annual report 2004 - Severočeské doly a.s.

SEVEROČESKÉ DOLY a.s. — annual report 2004
SEVEROČESKÉ DOLY a.s.
annual report 2004

Nature has endowed the area
around the Krušné hory mountains
with a high concentration
of resources in the form of a coal
bed. It has influenced the lives and
fates of the many people who have
been, are, and will be involved
in mining. Their relationship
to mining, the shaft, and their
fellow workers is evidenced by
numerous historical documents,
photographs, songs, and the jargon
that has been passed down
the generations. As a result,
professional slang, which is full
of words, meanings, and terms
used by those in the mining
industry, has been preserved. It
brings people together and forms
a bond of common interests among
those who have devoted their lives
to the mines.

Severočeské doly a.s.
is the largest brown coal
mining company
in the Czech Republic.
The company was
established
on 1 January 1994 by
the merger of Doly Bílina
and Doly Nástup Tušimice.
The company operates
in the North Bohemian
brown coal basin. Its core
businesses are
the extraction, preparation,
and sale of brown coal and
related materials.
The company’s domestic
market share in 2004 was

44.9%. Its largest customer
is the electricity company
ČEZ. The majority
shareholder is the National
Property Fund of the Czech
Republic. Severočeské
doly a.s. is a stable,
successful corporation,
a major participant
in the development of both
its sector and the region,
with a traditional corporate
culture, known and
appreciated for being open
and fair towards its
business partners,
the public, its employees,
and its shareholders.

RAM
The operating part of a heavy tup or ram. Used for forging,
ramming, and nailing.

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Key Figures
Indicator Unit of measure 2004 2003 2002 2001 2000
Market share % 44.9 45.2 43.8 44.4 44.0
Gross amount of coal
extracted tonnes thousands 22,023 23,440 21,812 23,095 22,872
Amount of coal sold tonnes thousands 21,753 22,739 21,387 22,563 22,115
Revenues from
operating activities CZK millions 7,801 7,954 7,610 7,999 7,918
Operating costs CZK millions 6,645 6,898 8,630 7,726 8,345
Value added CZK millions 4,279 4,477 3,876 4,792 4,335
Operating profit CZK millions 1,439 1,307 685 1,008 518
Financial profit CZK millions 390 457 549 502 477
Net earnings CZK millions 1,365 1,294 963 1,113 827
Fixed assets CZK millions 17,040 17,556 16,854 14,938 13,915
Equity CZK millions 16,339 17,065 16,468 15,850 14,745
Liabilities CZK millions 5,932 6,034 5,809 6,576 5,535
Statutory reserves CZK millions 4,034 3,972 3,858 3,893 3,552
Capital investment CZK millions 1,255 1,084 1,370 1,549 2,040
Environmental
expenditure CZK millions 572.7 565.6 505.2 432.4 492.7
Depreciation level % 61.8 59.8 57.7 55.8 59.1
Average number
of employees persons 3,724 3,934 4,154 5,510 5,800
Average monthly wage CZK 20,892 19,596 18,360 16,438 15,361
Closing PSE share price
at 31 December CZK 1,480.0 935.0 433.9 286.6 244.1
P/E 9.76 6.50 4.05 2.32 2.62
Dividend per share CZK 240 234.75 60 40 20

CONCERTINA
The protective concertina-type section of machinery. Used
to protect telescopic chutes when loading coal, or the bolts
of jacking and tensioning devices.

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Contents
Most Important Events of 2004 8
Interview with the Chairman of the Board 11
Directors and Officers 13
Corporate Governance 16
Company Profile 19
Report of the Board of Directors on Company Business Activities and Assets 21
Business Environment 21
Sales and Marketing 23
Production 26
Investment 28
Financial Activities 30
Capital Interests 31
Personnel and Social Policies 32
Social Responsibility 34
The Environment 36
Cleanup and Reclamation 37
Research and Development 38
Information System 38
Financial Performance Commentary 41
Shares and Shareholders 45
Strategy and Outlook for 2005 49
Supervisory Board Report 52
Financial Section 53
Report of Independent Auditors 53
Consolidated Financial Statements in Accordance with IFRS 54
Post Balance Sheet Date Events 68
Cash and In-kind Income 69
Events Forecast in 2005 70
Organizational Chart 71
Glossary 72
Shareholder Financial Calendar 73
Contact Addresses 74
Persons Responsible for the Annual Report 75

Most Important Events of 2004
January — 10 years of company operations
— conversion to a new organizational structure
February — SAP ČR, s.r.o. wins a tender to supply a new information
system
— the audit of the financial statements for 2003 returns
a verdict of ‘unqualified’
March — approval of the business plan for 2004
— the process of privatizing the state-held stake
in the company is halted
— Annual General Meetings held at all subsidiaries
— contract concluded for the supply of an integrated
information system customized for the mining industry
April — signing of a long-term contract sale contract with
Teplárna Ústí nad Labem, a.s. for coal supplies until
2020
— sale of a stake in Teplárna Ústí nad Labem, a.s.
— implementation of the SAP information system kicked off
May — assembly of the SchRs 1320 excavator kicked off
at Doly Nástup Tušimice
— the reserve KU 800/K 65 large-scale excavator is put
into service following a long-term gearbox breakdown
in the bucket wheel of the KU 800/K 98 excavator
June — the company’s Annual General Meeting, which inter alia
approves a dividend payment of CZK 234.75 per share
and changes to the company bodies
July — the Controlling Department starts operating
— completion of the construction of an ancillary pumping
station at Doly Nástup Tušimice as anti-flood protection
August — reclamation of an extraction shaft at the former Ludmila
Underground Mine run by Doly Nástup Tušimice
— shutdown of the K 2000/K 101 large-scale excavator
for a general overhaul

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September — transfer of the relocation of the second overburden
09
bench of the K 99 long-distance conveyor line over
the northern wing of the quarry to the internal spoil
heap at Doly Bílina
— continuation of the rerouting of the railway track
at Březno u Chomutova – Chomutov and resumption
of the boring of a tunnel in a direction away from
the municipality of Droužkovice
October — completion of the first stage of a construction project
to increase the capacity of the Březno mine water
treatment plant, and the commencement of trial
operations at Doly Nástup Tušimice
November — conclusion of a purchase agreement with Severočeská
energetika for the supply of electricity in 2005
— reconstruction of the radius of the bucket-wheel boom
of the KU 300/K 91 excavator at Doly Bílina
December — conclusion of a purchase agreement with ČEZ for coal
supplies in 2005
— signing of the collective agreement for 2005
— launch of talks with ČEZ on a programme to retrofit
existing power plants and build new power plants
in upcoming years
— in cooperation with the Economic and Social Council
of the Ústecko Region, a study is completed called
‘The Role of Brown Coal Mining in the Structure
of the Czech Republic’s Energy Sources’, as the basis
for decision-making on the region’s area plan and
energy policy
— approval of mine planning maps for 2005
— termination of operations and abandonment of buildings
in the Málkov complex at Doly Nástup Tušimice
— completion of the main stage in the implementation
of the new information system

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Interview with the Chairman of the Board
Which events had a significant effect on the activities of Severočeské doly in 2004?
Mining sites where we use advanced mining technology presented us with a whole range of new situations
during the year. We have had to cope with breakdowns in mechanical equipment that have been of varying
sizes and complexity, and nature tested our ability to handle mining anomalies. Fortunately we managed
to avoid incidents that could have had a fundamental impact on the company’s economic situation.
How is the management satisfied with the results achieved by the company and what did
you personally take most pleasure in?
A company’s reputation hinges on its earnings. Our company has earned its place in the sun thanks
to the solid results it has posted over the past ten years. I am particularly pleased by the fact that these
quality financial results have been achieved without record coal output.
How do you view the position of Severočeské doly in the context of the Czech Republic’s accession
to the EU last year?
Severočeské doly has been involved in various professional initiatives in Europe for many years
now through the foreign section of the Mining and Oil Refining Industry Employers Union. Longterm
cooperation, particularly in the fields of legislation and the environment, is well worth it.
What does Severočeské doly mean for the region and what role does the region play in your
corporate strategy?
Cooperation with the region began as soon as the company was founded in 1994. This sort of cooperation
is an integral part of our business plans and is just as important as production. Specifically, this means
relations with towns and villages on the edges of our mining sites or the social and civic institutions
in the areas of Chomutovsko and Teplicko. The primary aims are to provide financial assistance
and have a positive influence on society.
In your opinion, is Severočeské doly a socially responsible corporation? How is this social
responsibility manifested?
The very fact that Severočeské doly is at the start of the economic chain places it in the category
of socially responsible companies. Opencast mining is unthinkable without primary, and often very
extensive, defacement of the landscape. These operations have been carried out to the benefit of the whole
of society for several decades. We round off the process by regenerating the natural environment.
We view our efforts to revitalize the landscape as a public issue.
What does the management of Severočeské doly want to achieve in 2005? What economic and
business goals does it have?
This year we expect to discuss the region’s land-use plan and energy policy. These talks will have a bearing
on the company’s mining strategy for decades to come. The business and economic goals are linked to the programme
drawn up by our largest customer, ČEZ, to retrofit its power plants. This year, we will also complete
the assembly of a new large-scale excavator, which will be put into service at the Libouš North site.
Severočeské doly is one of the largest employers in the region. How do you rate the contribution
of your employees and what do you expect of them in 2005?
The company’s success depends on the professional potential of employees, the corporate culture, and
healthy patriotism. Severočeské doly a.s. and its subsidiaries can draw on such a team of several
thousand employees. Therefore I expect each of them to perform to a quality, professional standard.
Vratislav Vajnar
Chairman of the Board of Directors and Chief Executive Officer

PEAR
The socket of a tram rope, which is used when loading coal
products into wagons, or part of a gearbox. In mining jargon,
this term is also used for a specific method of developing
an opencast mine.

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Directors and Officers
Board of Directors
Chairman of the Board of Directors
Vratislav Vajnar (*1944)
Chief Executive Officer of Severočeské doly a.s., member of the Supervisory Board of Coal Energy, a.s.,
member of the Board of Directors of Výzkumný ústav pro hnědé uhlí a.s., member of the Board of Directors
of SHD – KOMES a.s., member of the Board of Directors of the Mining and Oil Refining Industry Employers
Union, member of the State Raw Material Policy Commission at the Ministry of Industry and Trade,
member of the Board of Governors of the Ostrava Mining and Technical University
— Graduate of the Mechanical and Power Engineering Faculty, Ostrava Institute of Mining, 36 years’ mining
industry experience, employed in various technical positions at Doly Nástup Tušimice since 1969
Vice-Chairmen of the Board of Directors
Erich Grünbaum (*1929)
Company Proxy and Financial Director of Severočeské doly a.s., Chairman of the Board of Directors
of Výzkumný ústav pro hnědé uhlí a.s., Vice-Chairman of the Board of Directors of SHD – KOMES a.s.
— Graduate of the University of Economics, Prague, and the Ostrava Institute of Mining, 51 years’ mining
industry experience
Aleš Cincibus (*1956)
Chief Adviser to the Minister of Industry and Trade, associate of R.G.I., spol. s r.o., associate
of B.R.G., spol. s r.o., associate of A.R.G., spol. s r.o., associate of R.I.G.I., spol. s r.o.
— Graduate of the Institute of Chemical Technology, Prague, 25 years’ experience
Members of the Board of Directors
Daniel Beneš (*1970)
ČEZ, a.s. Executive Director for Purchasing, Chairman of the Supervisory Board of ČEZ Logistika, s.r.o.,
member of the Supervisory Board of ŠKODA PRAHA a.s.
— Graduate of the Faculty of Mechanical Engineering, Ostrava Institute of Mining, 12 years’ experience
Jan Demjanovič (*1953)
Sales Director of Severočeské doly a.s., Vice-Chairman of the Board of Directors of Coal Energy, a.s.,
Vice-Chairman of the Supervisory Board of SD – Kolejová doprava, a.s., member of the Supervisory
Board of ČEZ, a.s.
— Graduate of the Faculty of Mechanical Engineering, Liberec Institute of Mechanical Engineering and
Textiles, 25 years’ mining industry experience
Karel Goldemund (*1968)
Adviser to the Minister of Finance, member of the Board of Directors of Municipální finanční společnost a.s.,
member of the statutory body of Nadace Duhová energie, member of the Supervisory Board of První
česko-ruská banka, s.r.o., member of the statutory body of the State Housing Development Fund
— Graduate of the Brno Institute of Agriculture, 15 years’ experience
Pavel Kuta (*1968)
Vice-Chairman of the Executive Committee of the National Property Fund of the Czech Republic, member
of the Supervisory Board of UNIPETROL, a.s., member of the Supervisory Board of ČESKÝ TELE-
COM, a.s., Vice-Chairman of the Supervisory Board of MERO ČR, a.s.
— Graduate of The Master’s College (USA), London Business School (UK), 13 years’ experience

Supervisory Board
Chairman of the Supervisory Board
Robert Sýkora (*1964)
External specialist at the Ministry of Industry and Trade of the Czech Republic, Chairman of the Board
of Directors of OXO GROUP a.s., Chairman of the Supervisory Board of Alfa Plastik, a.s., associate
of KAPSTOP s.r.o., member of the advisory body of the Czech Mining Office responsible for opencast
coal mining
— Graduate of the Faculty of Civil Engineering, Brno Technical Institute, and the Open University
Business School, 16 years’ experience
Vice-Chairman of the Supervisory Board
Jiří Zahradník (*1956)
Member of the Supervisory Board elected by employees, Head of the Planning and Controlling Department
of Severočeské doly a.s., Chairman of the Supervisory Board of SD – Vrtné a trhací práce, a.s., member
of the Supervisory Board of PRODECO, a.s., member of the Board of Directors of SHD – KOMES a.s.
— Graduate of the Institute of Mechanical and Power Engineering, Plzeň, 26 years’ mining industry
experience
Members of the Supervisory Board
Martin Engel (*1971)
Lawyer at the National Property Fund of the Czech Republic, Chairman of the Supervisory Board of THER-
MAL–F, a.s.
— Graduate of the Faculty of Law, Charles University, Prague, 6 years’ experience
Ivan Hink (*1950)
Head of the legal section at the National Property Fund of the Czech Republic, member of the Executive
Committee of the National Property Fund, member of the Supervisory Board of Východočeská energetika,
a.s., member of the Supervisory Board of MERO ČR, a.s.
— Graduate of the Faculty of Law, Charles University, Prague, 19 years’ experience
Josef Hutař (*1947)
Member of the Supervisory Board elected by employees, Chairman of the trade union at Doly Nástup
Tušimice
— Graduate of the secondary power engineering technical school in Chomutov, 39 years’ mining
industry experience
Jan Kobes (*1946)
External Specialist of the National Property Fund of the Czech Republic
— Graduate of the Institute of Chemical Technology, Prague, 37 years’ experience
Alexandr Novák (*1956)
Senator, associate of OMC s.r.o.
— Graduate of secondary energy industry school, 27 years’ experience
Šimon Vohár (*1954)
Member of the Supervisory Board elected by employees, Chairman of the Union of Labour Organizations
of Doly Bílina and subsidiaries
— Graduate of the secondary power engineering technical school, 24 years’ mining industry experience

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Jaroslav Volšický (*1947)
Director of the Production Section, ČEZ, a.s., member of the Supervisory Board of LOMY MOŘI-
NA, spol. s r.o., member of the Supervisory Board of KOTOUČ ŠTRAMBERK, spol. s r.o.
— Graduate of the Institute of Mechanical and Power Engineering, 36 years’ experience
Management
Vratislav Vajnar (*1944)
Chief Executive Officer – for information on membership of the bodies of other companies, education,
and experience, see his entry as Chairman of the Board of Directors
Erich Grünbaum (*1929)
Financial Director – for information on membership of the bodies of other companies, education,
and experience, see his entry as Vice-Chairman of the Board of Directors
Jan Demjanovič (*1953)
Sales Director – for information on membership of the bodies of other companies, education, and
experience, see his entry as a member of the Board of Directors
Miroslav Eis (*1957)
Technical Director, Vice-Chairman of the District Economic Chamber, Chomutov, Chairman
of the Supervisory Board of SD – Kolejová doprava, a.s., Chairman of the Supervisory Board of Skládka
Tušimice, a.s., member of the Academic Council of the Faculty of Mining and Geology, Institute
of Mining – Ostrava Technical University
— Graduate of the Faculty of Mining and Geology, Ostrava Institute of Mining, 22 years’ mining
industry experience
Josef Molek (*1956)
Human Resources Director, Chairman of the Supervisory Board SD – Autodoprava, a.s., member
of the Board of Governors of the J. E. Purkyně University in Ústí nad Labem
— Graduate of the Faculty of Production and Economics, University of Economics, Prague, 25 years’
mining industry experience
Antonín Vincenc (*1950)
Director of Doly Bílina, Chairman of the Supervisory Board of SD – 1.strojírenská, a.s., Chairman
of the Supervisory Board of SD – Humatex, a.s., Vice-Chairman of the Supervisory Board of
SD – Autodoprava, a.s.
— Graduate of the Faculty of Mechanical Engineering, Czech Technical University, Prague, 32 years’
transport and mining industry experience
Jiří Neruda (*1957)
Director of Doly Nástup Tušimice, Vice-Chairman of the Supervisory Board of SD – 1.strojírenská, a.s.
— Graduate of the Mechanical and Power Engineering Faculty, Ostrava Institute of Mining, 23 years’
mining industry experience
Changes in Company Bodies
In November 2003, Jan Škurek resigned from his position of member of the Board of Directors. At the General
Meeting held on 25 June 2004, Josef Sedlák and Jaroslav Šulc were recalled. The new members of the Board
of Directors elected by the General Meeting were Daniel Beneš, Karel Goldemund, and Pavel Kuta. In June
2004, Miroslav Šifner resigned from his position of member of the Supervisory Board. Michael Šenberger
was recalled from his office by the General Meeting held on 25 June 2004. Ivan Hink and Robert Sýkora
were elected new members of the Supervisory Board by the General Meeting.

Corporate Governance
The management principles of Severočeské doly a.s. (the ‘company’) are defined in the company’s Articles
of Association, which stipulate the rights and obligations of the company’s bodies and fully respect all
legal requirements in the management of the company.
Although the company has not ascribed to the voluntary Corporate Governance Code, based on OECD
Principles and recommended by the Czech Securities Commission, corporate governance principles
under this Code are either respected or being developed further.
General Meeting
The company’s supreme body is the General Meeting, which is composed of company shareholders.
The General Meeting makes decisions on fundamental economic, organizational, and operating affairs.
The General Meeting’s competence and powers are defined by the Commercial Code and the company’s
Articles of Association. The Board of Directors convenes an Ordinary (Annual) General Meeting
at least once per accounting period. The first General Meeting in the year must be held within six
months of the end of the preceding accounting period. Other General Meetings convened by the Board
of Directors, the Supervisory Board, or a qualified minority are Extraordinary General Meetings.
Board of Directors
The seven-member Board of Directors is the statutory body managing the company and acting in the name
of the company. The Board of Directors makes decisions on all matters which are not in the competence
of the General Meeting or Supervisory Board, in accordance with legislation in force and the
company’s Articles of Association. The Board of Directors is responsible for the business management
of the company. The members of the Board of Directors are appointed by the General Meeting for a fouryear
term of office. The Board of Directors is composed of three representatives of the company’s executive
management, a representative of the majority shareholder (the National Property Fund of the Czech
Republic), a representative of the energy company ČEZ, which is a significant shareholder,
a representative of the Ministry of Industry and Trade, and a representative of the Ministry of Finance.
All members of the Board of Directors have the relevant professional qualifications, education, and
experience required for this position. The Board of Directors elects a Chairman and two Vice-Chairmen
from its midst. The members of the Board of Directors are obliged to exercise their powers with the due
care of a good husbandman and to keep secret all confidential information and facts. The obligation
of confidentiality remains in force even after a member of the Board of Directors ceases to hold this
office. The Board of Directors meets at least once every three months.
Supervisory Board
The Supervisory Board has nine members and monitors the exercise of powers by the Board of Directors
and the fulfilment of the company’s business plan. It informs the General Meeting of the results
of its supervisory activities. The composition, competence, and powers of the Supervisory Board are
defined in the Commercial Code and the company’s Articles of Association. Two thirds of the Supervisory
Board’s members are appointed and recalled by the General Meeting; one third of its members are
appointed and recalled by the company’s employees. The term of office of a Supervisory Board
member is four years. The Supervisory Board contains three representatives of the majority shareholder
(the National Property Fund of the Czech Republic), one representative of the energy company
ČEZ, a senator or former Mayor of Chomutov, an external specialist from the Ministry of Industry
and Trade, and three employee representatives. One of the employee representatives is the Vice-
Chairman. All the members of the Supervisory Board have the relevant professional qualifications,
education, and experience required for this position. The Supervisory Board elects a Chairman and
Vice-Chairman from its midst. The members of the Board of Directors are obliged to exercise their powers
with the due care of a good husbandman and to keep secret all confidential information and
facts. The obligation of confidentiality remains in force even after a member of the Supervisory
Board ceases to hold this office. The Supervisory Board meets at least three times a year.

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Executive Management
The company has a Chief Executive Officer, who is also the Chairman of the Board of Directors. The Chief
Executive Officer is appointed and recalled by the Board of Directors. The Chief Executive Officer is
responsible for the business management of the company and for the implementation of decisions
made by the Board of Directors, the General Meeting, or the Supervisory Board. The Chief Executive
Officer has a CEO Council, which is his advisory body and is composed of members of the company’s
executive management and the director of the Chief Executive Officer’s Office. The status
of the Council and its tasks are regulated in its Statutes.
Members of the executive management are also appointed and recalled by the Board of Directors,
based on a proposal from the Chief Executive Officer.
The Board of Directors acts in the name of the company. The Board of Directors is represented in external
relations either by the Chairman of the Board of Directors alone or by one of the Vice-Chairmen together
with one member of the Board of Directors. The Company Proxy, authorized to carry out all legal actions
except property conveyancing and mortgaging, may also act in the name of the company.
The company’s employees also carry out legal transactions on behalf of the company based on authorization
awarded in accordance with the company’s internal regulations and signing rules.
Relations between the Company and Shareholders
The company respects all the provisions of the Commercial Code concerning the protection of shareholder
rights, and in particular provides all relevant information about the company promptly and
convenes General Meetings as required. In addition, the company ensures that all shareholders are
treated equally.
Shareholder Rights
No special rights are attached to the ownership of company shares. The basic rights of shareholders,
the way these rights are exercised, and transferability are regulated by Act No 513/1991,
the Commercial Code, and the Articles of Association. Where rights are not exercised, the resultant
procedure is laid down in the Articles of Association in accordance with generally binding legal
regulations in force in the Czech Republic.
Rights attaching to shares are exercised by the person listed in the statutory records at the Prague
Securities Centre, unless the law specifies to the contrary.
1. Shareholders have one vote per CZK 1,000 of nominal value. If one share is owned by several
persons the co-shareholders are obliged to agree on which of them shall exercise the rights attaching
to the share or to appoint a joint representative.
2. A shareholder has the right, subject to the conditions laid down in Section 178 of the Commercial Code,
to a share in the company’s profits (i.e. a dividend) as approved for distribution by the General Meeting.
a) This share is determined by the ratio of the nominal value of a shareholder’s shares to the
nominal value of the shares of all shareholders.
b) The dividend is payable within three months of the date the General Meeting resolution
on the distribution of profits is adopted. The time limit for the payment of a dividend relates
both to holders of bearer shares and holders of registered shares. The General Meeting shall
decide, pursuant to a proposal from the Board of Directors, on the dividend payment date, place,
method of payment, and decisive day for the payment of the dividend.
c) The right to the payment of a dividend is time-barred once four years have elapsed as of the
decisive date for the dividend payment.
d) A shareholder is not obliged to return a dividend to the company which is received in good faith.
3. Over the life of the company, and subsequent to the winding-up of the company, a shareholder is
not entitled to demand the return of his contributions. Only the considerations allowed under
the law shall not be deemed to be the return of contributions. If the company is wound up with
liquidation, a shareholder has the right to a share in the liquidation balance.
4. A shareholder has the right to participate in the management of the company, i.e. to attend the General
Meeting and cast votes, demand and receive explanations relating to the company where such

explanations are required for an assessment of an item on the agenda of the General Meeting,
and to make proposals and counterproposals at the General Meeting.
a) If a shareholder intends to make counterproposals to proposals at a General Meeting, the
content of which is specified in the invitation to the General Meeting or notification of the General
Meeting, or in cases where a notarial deed must be drawn up on a decision of the General Meeting,
the shareholder is obliged to deliver the written text of his proposal or counterproposal to the company
no later than five working days before the date of the General Meeting. A shareholder has
the same right to demand and receive explanations regarding affairs related to persons
controlled by the company.
b) A shareholder may request the Board of Directors for the issue of a copy of the minutes
of the General Meeting or part thereof at any time during the existence of the company. Copies
are made at the shareholder’s expense.
c) A shareholder may petition a court to declare a resolution of the General Meeting null and void
should it contravene legal regulations, the Memorandum of Association, or the Articles
of Association. If this right is not exercised within three months of the date of the General Meeting
or, if a General Meeting has not been duly convened, within three months of the date the shareholder
could have learnt that the General Meeting had taken place, but no later than one
year, this right shall cease to exist. If the reason for the action is that the General Meeting
did not adopt the claimed resolution or that the content of the claimed resolution does not
correspond to the resolution adopted by the General Meeting, the action may be filed within
three months of the day the petitioner learnt of the claimed resolution but no later than one
year as of the date the General Meeting is held. A statement declaring a decision of the General
Meeting null and void may only be sought in cases specified by law.
5. A shareholder has the preferential right to subscribe to a portion of new company shares underwritten
to increase the registered capital in the scope of his share in the company’s registered
capital, provided that the shares are being subscribed to with monetary contributions. This right
may be restricted or suspended only by a decision of the General Meeting and only provided this
decision is in the important interests of the company.
6. A shareholder or shareholders who hold shares or interim certificates with a value of more than
three per cent of the registered capital (hereinafter referred to as ‘qualified minority’) may request
the Board of Directors for an Extraordinary General Meeting to be convened in order to discuss
proposed affairs. The manner in which such a General Meeting is convened and the coverage
of the costs thereof are regulated by law.
Openness and Transparency of Information
Severočeské doly has been a long-standing advocate of the openness of information in relation to current
and potential investors and in relation to other parties similarly involved with the company.
The company respects the guidelines of the Czech Security Commission regarding the publication of all
material information. The company also consistently ensures that all information requirements under
the regulations of the Prague Stock Exchange, the RM-System, and the Prague Securities Centre are
met. In this respect, all shareholders and potential shareholders, without discrimination, have an overview
of the financial situation, performance, ownership, and management of the company for their investment
decisions.
The trustworthiness and transparency of the financial figures released by the company is
guaranteed by the fact that the company’s financial statements are subjected to an independent audit
by Ernst & Young ČR, s.r.o. The independent auditor, approved by the Supervisory Board, also
examines the Report on Relations between Related Entities and the correctness of the information disclosed
in the Annual Report.
Company Policy in Relation to Involved Parties
The company consistently discharges all its statutory obligations in relation to involved parties, including
employees, creditors, customers, and suppliers. In addition, the company is aware of its broader
duties to the local community and the environment.

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19
Company Profile
Severočeské doly a.s., company registration number: 49901982, is a company established by a decision
to privatize significant parts of the assets of two state enterprises, Doly Nástup Tušimice and Doly
Bílina, of 1 January 1994, based in Chomutov. The company was established in accordance with
the Commercial Code (Act No 513/1991), as amended, pursuant to generally binding legal regulations
in force in the Czech Republic. The company’s core business is the excavation, processing, and
sale of brown coal and by-products. Information about the company is entered in the Commercial Register
kept by the Regional Court in Ústí nad Labem under Section B, Entry 495. The company’s majority shareholders
are the National Property Fund of the Czech Republic (55.4%) and ČEZ, a.s. (37.2%).
The company’s mining activities take place in two separate localities in the North Bohemian brown-coal
basin, Tušimice and Bílina. Doly Bílina produces low-sulphur graded and boiler coal. Doly Nástup Tušimice
mainly produces boiler coal. Although the two localities differ in terms of specific natural and historical
characteristics, they were successfully integrated right at the beginning of the company’s ten-year history.
Proof of this is the company’s leading position on the brown coal market, where it enjoyed a market
share of 44.9% in 2004. Further developments on the fuel market will be influenced by the Government
Energy Concept as the basic document expressing targets in the energy sector. The liberalization of the energy
markets in the EU is in full swing, and will gradually spread to the Czech Republic under the relevant
measures which have been adopted. These factors, which influence the consumption of energy in the Czech
Republic and have an impact on the demand for coal, are a decisive element in determining how the business
activities of Severočeské doly will progress in the future. The company is prepared to be one of the stable
pillars of the Czech and European energy sectors in the decades to come.
In relation to customers, a large emphasis is placed on the quality and reliability of supplies and
on accommodating other customer requirements. The dominant customer is ČEZ, a.s. The company’s
production range is very broad; the structure of customers, who benefit from guaranteed quality
and standards of coal produced by the company, is just as wide and diverse. The company annually
produces approximately 20 million tonnes of coal, making it the market leader. Significant competitors
remain Mostecká uhelná společnost, a.s., právní nástupce, and Sokolovská uhelná, a.s.
The company’s mission is not just the excavation of coal for the energy sector. The company is
fully aware of the need to compensate for the natural sources it exploits by cleaning up the consequences
of its mining activities. The thorough preparation and implementation of re-landscaping and
restoring environmental stability on completion of brown-coal mining is one of the company’s basic
areas of activity. To this end, the company creates financial reserves for cleanup and reclamation
and provisions to settle mining damage. The company invests resources from these reserves into financial
instruments in accordance with a suitably conservative risk policy.
The company pays considerable attention to its human resources policy and communication with
trade unions, especially during collective bargaining. In this respect, the company also strives to protect
the health and safety of its employees and the inhabitants in all municipalities affected by mining
activities. The company has a headcount of approximately 3,700 employees; thousands of other people
have found work at subsidiaries and supplier companies. In terms of its economic and social power,
Severočeské doly is also a stabilizing element in the region, and helps to find solutions to a number
of problems faced by local municipalities. In its communications, the company respects the principle
of the openness of information, not only in relation to employees and shareholders, but also in relation
to business partners and the public.
The company’s main goals include, but are not limited to:
long-term and stable increases in the capital invested by shareholders, reinforcement of the company’s
market position, preservation of the company’s financial stability, the posting of reasonable yields
on disposable financial assets, an increase in the profitability of assets, consolidation of social
peace within the company, the fulfilment of environmental protection requirements, the cleanup
and reclamation of land affected by mining, the reinforcement of good relations with municipalities.

WASHING
Technological premises for processing feed coal by means
of gravitational separation (washing). Every year, an average
of 3 million tonnes of feed coal with a granularity of
10–100 mm are processed.

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21
Report of the Board of Directors
on Company Business Activities and Assets
Business Environment
Significant Events of 2004
On 1 May 2004, the Czech Republic and another nine candidates joined the European Union. An amendment
to the Energy Act and the draft National Allocation Plan (NAP) for CO 2 emission trading, which
will enter into force after endorsement within the EU, were approved.
In the coal industry, Sokolovská uhelná, a.s. was privatized, and the privatization of OKD, a.s., KAR-
BON INVEST Group member was completed.
A bill to promote the generation of electricity from renewable energy sources is still at the stage
of discussion, and has had a first reading in Parliament.
Negotiations on the Ústecko Region Land-Use Plan 2006–2020, including the validity of and changes
to Area Environmental Limits for Coal Mining, kicked off.
In March 2004, the Government halted the process of privatization the state-held stake in
Severočeské doly a.s.
The Czech Economy in 2004
The Czech Republic’s gross domestic product went up by 4.0% in 2004. Consumer prices climbed by
2.8% year on year. The unemployment rate fell to 9.5%, mainly thanks to a change in the calculation
methodology to conform to EU standards. Labour offices had 541,675 unemployed registered in their
books; unemployment kept to the same level as in 2003. In the scope of the reform of public finances,
the value added tax standard rate was cut from 22% to 19% as of 1 May 2004. The corporate income tax
rate was reduced to 26%. Brown-coal mining reported a 4% decrease year on year. The prices of electricity,
gas, and district heating went up and the cost of acquiring electricity from renewable energy sources
was reduced. Hard-coal mining posted a moderate 2.2% rise year on year; the selling price of coking
coal went up.
The Czech crown appreciated against both the euro and the US dollar. As at 31 December 2004,
the exchange rates were 30.465 CZK per EUR and 22.365 CZK per USD.
Generation of Electricity in the Czech Republic
There was a year-on-year rise in total electricity generation by 1.3% (1.1 TWh) to 84.3 TWh. Electricity
generation at nuclear power plants rose by 1.7%, and in steam power stations fell by 0.4%.
The excavation of brown coal and lignite dipped year on year from 50.3 to 48.5 million tonnes; hardcoal
mining fell from 13.8 to 13.3 million tonnes.
Power generation in the Czech Republic in 2004 (%)
0 10 20 30 40 50 60 70
Coal power stations
62.6%
Nuclear power stations
31.2%
Vapour gas and gas power
stations — 3.1%
Hydro, wind, solar, and other
alternative power plants
3.1%
Market Share
Severočeské doly achieved sales of 21.8 million tonnes of coal in 2004, thus recording a drop in sales
production by almost 1 million tonnes (4.33%) compared to 2003, mainly because of a fall in boiler-coal
supplies to ČEZ power plants. Compared to the other brown-coal producers, Severočeské doly confirmed
its status as the number-one player on the brown-coal market with a market share of 44.85%.

Market share by brown-coal mining company in the Czech Republic in 2004 (%)
Severočeské doly a.s.
44.9%
Mostecká uhelná společnost, a.s.
33.4%
Sokolovská uhelná, a.s.
20.8%
Lignit Hodonín, s.r.o.
0.9%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
0 10 20 30 40 50
Developments in market share by mining company (%)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Severočeské doly a.s.
Mostecká uhelná společnost, a.s.
0 10 20 30 40 50 60 70 80 90 100
Palivový kombinát Ústí, s.p.
Sokolovská uhelná, a.s.
Lignit Hodonín, s.r.o.
Developments in brown coal sales by mining company (millions of tonnes)
Severočeské doly a.s.
Mostecká uhelná společnost, a.s.
0 10 20 30 40 50 60
Palivový kombinát Ústí, s.p.
Sokolovská uhelná, a.s.
Lignit Hodonín, s.r.o.

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23
Sales and Marketing
Sales Strategy and Contractual Arrangements
Severočeské doly’s strategy in sales is centred on annual, medium- and long-term coal supply contracts
respecting mutually beneficial business conditions. Contractual relations form the basis for long-term
stable use of brown coal as a source of quality, reasonably priced energy which is strategically
important today and will remain so in the future.
In 1997, Severočeské doly a.s. and ČEZ, a.s. entered into an agreement on future coal supply purchase
contracts up to 2015 with an option to renew until 2030. The conclusion of long-term sales contracts
with ČEZ in 1997 enabled Severočeské doly to structure and implement an efficient long-term investment
programme. In 1996, Severočeské doly entered into business cooperation with Teplárna Ústí nad Labem.
Under long-term contracts the company provided the heat plant with an interest-bearing loan
in 1996–1997 and the heat plant agreed to buy a minimum of 0.9 million tonnes of brown coal from
Severočeské doly each year. In 2004, the business cooperation was extended by a long-term purchase
contract valid until mid–2020. At the end of 1997, a long-term contract was signed with ECK Generating
Kladno for coal supplies to the Kladno Energy Centre in the period until 2020. The specific parameters
of these long-term agreements are subject to annual clarification in annexes signed for each individual
year, which form the basis of flexible mutual trade. This ensures that the sale of three quarters
of production is guaranteed each business year and means the company has some idea of how to proceed
in its other business and investment programmes and what decisions to make. In 2004, a number
of other sales contracts were also concluded with smaller and medium-sized customers for supplies
of graded coal and coal dust in the various regions of the Czech Republic.
Supplies of Output
The output of Severočeské doly a.s. is supplied to several market segments. Fuel compounds are intended
for the ‘large power industry’, which is dominated by ČEZ. Highly calorific rough powders and additive
dust coal are intended for the industrial and municipal sectors (large and medium-sized industrial
and municipal heat plants). Sorted coal in the categories of Cube ko2, Nut o1 and Nut o2, with a low
content of aggressive substances, is supplied to small and medium-sized plants in the municipal
sector and to the public. Another market segment is exports of output to Slovakia, Austria, Slovenia,
Croatia, Poland, and Hungary, mediated by CARBOUNION BOHEMIA, spol. s r.o.
The parameters of the fuel generated from coal mined at Doly Bílina comply with the requirements
laid down in Regulation of the Ministry of the Environment No 357/2002, on the quality
of solid fuels supplied for combustion in energy plants. Nut o2 is a suitable fuel for grate boilers and
automatic boilers with a high combustion efficiency (e.g. Carborobot, Ekoefekt), NOX boilers, and other
coal-fired boilers.
Besides coal products, Severočeské doly also offers a number of by-products, such as ceramic, brick,
and plugging clay, and ceramsite.
Coal Products
Severočeské doly sold graded coal in the categories of Cube ko2 (granularity of 40–100 mm), Nut o1
(granularity of 20–40 mm), and Nut o2 (granularity of 10–25 mm) to selected industrial customers
and consumers in the tertiary sphere (i.e. households, schools, authorities and hospitals). Rough powder
(granularity of 0–10 mm) and industrial mixes (granularity of 0–30 mm) were supplied to producers
of heat and electricity, in particular ČEZ power stations and large heat plants.
Despite the impact of certain negative effects, especially the full operation of the two units at Temelín
Nuclear Power Station, the company reported sound coal sale results in 2004. Exports of electricity from
ČEZ, a.s. and Coal Energy, a.s. (a direct link to the need for additional purchases of coal for ČEZ power
stations during the year), the high quality of the coal produced by the company, and suitable incentives
(discounts, financial bonuses, extended payment periods) all contributed substantially to this situation.
A significant item of Severočeské doly coal sales in 2004 comprised graded coal from Doly Bílina,
which recorded sales of 2.2 million tonnes. Sales of rough powder coal slipped by 24,400 tonnes
(2.9%) year on year to 826,000 tonnes. In 2004, supplies of industrial mixtures amounted to 18.8 mil-

Coal customer structure in 2004 (%)
ČEZ, a.s.
78.7%
power plants over 50 MW
8.0%
power plants 50 MW and
under — 0.5%
fuel dealers
11.5%
exports to Slovakia
0.6%
other exports
0.7%
Developments in exports (kt)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Slovakia
Hungary
Croatia
0 10 20 30 40 50 60 70 80
0 200 400 600 800 1,000 1,200
Slovenia
Germany
Austria
Macedonia
Poland
lion tonnes, a year-on-year fall by 906,000 tonnes (4.6%) resulting from lower supplies to ČEZ power
stations, where 17.1 million tonnes were supplied, i.e. 708,000 tonnes (4%) less than in 2003. Revenues
were down by CZK 159 million (2.1%) to CZK 7,391.3 million (including the change in inventories).
Non-Coal Products
A significant area of company trading is the sale of non-coal products and services. The main byproducts
offered by the company included gravel, kaolin, marlite, and plugging and brick clay.
Revenues in 2004 amounted to CZK 11.4 million, a rise by CZK 4.6 million (67%).
Coal Sale Distribution Routes in the Czech Republic
There are several different distribution routes from the mining company to the end consumer.
Key industrial customers are supplied with a substantial portion of sales under medium-term and
long-term sales contracts.
Coal wholesalers are another market area. This market segment is smaller than the segment of direct
customers. It distributes products to companies, the municipal sphere, and the retail network. The network
of coal dealers is illustrated on the map.
A nationwide network of retailers is in direct contact with end customers. Despite competition from
other types of energy, the company has not recorded a reduction in the number of points of sale or

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Product structure (%)
industrial mixes
86.3%
Cube ko2
2.5%
Nut o1
4.0%
Nut o2
3.4%
rough powder
3.8%
0 10 20 30 40 50 60 70 80 90 100
uneven distribution over the territory of the Czech Republic. Retail distributors respond very flexibly
to market requirements. Their mutual competition affects pricing, as well as the quality and availability
of products.
The company is in direct contact with all links in the distribution chain. Information analysed by
the company underlines the positive developments in demand for the fuel sold by Severočeské doly.
Coverage of the Czech Republic by significant dealers in fuel from Severočeské doly:
Significant fuel dealers of Severočeské doly a.s. in the Czech Republic
Expositions and Trade Fairs
Severočeské doly profiles its activities and consolidates its corporate image by participating
in expositions and trade fairs. In 2004, the company took part in top international trade fairs, including
the International Mechanical Engineering Fair in Brno. The company also attended the prestigious
Aqua-therm Praha fair, which specializes in the energy sector, heating systems for buildings, and
the environment.
In the scope of the side programmes of fairs and expositions, Severočeské doly organizes expert
seminars, focusing on new progressive technologies of brown-coal combustion which reduce
the environmental burden at power plants certified in accordance with European standards and meeting
criteria laid down in the Clean Air Act. Specialized seminars were also held outside the scope
of expositions and fairs (e.g. for army representatives from VUSS, the Military Accommodation and
Facility Management Authority) in order to address the broader professional public active in various
sectors. Target groups are mayors and parish chairmen, the owners and operators of small and mediumsized
plants, and the general public.

Future Trends
Developments on the fuel market will hinge on the success achieved in fulfilling the goals
of the Government Energy Concept, as the key document laying down the paths to be followed in energy
management, the National Allocation Plan (the fulfilment of the conclusions of the Kyoto Protocol
concerning reductions in the quantities of greenhouse gas discharged into the atmosphere), and
the related energy policies in place in the individual regions of the Czech Republic.
These are measures aimed at energy plants included in the company’s trading operations, which
will have to achieve the required cut in energy sector emissions generated by the combustion of fossil
fuels.
The aim is to implement new, efficient combustion technology and to promote the use of renewable
energy sources and gas fuels.
The impact of the liberalization of energy markets in the Czech Republic and the pricing policies
of rival producers will also affect the prospects of the brown-coal market.
Production
In 2004, the company extracted a total of 22.02 million tonnes of coal and 77.03 million m 3 of overburden.
Doly Nástup Tušimice
Doly Nástup extracted 12.9 million tonnes of coal. All of DNT’s production was supplied to ČEZ. Overburden
extraction totalled 33.6 million m 3 .
Libouš-West Quarry, North Quarry
The North Quarry, in operation since 1997, is located in the western portion of Libouš-East Quarry, and
follows up on advances from 1988–1992. The quarry is at the edge of the mining area, where the coal
seam runs deep. It is advancing via overburden and coal sections in a southward direction towards
Libouš Quarry, eliminating the danger of instability in the closing banks.
Libouš-East Quarry
The quarry is advancing in a northerly direction towards the border of the mining area near the town
of Černovice. The town is protected from the adverse effects of the quarry by earth embankments.
The border of the mining area will be reached by the overburden section in 2006, and by the coal quarry
in 2014.
Libouš-West and Libouš-East Quarries run extraction programmes in accordance with approved
project documentation and the resulting Plan of Development, Preparation and Extraction, approved
under mining authorization from the Most District Mining Authority of 4 December 1998.
Libouš II Quarry
After Libouš-East is mined out in both directions, the extraction of overburden from 2006 and coal
from 2015 will continue in the final part of the mining area, in the newly opened quarry Libouš II Before
the new quarry can be developed, it will be necessary to complete the rerouting of a section
of the Chomutov – Březno railway line in order to take it out of the mining area; this stretch of relaid
track should enter into operation in 2007.
The quarry in the current mining area, compliant with the ecological limits imposed by Government
Resolution No 444/1991, is expected to be shut down between 2030 and 2035.
Overburden Disposal
Extracted overburden materials are disposed of exclusively by back filling into internal spoil heaps.
In order to free up the advancement of back-filling, conveyor technology from the former coal corridor
has been dismantled.

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27
Developments in coal extraction (millions of tonnes)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Doly Nástup Tušimice Doly Bílina
0 5 10 15 20 25
Technologies Used
Overburden is extracted using KU 800 and SchRs 1550 excavators of the TC2 range. Overburden is
transported by 1,800 mm gauge conveyor belt and deposited in spoil benches adjacent to the ZP 5500,
6600 and ZPDH 6300 spreaders of the same series.
In the coal quarry, we use KU 300S and K 800 excavators of the TC1 range. Coal is extracted by
1,200 mm gauge conveyor belt and transported by 1,600 and 1,800 mm gauge conveyor belt
to the Tušimice II Power Station or to a loading facility for the power stations Prunéřov I, Prunéřov II,
and Chvaletice.
A homogenization depot, through which most extracted coal passes, ensures consistent quality
of coal extracted for supply to ČEZ power stations.
Estimate of Economically Usable Stocks of Doly Nástup Tušimice
At the end of 2004, 320 million tonnes of usable stocks were available in the Tušimice mining area
as set by the Most District Mining Authority on 9 August 1994.
Doly Bílina
In 2004, Doly Bílina extracted 9.2 million tonnes of coal and 43.4 million m 3 of overburden.
In the years to come, mining activity at Doly Bílina will continue at just two sites: the quarry itself
and the external Pokrok overburden dumping area. The mining front is advancing in a parallel westerly
direction.
Bílina Quarry
At an estimated annual coal extraction volume of 8.0–8.5 million tonnes, the Bílina Quarry mining
operation in its current spatial figuration, given by environmental protection restrictions under
Government Resolution No 444/1991, will be shut down between 2030 and 2035. Under a Decision
of the Most District Mining Authority of 23 January 2004, the mining operations of Doly Bílina are
permitted in accordance with the approved Plan of Development, Preparation and Extraction
for the period up to the end of 2010, or until such time as the permitted limits are reached.
Overburden Disposal
The bulk of extracted overburden is deposited at an internal spoil heap. Only overburden from the first
overburden section is disposed of at the external Pokrok dumping area.

Ledvice Coal Preparation Facility
Coal processing at the preparation facility in Ledvice produced 8.75 million tonnes of coal in a wide
range of types graded in accordance with the requirements of customers on the brown-coal market,
including coal with additives containing a calcium hydroxide mix.
Technologies Used
Overburden at Doly Bílina is extracted using a single TC3 technological configuration consisting
of a K 10 000 excavator, 2,200 mm gauge trunk conveyor, and ZP 10 000 belt spreader, as well as
TC2 technology composed of four KU 800 excavators and one K 2000 excavator, and 1,600 mm, 1,800 mm,
2,000 mm, and 2,200 mm gauge belt conveyors. The overburden excavated by the TC2 excavators is
disposed of by ZPD 8000 and ZP 5500 spreaders and two spreaders of the ZP 6600 type.
The technology of the coal quarry comprises TC1 excavators of the KU 300/S type and a K 650
excavator. Non-coal materials from the quarry are transported by 1,200 mm and 1,600 mm gauge
belt conveyors to ZP 2500 and ZP 3500 spreaders for back-filling into mined-out areas. A total of six
TC1 excavators were used at the coal quarry, of which five were KU 300/S and one was a K 650.
Estimate of Economically Usable Stocks of Doly Bílina
At the end of 2004, 232.6 million tonnes of usable stocks were available in the planned mining area,
as set by the Most District Mining Authority on 4 September 1996.
Coal Production Quality Management
Both mines operate homogenization depots of extracted coal, which are equipped with stockyard
machinery.
These transfer points allow the mines to respond flexibly to current developments in sales. The company
pays maximum attention to the quality of charge coal during extraction. The company’s top-class
control centre monitors sulphur and ash content non-stop. Other parameters, such as water content,
calorific value, and combustion heat, are assessed in the coal laboratory. This information enables
the company to react promptly to customer needs and requirements. The final products are therefore
assured of a standard quality conforming to the parameters specified in the Coal Catalogue.
Authorization to Operate Mining Activities
The main terms and conditions relating to the mining and economical use of mineral deposits are laid
down by Act No 44/1988, on the protection and use of mineral resources (the Mining Act), and by
Act No 61/1988, on mining, explosives and the State Mining Authority; the company fully respects
these terms and conditions. The District Mining Authority in Most, which gave Severočeské doly authorization
to carry out mining activities, is tasked with inspecting observance of these conditions. In accordance
with the Mining Act (No 44/1988), the company creates legal reserves for cleanup, reclamation,
and mining damage in order to eliminate the consequences of mining operations and remove
damage associated with extraction activities. Under this Act, the company also makes contributions
from mining-area and extracted-mineral proceeds.
Mining at individual mining localities is carried out in an area restricted by ecological limits set
under Government Resolution No 444 of 1991. The company’s mining activities are also affected by Act
No 100/2001, on environmental impact assessments.
Investment
Capital Investment in 2004
Severočeské doly expended CZK 1,255 million on capital investments in 2004. The investment programme
focused on projects related to requirements stemming from mining processes at the quarries.
Besides the acquisition of new mining technology, and the reconstruction and modernization of existing
mining technology, the programme also included the resumption of mechanization and construction
of an ecological nature.

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29
Developments in investments (CZK billions)
1999
2000
2001
2002
2003
2004
0 0.5 1 1.5 2 2.5
Capital expenditure Investments into excavating technology
Capital Investment Projects at Doly Bílina
The following significant projects were completed in 2004:
— third stage of the construction of the third coal exhaust,
— modernization of the crushing machines in the boiler coal crushing plant at the Ledvice Coal
Preparation Facility,
— acquisition of a new belt conveyor for the coalface side of the third coal exhaust,
— reconstruction of the vehicle scales at the coal dust dump in Ledvice,
— modernization of the drive unit of 1,200 mm belt conveyor No 57,
— rerouting, modernization, and overhaul of the conveyor line from the Radovesice external spoil heap
to the internal spoil heap,
— reconstruction of the radius of the bucket-wheel boom of the KU 300/91 excavator, and
— reconstruction of the driver’s cabin of the KU 800/19 excavator.
Capital Investment Projects at Doly Nástup Tušimice
The following significant projects were completed in 2004:
— modernization of the TR II transformer station,
— reduction in the transport distance of the tandem conveyors at the S1 overburden,
— increase in the capacity of the Černovice pumping station,
— new pumping station for belt conveyor No 105, and
— modernization of belt conveying at the S1 overburden.
The following projects were in progress:
— supply of a new SchRs 1320 excavator (due for completion in January 2006),
— increase in the capacity of the Březno mine water treatment plant (due for completion in February 2005),
and
— fourth stage of the construction of the Quarry Operation central control centre (due for completion
in March 2005).
Company Administration Investment Projects
The following modules have in productive operation since 1 January 2005 as part of the programme
to implement the new SAP information system: financial accounting, tangible and intangible assets,
treasury, controlling, sales, supply and warehouses, document management, and workflow.
Principal Future Investments
At Doly Bílina, the Libkovice pumping station will be relocated, the Hrdlovka pumping station will
be replaced, and the capacity of Nut o2 fuel production will be increased.
At Doly Nástup Tušimice, the technology of the crushing plant (ÚDUT II) and the loading bin
(NZ II) will be modernized together with the TR IV transformer station.

Significant Contractual Relations
The company entered into major contracts with PRODECO, a.s., KLEMENT a.s., První Elektro, a.s.,
SD – 1.strojírenská, a.s. and Elektroprim – Koutník, a.s. The main building contractors are SMP CON-
STRUCTION, a.s. and KLEMENT a.s. PRODECO has been contracted to supply a new SchRs 1320
excavator to Doly Nástup Tušimice in January 2006. PRODECO modernized the crushing machine
in the boiler coal crushing plant for Doly Bílina, the third stage of the third coal exhaust was completed,
and the radius of the bucket-wheel boom of KU 300/91 was modernized.
KLEMENT relocated the belt conveying exhaust from the external Radovesice spoil heap to the internal
spoil heap at Doly Bílina. První Elektro modernized the TR II transformer station for Doly Nástup
Tušimice and is now completing the fourth stage of the construction of the Quarry Operation central
control centre. Elektroprim – Koutník supplied a new belt conveyor for the third coal exhaust line
at Doly Bílina. The subsidiary SD – 1.strojírenská reconstructed the drive unit of the 1,200 mm gauge
belt conveyor No 57 at Doly Bílina, and reduced the transport distance of the tandem conveyors
at the overburden section. SMP CONSTRUCTION completed a project to modernize and increase
the capacity of the mine water treatment plant at Doly Nástup Tušimice.
Financial Activities
In 2004, Severočeské doly made a profit from financial operations of CZK 390 million, which is CZK 68 million
(14.8%) less compared with the previous year. The year-on-year fall can be attributed to an absolute
fall in the improved financial assets by CZK 820 million as a result of an exceptionally high dividend
payout of CZK 2.1 billion for 2003.
Financial Strategy
Severočeské doly applies a conservative financial risk management policy, which entails diversification
of financial activities among top quality financial institutions and various types of investment instruments
from issuers with a high credit rating. Temporarily idle assets from reserves created to eliminate
the effects of mining operations are appreciated via liquid financial instruments with a quality rating
and sufficient term of investment. To this end they respond to new investment opportunities
on the financial market in accordance with the company’s investment strategy.
Financial Risk Management
The weighted rating of the company portfolio according to Standard & Poor’s is A, which corresponds
to the Czech Republic’s rating. The company monitors fundamental interest rate risk management
indicators in order to eliminate the undesirable impacts of interest rate movements. Standard financial
market instruments were used to manage interest rate and foreign currency risk.
Financial Investments
Financial investments consisted of a portfolio of government bonds, corporate and bank bonds,
mortgage bonds, and Eurobonds of top-class issuers, long-term deposit bills at leading banks, an interest-bearing
cash loan and equities, as well as the spin-off of certain assets to subsidiaries. The equity
and loan investments are strategic in character.
The company made active use of money market instruments, i.e. short-term financial assets, in its
cash flow management programme. It generated revenues on treasury bills, bank deposits, deposit
certificates, deposit bills, and the share certificates of open-ended mutual funds. Daily current account
balances were placed in overnight and atvis deposits. At year-end, the company held bonds and
Eurobonds with a total book value of CZK 6,317 million, down CZK 720 million from year-end 2003.
Teplárna Ústí nad Labem repaid another CZK 34 million on a loan, of which CZK 120 million remained
outstanding at the end of the year. The company also held long-term deposit bills with a total book
value of CZK 128 million, treasury bills in the amount of CZK 2,606 million, share certificates amounting
to CZK 150 million, and deposit instruments totalling CZK 1,235 million. Overall, the book value
of financial investments fell by 6.2% and the book value of financial assets by 7.6% over the year.

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How Investments are Financed
The company financed its investments in tangible and intangible fixed assets solely from depreciation.
Thanks to its long-term stable financial strength, the company did not have to draw on any external
sources of financing (i.e. loans, bank credit, bonds, or bills of exchange).
Capital Interests
Subsidiaries at 31 December 2004
Company Number of shares Shareholding at nominal Share in registered
value (CZK’000) capital (%)
SD – Vrtné a trhací práce, a.s. 12,308 83,694 100.00
Skládka Tušimice, a.s. 13,735 137,350 98.00
SD – Autodoprava, a.s. 317,294 330,785 100.00
SD – 1.strojírenská, a.s. 67 67,000 100.00
SD – Kolejová doprava, a.s. 400 370,000 100.00
SD – Humatex, a.s. 25 25,000 100.00
PRODECO, a.s. 253 10,036 50.50
Subsidiaries total 1,023,865
SD – Vrtné a trhací práce was established in 1997 by the spin-off of Severočeské doly’s drilling and
blasting unit to form a separate company. The core business of the company is blasting work and
the research, production, disposal, defusing, processing, purchase, and sale of explosives.
In November 2004, this subsidiary’s capital structure was optimized when the registered capital
was reduced by CZK 9,846,000.
The company’s stake in Skládka Tušimice indicates its organizational and legal interest
in the management of solid municipal and other hazardous waste. This subsidiary’s co-shareholders
are large towns and cities in the region. Its core business is waste management and the mediation
of waste management services.
In November 1997, Severočeské doly’s Doly Bílina truck transport operations were spun off and now
do business as a subsidiary of Severočeské doly a.s. under the name SD – Autodoprava. Later, in 2001,
part of the truck operations at Doly Nástup Tušimice were integrated into this subsidiary. This
company’s core business is road freight and passenger transport, motor vehicle repairs, and motor
vehicle rentals. In October 2004, this subsidiary optimized its capital structure by reducing its registered
capital by CZK 36,422,000.
The subsidiary SD – 1.strojírenská was established at the end of 2001. At the beginning of 2002,
Severočeské doly’s workshop unit and mine technology operating unit were spun off from Severočeské
doly and transferred to this subsidiary, which is involved in the mechanical engineering sector.
SD – Kolejová doprava was founded at the end of 2001 to run the operations of selected railway
activities which were spun off from Severočeské doly at the beginning of 2002.
In the wake of a decision to spin off the manufacture of oxyhumolite-based chemical products
from Severočeské doly, the subsidiary SD – Humatex was established at the end of 2002. This company
launched operations at the beginning of 2003.
By making a joint capital investment with Sokolovská uhelná into PRODECO (formerly VÍTKOVICE –
PRODECO), in 2002 Severočeské doly gained control of this supplier of important excavating technology.
During 2003, Severočeské doly purchased an additional 1% of shares, making PRODECO a subsidiary.

Other Capital Interests at 31 December 2004
Company Number of shares Shareholding at nominal Share in registered
value (CZK’000) capital (%)
Equity investments in associates
Výzkumný ústav pro hnědé uhlí a.s. 27,399 27,399 38.97
SHD – KOMES a.s. 168,235 168,235 46.33
Coal Energy, a.s. 1 10,000 20.00
ENETECH a.s. 56 10,500 50.00
Other investment securities and participating interests
Sokolovská uhelná, a.s. 1 1 0.00
Total other capital interests 216,135
The company’s stake in Výzkumný ústav pro hnědé uhlí (the Brown Coal Research Institute) allows
it to participate in the management and supervision of the activities of the Institute, which is a key
institution for applied research in fields crucial to the development of the brown coal industry.
The stake in SHD – KOMES is an instrument of control over one of the largest suppliers of materials
consumed by Severočeské doly’s operations. At the same time, the stake is a long-term investment
in SHD – KOMES’s fixed tangible assets that are useful in the commercial, service and tourism sectors.
In April 2004, Severočeské doly sold a 34.22% stake in the registered capital of Teplárna Ústí nad Labem.
In 2002, a project was implemented with ČEZ, Mostecká uhelná společnost, Sokolovská uhelná, and
CARBOUNION BOHEMIA to establish the joint venture Coal Energy. This company started operating
as an exporter of electricity generated at conventional Czech coal power stations in a move intended
to eliminate the negative impact of putting Temelín Nuclear Power Station into service.
The main incentive behind the investment into ENETECH was to acquire a stake in a company
with important mining technology know-how.
Personnel and Social Policies
The aim of the company’s personnel and social strategy is to ensure the development of skilled, highly
motivated employees, who are the cornerstone of success as the company seeks to meet its targets.
The incentive programme focuses on employee bonuses, financial and non-financial employee benefits,
and employee training. The social programme concentrates on promoting safety and health at work.
The basic document for the company’s personnel and social policy is the collective agreement concluded
for the period from 2004 to 2006.
Number of Employees
At the end of 2004, the company had a headcount of 3,685 employees, i.e. 97 employees fewer than
at year-end 2003, continuing the downward trend of previous years. By reducing its number of employees,
the company was responding to influences from the energy market, in particular the startup
of Temelín Nuclear Power Station and the need to increase the efficiency of production, ensuring a rise
in labour productivity. In 2001–2003, the company released 1,084 employees to subsidiaries. In 2004,
Employee age structure (%)
up to 25
1.6%
25–35
17.8%
35–45
26.5%
45–55
36.9%
over 55
17.2%
0 10 20 30 40

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Employee education structure (%)
primary school
13.0%
apprenticeship
59.3%
secondary school
22.6%
university
5.1%
Employee process structure (%)
0 10 20 30 40 50
Overburden
33.0%
Coal extraction and dressing
46.5%
Administration
20.5%
Developments in productivity and monthly wages
105,000
100,000
95,000
90,000
85,000
80,000
75,000
70,000
65,000
60,000
55,000
50,000
45,000
40,000
35,000
8,500
8,000
7,500
7,000
6,500
6,000
5,500
5,000
4,500
4,000
3,500
0 10 20 30 40 50 60
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Labour productivity from value added Average monthly wage
Developments in workforce size and coal extraction
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Average number of employees Gross amount of coal extracted (kt)
21,000
19,000
17,000
15,000
13,000
11,000
the company implemented the next stage of a plan to reduce the number of white-collar workers, as
laid down in the project ‘Optimization of the Organizational Structure’.
Wages and Labour Productivity
The average monthly wage at the company in 2004 was CZK 20,892 per employee (year-on-year growth
of 6.6%). The rise in average earnings was achieved by increasing the tariff-based wages of employees
by 5.5% and raising the supplementary wage. The company fulfilled all its obligations under the col-
9,000
7,000
24,000
23,500
23,000
22,500
22,000
21,500
21,000
20,500

lective agreement. Labour productivity measured by value added remained more or less at the same
level year on year.
Social Policy
The company’s social programme fully respected the provisions of the collective agreement and other
legal regulations. In the field of social policy, the company spent resources primarily on works catering,
pension funds, protective equipment, cleaning and washing products, and protective drinks.
In 2004, there was a change in the system used to make the employer’s contribution to pension funds.
The employer’s contribution had been taken up by 80% of employees by the end of the year.
Resources from the social fund were used mainly for recreational, cultural, and sports activities, and
for the promotion of employees’ health. Overall, CZK 16.7 million was drawn from the social fund.
Education Programme
The employee training programme focused on increasing, complementing, and maintaining
the qualifications of employees. Employees participated in compulsory training sessions and courses,
the individual management groups continued their training programmes, and language courses were
held again for employees. In the scope of the company’s support of improved qualifications and retraining,
selected employees were given the opportunity of acquiring a certificate of apprenticeship; 19 employees
studied at secondary school or university with assistance from their employer. CZK 4.6 million was
spent on education and training.
Social Responsibility
Business Principles
In its business activities, Severočeské doly is not only governed by the principle of maximizing economic
value for its shareholders, but also respects and makes a significant contribution to the creation
of social and environmental values. An important element of corporate culture is fairness in business;
the company’s finances are transparent. In its communications, the company respects the principle
of the openness of information, not only in relation to employees and shareholders, but also in relation
to business partners and the public. In relation to customers, a large emphasis is placed on the quality
and reliability of supplies and on accommodating other customer requirements. The company is
aware that employees are a valuable source of success, and therefore it pays considerable attention
to its human resources policy and communication with trade unions, especially during collective bargaining.
In this respect, the company also strives to protect the health and safety of its employees and
the inhabitants in all municipalities affected by mining activities. With this in mind, the company consistently
respects safety rules and invests in environmentally-friendly modern technology and production
processes. Respect for the environment has become an integral part of all company activities.
In terms of its economic and social power, Severočeské doly is also a stabilizing element in the region,
and helps to find solutions to a number of problems faced by local municipalities.
Environmental Responsibility
A significant element in the company’s business plans is measures to eliminate negative environmental
effects and to improve the environment. In the scope of its efforts to minimize the effects of mining
on the surrounding area, Severočeské doly spends considerable amounts of money on land reclamation
and environmental investments. To this end, it creates cleanup and reclamation reserves and reserves
for the settlements of anticipated mining damage. Therefore, in the long term the company is laying
conceptual, technological, and financial foundations for the landscape to be returned to a condition
corresponding to the region’s requirements once mining activities are discontinued.
Regional and Public Relations
The company’s means and opportunities to promote the development of public life in its place of business
(and in several cases further afield) were used on a broad scale. In 2004, the company cooperated with

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municipalities and other organizations, assisting their operations in various forms. The basis of financial
assistance was resources provided in accordance with a General Meeting resolution and a government
resolution on the provision of gifts and donations.
Municipalities were provided with donations of more than CZK 16 million to develop their infrastructure
and implement regional development projects. CZK 11 million was channelled into health care
and social and charity purposes. In the field of physical education and sport, especially the use of free
time and the development of talent among children and young people, the company made CZK 5.8 million
available. Small and large sports clubs received sponsorship; some of them were dependent on this
support as they sought to continue training young people. These beneficiaries included young wrestlers,
softball players, junior football teams, ice-hockey clubs, and handicapped athletes. Further funds were
donated to voluntary fire brigades in the region to safeguard the protection of the public against fire,
and to social service institutions so that they could buy the equipment they needed.
CZK 8.6 million was gifted to cultural projects recommended by the Ministry of Culture and to environmental
protection. These beneficiaries included the Chomutov District Museum, the Teplice Regional
Museum, the Chomutov Municipal Theatre, Duchcov Castle, and Chomutov Forest Park. The North
Bohemian Philharmonic Orchestra received sponsorship for a Beethoven festival. CZK 5.1 million was
donated to science and education, primarily to equip schools with modern teaching aids and to nurture
the talent of children and young people. Funds were made available to nursery, primary, and
secondary schools, selected universities and colleges, children’s homes, and youth centres.
Sports, cultural, educational and other social organizations received more than CZK 16.7 million
in the form of consideration paid for advertisements and promotion.
In 2004, Severočeské doly supported the publication of a number of publications and textbooks
(e.g. Mining Maps and Measuring Devices). The company worked in association with the Czech
Agricultural University to prepare an exhibition of photographs detailing the reclamation and field
engineering of the landscape affected by opencast coal mining; this exhibition was shown in exhibition
halls in Teplice, Bílina, Chomutov and Ostrava. Severočeské doly a.s. is a permanent member of the Mining
and Oil Refining Industry Employers Union and the Czech Managers Association. It was also an active
participant in the activities of the District Economic Chambers and Economic and Social Councils
of Chomutov and Teplice.
Responsibility to Employees
Severočeské doly offers reliable employment and good social security for the workforce, especially
in the districts of Chomutov and Teplice, where unemployment is rife. Besides stable employment
in a good working environment and the corresponding level of pay, employees enjoy a number of special
benefits. In its personnel policy, the company tries to motivate employees to put in higher, betterquality
performance, to communicate openly, to improve qualifications, to improve the corporate
culture, and to consolidate the company’s identity. These factors make a significant contribution
to social peace within the company, as evidenced by the bilaterally correct and conflict-free collective
bargaining between the management and the trade unions.
Relations with Business Partners
Severočeské doly places a large emphasis on the quality of production, on the reliability of supplies,
and on ensuring an accommodating approach to customers. The company actively helps to find
Use of funds from net earnings in 2004 approved by the General Meeting
(CZK millions)
Infrastructure — 16.0
Health care, charity, social services — 11.0
Sport — 5.8
0 10 20 30 40 50
Arts and the environment — 8.6
Young people, education, and science — 5.1

solutions to customers’ problems related to transportation, environmentally-friendly technology, waste
management, financing, etc. The company’s main customers are the regional CHP plants operated
by ČEZ. The long-term successful cooperation between Severočeské doly and ČEZ forms a key pillar
of the Czech energy sector and makes a major contribution to regional development.
The company presents itself in the form of expert seminars, focusing on new progressive technologies
of brown-coal combustion which reduce the environmental burden. Seminars are organized with
the aim of addressing the professional and lay public in the various regions.
Although the company is aware of its prominent position as a major customer of mining technology,
reclamation work, materials, and energy, it always behaves correctly and with respect in its relations
with suppliers. The company primarily makes use of services offered by local suppliers in order to help
regional development. The company prefers to cooperate with suppliers who pursue similar principles
of social responsibility.
Openness of Information
Communication has become an important part of company policy and culture. The aim is to keep
the broader environs informed of our activities and to provide assistance in finding solutions to problems
suffered by the region and areas further afield. Severočeské doly provides regular information
via the media and competent institutions concerning its financial results, major events within the organization,
and circumstances relating to external affairs.
The Environment
Ecology and environmental protection are fundamental priorities of Severočeské doly. In 2004, the company
spent CZK 572.7 million on environmental protection, which is CZK 7 million more than in 2003.
State of reclamation at year-end 2004 (ha)
in progress
completed
0 500 1,000 1,500 2,000 2,500 3,000
agricultural forested water
other
The harmonization of Czech protection legislation with European Union legislation is placing increasing
demands on the construction or modernization of certain structures and technologies, especially
in terms of water protection and restrictions in noise and dust (clean air). In 2004, work continued
on increasing the capacity of the mine water treatment plant for Doly Nástup Tušimice, and a similar
structure will be built for Doly Bílina, where a construction project intended to cut down on noise and
dust in Ledvice is ready for implementation.
Clean Air
In terms of air protection, the company has taken measures intended to reduce the dust generated
during mining and during the transportation of coal and overburden. The company operates a dust
monitoring programme involving continuous measurements and remote data transmission; this
monitoring is carried out by an independent accredited laboratory. Every month, the latest recorded
measurements are made available to the municipalities affected by mining operations. The company’s
activities in this area also take into account consumers, who are offered graded and boiler coal
with a low sulphur and additive content.
Water Protection
Severočeské doly places great emphasis on the technical standard of its waste and mining water treatment
technologies. Mining water is treated in sedimentation tanks and then in mining water purifica

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tion plants based on the oxidation neutralization principle. Waste water is treated in highly effective
mechanical and biological purification plants. Besides the quality of discharge water, the company
also monitors the amount discharged. Monitored discharge water quality is guaranteed by the company’s
own laboratory, which is equipped with state-of-the-art analytical equipment. In 2004, the company
completed the first stage of a project to increase the capacity of the mine water treatment plant for Doly
Nástup Tušimice Březno, and this structure was put into trial operation.
Waste Management
The number-one priority for Severočeské doly is to minimize waste generation, especially with regard
to hazardous waste. The company organizes waste collection, sorting and reuse. Waste that cannot be
reused is liquidated by incineration or, if it cannot be incinerated, by landfill disposal.
Noise
Sources of noise at both mines are large machinery, conveyor belts, and supplementary mechanical
equipment. The distance of the source and the terrain are key factors determining how far noise
will spread. Noise levels are monitored on a regular monthly basis in all towns affected by the mining
operations. The monitoring is carried out by independent accredited laboratories and the relevant
municipalities receive results every month.
Outlook
In connection with an upcoming ecological audit, an agreement was concluded with the National
Property Fund of the Czech Republic in 2002 on the settlement of ecological liabilities occurring
prior to privatization. In 2004, intensive work continued in accordance with negotiated processes,
as set forth in the agreement.
The audit of results in the field of environmental protection suggests that the trend pursued by
the company is the right path to take. The approach to this issue will not change much in the upcoming
period, although the company will be subject to more stringent requirements as Czech law is
harmonized with EU legislation.
Environmental expenditure in 2004 (CZK millions)
water protection — 19.4
clean air and climate protection — 33.2
waste management — 3.5
Cleanup and Reclamation
0 100 200 300 400 500 600
reclamation — 312.4
other projects — 89.2
capital expenditure — 115.0
Thoroughly prepared and executed post-mining land reclamation and environmental stability is an integral
part of the company’s activities. Current reclamation practices, based on a landscaping concept,
do not just focus on reclaiming land for agricultural purposes; reclamation measures are being
introduced which correspond to the social and economic conditions throughout the region. The company
also takes into account non-mining industrialization, urbanization of the landscape, population
density, employment, and the agricultural and forest land resources. Reclaimed land must fulfil
basic functions – it must be ecologically balanced, free of health and hygiene defects, economically
exploitable, and, not least, aesthetically pleasing. The results achieved so far by the company reveal
that, with a knowledge of the nature of the excavation of relocated rock formations and all natural
relations in the area, solutions can be found which significantly reduce the negative impacts on the environment.
Thanks to its extensive research, differentiated approach to individual localities, and financial
power, Severočeské doly has all that is required for the organic re-incorporation of areas devastated
by mining into the landscape under the Krušné Hory mountain range.

The main aim of reclamation activities is to create a new landscape, restoring its basic functions
and integrating it smoothly into the surrounding area. This is a long-term, technically and economically
demanding process. The basic conditions for comprehensive cleanup and reclamation are drawn
up in conceptual documentation of summary plans and specialized studies to handle territorial and
reclamation issues. The result is a coherent picture of how the newly created and integrated area will
fit into the surrounding landscape, including the need to ensure sufficient financial reserves for this
activity in the period after the decommissioning of mining operations.
Cleanup and Reclamation Reserve
In order to cover future financial requirements, the company creates a statutory financial reserve
for cleanup and reclamation. In 2004, the company increased this reserve from CZK 2,597 million
to CZK 2,730 million. It drew CZK 312.4 million from this reserve.
Land Clearance Programme
In clearing land for mines and spoil heaps, the company must consider how to deal with the clearance
of vegetation, structures, and roads. The company paid considerable attention to the mining of reclaimable
soil, before the advance of quarries and dumps, sufficiently in advance. The company spent CZK 57.1 million
on excavating 439,000 m 3 of this soil. The company had an outlay of CZK 8.5 million on land
purchases. Construction of premises continued after the resumption of work with a total financial
volume of CZK 163.2 million.
An important fact is that mining activity in the set mining area does not require the relocation
of human settlements.
Road and Track Rerouting
Of pivotal importance was the continuation of the rerouting of the ČD–DDC railway track from Březno
u Chomutova to Chomutov. In 2004, work resumed on the boring of a tunnel in a direction away
from the municipality of Droužkovice.
Mining Damage Settlement Reserve
To cover the increased need for funds in future years, the company has set up a statutory financial
reserve for the settlement of anticipated mining damage claims. In 2004, the company drew CZK 164.2 million
from this reserve.
Research and Development
The research and development programme covered set themes in the form of technical development
tasks in line with the company’s requirements, concentrating on technological and technical
innovations, research and evaluation of mining conditions for coal seam overburden, and pit-water
research. These tasks focus on the company’s core business activities. These tasks were handled
in cooperation with mining plants and the specialist sections of the two mines, and in association with
external centres, including universities.
In the field of improvements, five improvement proposals were made at the company in 2004, of which
three were accepted.
The company owns registered trademarks entered in the trademarks register: the combined trademark
SD (the company logo) and the verbal graphic sign S1. The company does not own patents or hold
licences to use the patents of other organizations.
Information System
Severočeské doly used an S1 integrated information system, rolled out in cooperation with its former
subsidiary SHD – SOFT (ware). Based on a decision of the Board of Directors of 12 May 2003,

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on the innovation of the current information system, a call for tenders was advertised at the end of 2003
for the supply of a mining industry information system.
The winning bid was placed by SAP ČR, spol. s r.o., and a contract was signed on 25 March 2004.
The following modules were implemented in 2004: financial accounting, tangible and intangible assets,
treasury, controlling, sales, supply and warehouses, document management, and workflow.
These modules were put into live operation on 1 January 2005. On this date, the part of the sales
module intended for the support of non-coal sales was put into operation. Coal sales are currently being
temporarily managed in the form of cooperation between the existing S1 information system and
the implemented modules of the SAP system. Coal sales will be transferred to the SAP system during
2005.
Advantages of the New System
Thanks to the perfectly designed client-server architecture, compared with the current system it is
possible to reduce the number of servers and situate them all in a single locality. This makes system
administration much simpler and centralized. In order to safeguard maximum security and reliability,
part of the centre is physically separate from the IT centre. Other advantages are the carefully formulated
controlling tools and support of European Union legislation in accounting and logistics.
Plans and Objectives
The repairs and maintenance module will be ready by 1 June 2005, and the human resources (HR)
module will be put into operation on 1 January 2006. The company is also considering whether
to use modules for investment management, which would meet all requirements related to the planning
of investment acquisition resources, the management of capital construction and evaluations thereof,
and a strategic controlling module, making it possible to monitor company performance and manage
shareholder relations.

SLIPPER
The track chain link of an excavator conveyor belt.

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Financial Performance Commentary
Evaluation of the Company’s Financial Position in 2004
In 2004, Severočeské doly underscored its long-term stable and strong financial position with successful
financial results. It continued the trend of the past few years by implementing a policy of cutting
operating costs. Investment activities were funded solely out of the company’s own resources. All
loans taken over by the company on its foundation from its legal predecessor were prepaid in previous
years. The company’s annual profits enable it to pay a dividend to shareholders without threatening
its financial stability.
The company consistently meets all its legal obligations, the most significant of which include
the creation of cleanup and reclamation reserves and mining damage reserves. These statutory provisions
are fully covered by a portfolio of financial assets, made up of liquid financial instruments with
quality ratings. Financial instruments, in accordance with the conservative risk policy, generate yields
which contribute significantly to the company’s overall earnings.
Severočeské doly was not party to, and does not expect to be a party to, any judicial, administrative,
or arbitration proceedings which could have a significant impact on the company’s financial situation.
Structure of Assets
At the end of 2004, the company’s total assets stood at CZK 22,272 million. The year-on-year decline
by CZK 828 million can be attributed to the record dividends, which were reflected in assets in the form
of a reduction in financial investments by CZK 482 million and in short-term financial assets by
CZK 339 million.
Financial investments comprised bonds, strategic ownership interests, and a loan to Teplárna
Ústí nad Labem. Short-term financial assets were mainly composed of deposit instruments of selected
financial institutions, bonds, share certificates, and treasury bills.
Depreciation of current assets pushed down the net book value of tangible fixed assets by CZK 80 million.
The rise in intangible assets by CZK 46 million was mainly the result of SAP licence purchases.
Inventories rose by CZK 30 million to CZK 144 million. The calculated deferred tax receivable
at 31 December 2004, which changed the deferred tax receivable for 2003 into deferred tax payable,
reduced long-term receivables by CZK 50 million. At the end of 2004, the company reported no longterm
receivables; short-term receivables went up year on year by CZK 43 million to CZK 970 million.
Sources of Financing
At the end of 2004, there was an increase in the registered capital by CZK 80.6 million. This was
inscribed in the Commercial Register on 18 February 2005. The increase took the form of a nonmonetary
contribution of land from the residual state enterprise.
The increase in the ‘reserve fund and other funds’ item by CZK 84 million to CZK 5,893 million is
the result of an allocation from the 2003 profit to the reserve fund, the municipal donations fund,
the social fund, and the drawing on the social fund and the municipal donations fund.
Retained earnings and the 2003 result were used, in 2004, for the payment of dividends, directors’
fees, and for an appropriation to the reserve fund and other funds created out of profit.
Reserves, the largest liability item, rose by CZK 62 million to CZK 4,886 million. At the same time as
the ongoing concentration of financial resources for the remediation of mining activities, the company
drew on reserves to finance reclamation and provide compensation – resources for the relaying
of the ČD – DDC track at Březno u Chomutova.
The rise in long-term payables by CZK 58 million can be attributed to the recognition of the deferred
tax receivable for 2003 which, based on the calculation of tax deferred as at 31 December 2004, was
transformed into deferred tax payable.
Short-term payables went down year on year by CZK 221 million to CZK 988 million, which was influenced
not only by a fall in tax payable and trade payables, but also by the drop in estimated accrued
items, a reduction in pro-forma invoices for coal, and the refund of principals remitted in a tender.
Severočeské doly has no bank loans, confirming its financial strength and stability.

Creation of Earnings
In 2004, Severočeské doly made an operating profit of CZK 1,439 million, i.e. CZK 132 million and 10.1%
more than in the previous year. Total operating revenues and costs came to CZK 8,084 million and
CZK 6,645 million respectively.
The year-on-year comparison reveals that, in particular, operating costs registered a positive tendency.
The company’s lower sales pushed down revenues from coal sales by CZK 158.5 million. The con-
Developments in asset structure (CZK billions)
2000
2001
2002
2003
2004
Developments in liability structure (CZK billions)
2000
2001
2002
2003
2004
Intangible fixed assets
Tangible fixed assets
Financial investments
Equity
Reserves
Long-term payables
0 5 10 15 20 25
Inventories
Receivables
Financial assets
0 5 10 15 20 25
Short-term payables
Long-term bank loans
Current bank loans
Developments in profit structure (CZK millions)
2000
2001
2002
2003
2004
Operating profit
Profit from financial operations
Other assets
Other liabilities
-500 0 500 1,000
1,500
Extraordinary profit
Income tax
Net profit

42
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43
sumption of materials and energy fell by CZK 11.3 million, and the cost of services rose by CZK 38.4 million.
In the field of depreciation, there was a year-on-year reduction by CZK 63.5 million.
The company made a profit from financial operations of CZK 390 million, which is CZK 68 million
(14.8%) less compared with the previous year. This year-on-year reduction can mainly be attributed
to the posting of a provision of CZK 55 million for the equity interest in Teplárna Ústí nad Labem
at the end of 2003 and an absolute fall in appreciated financial assets, which is due to the exceptionally
high dividends for 2003. In order to improve the value of its idle assets, much of which is composed
of reserves to eliminate the effects of mining activities, the company used liquid financial instruments
with a quality rating and with an adequate term of investment, in accordance with the company’s conservative
risk policy. In 2004, the company recorded no interest expense based on credits or loans.
Net profit amounted to CZK 1,365 million, i.e. CZK 70 million (5.4%) more than in 2003.
Distribution of company net earnings (CZK’000)
2004 2003 2002 2001 2000
Net profit
Allocation to:
1,364,798 1,294,309 962,859 1,113,183 826,926
reserve fund
other funds
68,240 64,716 48,143 55,659 41,347
social fund 23,948 23,416 27,480 26,859
municipal donations fund 50,000 30,000 50,000 50,000
investment fund 313,397 613,993 494,670
capital interest to reduce unemployment 30,000
Dividends 2,160,013* 2,112,763* 540,003 359,901 179,950
Board member bonuses 13,650 11,350 7,900 6,150 4,100
Transfer to retained earnings 409
* in addition to the current-year profit, retained earnings were also used for the dividend payout

TART
The product of filtering equipment used to process slurry
coal. Ninety 'slurry tarts' are filtered in one filter press cycle.
Approximately 30,000 m 3 of slurry is processed every month.

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45
Shares and Shareholders
Information on the Company’s Shares at 31 December 2004
I. Dematerialized bearer shares
Name: SEVEROČ. DOLY
ISIN: CZ0005102350
Total value of issue: CZK 7,516,485,000
Nominal value per share: CZK 1,000
Number of shares: 7,516,485
Year of issue: 1994
II. Dematerialized registered shares
ISIN: CZ0005102467
Total value of issue: CZK 1,483,570,000
Nominal value per share: CZK 1,000
Number of shares: 1,483,570
Year of issue: 1994
Shareholder Structure at 31 December 2004
Shareholder Number of shares Share in registered capital (%)
A. Legal entities 8,776,740 97.52
A.I. Domestic legal entities 8,755,442 97.28
National Property Fund of the Czech Republic 4,985,692 55.40
ČEZ, a.s. 3,347,950 37.20
Municipalities (11 towns and cities) 402,105 4.47
Other legal entities 19,695 0.21
A.II. Foreign legal entities 21,298 0.24
B. Private individuals 223,315 2.48
B.I. Domestic private individuals 219,984 2.44
B.II. Foreign private individuals 3,331 0.04
Number of shares 9,000,055 100.00
Shareholder structure at 31 December 2004 (%)
National Property Fund
of the Czech Republic — 55.40%
ČEZ, a.s.
37.20%
Municipalities
(11 towns and cities) — 4.47%
Other legal entities
0.21%
Private individuals
2.48%
Foreign legal entities
0.24%
0 10 20 30 40 50 60
The Company has issued 7,516,485 bearer shares with CZK 1,000 nominal value and 1,483,570 registered
shares with CZK 1,000 nominal value. Both share issues are publicly tradable, however registered
shares may only be transferred using the procedure set forth in the Articles of Association. Shareholder
rights are set forth in the Articles of Association and are in accordance with the valid version
of the Commercial Code (Act No 513/1991).

At year-end 2004, the National Property Fund of the Czech Republic controlled 55.4% of the company’s
equity, of which 47.6% in the form of bearer shares. In 1998, ČEZ gradually increased its holding
in the company to a strategic stake of 37.2%, of which 33.8% is held in the form of bearer shares.
The registered shares are held by the National Property Fund of the Czech Republic (7.8%),
municipalities (4.5%), and ČEZ (3.4%).
Changes in Registered Capital
In 1997, in conjunction with asset transfers from residual state owned enterprises pursuant to amendments
to the privatization project, the company increased its registered capital by CZK 107,368,000.
In 2000, the registered capital was increased by a further CZK 163,282,000.
A part of the increase (CZK 10,670,000) was registered in the Commercial Register in 1998. The remaining
portions of the aggregate registered capital increase, totalling CZK 259,980,000, were registered
in 2000; this resulted in an increase in the number of bearer shares by 141,306. The remaining
129,344 new shares arising out of the capital increases materialized in 2001, and were credited
to the National Property Fund of the Czech Republic.
In 2002, the registered capital was increased by a further CZK 2,525,000. The entry in the Commercial
Register and the subsequent clearance of shares to the National Property Fund of the Czech Republic
took place in 2003.
At the end of 2004, the registered capital was increased by a further CZK 80,576,000 to
CZK 9,080,631,000. The entry in the Commercial Register was made on 18 February 2005 and the subsequent
clearance of shares to the National Property Fund of the Czech Republic took place in 2005.
Trading in the Company’s Shares
The company’s shares were first accepted for trading on the Prague Stock Exchange PSE in early March
1995; the shares were moved to the former Listed Market of the Prague Stock Exchange on 27 June 1995.
On 4 September 1995, as part of a reorganization of the PSE, the shares were transferred to the PSE’s First
Tier; under a bourse decision dated 1 January 1998, the shares were moved to the Second Tier. When
the shares were first listed in March 1995, the initial price was CZK 650 per share. The shares are also
traded in the RM–System.
2004 2003 2002 2001 2000 1999
Minimum price (CZK) 935.0 433.9 258.7 226.0 211.0 506.3
Maximum price (CZK) 1,580.0 965.0 433.9 330.0 810.0 1,000.0
Last quoted price in year (CZK) 1,480.0 935.0 433.9 286.6 244.1 506.3
Dividend per share (CZK) 240 234.75 60 40 20 35
Earnings per share (CZK) 151.6 143.8 107.0 123.7 93.2 119.8
Developments in the share price and trading volume on the PSE
1,600
1,400
1,200
1,000
800
600
400
200
0
I. 2001 VI. 2001 I. 2002 VI. 2002 I. 2003 VI. 2003 I. 2004 VI. 2004 I. 2005
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Share price (CZK) Trading volume (CZK)

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47
Right to a Dividend
1. The General Meeting shall decide, pursuant to a proposal from the Board of Directors, on the dividend
payment date, place, method of payment, and decisive day for the payment of the dividend.
The dividend is payable within three months of the date the General Meeting resolution
on the distribution of profits is adopted.
The right to the payment of a dividend is time-barred once four years have elapsed as of the decisive
date for the dividend payment.
2. Rights attaching to shares are exercised by the person listed in the statutory records at the Prague
Securities Centre, unless the law specifies to the contrary.
a) If one share is owned by several persons the co-shareholders are obliged to agree on which
of them shall exercise the rights attaching to the share or to appoint a joint representative.
b) Should a shareholder die, his heir is entitled to exercise rights attaching to a share, unless
the law specifies to the contrary. Where there is more than one heir, the co-shareholders are
obliged to agree on which of them shall exercise the rights attaching to the share, or to appoint
a joint representative. Should the heirs be unable to reach agreement, a court shall decide,
pursuant to a proposal from the company, on the person entitled to exercise rights attaching
to a share until such time as the end of proceedings.
c) The right to the payment of a dividend may be transferred independently by registration
of the transfer in the records of dematerialized shares.
Detailed information about shareholder rights can be found in the chapter entitled ‘Corporate
Governance’.

DOLL
A screw or hydraulic jack with a lifting capacity of 5 tonnes
(some types have a lifting capacity of up to 50 tonnes). Used
to lift loads, during the repair of machinery, etc.

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49
Strategy and Outlook for 2005
The prospects of the market in brown coal are affected by developments in the gross domestic product
in the Czech economy and EU Member States, the energy requirements behind the formation of GDP,
the structure of power generation (the share of brown coal, hard coal, lignite, oil, hydro-energy, natural
gas, nuclear energy, and renewable resources), exports and imports of energy, and power consumption.
Forecasts of developments in demand for fuel and energy are connected with the general predictions
of economic development in the Czech Republic.
2005 will focus on reforms of the social, education, and healthcare system. We can assume that trading
in emissions will begin in accordance with the approved NAP, and that the bill on the promotion
of the generation of electricity from renewable energy sources will be passed. Following the appointment
of Mr Andris Piebalgs as the new EU Energy Commissioner, it is expected that a new energy platform
will be introduced – the Hydrocarbon Forum – and that, in this context, further discussions
will be held on hydrocarbon tax and clean coal technologies.
Energy management is currently undergoing privatization and restructuring. The liberalization
of the energy markets in the EU has started, and will gradually spread to the Czech Republic under
the relevant measures which have been adopted. An integral element of this process is to define
the legislative environment, especially in the fields of power engineering, the heat industry, the gas
industry, and environmental protection. In this respect, it is necessary to harmonize Czech law and
European regulations (e.g. the Energy Act, the Energy Management Act, the Clean Air Act).
The amendment to the Energy Act appoints time limits for the liberalization of the electricity market,
including the categorization of the corresponding customers.
When balancing all factors, developments in emissions of pollutants are taken into account. Every
year, there is a reduction in the production of SO 2 , NO X , and solids, but the quantity of CO 2 is rising.
Measures aimed at achieving the required effect of reduced emissions in the energy sector concentrate
on enhancing energy efficiency, implementing economical combustion technologies, and using
renewable energy sources and gas fuels.
These are the fundamental factors affecting the consumption of energy in the Czech Republic,
and they will have an impact on the demand for coal. Therefore, they determine Severočeské doly’s business
strategy.
Production Strategy and Sales Activities
Severočeské doly’s strategy in sales is centred on medium- and long-term contractual relations respecting
mutually beneficial business conditions. Contractual relations form the basis for long-term stable
use of brown coal as a source of quality, reasonably priced energy which is strategically important
today and will remain so in the future. Long-term business relations with ČEZ and several other
customers operating in North Bohemia remain the kernel of the company’s strategy in sales. The company
views the Czech market as its main territory of business interest. The sales policy includes ensuring
reliability in the fulfilment of contracts from the aspects of volume, range, and pricing. Relations
with consumers will continue to be cemented with activities aimed at finding solutions to the need
for more environmentally-friendly energy plants. In order to meet this goal, the company draws on stateof-the-art
technological facilities for coal mining and processing, and cutting-edge systems to control
the quality of production.
Financial Strategy
The company’s main goal is to ensure lasting, stable increases in the value of the capital invested
by shareholders. Severočeské doly will continue its successfully established policy of making cuts
in operating costs, and will strive to increase the profitability of its assets. The company’s financial
power will enable it to continue funding its investments solely out of its own resources. The company
regularly creates land cleanup and reclamation reserves and mining damage settlement reserves;
it puts its cash surpluses from these reserves and other sources to work by investing them in liquid
financial instruments a quality rating and with adequate investment terms. The company monitors

fundamental interest rate risk management indicators in order to eliminate the undesirable impacts
of interest rate movements. Standard financial market instruments are used to manage interest
rate and foreign currency risk.
Personnel Strategy
The targeted application of personnel and social policies helps foster conditions ensuring the accomplishment
of principal targets, i.e. the posting of competitive results and economic growth of the company.
In this respect, the company is responding to a situation where the launch of the full operation
of Temelín Nuclear Power Station is being felt. The incentive programme focuses on employee
bonuses, financial and non-financial employee benefits, and employee training. In the field of social
standards, the company places the main emphasis on promoting safety and health at work. Good communication
with the trade unions, combined with a high standard of corporate culture, make a significant
contribution to the social peace.
Communication Strategy
In its corporate communication strategy, Severočeské doly strives to be perceived by the public as
a stable, successful, competitive, trustworthy company of great importance for the development
of the sector and the region, a company that works to minimize the impact of its business
on the environment. Great emphasis is placed on openness and honesty in our dealings with business
partners, the public, our employees, and shareholders, as well as on strengthening the corporate image
and culture. The company employs an accommodating approach as it seeks to maintain and develop
relations with neighbouring municipalities. The company will continue to contribute to the development
of employment, health care, education, sports and physical education, the arts and other areas of public
life.
The Environment
In realizing its strategy for protecting the environment, the company pays very close attention to environmental
needs and relationships in its area, especially with regard to the towns and cities located
near its mines. Our systematic preparation and realization of cleanup and reclamation work on land
affected by mining activity is a unique aspect of this relationship.
Investment Strategy
The anticipated decline in brown coal sales will necessitate certain cutbacks in capital investment.
However, investment focused primarily on renewing and modernizing excavation technology, and
on environmentally-friendly construction, will continue to ensure that the necessary approach to mining
and environmental requirements is maintained. The approval of the Government Energy Concept
and the related ČEZ decision on how to modernize its CHP plants will have a significant impact
on the investment strategy.
Information on the Company’s Conversion to International Accounting Standards
As an issuer of shares listed on the regulated market, as of 1 January 2005 Severočeské doly a.s. is obliged
to use International Accounting Standards, modified by the legislation of the European Communities,
for its bookkeeping and the preparation of its financial statements. Considering the significant disparities
between Czech accounting legislation and the International Accounting Standards, in previous
years the company has identified material differences and has transformed its financial statements
for internal requirements based on these differences. For 2003, the company used the legal
possibility of applying International Accounting Standards in the preparation of its consolidated financial
statements. These financial statements were audited with a verdict of ‘no reservations’ and
were part of the information published in the company’s annual report for 2003. For 2004, the company
is presenting its consolidated financial statements prepared in the same manner. As of 1 January
2005, the company has therefore applied accounting methods and procedures which it has already
become accustomed to in accordance with International Accounting Standards.

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51
Outlook for 2005
Territorial ecological mining limits will be set as part of the process of approving the Ústecko Region
Land-Use Plan. Brown-coal mining will continue its downward trend, which means that Severočeské
doly will have to try to cut costs further. In order to fulfil the Government Energy Concept, a number
of conceptual decisions are expected from energy producers regarding the reconstruction or
new construction of operating technologies; based on these decisions, the company will elaborate
on its investment plans for the upcoming period.
The company forecasts total coal mining of 20.5 million tonnes; the main customer, ČEZ, will account
for approximately 80% of the company’s total sales. A 5.7% year-on-year drop in coal product sales
is expected. Depending on the volume of coal sales, it will be necessary to make arrangements
for the removal of overburden and free up the coal substance in the seam in good time. Therefore, it
will be necessary to excavate at least 75 million m 3 of overburden.
In its business plan, the company has set itself the goal of making a net profit of CZK 1.2 billion, even
though there will be a year-on-year reduction in coal sales. The successfully established policy of making
savings in operating costs and in enhancing the profitability of total assets will continue.
There are plans to invest more than CZK 900 million. Besides the acquisition of new mining technology,
the approved investment programme includes the reconstruction and modernization of existing
equipment, dressing operations, and the replacement of ancillary mechanical facilities. The transport
and drainage systems required by the quarries will be set up along with a power supply and
the implementation of environmental projects. In 2005, work will continue on implementing the new
SAP integrated information system.
The reclamation process will advance in accordance with long-term plans for the final formation
of the landscape over a total area of 2,567 ha. A cleanup and reclamation reserve of CZK 432 million
will be created based on the estimated volume of coal excavation in 2005.
There will be no more large-scale redundancies of the kind we have witnessed in recent years.
The average headcount will be 3,637 employees, i.e. a year-on-year fall by 87 persons. A rise in tariff-based
wages by 5.5% to 6.0% was agreed for 2005 in the collective agreement; the average monthly
wage should therefore rise to CZK 21,860.

Supervisory Board Report
Supervisory Board on the ordinary and consolidated financial statements, on the proposed
distribution of the 2004 profit, and on its examination of the report on relations between related
entities
The Supervisory Board met six times in 2004. At its meetings, the Supervisory Board discussed
the economic development of the Company, including related fields affecting profit generation. At the
end of the 2004 accounting period, the Supervisory Board discussed the projected financial results
and primarily paid attention to the preparation of the financial statements for 2004. After
31 December 2004, the Supervisory Board discussed the financial statements, the proposed distribution
of the profit from 2004, and the auditor's report for 2004. Considerable attention was also
paid to collective bargaining with the trade unions and the conclusion of the collective agreement
for 2005. At its meeting in March 2005, the Supervisory Board approved the auditor for 2005.
Representatives of the Company's management were invited to Supervisory Board meetings where
required by the items on the agenda. The Company's management arranged for replies to be prepared
in response to all necessary information concerning the Company's finances and supplied all
requested background documentation and reports.
The Supervisory Board makes the following statements:
1) the Company's business activities and the exercise of powers by the Board of Directors complied
with the Company's Articles of Association and the instructions of the General Meeting.
2) The Supervisory Board has examined the Company's ordinary and consolidated financial statements
and discussed the auditor's report. The Supervisory Board recommends that the General Meeting
approve the presented ordinary and consolidated financial statements.
3) The Supervisory Board was informed of the proposal presented by the Board of Directors for the distribution
of profit once the financial statements for 2004 had been drawn up. The Supervisory Board
recommends that the General Meeting approve the proposed profit distribution.
4) The Supervisory Board has examined the Report on Relations between Related Entities in accordance
with Section 66a(9) of the Commercial Code and has no comments or suggestions regarding
this Report.
Chomutov, 15 June 2005
Robert Sýkora
Chairman of the Supervisory Board

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53
Report of Independent Auditors
To the Board of Directors and the Supervisory Board of Severočeské doly a.s.:
We have audited the accompanying consolidated balance sheet of Severočeské doly a.s. and its subsidiaries (“the Group”)
as of December 31, 2004 and the related consolidated statements of income, shareholders’ equity, cash flows and
the related notes 1 to 18 for the year ended December 31, 2004. These consolidated financial statements are the
responsibility of the management of Severočeské doly a.s. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Group as of December 31, 2004, and the results of its operations and its cash flows for
the year ended December 31, 2004, in accordance with International Financial Reporting Standards.
Ernst & Young ČR, s.r.o.
February 18, 2005

Consolidated Financial Statements in Accordance with
IFRS
Consolidated Balance Sheets at December 31, 2004 and 2003 (in CZK million)
Note 2004 2003
ASSETS
Property, plant and equipment:
Plant in service 28,483 28,052
Less accumulated provision for depreciation (17,216) (16,318)
Net plant in service 4 11,267 11,734
Construction work in progress 684 518
Total property, plant and equipment 11,951 12,252
Other non-current assets:
Investments 5 6,544 6,819
Investments in associates 6 304 789
Deferred tax assets 12 449 140
Intangible assets, net 84 105
Total other non-current assets 7,381 7,853
Current assets:
Cash and cash equivalents 8 233 258
Investments 5 4,078 4,373
Accounts receivable, net 7 939 957
Materials and supplies, net 164 141
Other current assets 31 28
Total current assets 5,445 5,757
Total assets 24,777 25,862
LIABILITIES AND SHAREHOLDERS’ EQUITY
Shareholders’ equity:
Share capital 11 9,081 9,000
Net unrealized gains on available-for-sale assets 54 49
Retained earnings 11 5,646 7,569
Total shareholders’ equity 14,781 16,618
Minority interests 3 3
Non-current liabilities:
Provision for decommissioning, reclamation and mining damages 3 8,792 7,783
Deferred tax liability 12 44 53
Total non-current liabilities 8,836 7,836
Current liabilities:
Accounts payable 9 665 814
Income tax payable 207 298
Accrued and other liabilities 10 285 293
Total current liabilities 1,157 1,405
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these financial statements.
24,777 25,862

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55
Consolidated Statements of Income for the Years Ended December 31, 2004
and 2003 (in CZK million)
Note 2004 2003
Revenues:
Sales of coal 7,361 7,520
Other sales 592 594
Total revenues 7,953 8,114
Expenses:
Repairs, maintenance and other services (1,620) (1,517)
Personnel 13 (1,752) (1,721)
Depreciation and amortization (1,478) (1,573)
Spare parts and other materials (892) (824)
Energy (629) (674)
Other operating expenses, net (970) 283
Total expenses (7,341) (6,026)
Operating income 612 2,088
Other income/(expenses):
Income from associates 6 28 60
Interest income 394 397
Interest on provisions 3 (420) (414)
Other financial expenses, net (363) (16)
Total other income/(expenses) (361) 27
Profit before income taxes 251 2,115
Income taxes 12 (72) (704)
Profit after income taxes 179 1,411
Minority interests — —
Net profit from ordinary activities 179 1,411
Net profit per share (CZK per share) (Note 11)
Basic 20 157
Diluted 20 157
Average number of shares outstanding (shares) (Note 11)
Basic 9,000,055 8,999,958
Diluted
The accompanying notes are an integral part of these financial statements.
9,006,898 8,999,958
Consolidated Statements of Shareholders’ Equity for the Years Ended
December 31, 2004 and 2003 (in CZK million)
Note Number Share capital Net unrealized Retained Total equity
of shares gains/(losses) earnings
Balance at December 31, 2002 8,997,530 9,000 106 6,698 15,804
Dividends paid — — — (540) (540)
Capital contribution 11 2,525 — — — —
Net loss on available-for-sale investments — — (57) — (57)
Net profit — — — 1,411 1,411
Balance at December 31, 2003 9,000,055 9,000 49 7,569 16,618
Dividends paid — — — (2,113) (2,113)
Capital contribution 11 — 81 — 11 92
Net gain on available-for-sale investments — — 5 — 5
Net profit — — — 179 179
Balance at December 31, 2004 9,000,055 9,081 54 5,646 14,781
The accompanying notes are an integral part of these financial statements.

Consolidated Statements of Cash Flows for the Years Ended December 31,
2004 and 2003 (in CZK million)
2004 2003
Operating activities:
Profit before income taxes 251 2,115
Adjustments to reconcile profit before income taxes to net cash provided by operating activities:
Depreciation and amortization 1,478 1,573
Interest income, net (394) (397)
Change in provisions 1,650 420
Change in allowances — 18
Gain on fixed asset retirements (29) (37)
Loss from the sale of associate 308 —
Income from associates (28) (60)
Changes in assets and liabilities:
Receivables and other current assets 57 153
Spare parts and other materials (25) (35)
Accounts payable, accrued and other liabilities (74) (88)
Cash generated from operations 3,194 3,662
Income taxes paid (682) (493)
Net cash provided by operating activities 2,512 3,169
Investing activities:
Purchase of property, plant and equipment (1,360) (1,047)
Payments for financial investments (1,144) (3,441)
Proceeds from sale of property, plant and equipment 37 57
Proceeds from sale of financial investments 2,101 2,129
Interest received 218 165
Payments for reclamation and restoration of mining damages (477) (576)
Total cash used in investing activities (625) (2,713)
Financing activities:
Dividends paid (1,912) (521)
Total cash used in financing activities (1,912) (521)
Net decrease in cash and cash equivalents (25) (65)
Cash and cash equivalents at beginning of year 258 323
Cash and cash equivalents at end of year
The accompanying notes are an integral part of these financial statements.
233 258

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Notes to Consolidated Financial Statements for the Year Ended
December 31, 2004
1. General
Severočeské doly a.s. (“Severočeské doly” or “the Company”) is a Czech Republic joint-stock company, which was
established on January 1, 1994 and its registered seat is in Chomutov, Czech Republic. The Company was established
by merging of two state owned enterprises Doly Nástup Tušimice and Doly Bílina. As of December 31, 2004 the state
represented by National Property Fund held 55.4% of its shares.
Severočeské doly is a mining company, which has approximately 45% share in lignite market in the Czech Republic.
The Company has an agreement with ČEZ, a.s., the dominant electricity producer in the Czech Republic and
a holder of 37.2% of the Company’s outstanding shares, to supply lignite to ČEZ’s five fossil power plants in the North
Bohemia region and certain large fossil power plants elsewhere in the Czech Republic. As a result, approximately
79% of the lignite production was supplied to ČEZ, a.s., which represented 60% of ČEZ’s coal consumption. The Company
operates two separate mines; the Nástup Tušimice (“DNT”) mine and the Bílina (“DB”) mine. The geological reserves
of the mines amount to 1,019 million tons of lignite from which 549 million tons can still be mined. Annual production
of the mines is about 22 million tons of lignite, with an overburden roof approximately 77 million cubic meters
of earth.
The financial statements were authorised for issue by Erich Grünbaum, Chief Financial Officer of Severočeské
doly a.s., on February 18, 2005.
2. Summary of Significant Accounting Policies
Statement of Compliance
The consolidated financial statements of Severočeské doly a.s. have been prepared in accordance with International
Financial Reporting Standards (“IFRS”).
Basis of Preparation
The consolidated financial statements are prepared under the historical cost convention, except that available-forsale
investments are stated at their fair value (see Note 5).
Changes in IFRS
The International Accounting Standards Board (IASB) introduced many changes to the International Financial
Reporting Standards and issued new standards and interpretations during 2003 and 2004 that will be valid from
1 January 2005 or later. Therefore, it is possible that the IFRS financial statements for the year ended 31 December
2005 or later will contain comparative data for the year 2004 that will differ from the data presented in these financial
statements. The Company is currently assessing the impact that new or revised standards will have on the Group
accounting policies and financial data presented.
Principles of Consolidation
The consolidated financial statements of Severočeské doly (“the Group”) include Severočeské doly a.s. and
the companies that it controls (see Note 17). This control is normally evidenced when the Company owns, either
directly or indirectly, more than 50% of the voting rights of a company’s share capital or is able to govern the financial
and operating policies of an enterprise so as to benefit from its activities. The equity and net income attributable
to minority shareholders’ interests are shown separately in the Consolidated Balance Sheets and the Consolidated
Statements of Income, respectively.
The purchase method of accounting is used for acquired businesses. Companies acquired or disposed of during
the year are included in the consolidated financial statements from the date of acquisition or to the date of disposal.
Intercompany balances and transactions, including intercompany profits and unrealized profits and losses are
eliminated. Unrealized losses are eliminated similarly but only to the extent that there is no evidence of impairment
of the asset transferred.
Investments in associates are accounted for by the equity method of accounting. Associates are entities over
which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant
influence, but which it does not control. Unrealized gains on transactions between the Group and its associates are
eliminated to the extent of the Group’s interest in the associates; unrealized losses are also eliminated unless
the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in associates
includes goodwill (net of accumulated amortization) on acquisition. When the Group’s share of losses in an associate
equals or exceeds its interest in the associate, the Group does not to recognize further losses, unless the Group
has incurred obligations or made payments on behalf of the associates.
Consolidated financial statements are prepared using uniform accounting policies for like transactions and other
events in similar circumstances.

Basis of Accounting
The Group maintains its books and records in accordance with accounting principles and practices mandated by
the Czech Law on Accounting. Czech Accounting Standards and IFRS differ in certain respects. The accompanying
financial statements reflect certain adjustments and reclassifications not recorded in the accounting records
of the Group in order to conform the Czech statutory balances to financial statements prepared in accordance
with IFRS issued by the International Accounting Standards Board. The adjustments are summarized in Note 18.
Change in Classification of Items
Certain prior year financial statement items have been reclassified to conform to the current year presentation.
Measurement Currency
Based on the economic substance of the underlying events and circumstances relevant to the Group, the measurement
currency of the Group has been determined to be the Czech crown (CZK).
Estimates
The preparation of financial statements in conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenues and expenses during the year. Actual
results could differ from those estimates.
Revenue Recognition
Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow
to the enterprise and the amount of the revenue can be measured reliably. Sales are recognized net of sales taxes
and discounts.
Revenue from sales of goods are recognized when delivery has taken place and transfer of risks and rewards
has been completed.
Revenues from sales of services are recognized on providing services to third parties.
Interest is recognized on a time proportion basis that reflects the effective yield on the asset.
Dividends are recognized when the shareholder’s right to receive payment is established.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment
loss. When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and
any gain or loss resulting from their disposal is included in the Consolidated Statement of Income.
The initial cost of property, plant and equipment comprises its purchase price, including import duties and
non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and
location for its intended use. The original cost also includes the estimated cost of dismantling and removing the asset
and restoring the site to the extent that it is recognized as a provision under IAS 37, Provisions, Contingent Liabilities
and Contingent Assets.
Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance
and overhaul costs, are normally charged to income in the period the costs are incurred. In situations where it
can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits
expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed
standard of performance, the expenditures are capitalized as an additional cost of property, plant and equipment.
Depreciation is computed on a straight-line basis over the following estimated useful lives:
Years
Buildings and structures 15.0 – 45.0
Machinery and equipment 3.0 – 14.5
Furniture and fixtures 3.0 – 14.5
Motor vehicles 3.0 – 14.5
The useful life and depreciation method are reviewed periodically to ensure that the method and period of depreciation
are consistent with the expected pattern of economic benefits from items of property, plant and equipment.
Construction-work-in-progress represents plant and properties under construction and is stated at cost. This
includes cost of construction, plant and equipment and other direct costs. Construction-work-in-progress is not
depreciated until such time as the relevant assets are completed and put into operational use.
Investments
The company applies IAS 39, Financial Instruments: Recognition and Measurement. As a result, financial investments
are classified into the following categories: held-to-maturity and available-for-sale. Investments with fixed or
determinable payments and fixed maturity that the Company has the positive intent and ability to hold to maturity
other than loans and receivables originated by the Company are classified as held-to-maturity investments. All other
investments, other than loans and receivables originated by the Company, are classified as available-for-sale.

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Held-to-maturity investments are included in non-current assets unless they mature within 12 months of the balance
sheet date. Available-for-sale investments are classified as current assets if management intends to realize them
within 12 months of the balance sheet date.
All purchases and sales of investments are recognized on the settlement date.
Investments are initially measured at cost, which is the fair value of the consideration given for them, including
transaction costs.
Gains or losses on measurement to fair value of available-for-sale investments are recognized as a separate
component of Shareholders Equity, until the investment is sold or otherwise disposed of, or until it is determined
to be impaired, at which time the cumulative gain or loss previously recognized in equity is included in net profit or
loss for the period.
Held-to-maturity investments are carried at amortized cost using the effective interest rate method.
Receivables, Payables and Accrual
Receivables are stated at the fair value of the consideration given and are carried at amortized cost, after provision
for any uncollectible amounts. At December 31, 2004 and 2003 the provision for uncollectible receivables amounted
to CZK 94 and 136 million, respectively.
Payables are recorded at invoiced values and accruals are reported at expected settlement values.
Cash and Cash Equivalents
Cash includes cash on hand and cash with banks. Cash equivalents are short-term, highly liquid investments
that are readily convertible to known amounts of cash with original maturities of three months or less and that
are subject to an insignificant risk of change in value.
Materials and Supplies
Materials and supplies are principally composed of plant maintenance materials and spare parts. These items
are valued at cost after provision for obsolete items. These materials are recorded in inventory when purchased and
then expensed or capitalized to plant, as appropriate, when used. Accumulated provisions for obsolete items
of CZK 56 million and CZK 54 million were created against materials and supplies as of December 31, 2004 and 2003,
respectively.
Intangible Assets
Intangible assets consist mainly of software and are valued at their acquisition cost and related expenses. Intangible
assets are recognized if it is probable that the future economic benefits that are attributable to the asset will
flow to the enterprise; and the cost of the asset can be measured reliably. After initial recognition, intangible assets
are measured at cost less accumulated amortization and any accumulated impairment losses. Intangible assets are
amortized on a straight-line basis over the best estimate of their useful lives of 4 years. The amortization period and
the amortization method are reviewed annually at each financial year-end.
Income Taxes
The provision for corporate tax is calculated in accordance with Czech tax regulations and is based on the income
or loss reported under Czech accounting regulations, adjusted for appropriate permanent and temporary differences
from Czech taxable income. In the Czech Republic, income taxes are calculated on an individual company basis
as the tax laws do not permit consolidated tax returns. Current income taxes are provided at a rate of 28% and
31%, respectively for the years ended December 31, 2004 and 2003 after adjustments for certain items which are not
deductible for taxation purposes.
Certain items of income and expense are recognized in different periods for tax and financial accounting purposes.
Deferred taxes are calculated using the balance sheet liability method. Deferred income taxes are provided on temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled
based on tax rates enacted or substantially enacted at the balance sheet date.
Based on the Income Tax Act valid in the Czech Republic at 2004 year-end, the income tax rates will be 26%
and 24% in the years 2005 and 2006 and on, respectively (see Note 12).
Deferred tax assets and liabilities are recognized regardless of when the timing difference is likely to reverse.
Deferred tax assets and liabilities are not discounted and are classified as non-current assets (liabilities)
in the Consolidated Balance Sheets. Deferred tax assets are recognized when it is probable that sufficient taxable
profits will be available against which the deferred tax assets can be utilized. A deferred tax liability is recognized
for all taxable temporary differences.
Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited
or charged, in the same or a different period, directly to equity.
Provisions
A provision is recognized when, and only when, the company has a present obligation (legal or constructive) as
a result of a past event and it is probable that an outflow of resources will be required to settle the obligation,

and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance
sheet date and adjusted to reflect the current best estimate.
The Company has recognized provisions for its obligations to decommission and reclaim its mines at the end
of their operating lives. The provisions recognized represent the best estimate of the expenditures required to settle
the present obligation at the current balance sheet date. Such cost estimates, expressed at current price levels,
are discounted using a long-term real rate of interest of 2.5% per annum to take into account the timing of payments.
The initial discounted cost amounts are capitalized as part of property, plant and equipment and are depreciated
over the lives of the mines. Each year, the provisions are increased to reflect the accretion of discount and to accrue
an estimate for the effects of inflation, with the charges being recognized as a component of interest expense.
The estimate for the effect of inflation is approximately 3.5%, which is based on the current risk free rate of interest
of approximately 6% and the 2.5% real rate of interest.
Changes in a decommissioning liability that result from a change in the current best estimate of cash flows required
to settle the obligation or a change in the discount rate are added to (or deducted from) the amount recognized
as the related asset. However, to the extent that such a treatment would result in a negative asset, the effect
of the change should be recognized in the income for the current period.
The decommissioning and reclamation process is expected to continue for an approximate fifteen-year period
subsequent to the end of operation of the mines, which is currently estimated in 2035. While the Company has made
its best estimate in establishing its provisions, because of potential changes in technology as well as safety and
environmental requirements, plus the actual time scale to complete decommissioning and reclamation activities,
the ultimate provision requirements could either increase or decrease significantly from the Company’s current
estimates.
Foreign Currency Transactions
Asset acquisitions or production costs which were denominated in foreign currencies were translated to Czech
crowns at the exchange rates prevailing at the date of each acquisition or at the date on which the related items
were included in assets.
Foreign currency on hand, bank accounts, receivables and payables denominated in foreign currencies are
translated to Czech crowns at the exchange rates existing at the transaction date and are adjusted at year-end
to the exchange rates at that date as published by the Czech National Bank.
Exchange rate differences arising on settlement of transactions or on reporting foreign currency transactions
at rates different from those at which they were originally recorded are included in the Statement of Income as they
occur.
Impairment of Assets
Financial instruments
Financial instruments are reviewed for impairment at each balance sheet date. For financial assets carried at amortized
cost, whenever it is probable that the company will not collect all amounts due according to the contractual
terms of receivables or held-to-maturity investments, an impairment or bad debt loss is recognized in the Consolidated
Statement of Income. Reversal of impairment losses previously recognized is recorded when the decrease in impairment
loss can be objectively related to an event occurring after the write-down. Such reversal is recorded in income.
However, the increased carrying amount is only recognized to the extent it does not exceed what amortized cost
would have been had the impairment not been recognized.
For available-for-sale financial assets, the cumulative gain or loss previously recognized in equity is included
in net profit or loss for the period when there is objective evidence that the asset is impaired. The recoverable amount
of a debt instrument remeasured to fair value is the present value of expected future cash flows discounted at the current
market interest rates for a similar financial asset. A reversal of an impairment loss is recorded when the decrease
in the impairment loss can be objectively related to an event occurring after the write down. Such reversal is recorded
in income.
Other assets
IAS 36, Impairment of assets, applies to all assets other than inventories, deferred tax assets and financial instruments.
Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable
amount, an impairment loss is recognized in income. The recoverable amount is the higher of an asset’s net
selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length
transaction less the costs of disposal while value in use is the present value of estimated future cash flows expected
to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts
are estimated for individual assets or, if this is not possible, for the cash-generating unit to which the asset belongs.
Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment
losses recognized for the asset no longer exist or have decreased. The reversal is recorded in income. However,
the increased carrying amount of an asset due to a reversal of an impairment loss is recognized to the extent it does
not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no
impairment loss been recognized for that asset in prior years.

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Segments
The Group has only one distinguishable business segment being the mining and selling of lignite. None of the waste
disposal, transportation, engineering and blasting business segments are considered as a reportable segment as
their respective segment revenues, results and total assets are immaterial compared to those of the mining segment.
Contingencies
Contingent assets and liabilities are not recognized in the financial statements. Contingent liabilities are disclosed
unless the possibility of an outflow of economic resources is remote. Contingent assets are disclosed when an inflow
of economic benefits is probable.
Subsequent Events
Post-year-end events that provide additional information about the company’s position at the balance sheet date
(adjusting events), are reflected in the financial statements. Post-year-end events that are not adjusting events
are disclosed in the notes when material.
3. Provisions for Decommissioning, Reclamation and Mining Damages
Composition of provisions for decommissioning, reclamation and mining damages is as follows
(in CZK million):
2004 2003
Decommissioning and Reclamation 7,553 7,307
Mining Damages 1,216 456
Other 23 20
Total provisions 8,792 7,783
Decommissioning and Reclamation
The Czech Republic has adopted a series of environmental acts and laws and regulations (“the Acts”) concerning
reclamation of damaged lands and can impose fines and penalties for not meeting the requirements of the Acts.
The Company is liable under the Acts for continuing restoration of land damaged by its mining activities.
The Company has been restoring areas damaged by mining since 1950. As of the end of 2004 approximately 30 square
kilometers has been fully restored and an additional 26 square kilometers is under restoration. Additional restoration
of land damaged as of December 31, 2004 of approximately 65 square kilometers will be carried out in the future.
The Company has established provisions, as described in Note 2, to recognize its estimated liabilities
for decommissioning and reclamation of the areas damaged by mining. The following is a summary
of the provisions for the years ended December 31, 2004 and 2003 (in CZK million):
Decommissioning and reclamation
Balance at December 31, 2002 7,285
Changes made during 2003:
Discount accretion and effect of inflation 414
Current cash expenditures (392)
Balance at December 31, 2003 7,307
Changes made during 2004:
Discount accretion and effect of inflation 420
Current cash expenditures (312)
Provision 302
Effect of change in estimate (164)
Balance at December 31, 2004 7,553
The provision relates to the extension of the mining area in the respective years. The current cash expenditures
reflect the payments for decommissioning and reclamation works carried out in the year.
In 2004 the Company reassessed the estimated decommissioning and reclamation costs at Mine Bílina and Nástup
resulting in a decrease of CZK 164 million in the present value of best estimate of the expenditures required to settle
the present obligation. Change in estimate was reflected in the accompanying consolidated financial statements as
the deduction from the amount recognized as the related asset included in Property, Plant and Equipment (see Note 4).
The actual decommissioning and reclamation costs could vary substantially from the above estimates because
of new regulatory requirements, changes in technology, increased costs of labor, materials, and equipment and/or
the actual time required to complete all decommissioning and reclamation activities.
Mining Damages
The Company is liable to cover the cost of railway track replacement. The railway track connection Prague – Chomutov
operated by Czech Railways crosses mining areas of the Company. The Company has recorded a provision for such
liability in the total amount of CZK 1,442 million till December 31, 2004. The provision was already draw on as
of December 31, 2004 in total amount of CZK 1,084 million. The total volume of liability at the end of the year

2004 represents CZK 358 million. Due to the change in the technology of tunnelling of railway track replacement,
the liability of the Company will increase. In 2004 the Company created a provision in the amount of CZK 853 million
for this increase. The creation of provision is reported in the Consolidated Statement of Income in Other operating
expenses, net.
4. Property, Plant and Equipment, Net
Property, plant and equipment at December 31, 2004 and 2003 is as follows (in CZK million):
Buildings Plant Land and other Accumulated Total
and constructions and equipment tangibles depreciation
and accumulated
impairment loss
December 31, 2002 8,369 18,907 750 (15,589) 12,437
Additions 213 689 9 — 911
Retirements (164) (721) — 848 (37)
Depreciation — — — (1,515) (1,515)
Impairment loss — — — (62) (62)
December 31, 2003 8,418 18,875 759 (16,318) 11,734
Additions 254 830 100 — 1,184
Retirements (26) (563) — 587 (2)
Depreciation — — — (1,445) (1,445)
Impairment loss — — — (40) (40)
Change in IAS 37 estimate (164) — — — (164)
December 31, 2004 8,482 19,142 859 (17,216) 11,267
Buildings and constructions include capitalized costs of provisions (see Note 2) in the amount of CZK 2,353 million.
At December 31, 2004 and 2003 the accumulated depreciation of the capitalized costs of provisions was CZK 731
and 673 million, respectively. In 2004, the decrease of CZK 164 million was recorded in the capitalized costs of provisions
in respect of change in estimate of related provision for decommissioning and reclamation (see Note 3).
At December 31, 2004 and 2003 fully depreciated tangible assets still in active use amounted to CZK 6,735 million
and CZK 5,510 million, respectively, at cost.
At December 31, 2004 and 2003 the Group discloses a total impairment loss of CZK 271 million and CZK 231 million,
respectively, related particularly to electric engines, ash manipulating equipment and a group of assets at Radovesice
location, which are not used and a hotel, which is held for sale. The change in impairment loss in the period is
reflected in the Consolidated Statement of Income in Other operating expenses, net.
5. Investments
Investments as of December 31, 2004 and 2003 are as follows (in CZK million):
2004
Investments – non current
2003
Held to maturity investments 989 985
Available-for-sale investments 5,410 5,680
Loan to Teplárna Ústí nad Labem, a.s. 145 154
Total non current investments 6,544 6,819
Investments – current
Held to maturity investments 3,927 4,128
Available-for-sale investments 151 245
Total current investments 4,078 4,373
Non current held-to-maturity investments comprise long-term deposits with a redemption date in 2010, eurobonds
and mortgage certificates with redemption dates ranging from 2006–2009, which the Company intends and is
able to hold until their redemption dates.
Non current available-for-sale investments consist primarily of government bonds, commercial debentures
and eurobonds. The fair value of available-for-sale investments was assessed by reference to the quoted price
on the relevant Stock Exchange.
Current held-to-maturity investments comprise state treasury bills, commercial debentures and certificates
of deposits, which the Company holds until redemption date.
Current available-for-sale investments consist of mutual fund units.

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6. Investments in Associates
The following is a list of the principal investments in associates at December 31, 2004 (in CZK million):
Entity Place Principal activity Ownership interest Group’s share
of incorporation of income
PRODECO, a.s. Czech Republic Projections and constructions 50.50% 4
SHD – KOMES, a.s. Czech Republic Purchase and sale of goods 46.33% 3
Výzkumný ústav pro hnědé uhlí a.s.` Czech Republic Research 38.97% 1
ENETECH a.s. Czech Republic Engineering 50.00% —
Coal Energy, a.s. Czech Republic Energy trading 20.00% 20
Although the interest in share capital of PRODECO, a.s., is 50.50%, the Company does not exercise control and
thus the investment is accounted for using the equity method of consolidation.
In 2004 the Company sold the share in Teplárna Ústí nad Labem, a.s. for the price of CZK 194 million. The net book
value of sahe sold is in the Consolidated Statement of Income reported in Other financial expenses, net.
7. Accounts Receivable, Net
The composition of accounts receivable at December 31, 2004 and 2003 is as follows (in CZK million):
2004 2003
Trade receivables 1,018 1,057
Other receivables 15 36
Less: allowance for doubtful accounts (94) (136)
Total 939 957
8. Cash and Cash Equivalents
The composition of cash and cash equivalents at December 31, 2004 and 2003 is as follows
(in CZK million):
2004 2003
Cash in hand 1 1
Bank accounts 232 257
Total 233 258
9. Accounts Payable
The composition of accounts payable at December 31, 2004 and 2003 is as follows (in CZK million):
2004 2003
Trade payables 423 529
Wages, social and health insurance payable 128 119
Other 114 166
Total 665 814
10. Accrued and Other Liabilities
The composition of accrued and other liabilities at December 31, 2004 and 2003 is as follows
(in CZK million):
2004 2003
Accruals 99 147
Social and donations fund 186 146
Total 285 293
11. Shareholders’ Equity
As of December 31, 2004, the share capital of Severočeské doly consisted of 7,516,485 registered shares and 1,483,570
bearer shares with a nominal value of CZK 1,000 each.
In 2004 the National Property Fund contributed assets with a total value of CZK 89 million, which resulted
in an increase in share capital and non-distributable reserve fund.
In 2002 the National Property Fund contributed land with a total value of CZK 2 million, which resulted in an increase
in share capital. The increase was registered in 2003.
28

Reserve Fund
In accordance with Czech regulations, joint stock companies are required to establish a non-distributable reserve
fund for contingencies against possible future losses and other events. Contributions must be a minimum of 20%
of after-tax profit in the first year in which profits are made and 5% of profit each year thereafter, until the fund
reaches at least 20% of share capital. As of December 31, 2004 and 2003, the balance was CZK 1,537 million and
CZK 1,460 million, respectively, and is reflected as a component of retained earnings.
Net Profit per Share
2004 2003
Numerator – basic and diluted (CZK millions)
Net Profit 179 1,411
Denominator (shares)
Basic:
Weighted average shares outstanding 9,000,055 8,999,958
Diluted:
Adjusted weighted average shares 9,006,898 8,999,958
12. Income Taxes
Income Tax Legislation
Corporate income tax is calculated in accordance with Czech tax regulations at the rate of 28%. The corporate income
tax rate for 2005 and 2006 will be 26% and 24%, respectively.
The Czech Republic currently has a number of laws related to various taxes imposed by governmental authorities.
Applicable taxes include value-added tax, corporate tax, and payroll (social) taxes, together with others. In addition,
laws related to these taxes have not been in force for significant periods, in contrast to more developed market
economies. Accordingly, few precedents with regard to issues have been established. Often, differing opinions
regarding legal interpretations exist both among and within government ministries and organizations; thus, creating
uncertainties and areas of conflict. Tax declarations, together with other legal compliance areas (as examples,
customs and currency control matters) are subject to review and investigation by a number of authorities, who
are enabled by law to impose extremely severe fines, penalties and interest charges. These facts create tax risks
in the Czech Republic substantially more significant than typically found in countries with more developed tax
systems. Management believes that it has adequately provided for tax liabilities in the accompanying financial
statements; however, the risk remains that those relevant authorities could take differing positions with regard
to interpretive issues and the effect could be significant.
Income Tax Provision
The components of the income tax provisions for the years ended December 31, 2004 and 2003 are as
follows (in CZK million):
2004 2003
Current 390 401
Deferred (318) 303
Total 72 704
Reconciliation of expected income tax expense to the actual tax expense is as follows (in CZK million):
2004 2003
Profit before income taxes 251 2,115
Statutory income tax rate 28% 31%
‘Expected’ income tax expense 71 655
Add/(deduct) the effect of:
Czech/IFRS accounting differences 31 36
Tax exempt income (24) (32)
Investment tax relief (8) (10)
Income already taxed (11) (20)
Final withholding income tax on security income 3 9
Tax credits (1) (41)
Additional tax assessments/(recoveries) (2) (4)
Change in tax rates 13 80
Other items, net — 31
Income taxes 72 704
Effective tax rate 28% 33%

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Deferred Taxes, Net
At December 31, 2004 and 2003 deferred tax assets (liabilities) were comprised of the following
(in CZK million):
2004
Deferred tax assets:
2003
Accumulated provision for decommissioning, reclamation and mining damages 1,158 1,130
Accumulated provision for mining damages 213 —
Allowance for uncollectable receivables 5 6
Allowance for obsolete inventory 15 15
Allowance for impairment of fixed assets 115 159
Investments at fair value 1 3
Total deferred tax assets 1,507 1,313
Deferred tax liabilities:
Depreciation of fixed assets (418) (393)
Repairs and maintenance accrual (233) (248)
Capitalized costs of provisions (390) (446)
Investments in associates (61) (139)
Total deferred tax liabilities (1,102) (1,226)
Total deferred tax, net 405 87
Deferred tax assets are recorded at an amount which management believes will ultimately be realized. Realization
of deferred tax assets is dependent upon sufficient future taxable income during the periods that temporary differences
are expected to be available to reduce taxable income.
13. Personnel Expenses and Average Number of Employees
Average number of employees and the composition of personnel expenses (in CZK million):
2004 2003
Wages and salaries 1,238 1,226
Social and other personnel expenses 514 495
Total personnel expenses 1,752 1,721
Number of employees 5,038 5,242
14. Financial Instruments
The Company, in the normal course of business, uses various types of financial instruments, including items such
as cash, cash equivalents, short-term securities and trade receivables, which expose the Company to market or
credit risk. Management believes that the estimated fair values of these financial instruments approximate their
carrying amounts.
The Company pursues a conservative risk management and investment policy, which entails diversifying financial
instruments with reputable financial institutions. There is a written internal policy “Investment strategy and financial
assets management” that governs the allowed types of financial instruments and the rules of risk management
(credit risk, interest rate risk, foreign exchange risk, liquidity risk).
The Company investments contain a portfolio of liquid financial instruments with high quality ratings and
with suitable time horizons. The financial instruments used by the Company for investments include government
bonds, treasury bills, commercial and bank debentures, eurobonds, term deposits and mutual fund units.
The Company monitors the basic market indicators for management of interest rate risk.
15. Commitments and Contingencies
By 2006 the Company will purchase one piece of heavy mining machinery having a value of CZK 906 million.

16. Related Party Transactions
The balance sheet includes the following amounts resulting from transactions with related parties
(in CZK million):
2004
Trade receivables
2003
ČEZ, a.s. 536 509
Teplárna Ústí nad Labem, a.s.* — 29
Other 1 2
Total trade receivables 537 540
Trade payables
SHD – KOMES a.s. 44 41
ČEZ, a.s. 10 10
PRODECO, a.s. 24 26
Other 10 8
Total trade payables
* The Company was sold in 2004.
88 85
Sales and purchases with related parties amounted to the following (in CZK million):
2004
Sales
2003
ČEZ, a.s. 5,076 5,179
Teplárna Ústí nad Labem, a.s.* 289 317
Other 6 8
Total sales 5,371 5,504
Purchases
PRODECO, a.s. 167 109
SHD – KOMES a.s. 435 367
ČEZ, a.s. 47 49
Other 14 14
Total purchases
* The Company was sold in 2004
663 539
The Group mostly sells lignite and provides services to related parties. Purchases from related parties comprise
purchases of machinery, transport and other services in particular. All transactions are concluded under normal
terms and conditions.
17. List of Subsidiaries
Entity Place of incorporation Principal activity Ownership interest
SD – Vrtné a trhací práce, a.s. Czech Republic Drilling and blasting 100.00%
SD – Autodoprava, a.s. Czech Republic Transportation 100.00%
SD – 1.strojírenská, a.s. Czech Republic Engineering 100.00%
SD – Kolejová doprava, a.s. Czech Republic Rail transportation 100.00%
SD – Humatex, a.s. Czech Republic Sale of chemicals 100.00%
Skládka Tušimice, a.s. Czech Republic Waste disposal 98.00%
18. Reconciliation of Retained Earnings and Net Profit
The accompanying financial statements are presented on the basis of International Financial Reporting Standards.
Certain accounting principles generally accepted in the Czech Republic (CAS) do not conform to International
Financial Reporting Standards used in preparing the accompanying financial statements. A description of the significant
adjustments required to conform the Group’s statutory balances to financial statements prepared in accordance
with International Financial Reporting Standards is set forth in the following tables.

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The effect on retained earnings of differences in IFRS and CAS is as follows (in CZK million):
2004 2003
Consolidated retained earnings per statutory accounts at end of year 7,655 8,644
Adjustments required by IFRS:
Reclassification of items from retained earnings, net (228) (150)
Repairs and maintenance accrual, net of deferred tax 1,349 1,314
Provision for decommissioning, reclamation and mining damages, net of deferred tax (4,828) (3,938)
Capitalized costs of provisions, net of deferred tax 1,753 1,755
Interest income of available-for-sale investments (55) (56)
IFRS retained earnings at end of year 5,646 7,569
The effect on net profit of differences in IFRS and CAS is as follows (in CZK million):
2004 2003
Consolidated net profit per statutory accounts 1,194 1,390
Adjustment required by IFRS:
Reclassification of items from retained earnings, net (158) (92)
Repairs and maintenance accrual, net of deferred tax 35 356
Provision for decommissioning, reclamation and mining damages, net of deferred tax (890) (412)
Depreciation of capitalized costs of provisions, net of deferred tax (2) 197
Interest income of available-for-sale investments — (28)
IFRS net profit 179 1,411

Post Balance Sheet Date Events
January 2005 — routine operation of the new SAP information system kicks off
— as of 1 January, the company applies International Accounting Standards in its accounting
and in the preparation of financial statements
— approval and launch of the programme ‘Optimization of the Maintenance and Number
of Category D Workers’
March 2005 — approval of the business plan for 2005
— approval of the business plans of subsidiaries for 2005
— General Meetings of subsidiaries held
April 2005 — public contract for asset insurance granted to Kooperativa, pojišťovna, a.s.
May 2005 — addendum to the long-term purchase agreement with ČEZ signed
June 2005 — Annual General Meeting
— approval of a dividend of CZK 240 per share
— change in the composition of Company bodies

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Cash and In-kind Income
Information about all pecuniary income and income in kind received in the accounting period by executives and
members of the Supervisory Board from the issuer and from persons controlled by the issuer:
Board of Directors
In 2004, members of the Board of Directors received CZK 3,240,000 in fees; bonuses from the distribution of the profit
from 2003 amounted to CZK 6,715,000.
Supervisory Board
In 2004, members of the Supervisory Board received CZK 1,530,000 in fees; bonuses from the distribution of the profit
from 2003 amounted to CZK 2,079,000; income in kind amounted to CZK 118,000.
Executives
In 2004, the company’s executives received base pay totalling CZK 17,354,000; bonuses tied to the company’s results
came to CZK 21,119,000 and other pecuniary income and income in kind totalled CZK 910,000. Remuneration
for positions in the bodies of controlled companies came to CZK 1,131,000; bonuses from the distribution of the 2003
profit amounted to CZK 92,000.
Principles of Remuneration
The remuneration of members of the Board of Directors and Supervisory Board is governed by the principles approved
by the company’s General Meeting on 28 June 2002.
Members are due monthly remuneration in the scope approved by the Board of Directors. The company’s General
Meeting may also award bonuses for the financial results achieved by the company.
The total volume of resources available for fees and bonuses is subject to approval by the company’s General
Meeting.
The company may also provide resources and equipment, in accordance with approved principles, that are required
for a particular position, i.e. use of an office, communication technology, a company car. The terms and conditions
applicable to the use of such resources and equipment are governed by general regulations and by internal management
documents.
Members of the Board of Directors and Supervisory Board are insured to cover liability of the members of company
bodies for damage caused.
The remuneration of executives is governed by principles approved by the company’s Board of Directors.
Under these principles, a base pay is set, plus the amount of quarterly and annual bonuses. Bonuses are tied
to financial results (profit) and the fulfilment of other tasks connected with the holding of a position. Communication
technology and company cars may be assigned for particular positions.
Other matters are governed by the collective agreement.
Information on Securities
The number of shares issued by the company which are owned by members of statutory bodies, other executives
of the issuer, and members of the Supervisory Board, including the next of kin of these persons, is immaterial
and these persons did not engage in trading in such securities during 2004. Options and similar agreements
where the underlying assets are participating securities in favour of these persons have not been concluded.

Events Forecast in 2005
— May 2005 – a meeting is planned by the Ústecko Region autonomous governing body to discuss territorial
ecological limits (as part of the procedure to approve the region’s land-use plan and energy policy)
— update of the long-term purchase agreement with ČEZ
— ČEZ decision on the scope of reconstruction of CHP plants, including a schedule for the shutdown
of the facilities to be reconstructed and renovated
— implementation of further modules of the new SAP information system
Doly Bílina
— April to May 2005 – extensive reconstruction of the conveyor belt facilities of the fifth section, with
a reduction in the level and the relaying of the belt conveyors
— April to June 2005 – partial general overhaul and reconstruction of the electrics and electronics of the spreader
ZPD 8000/Z98
— July 2005 – completion of the general overhaul of the K 2000/K101 large-scale excavator
— August 2005 – launch of the general overhaul of the KU 800/K99 large-scale excavator
— December 2005 – completion of a significant ecological project: transfer of water discharge and treatment from
the Ledvice pumping station to the main pumping station (termination of the discharge of water to Ledvice
Stream)
Doly Nástup Tušimice
— completion of the assembly of the second ‘heavy’ SchRs 1320 excavator (August 2005), transfer to the point
of use; launch of trial and then permanent operation in the final quarter of 2005
— completion of the modernization of the mine water treatment plant in Březno
— first stage of modernization and general overhaul of ÚDUT II
— completion of the optimization of the organizational structure – the merger of operating sections
at the overburden operation and quarry operation (abandonment of the Málkov and Zásada complex)
— reduction in the excavation of overburden by reducing the shift system at the first overburden bench by one
shift as of 1 July 2005 in accordance with the expected decline in coal mining due to the planned general
overhaul of ETU II between 2007 and 2010
— the advance of the overburden and coal sections and spoil bank will reach the area of the deep coal seam
(the ‘Kralupy Fault’ area) and there is a risk that the overburden, coal, and spoil banks will slide even if
adopted measures and subsequently adopted extraordinary measures are respected and implemented

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Organizational Chart
General Manager
— CEO’s Office
— Public Relations Division
— Information Technology Division
— Legal Division
Financial Director Sales Director Technology Director Human Resources Director
— Secretariat — Secretariat — Secretariat — Secretariat
— Information System — Sales Division — Land Preparation and — HR Work Division
— Division — Commercial Division — Reclamation Division — DNT HR Division
— Planning and Controlling — Purchasing Division — Ecology Division — DB HR Division
— Division — Innovation Division — Investment and — Asset Management and
— Financing Division — Trade Economics — Technical Development — Realization Division
— Taxation and Charges — Division — Division
— Division — Mining Base
— Internal Audit Division — Development Division
— Strategic Development
— Division
Director – Doly Bílina Director – Doly Nástup Tušimice
— Deputy Director for Production Technology — Deputy Director for Production Technology
— Deputy Director for Economics — Deputy Director for Economics
— OVERBURDEN UNIT — OVERBURDEN UNIT
— OPENCAST PIT UNIT — OPENCAST PIT UNIT
— LEDVICE COAL PREPARATION PLAN UNIT

Glossary
ČEPS Czech Power Transmission System
DB Doly Bílina
DNT Doly Nástup Tušimice
NAP National Allocation Plan
NPF CR National Property Fund of the Czech Republic
PSE Prague Stock Exchange
humitanes humic acid salts used as fertilizers, pigments, in the healthcare industry, etc.
lignite general generic term covering all types of brown coal, which vary in terms of pure coal
oxyhumolite particular type of brown coal created mostly by climatic processes
atvis automatic one-day bank deposit of an excess current account balance
overnight one-day bank deposit
P/E price-to-earnings ratio
rating evaluation of credit standing (ability to pay future obligations) for issuers of debt securities

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Shareholder Financial Calendar
Strike date for attendance at Annual General Meeting: 17 June 2005
Date of Annual General Meeting: 24 June 2005
Strike date for dividend payout: 25 July 2005
Date dividends will be paid: 26 September 2005
Where dividends will be paid: Company Headquarters, Chomutov,
Boženy Němcové 5359, Czech Republic
How dividends will be paid:
for private individuals who are citizens of the Czech Republic
The Company will pay out dividends, at its own expense and risk, by means of the cheques of Poštovní spořitelna
Československé obchodní banky, a.s., valid at all post offices for sixty days as of 22 August 2005. Cheques will be
sent to the shareholder’s address as listed in the issuer’s register as at the strike date for dividend payment.
for private individuals who are citizens of other countries
The Company will pay out dividends, at its own expense and risk, by bank transfer forthwith on receipt of written
notification containing the information necessary to make the transfer; shareholders are to send in this information
after receiving written invitation to do so, sent by 2 August 2005 to the shareholder’s address as listed
in the issuer’s register as at the strike date for dividend payment.
for legal entities
The Company will pay out dividends, at its own expense and risk, by bank transfer forthwith on receipt of written
notification containing the information necessary to make the transfer and on receipt of the legal entity’s
certificate of incorporation; shareholders are to send in this information after receiving written invitation to do so,
sent by 2 August 2005 to the shareholder’s address as listed in the issuer’s register as at the strike date for dividend
payment.
The right to the payment of a dividend is time-barred once four years have elapsed as of the decisive date for the dividend
payment.
Annual report location and shareholder affairs contact:
Zdeňka Montagová, Head of Financing, phone: +420/474/60 4270-1
For further information please visit www.sdas.cz

Contact Addresses
Severočeské doly a.s.
Boženy Němcové 5359, 430 01 Chomutov
PO Box 38
Czech Republic
Phone: +420/474/602 111, +420/474/652 265
Telefax: +420/474/652 264
E-mail: sdas@mail.sdas.cz
http://www.sdas.cz
Severočeské doly a.s.
SALES SECTION
5. května 213, 418 29 Bílina
PO Box 19, 20
Czech Republic
Phone: +420/417/804 211, +420/417/804 265
Telefax: +420/417/804 210, +420/417/804 260
Severočeské doly a.s.
DOLY BÍLINA
5. května 213, 418 29 Bílina
Czech Republic
Phone: +420/417/804 111, +420/417/734 111
Telefax: +420/417/829 080
Severočeské doly a.s.
DOLY NÁSTUP TUŠIMICE
432 01 Kadaň
Czech Republic
Phone: +420/474/902 111, +420/474/333 139
Telefax: +420/474/333 179

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Persons Responsible for the Annual Report
The financial statements for the years ending 31 December 2004, 2003, and 2002, and the Annual Report were
audited by:
Ernst & Young ČR, s.r.o. Ladislav Langr
Licence No 401 auditor
Karlovo náměstí 10, Praha 2, 120 00 Certificate No 257
Fees paid to auditors for 2004 amounted to CZK 2,550,000.
Declaration of Honour
I hereby declare on my honour that the information disclosed in the Annual Report is truthful and that no material
circumstances which could affect an accurate, correct assessment of the issuer and securities have been omitted.
I further declare that the financial statements for the past three accounting periods have been examined by
an auditor and that the auditor’ s report contained in the Annual Report is truthful.
Vratislav Vajnar Erich Grünbaum
Chairman of the Board of Directors and Chief Executive Officer Vice-Chairman of the Board
of Directors, Company Proxy
and Financial Director

Notes

Consulting and production:
© B.I.G. Prague, Hill & Knowlton Associate, 2005
Design: © ReDesign 2005