| 1. |
The Directors present herewith the audited
financial statements for the year ended 31 December 2002. |
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| 2. |
FORMATION |
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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.
On 28 November 2002, the Government of Sri Lanka divested a further
12% of the holding in the Company by an Initial Public Offering.
Pursuant to the special resolution passed at the Extraordinary General
Meeting of the Company held on 12.11.2002 a new set of Articles of
Association of the Company came into effect on 29.11.2002, which date
was the closing date of the Company’s IPO.
The shares of the Company commenced trading publicly on the Colombo
Stock Exchange in 14 January 2003. |
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| 3. |
RESULTS |
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The results for the year and the changes in equity,
are set out in the Income
Statement on page 31 and the Statements
of Changes in Equity on pages 33 and 34 respectively. |
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| 4. |
REVIEW
OF BUSINESS |
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The state of affairs of the Company at 31 December
2002 is set out in the Balance
Sheet on page 32.
An assessment of the Company during the financial year is given in
the CEO’s Review. |
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| 5. |
PROPERTY,
PLANT & EQUIPMENT |
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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. |
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| 6. |
GROUP
ACTIVITIES |
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The Group provides a broad portfolio of telecommunication
services across the country, the main
activity being domestic and international telephone services. The
range of services provided by the
Company include, inter alia, internet access, data services, domestic
and international leased circuits,
frame relay, ISDN, satellite uplink and maritime transmission.
In November 2002 the Company acquired the remaining 60% of the issued
share capital of Mobitel (Pvt)
Limited from Telstra Holdings (Pty) Limited of Australia for a purchase
consideration of US Dollars
9,500,000 to be in three instalments of which the first instalment
of US$ 3,000,000 was paid upfront.
Thus Mobitel which was an associate company as at 31 October 2002,
bacame a fully owned
subsidiary of SLT on 01.11.2002.
With the acquisition of Mobitel, SLT becomes the only integrated operator
in Sri Lanka able to offer fixed
line, data and mobile services to its retail and corporate customers. |
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| 7. |
DIVIDENDS
AND TRANSFERS TO RESERVES |
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An interim dividend of Rs. 0.3 per share for the
year ended 31 December 2002 was declared by the
Board and paid out on 11 February 2003.
The Directors also propose a distribution of a Final Dividend of Rs.
0.3 less tax per share, bringing the
total dividend for the year ended 31 December 2002 to Rs. 0.6. |
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| 8. |
RESERVES |
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Total reserves of the Group and their composition
have been given in the Statement
of Changes in
Equity on page 31 of the financial statements. |
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| 9. |
SUBSTANTIAL
SHAREHOLDINGS |
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According to the Share Register the under noted
held more than a 5% interest in the issued share
capital of the Company at the Balance Sheet date: |
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| Name |
No.
of Shares |
% |
 |
| Government
of Sri Lanka |
893,405,700 |
49.50 |
| NTT Communications
Corporation |
635,076,318 |
35.20 |
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The public holds 15.30% of the Issued Share Capital. |
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| 10. |
DIRECTORS |
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| The
Directors of the Company as at 31 December 2002 were: |
| Mr.
Thilanga Sumathipala - Chairman |
Appointed
on 24 January 2002 |
| Mr.
Shuhei Anan - Chief Executive Officer |
Appointed
on 5 June 1999 and as CEO on 21 July 2001 |
| Mr.
K.A.P. Goonatilleke |
Appointed
on 24 December 1998 |
| Mr.
H.N. Gunewardena |
Appointed on 21
February 2000 |
| Mr.
Kazuhiro Yaginuma |
Appointed on 20
July 2001 |
| Mr.
A.R. Ekanayake |
Appointed on 24
September 2001 |
| Mr.
W.R.H. Fernando |
Appointed on 24
September 2001 |
| Mr.
N. Pathmanathan |
Appointed on 28
March 2002 |
| Mr.
Setsuya Kimura |
Appointed on 28
March 2002 |
| Mr.
Kiyoshi Maeda |
Appointed on 25
April 2002 |
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Mr. J.C.L. de Mel, Mr. S. Hashimoto, Mr. N. Asami
and Mr. W.H.W. Soysa, who were Directors of the
Company as at January 2002 resigned their office with effect from
23 January 2002, 28 April 2002,
25 April 2002 and 28 April 2002 respectively.
In terms of the Company’s new Articles of Association which
came into effect on 29.11.2002, one-third
of the Directors or the number nearest thereto retire at each Annual
General Meeting of the Company.
Therefore the following Directors will retire and being eligible offer
themselves for re-election at the
AGM: Messrs. Goonatilleke and Yaginuma.
In terms of Section 181 of the Companies Act, Mr. H.N. Gunewardena
has informed the Company that
he has reached the age of 70 on May 6, 2002. The Board recommends
that he be elected a Director of
the Company and that the age limit specified in Section 181 shall
not apply to him. |
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| 11. |
CORPORATE
GOVERNANCE |
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Within the corporate entity, the Company’s
business and affairs are managed and directed with the
objective of balancing the attainment of corporate objectives, the
alignment of corporate behaviour within
the expectation of the law and society and the accountability to shareholders
and responsibility to other
recognized stakeholders.
In keeping with the best practice guidelines an Audit Committee consisting
of 4 Non-Executive Directors
have been appointed during the year.The CFO and the Internal Auditor
attend all meetings of the Committee.
The Remuneration Committee comprising of the Chairman and the CEO
determines the Senior
Managers remuneration and compensation. |
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| 12. |
DIRECTORS’
INTERESTS IN CONTRACTS AND PROPOSED CONTRACTS WITH THE COMPANY |
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The Directors’ interests in contracts and
proposed contracts with the Company, both direct and indirect,
are set out in Note 29 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. |
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| 13. |
DIRECTORS’
INTERESTS IN SHARES OF THE COMPANY |
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Directors’ individual shareholdings and their
spouses' shareholdings in the Company as at the year end
and their corresponding holdings as at the end of the previous year
are as shown below: |
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| Name |
As
at 31.12.02 |
As at 31.12.01 |
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| Mr.
N. Pathmanathan |
5,000 |
- |
| Mrs. M. Pathmanathan |
5,000 |
- |
| Mr. W.R.H. Fernando |
10,000 |
- |
| Mrs. A. Fernando |
5,000 |
- |
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| 14. |
DIRECTORS’
INTERESTS IN DEBENTURES OF THE COMPANY |
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Mr. H. N. Gunewardena, a Director of the Company,
held 5,000 debentures of the Company during the
year ended 31 December 2002.
None of the other Directors directly or indirectly held any debentures
in the Company during the year
ended 31 December 2002. |
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| 15. |
STATUTORY
PAYMENTS |
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All statutory payments to the Government and the
employees have been made up to date. |
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| 16. |
ENVIRONMENTAL
PROTECTION |
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The Company has not engaged in any activities which
would have been detrimental to the environment. |
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| 17. |
INVESTMENTS |
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The Company holds unlisted investments in Intelsat
as well as Inmarsat, international satellite consortia
as at 31.12.2002. |
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| 18. |
DONATIONS |
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During the year, the Company contributed Rs. 1,384,286/-
(2001 - Rs. 389,000/-) for charitable
purposes. Of the above contributions Rs. 1,100,000/- was for a government
approved charity. |
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| 19. |
POST BALANCE
SHEET EVENTS |
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No events have occurred since the Balance Sheet
date, which would require adjustments to, or
disclosure in, the financial statements. |
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| 20. |
APPOINTMENT
OF AUDITORS |
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A resolution to reappoint our present auditors,
Messrs. PricewaterhouseCoopers, Chartered Accountants,
who have expressed their willingness to continue, will be proposed
at the Annual General Meeting. |
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By Order of the Board
(Sgd.) Ms. P.G. Dias
Secretary
Colombo
21 April 2003 |
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