requirements to be recognized as long-lived assets, amounted to €197 million (€190 million and €211 million in 2011 and 2012, respectively).

Operating leases and other comprised operating leases for €1,592 million (€1,295 million and €1,432 million in 2011 and 2012, respectively) and royalties on the extraction of hydrocarbons for €1,413 million (€1,295 million and €1,555 million in 2011 and 2012, respectively).

Other expenses of €1,134 million included losses on disposal of tangible and intangible assets for €182 million, of which €108 million related to the Engineering & Construction segment and €66 million to the Exploration & Production segment.

Future minimum lease payments expected to be paid under non-cancellable operating leases are provided below:

Operating leases primarily regarded drilling rigs, time charter and long-term rentals of vessels, land, service stations and office buildings. Such leases generally did not include renewal options. There are no significant restrictions provided by these operating leases which may limit the ability of Eni to pay dividends, use assets or take on new borrowings.

Risk provisions net of reversal of unused provisions amounted to €857 million (€527 million and €871 million in 2011 and 2012, respectively) and mainly related to provisions for legal and other proceedings amounting to €222 million (net provisions of €166 million and €688 million in 2011 and in 2012) and to environmental liabilities amounting to €127 million (net provisions of €174 million and €67 million in 2011 and 2012, respectively).

More information is provided in Note 28 – Provisions for contingencies.

Other costs of €409 million (€334 million and €187 million in 2011 and 2012, respectively) comprised provisions for redundancy incentives of €279 million (€203 million and €64 million in 2011 and 2012, respectively) and costs for defined contribution plans of €109 million (€94 million and €100 million in 2011 and 2012, respectively).

Cost related to employee benefit plans are described in Note 29 – Provisions for employee benefits.

The Group average number and breakdown of employees by category is reported below:

The average number of employees was calculated as the average between the number of employees at the beginning and end of the period. The average number of senior managers included managers employed and operating in foreign Countries, whose position is comparable to a senior manager status.

As of December 31, 2013, the stock option plan incentive scheme outstanding is represented by the 2006-2008 assignment, approved by the Eni Shareholders’ Meeting on May 25, 2006. Afterwards, Eni terminated any stock-based incentive schemes.

The stock options plan outstanding, entitled for no consideration to Eni’s Group companies top managers and managers with strategic responsibilities (excluding Group listed subsidiaries), grants to purchase treasury shares with a 1 to 1 ratio. The strike price was determined as arithmetic average of official prices registered on the Mercato Telematico Azionario in the month preceding the grant date or the average carrying amount of treasury shares as of the day preceding the grant, if greater.

At December 31, 2013, 2,980,725 options, related to the 2008 plan, were outstanding for the purchase of 2,980,725 Eni ordinary shares (no par value) with a weighted-average strike price of €22.54.

At December 31, 2013, the residual life of the 2008 plan was 7 months.

The scheme evolution is provided below:

The average fair value weighted with the number of options granted during the year 2008 was €2.60 per share. The fair value was determined by applying the following assumptions:

Costs of the year related to stock option plans amounted to €3 million in 2011, no costs in 2012 and 2013.

Compensation of personnel holding key positions in planning, directing and controlling the Eni Group subsidiaries, including executive and nonexecutive officers, general managers and managers with strategic responsibilities in office at end of each year amounted (including contributions and ancillary costs) to €34 million, €33 million and €38 million for 2011, 2012 and 2013, respectively, and consisted of the following:

The increase from the previous periods primarily related to a different composition of the key management personnel.

Compensation of Directors amounted to €8.4 million, €13.2 million and €11.4 million for 2011, 2012 and 2013, respectively. Compensation of Statutory Auditors amounted to €0.513 million, €0.467 million and €0.474 million in 2011, 2012 and 2013, respectively.

Compensations included emoluments and social security benefits due for the office as director or statutory auditor held at the parent company Eni SpA or other Group subsidiaries, which was recognized as cost to the Group, even if not subjected to personal income tax.

The analysis of net income (loss) of financial derivatives was as follows:

Net income (loss) on other derivatives related to the ineffective portion of the hedging relationship of commodity derivatives which was recognized through profit and loss in the Gas & Power segment.

Net losses on trading and non-hedging derivatives related to: (i) gains and losses on fair value measurement and settlement of commodity derivatives entered into by the Gas & Power segment to optimize commercial margins and for proprietary trading (net loss of €8 million); (ii) gains and losses on fair value measurement and settlement of commodity derivatives which could not be elected for hedge accounting under IFRS because they related to net exposure to commodity risk (net loss of €91 million); (iii) fair value evaluation at certain derivatives embedded in the pricing formulas of long-term gas supply contracts in the Exploration & Production segment (net gain of €3 million).

Operating costs are disclosed in Note 43 – Transactions with related parties.

Depreciation, depletion, amortization and impairments by industry segment are disclosed in Note 42 – Information by industry segment and geographic information.