| 1. |
|
The Directors present herewith
the audited financial statements for the year ended 31
December 2004. |
| |
|
|
| 2. |
|
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 Telecommunication 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 on reconstitution of the former.
The Government of Sri Lanka divested a further 12% of
its holding to the public through the Colombo Stock Exchange
in November 2002, bringing down the Government's holding
to 49.5%. |
| |
|
|
| 3. |
|
RESULTS
The results for the year and the changes in equity are
set out in the income statement on page 64 and, the statements
of changes in equity on pages 66 and 67 respectively. |
| |
|
|
| 4. |
|
REVIEW
OF BUSINESS
The state of affairs of the Company at 31 December 2004
is set out in the balance sheet on page 65. An assessment
of the Company during the financial year is given in the
CEO’s Review. |
| |
|
|
| 5. |
|
PROPERTY,
PLANT & EQUIPMENT
The movements in property, plant & equipment during
the year are set out in Note 9 to the financial statements. |
| |
|
|
| 6. |
|
GROUP
ACTIVITIES
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.
With the acquisition of Mobitel in 2002, the Group became
the only fully integrated telecom operator in the country. |
| |
|
|
| 7. |
|
DIVIDEND
The Directors recommended the payment of a first and final
dividend of 5% per share for the year 2004 on the issued
share capital of Rs. 18,048,600,000. |
| |
|
|
| 8. |
|
RESERVES
Total reserves of the Group and their composition have
been given in the statement of changes in equity on page
66 of the financial statements. |
| |
|
|
| 9. |
|
SUBSTANTIAL
SHAREHOLDINGS
As at 31 December 2004 there were 1,804,860,000 ordinary
shares of Rs. 10 each in issue, and according to the share
register the undernoted held more than a 5% interest therein
at the balance sheet date.
| Name |
Holding
Percentage |
No. of
Shares |
|
 |
| Government of Sri
Lanka |
49.50% |
893,405,700 |
| NTT Communications Corporation |
35.20% |
635,076,318 |
| The public holds
15.30% of the issued share capital as at 31
December 2004. |
|
|
| |
|
|
| 10. |
|
SHAREHOLDER
RELATIONS
The Board lays emphasis on good investor relations. In
addition to the Annual General Meetings at which the Directors
have a dialogue with the shareholders, timely financial
reports are presented to them on quarterly and annual
basis. The Investor Relations Officers together with CEO
meet institutional shareholders and fund managers on a
regular basis. Additionally shareholders are kept up-to-date
on the Company's business endeavours and other activities
undertaken to enhance shareholder value, through its quarterly
newsletter "Investor". |
| |
|
|
| 11. |
|
DIRECTORS
During the year the Board comprised nine Directors and
as at 31 December 2004 the Directors were:
| Mr. Anil Obeyesekere, P.C. - Chairman |
Appointed as Director on 25 June 2004
and elected as Chairman on 29 July 2004 |
| |
|
| Mr. Shuhei Anan - Chief Executive Officer |
- |
| |
|
| Mr. S. B. Divaratne |
Appointed on 27 May 2004 |
| |
|
| Mr. Nigel Hatch, P.C. |
Appointed on 25 June 2004 |
| |
|
| Mr. Lalith De Mel |
Appointed on 26 August 2004 |
| |
|
| Mr. Sadao Maki |
Appointed on 26 August 2004 |
| |
|
| Mr. Palitha S. Thenuwara |
Appointed on 30 September 2004 |
| |
|
| Mr. Kiyoshi Maeda |
- |
| |
|
| Mr. Kiyoshi Maeda |
- |
| |
|
|
| |
|
Mr. Takashi Akiyama ceased
to be an alternate to Mr. Mitsuhiro Takase with the latter's
resignation from the Board on 17 June 2004. However, he
continues as an alternate to Mr. Kiyoshi Maeda and Mr.
Haruhiko Yamada. The principal Directors being non-executive
their alternate only attended Board meetings.
Mr. Tadashi Imachi was appointed to act as alternate to
Mr. Sadao Maki on 26 August 2004.
The following who were Directors of the Company at the
beginning of the year ceased to hold such office on the
dates mentioned below:
| Mr. K. A. P. Goonatilleke |
Removed on 3 March 2004 |
| |
|
| Mr. N. Pathmanathan |
Resigned on 10 May 2004 |
| |
|
| Mr. Mitsuhiro Takase |
Resigned on 17 June 2004 |
| |
|
| Ms. M. A. R. C. Cooray |
Resigned on 25 May 2004 |
| |
|
| Mr. K. C. Logeswaran |
Resigned on 25 May 2004 |
| |
|
| Mr. Thilanga Sumathipala |
Resigned on 4 August 2004 |
| |
|
| Mr. Palitha Thenuwara |
Compulsory resignation 28 February 2005 |
| |
|
Re-election of Directors
The Company's Articles of Association require that one-third
of the Directors retire at each Annual General Meeting
of the Company.
Accordingly Mr. Kiyoshi Maeda retires in terms of Article
91 and being eligible offers himself for re-election.
During the year, the under-mentioned Directors were appointed
to fill casual vacancies arising from the resignation
of Incumbent Directors. The Directors who have been so
appointed by the Board retire in terms of Article 97 and
being eligible offer themselves for re-election.
Mr. S.B. Divaratne
Mr. Nigel Hatch
Mr. Lalith De Mel
Mr. Sadao Maki |
| |
|
|
| 12. |
|
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 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. |
| |
|
|
| 13. |
|
DIRECTORS’
INTERESTS IN SHARES OF THE COMPANY
Directors' individual shareholdings in the Company as
at the year end and their corresponding holdings as at
the end of the previous year were as shown below:
|
|
| Mr. Lalith De Mel |
35,500 |
N/A |
|
|
| |
|
|
| 14. |
|
CORPORATE
GOVERNANCE
Within the corporate entity, the Company 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 recognised stakeholders.
The Remuneration Committee comprising the Chairman and
the CEO determines the Senior Executives remuneration
and compensation.
The Audit Committee comprises of 3 Non-Executive Directors
with CIA attending the meetings by invitation. |
| |
|
|
| 15. |
|
STATUTORY
PAYMENTS
All statutory payments to the government and the employees
have been made at the balance sheet date. |
| |
|
|
| 16. |
|
ENVIRONMENTAL
PROTECTION
It is the responsibility of the Company to operate in
a manner that will not have a detrimental effect on the
environment and to provide products and services of the
highest quality that have a beneficial effect for our
customers and the communities within which we operate. |
| |
|
|
| 17. |
|
INVESTMENTS
The Company holds an unlisted investment in Intelsat Limited,
which provides telephony and other related services via
geosynchronous satellites around the globe. |
| |
|
|
| 18. |
|
DONATIONS
During the year, the Company contributed Rs. 2,000,000
(2003 - Rs. 1,425,000) for charitable purposes. Of the
above contributions Rs. 600,000 (2003 - Rs. 1,200,000)
was for a government approved charity. |
| |
|
|
| 19. |
|
GOING
CONCERN
The Financial Statements are prepared based on the going
concern concept. The Board of Directors are satisfied
that the Company has adequate resources to continue its
operations in the foreseeable future. |
| |
|
|
| 20. |
|
POST
BALANCE SHEET EVENTS
No events have occurred since the balance sheet date,
which would require adjustments to, or disclosure in,
the financial statements. |
| |
|
|
| 21. |
|
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.) P.G. Dias
Secretary
Colombo
4th April 2005 |
