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- The Directors present herewith the audited financial statements
for the year ended 31 December 2003.
- 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
on reconstitution of the former.
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
(IPO).
- RESULTS
The results for the year and the changes in equity, are
set out in the Income Statement on page 55 and the Statements
of Changes in Equity on pages 57 and 58 respectively.
- REVIEW OF BUSINESS
The state of affairs of the Company as at 31 December 2003
is set out in the Balance Sheet on page 56 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 9 to the financial statements.
- 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, Sri Lanka Telecom becomes
the only integrated operator in Sri Lanka able to offer
fixed line, data and mobile services to its retail and corporate
customers.
- DIVIDEND
During the year an interim dividend of 3% per share and
a final dividend also of 3% per share were paid out of the
profits of 2002 in February and June 2003 respectively.
The Directors recommend a first and final dividend of 5%
per share for the year ended 31 December 2003 payable in
June 2004.
- RESERVES
Total reserves of the Group and their composition have been
given in the Statement of Changes in Equity on page 57 of
the financial statements.
- SUBSTANTIAL SHAREHOLDINGS
As at 31 December 2003 there were 1,804,860,000 ordinary
shares of Rs. 10 each in issue, and according to the share
register the under noted 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 |
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| The public holds 15.30% of the Issued
Share Capital as at December 2003. |
- 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 a quarterly an annual bases. 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".
- DIRECTORS
During the year the Board comprised nine Directors and as
at 31 December 2003 the Directors were:
Mr. Thilanga Sumathipala - Chairman
Mr. Shuhei Anan - Chief Executive Officer
Mr. K.A.P. Goonatilleke
Mr. N. Pathmanathan
Mr. Kiyoshi Maeda
Mr. Mitsuhiro Takase - Appointed on 22 July 2003
Mr. Haruhiko Yamada - Appointed on 4 September 2003
Ms. M.A.R.C. Cooray - Appointed on 2 December 2003
Mr. K.C. Logeswaran - Appointed on 17 December 2003
Mr. Takashi Akiyama was appointed to act as alternate to
Messrs. Maeda, Takase and Yamada during their absence abroad.
The principal Directors being non-executive their alternate
only attended Board meetings.
The following who were Directors of the Company at the beginning
of the year resigned from the Board on the dates mentioned
below:
Mr. R.H. Fernando - Resigned on 7 February 2003
Mr. K. Yaginuma - Resigned on 22 July 2003
Mr. S. Kimura - Resigned on 4 September 2003
Mr. H.N. Gunewardena - Resigned on 10 October 2003
Mr. A.R. Ekanayake - Resigned on 11 November 2003
Mr. N. Saito who was alternate to Mr. Yaginuma was appointed
on 23 January 2003 which appointment was revoked on 27 May
2003.
Mr. T. Akiyama was appointed as alternate to Mr. S. Kimura
on 27 May 2003 which appointment was revoked on 4 September
2003.
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. N. Pathmanathan retires in terms of Article
91 and being eligible offers himself for re-election.
During the year, the undermentioned 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. Mitsuhiro Takase
Mr. Haruhiko Yamada
Ms. M.A.R.C. Cooray
Mr. K.C. Logeswaran
Directors' Interests in Debentures of the Company
Mr. H.N. Gunewardena who resigned from the Board on 10 October
2003, held 2,500 debentures of the Company. None of the
other Directors directly or indirectly held any debentures
of the Company during the year ended 31 December 2003.
- 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.
- DIRECTORS’ INTERESTS IN
SHARES OF THE COMPANY
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:
| |
Number |
| Name |
2003 |
2002 |
|
| Mr. N. Pathmanathan |
5,000 |
5,000 |
| Mrs. M. Pathmanathan |
5,000 |
5,000 |
| Mr. W.R.H. Fernando |
- |
10,000 |
| Mrs. A. Fernando |
- |
5,000 |
- CORPORATE GOVERNANCE
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. The
Remuneration Committee comprising of the Chairman and the
CEO determines the Senior Executives remuneration and compensation.
- STATUTORY PAYMENTS
All statutory payments to the Government and the employees
have been made up to date.
- ENVIRONMENTAL PROTECTION
It is the responsibility of the Company to operate in a
manner that will not have detrimental effect on the environment
and to provide products and services of highest quality
that have a beneficial effect for our customers and the
communities within which we operate.
- INVESTMENTS
The Company holds an unlisted investment in Intelsat Limited
which provides telephony and other related services via
geosynchronous satellites around the globe. In November
2003 the Board decided to dispose of SLT's investment in
Inmarsat Ventures plc on a Management buy out. On this arrangement
all selling shareholders including SLT received US$ 15 per
share. The total amount realised by SLT on the sale its
holding of 50,000 shares was US$ 750,000.
- DONATIONS
During the year, the Company contributed Rs. 1,425,000/-
(2002 - Rs. 1,384,286/-) for charitable purposes. Of the
above contributions Rs. 1,200,000/- (2002 - Rs. 1,100,000/-)
was for a government approved charity.
- 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 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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