The Rules of Conduct regarding transactions with related parties and other significant transactions, which were approved in 2004 and formally adopted by all subsidiaries during 2005, reiterated the central role played by the Board of Directors in the system of corporate governance and have ensured that the transactions regulated therein were always executed appropriately, according to criteria of substantial and procedural fairness.

Related party transactions, that are atypical or concluded at non-standard conditions and for which the Board of Directors is not directly responsible, are, notwithstanding, submitted to the Board for prior approval. Greater details on the related party transactions executed during the financial year in question are provided in the section “Relations with the parent company, its subsidiaries, and other related parties” of the Directors’ Report for the consolidated accounts.

Also submitted to the Board of Directors for prior approval are those transactions of a significant impact on the financial standing or performance of the Company and the Group and which, for their amount, type of counterparty, object, methods or timeframes, could adversely affect the value of the Company. For both categories of transactions, the Board of Directors has passed resolutions based on adequate information provided with suitable advance notice.

The Rules of Conduct mentioned above do not expressly require that Board members with an interest in the transaction abstain from voting on such issue. In this way, it is left to the decision of the Board whether or not it is appropriate for such members to abstain from deliberations when this could compromise the maintenance of the quorum required.

On March 30, 2006, the Company’s Board of Directors adopted the new Procedure for Related party transactions and for Significant transactions in order to adopt the latest indications on the subject contained in the Corporate Governance Code of Listed Companies and to follow other domestic and international best practices in identifying the parties, the transactions and the corporate procedures necessary to facilitate the appropriate flow of information.

This new procedure provides for a more extensive definition (based on the indications contained in IAS 24) of related parties of Benetton Group S.p.A. and more rigorous authorization and disclosure procedures for transactions with such parties, including the requirement, in certain cases, of the prior opinion of the Internal Audit Committee regarding the transaction.

The new procedure also requires that the Board member who, either directly or through a third party, has an interest in a company transaction, even if such interest is potential or indirect, abstains from the Board’s deliberations on the issue or, in the event the member’s presence should be necessary for the purposes of maintaining the quorum required, from the actual vote. This Procedure is to be adopted in 2006 by all the Group’s companies. The entire text of this Procedure can be found on the Company’s web site in the Corporate Governance section.