Operating Results
The operating profit before depreciation during the year was Rs. 13,183 million, which is a 19% increase from Rs. 11,124 million last year. This has been due to significant increase in revenue and increased management effort to control of operating costs. While revenue increased by Rs. 2,455 million, an increase of

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12% from previous year, operating cost (other than depreciation) increased by only Rs. 396 million resulting in Rs. 2,059 million of the revenue increase directly contributing towards operating profits. An Increase of Rs. 748 million in depreciation finally resulted in a net operating profit of Rs. 6,316 million, an increase of 27% compared with that of last year. During the past two years the increase in costs had been almost at par with the increase in revenue, which resulted in a lower contribution towards the operating profit and as a result profit growth was low in those years.

Rental Income - 8% Domestic Call - 43% International Call - 13% International Settlement - 29% Others - 7%

Revenue
The operating revenue was Rs. 22,060 million, which is a 13% increase from Rs. 19,605 million last year. The increase in revenue has been mainly due to the increase in domestic call revenue including rental income and in international in payment. The increase in domestic call revenue is purely due to volume increase, as SLT did not increase the domestic call rates. The 78,447 new connections given in 2001 also contributed to this growth. Increase in international incoming traffic, which has been recovered by the arrangement with WLL operators has resulted in growth of international in payment. The share of international revenue from outgoing and incoming calls has reached 42% of total operating revenue.

Operating Costs
The operating costs were Rs. 8,877 million and the depreciation cost was Rs. 6,869 million. The cost consciousness of SLT employees in day-to-day operations contributed to control the increase in costs. Increase in operating costs was mainly due to increase in payments to other network operators, local as well as international. Payments to international network operators was increased by Rs. 267 million due to increase in international calls. The Payments to other local network operators also increased by Rs. 527 million, due to higher termination of calls on their network. These increases were however mitigated to a certain extent by reduction in repairs and maintenance, bad debts/stock provisions.

Cash flow Hedge
SLT, in accordance with its policy of complying with statutory and best accounting practise standards adopted International Accounting Standard 39, Financial Instruments with effect from 2001. Consequently cash flow hedging principles were applied and as a result the Company could not recognize the book losses on translating foreign currency denominated loans. This had favourable impact of Rs. 888 million on the income statement. Retrospective adjustments were not made as per the transitional provisions of the standard.

Profit and Taxation
The profit before tax was Rs. 3,618 million, which was the largest pre-tax profit in these five years. The tax charge of Rs. 1,515 million represents charge in respect of deferred taxation. Due to brought forward tax losses and Investment Tax Allowance SLT does not have to pay tax in respect of 2001. The deferred tax charge in 2001 is Rs. 822 million increases compared to the previous year. This is mainly due to the increase of profit before tax.

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Investing Activities
The investing activities were not very high compared to the last year as most of the major projects were completed. The total additions to property, plant & equipment during the year were Rs. 4,461 million at cost. This was mainly in respect of outside plant, exchanges and transmission equipment.

Financing Activities
During the year there were net settlements amounting to Rs. 4,437 million of long-term borrowings and the total debt balance as of the end of 2001 was Rs. 31,571 million. In addition to regular repayment of loans, the Company was able to prepay some high interest rate, foreign currency denominated loans, utilising the excess cash inflows. Efficient management of funds coupled with high interest rates during the year under review, SLT earned a record interest income of
Rs. 777 million, an increase of 129% over the previous year.

Excellence in Reporting
The Annual Report of SLT for the financial year 2000 was adjudged the winner in the categories of "New Companies Incorporated on or after 1st April 1996" and "Unquoted Companies" at the Annual Report awards competition organised by the Institute of Chartered Accountants of Sri Lanka. This is a creditable achievement gained by the Company in the Corporate Financial world. The criteria of selection underscore the Company's high standards in ensuring transparency, good governance and compliance with statutory and best accounting practises.