Formation
Sri Lanka Telecom (SLT) was established by an Incorporation Order made under Section 2, State Industrial Corporations Act, No. 49 of 1957 and published in Gazette Extraordinary No. 596/11 of
6 February 1990. Under an Order made by the Minister of Posts and Telecommunications on
24 July 1991 under Section 23, Sri Lanka Telecommunications Act, No. 25 of 1991 and published in Gazette No. 675 of 9 August 1991, all the property, rights and liabilities (other than those excluded by the agreement entered into between the Minister and SLT as per Sub-Section 2 of Section 23 of the Sri Lanka Telecommunications Act) to which the Department of Telecommunications (DOT) was entitled or subject to immediately before the transfer date (1 September 1991) were vested in SLT.

As part of the privatisation process SLT was converted to a public limited company, Sri Lanka Telecom Limited (SLTL), on 25 September 1996 under the Conversion of Public Corporations or Government Owned Business Undertakings into Public Limited Companies Act, No. 23 of 1987, vide Gazette Extraordinary No. 942/7 of 25 September 1996. Following the incorporation of SLTL, all of the business and related assets and liabilities of SLT were transferred to SLTL.

Subsequently, on 5 August 1997, the Government as the sole shareholder of SLTL divested 35% of its holding in the issued share capital of SLTL by the sale of 631,701,000 ordinary shares of
Rs. 10/- each to Nippon Telegraph and Telephone Corporation (NTT) and entered into an agreement with NTT to transfer the management of the Company to NTT.

On 2 July 1998, the Government of Sri Lanka divested a further 3.5% of the issued share capital of SLTL by the distribution of 63,170,010 ordinary shares to the employees of SLTL.

On 22 March 2000, NTT Corporation transferred the full amount of its shares in the Company to NTT Communications Corporation.

The Company sought and obtained a stock exchange listing from the Colombo Stock Exchange in
March 2000, following a Board decision to issue Unsecured Redeemable five year Debentures
2000/2005 with a par value of Rs. 1,000/- each, to the public. Consequent to the listed status conferred, the Company now comes under the supervision of the Securities Exchange Commission and the Colombo Stock Exchange.

Results
The results for the year and the Changes in Equity, are set out in the Income Statement and in the Statement of Changes in Equity.

Review of Business
The state of affairs of the Company at 31 December 2001 is set out in the Balance Sheet.
An assessment of the Company during the financial year is given in the CEO's Review.

Property, Plant & Equipment
The movements in property, plant & equipment during the year are set out in Note 8 to the financial statements. The value shown therein is not materially different from its current market value.

Group Activities
The main activity of the Group is providing domestic and international telephone services and other telecommunication services such as telex, telegraph, leased circuits, internet related services and data networks in Sri Lanka.
The activities of the Group have not changed materially from the last financial year.

Dividends and Transfers to Reserves
The Directors recommend a dividend of Rs. 0.30 per share for the year ended 31 December 2001.
An amount of Rs. 888 million has been transferred and retained in the hedge reserve as a debit balance in accordance with the accounting policy for hedging.

Reserves
Total reserves of the Group and its composition has been given in the Statement of Changes in Equity.

Substantial Shareholdings
According to the share register, the undernoted held more than 5% interest in the issued share capital of the Company at the Balance Sheet date:

	Holding Percentage		No. of Shares
Government of Sri Lanka	61.5%		1,109,988,900
NTT Communications Corporation	35.2%		635,076,318

Directors
The Directors of the Company at 31 December 2001 were:

Mr R N Wijeratne and Mr D J Amarasinghe, Directors of the Company resigned office with effect from 24 August 2001 and 21 August 2001 respectively.

Directors’ Interests in Contracts and Proposed Contracts with the Company
The Directors’ interests in contracts and proposed contracts with the Company, both direct and indirect, are set out in Note 27 to the financial statements. The Directors have disclosed the nature of their interests in contracts and proposed contracts with the Company at meetings of the Directors.

Directors’ Interests in Shares of the Company
Mr R N Wijeratne, who was a Director of the Company held 20,543 shares in the Company during the year ended 31 December 2001.
None of the other Directors directly or indirectly held any shares in the Company during the year ended 31 December 2001.

Directors’ Interests in Debentures of the Company
Mr R N Wijeratne who was a Director of the Company and Mr H N Gunawardena, a Director of the Company, held 2,000 and 5,000 debentures respectively of the Company issued during the year ended 31 December 2000.
None of the other Directors directly or indirectly held any debentures in the Company during the year ended 31 December 2001.

Statutory Payments
All statutory payments to the Government and the employees have been made up to date.

Environmental Protection
The Company has not engaged in any activities which would have been detrimental to the environment.

Donations
During the year the Company contributed Rs. 389,000/- (2000 - Rs. 20,000/-) for charitable purposes. No amount of the above has been for government approved charities.

Post Balance Sheet Events
No events have occurred since the Balance Sheet date, which would require adjustments to, or disclosure in, the financial statements.

Appointment of Auditors
A resolution to re-appoint our present Auditors, Messrs PricewaterhouseCoopers, Chartered Accountants, who have expressed their willingness to continue, will be proposed at the Annual General Meeting.

By Order of the Board

(Sgd.) Ms. P.G. Dias
Secretary
10 June 2002