Puntualizando un poco más el concepto Indígena

Principles of Internal Control

The Company’s system of internal controls consists of a number of rules and procedures put in place by Company management. The purpose is to help meet targets in terms of proper and effective Company operation, which means monitoring, in particular, the following:

adherence to management policies

proper caring for and protection of Company assets improvements in the efficiency of utilization of Company assets

economical use of all Company resources safe and reliable operation of plant and equipment prevention and uncovering of fraud and errors

correct and complete accounting, compilation of reliable financial statements

timely identification and addressing of risks.

Internal control applies throughout the Company and provides crucial feedback in the management process. It includes all activities of executives at all levels of

management, through which it determines, on an ongoing basis, whether achieved results are in line with plan. The Safety & Quality Management Section plays a key role in organizing and conducting control activities.

Company management endeavors to continuously improve the Company’s internal control system in line with changing internal and external business conditions.

The state and effectiveness of the internal control system are monitored and assessed by the Internal Audit Section, based on the principles of internationally recognized standards, and are evaluated by the external auditor as well. Coordination of activities between the external and internal auditors, as well as vetting of the assessment of the internal control system for objectiveness, are the responsibility of the ČEZ, a. s. Audit Committee.

Internal Audit

The Internal Audit Section of ČEZ, a. s. is independent of the Company’s executive management. It reports directly to the Board of Directors, and submits the results of its auditing activities to the ČEZ, a. s. Audit Committee and to the statutory bodies of the respective subsidiaries within CEZ Group. The Director of the Internal Audit Section of ČEZ, a. s. has direct access to meetings of the Board of Directors, which he attends, and he also participates, as a guest, in meetings of the Safety Committee, the Risk Committee, and the Development Committee. The section’s independence has been vetted by an external assessment of internal audit quality, carried out in 2006 in accordance with the Standards of Professional Internal Audit Practice and confirmed in late 2008 by an in-house assessment using the same methodology.

The internal audit activity plan is compiled on the basis of an assessment of the risk inherent in individual processes utilizing suggestions provided by CEZ Group executives, and integrates follow-up audits. In 2010, a total of 64 audits were conducted, 28 at ČEZ, a. s. and another 36 in subsidiaries (including five audits in international holdings) where they are conducted by the Internal Audit Section of ČEZ, a. s. under contract. The audit activities of ČEZ, a. s. are coordinated with the separate audit departments that exist in certain CEZ Group companies (ČEZ Distribuce, a. s., Severočeské doly a.s., as well as separate audit units in Bulgaria, Romania, and Albania).

Based on the results of audits, Final Reports are drafted in which all objective findings are listed (and documented) and recommendations are made for addressing shortcomings, if any. The Final Reports and other results of the audits are discussed with the management of the entities audited, which subsequently proposes corrective measures. Follow-up audits are conducted to verify the effectiveness of the corrective measures taken to deal with shortcomings found. On a quarterly basis, the Board of Directors and Audit Committee of ČEZ, a. s. are informed in summary fashion on the results of the audit activities, including modifications to the audit plan, if any. In the event of serious findings or shortcomings whose solution exceeds the competence of the audited entity, the Board of Directors of ČEZ, a. s. orders the requisite corrective measures by passing a resolution. 90 ČEZ, a. s. / Risk Management at CEZ Group

Vetting of Large Financial Outlays for Acquisitions and Investments

Every investment plan goes through a number of phases in the decision-making process, during which the field is gradually narrowed down. This process is based on a unified project evaluation methodology (including a unified set of assumptions), which was expanded in 2010 to include assessment of the risk level of individual projects. Larger investments and acquisitions that are subject to approval by the ČEZ, a. s. Board of Directors are subjected to at least four levels of checks and assessments, in which all relevant Company sections are involved. In addition, plans submitted to the Board of Directors are also

evaluated by the Development Committee or other body, as well as undergoing standard comment proceedings. Under Section 14(9) of the Articles of Association, the prior consent of the Supervisory Board is required for the implementation of Board of Directors decisions on investments and/or acquisitions of over CZK 500 million. Before the plans for such investments are discussed by the Supervisory Board, they ordinarily go before the

Supervisory Board’s Strategy Committee, which issues a recommendation for the Supervisory Board.

Large capital projects, including construction and comprehensive retrofits of power plants, are managed using a process-driven model in which the obligations, responsibility, and authority of individual sections of ČEZ, a. s. are determined, including the participation of relevant CEZ Group subsidiaries during the entire execution phase of projects. The process-driven model takes different forms depending on whether the project is being financed by ČEZ, a. s., a 100% subsidiary, or a joint-venture, but does not depend on whether the project is in the Czech Republic or abroad.

International Holdings

For CEZ Group international holdings, a model strategic solution is applied, the aim of which is to achieve returns on invested capital, develop international operations long-term, and reinforce the positive perception of CEZ Group at the international level. In 2010, the area of international holdings (among others) was subjected to critical scrutiny in view of the impacts the recession has had on CEZ Group and the regions/countries in which CEZ Group operates. As a result, the Group abandoned certain acquisition ambitions and began considering divestitures. Decisions related to the business policies of international holdings, their business development, and other CEZ Group international activities are made at the level of the governing bodies of ČEZ, a. s.

Safety and Quality Management