BENGAL FIBRE INDUSTRIES LIMITED
ANNUAL REPORT 2004
Company Information
BOARD OF DIRECTORS
Mr. Shaikh Shehzad Iqbal			Chairman
Mr. Muhammad Farooq			Chief Executive
Mr. Tanveer Iqbal
Mr. Tahir Iqbal
Mr. Asim Iqbal
Mr. Murad Iqbal
Mr. Ahmed
Mr. Muhammad Asif
Mr. Muhammad Saleern Patel
BOARD OF AUDIT COMMITTEE
Mr. Asim Iqbal			Chairman
Mr. Tahir Iqbal			Member
Mr. Muhammad Asif			Member
Mr. Muhammad Idrees			Secretary
CHIEF FINANCIAL OFFICER
Mr. Karamatullah Khan
COMPANY SECRETARY
Mr. Muhammad Iqbal Moon
AUDITORS
M/s . Gangat & Company
Chartered Accountants
BANKERS
Askari Commercial Bank Limited
Bolan Bank Limited
REGISTERED OFFICE & FACTORY
Plot No. 53&S4, Sector 15,
Korangi Industrial Area,
Karachi, Phone No. 5063593
Directors Report
2)    Proper books of account have been maintained.
3)    Appropriate Accounting Policies have been consistently applied in the preparation of financial statements.
4)    International Accounting Standards, as applicable in Pakistan, have been followed in the preparation of financial
statements.
5)    The system of internal control of the company is in place and is sound in design and is effectively monitored.
6)    The going concern assumption in the preparation of financial statements is appropriate.
7)    The company has endeavoured its full to follow the best practices of corporate governance as detailed in the
listing regulations.
8)    During the year eight Board meetings were held. Attendance by each director was as under:-
Directors Resigned			Directors Co-opted
Mr. Abdul Sattar Bengali			Mr. Tanveer Iqbal
Mr. Ali Muhammad Bengali			Mr. Tahir Iqbal
Mr. Noor Muhammad			Mr. Murad Iqbal
Mr. RaufW. Tabbani			Mr. Asim Iqbal
Mr. Yunus Hashim Bengali			Mr. Ahmed
Mr. Faisal G. Bengali			Mr. Muhammad Asif
Mr. Khizar Hyat Aamir(SLIC)			Mr. Muhammad Saleem Patel
NAME OF DIRECTORS				NO. OF MEETINGS ATTENDED
Mr.ShaikhShehzadlqbal				8
Mr. Muhammad Farooq
Mr. Tanveer Iqbal				3
Mr. Tahir Iqbal				3
Mr. Murad Iqbal				3
Mr. Ahmed				3
Mr. Asim Iqbal				7
Mr.Muhammad Asif				7
Mr. Mohammad Saleem Patel				3
Ex-Directors:
Mr. Ali Muhmmad Bengali				1
M. Abdul Sattar Bengali				1
Mr. Yunus Hashim Bengali				1
Mr. Faisal G. Bengali				1
Mr. Noor Muhammad Abubaker				1
FINANCIAL RESULTS
				2004	2003
				Rupees	Rupees
Operating Loss				-21,819,867	-22,924,958
Financial & other charges				-8,949,080	-5,645,092
Loss before Taxation				-30,768,947	-28,570,050
Taxation				-9,340	6,220,470
Loss after Taxation				-30,778,287	-22,349,580
Accumulated Loss brought forward				-26,025,813	-3,676,233
Accumulated Loss carried forward				-56,804,100	-26,025,813
Loss per share				-4.55	-3.31
REVIEW OF RESULTS
Pursuant to a Fact Finding Report by an Independent professional firm, the Board of Directors of the company decided to
shut down the plant and related production facilities in March 2003. This closure was necessitated by the losses being
suffered by the company due to adverse fiscal policy and higher costs, eventually resulting in a gross loss of Rs. 0.321
million in 2002.
During the year the Company has applied for de-listing and buy back of shares at a price @ Rs. 20.40 per share duly
approved by the Karachi Stock Exchange (Guarantee) Limited. The final approval/confirmation from stock exchange for
de-listing is awaited.
RESERVATION IN AUDITORS' REPORT TO MEMBERS & FUTURE OUTLOOK
As a result of sale of sponsor/institutional shares the new management took charge w.e.f. August 22, 2003. The manage-
ment is considering a number of options for restructuring the production facilities and running the Company and if this is
not viable may consider sell off whole or part of assets. The management believes they will have no difficulty in obtaining
new working capital and fixed financing, as the assets of the Company are free of charge after the repayment of loan and
lease liabilities. As such the management feels that the company is a going concern.
CODE OF CORPORATE GOVERNANCE
The directors hereby confirm the following as required by clause (xix) of the code;
1 )    The financial statements, prepared by the management present fairly the company's state of affairs, the results
of its operations, cash flows and changes in equity.
Statement of Compliance with the code of Corporate Governance
This statement is being presented to comply with the Code of Corporate Governance contained in the listing
regulations of Karachi and Lahore Stock Exchanges for the purpose of esablishing a framework of good
governance, whereby a listed company is managed in compliance with the best practices of corporate governance.
The Company has applied the principles conained in the code in the following manner:
1)      The board comprises nine directors, including the CEO, two executive and seven non-executive directors.
The company encourages representation of independent non-executive directors on its board.
2)      The Directors have confirmed that none of them is serving as a director in more than ten listed
companies, including this company.
3)     ' All the resident directors of the Company are registered as a taxpayers and non of them has defaulted
in payment of any loan to a banking company, a DPI or an NBFI or, being a member of a stock
exchange, has been declared as a defaulter by the stock exchange.
4)      Seven casual vacancies occurred in the Board during the current year and the same were filled up
within thirty days.
5)      The Company has prepared a 'Statement of Ethicsiand Business Practices', which has been signed by all
directors and employees of the Company .
6)      The board has developed a vision/mission statement. However overall corporate strategy and significant
polices of the company are under formulation.
7)      All the powers of the Board have been duly exercised and decision on material transactions, including
appointment and determination of remuneration and terms and conditions of employment of the CEO
have been taken by the Board.
8)      The meetings of the Board were presided over by the Chairman. The Board met at least once in every
quarter. Written notices of the Board meetings along with agenda and working papers were circulated
at least seven days before the meetings unless condoned. The minutes of the meetings were appropriately
recorded and circulated.
9)      The appointments of Chief Financial Officer, Company Secretary and Head of Internal Audit and their
remunerations and terms and conditions have been approved by the Board.
10)     The directors' report has been prepared in compliance with the requiremens of the code and fully
describes the salient matter required to be disclosed.
1 1)     The financial statements of the Company were duly endorsed by the CEO and CFO before approval of
the Board.
12)     The directors, CEO and executives do not hold any interest in the shares of the Company other than that
disclosed in the pattern of shareholding.
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF
COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE
GOVERNANCE
We have reviewed the Statement of Compliance with the best practices contained in the Code of
Corporate Governance prepared by the Board of Directors of BENGAL FIBRE INDUSTRIES
LIMITED, to comply with the Listing Regulations No. 37 and 38 (Chapter XI) of the Karachi
Stock Exchange and clause 49 (Chapter XIII) of Lahore Stock Exchange where the Company is
listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of
Directors of the Company. Our responsibility is to review, to the extent where such compliance
can be objectively verified, whether the Statement of Compliance reflects the status of the
Company's compliance with the provisions of the Code of Corporate Governance and report if it
does not. A review is limited primarily to inquiries of the Company personnel and review of
various documents prepared by the Company to comply with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the
accounting and internal control systems sufficient to plan the audit and develop an effective audit
approach. We have not carried out any special review of the internal control system to enable us to
express an opinion as to whether the Board's statement on internal control covers all controls and
the. effectiveness of such internal controls.
Based on our review except for non compliance with clause (xiv) of the Code relating to the
orientation courses for directors, nothing has come to our attention which causes us to believe that
the Statement of Compliance does not appropriately reflect the Company's compliance, in all
material respects, with the best practices contained in the Code of Corporate Governance.
The company has complied with all the corporate and financial reporting requirements of the code.
The Board has formed an audit committee. It comprises of three members. All the members are
non-executive directors.
The meetings of the audit committee were held at least once every quarter prior to approval of interim
and final results of the Company and as required by the code.
The term of reference of the committee have ben formed and advised to the committee for compliance.
The Board has set-up an effective internal audit function.
The statutory auditors of the Company have confirmed that they have been given a satisfactory rating
under the quality control review programme of the Institute of Chartered Accounants of Pakistan, that
they are or any of the partners of firm, their spouses and minor children do not hold shares of the
Company and that the firm and all its partners are in compliance with International Federation of
Accountants (IF AC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of
Pakistan.
The statutory auditors or the persons associated with them have not been appointed to provide other
services except in accordance with the listing regulations and the auditors have confirmed that they
have observed IF AC guidelines in this regard.
The Company has fully complied with the best practices on transfer pricing as contained in the listing
Regulation No . 3 8 of the Karachi Stock Exchange .
We confirm that all other material principals conained in the Code have been complied with.
Balance Sheet
fis fit 30 June 2004
			Note	2004	2003
ASSETS				Rupees	Rupees
Non-Current Assets
Tangible fixed assets
Operating assets
Long Term Deposits			3	145,877,800	162,427,280
Current Assets			4	276,310	6,880,145
Stores and spares
Stock-in-trade			5	26,270,911	31,586,956
Trade debts - unsecured, considered good			6	2,251,749	6,414,585
Advances, deposits, prepayments and				400,113	4,333,455
other receivables
Cash and bank balances			7	10,721,595	13,518,259
			8	93,762	8,059,685
TOTAL ASSETS				39,738,130	63,912,940
EQUITY AND LIABILITIES				185,892,240	233,220,365
Share Capital and Reserves
Authorised share capital
10,000,000 ordinary shares of Rs. 10/- each
Issued, subscribed and paid-up ,				100,000,000	100,000,000
Capital reserve - share premium			9	67,581,620	67,581,620
Accumulated Loss				27,840,933	27,840,933
				-56,804,100	-26,025,813
Deferred Income				38,618,453	69,396,740
Non-Current Liabilities			10	-	789,279
' Long term loans-unsecured
Liabilities against assets subject to finance lease			11	118,988,348	-
Deferred liability			12	-	24,161,229
Current Liabilities			13	21,638,919	21,638,919
Loan from director-unsecured
Short term finances - secured			14	-	15,000,000
Current portion of lease liabilities			15	-	60,326,607
Creditors, accrued and other liabilities			16	-	18,563,628
Unclaimed dividend			17	6,562,527	23,259,970
				83,993	83,993
Contingencies and commitments				6,646,520	117,234,198
TOTAL EQUITY AND LIABILITIES			18	-	-
				185,892,240	233,220,365
Auditors Report To The Members
We have audited the annexed Balance Sheet of BENGAL FIBRE INDUSTRIES LIMITED as at June 30, 2004 and the
related Profit and Loss Account, Cash Flow Statement and Statement of Changes in Equity together with the notes
forming part thereof, for the year then ended and we state that we have obtained all the information and explanations
which, to the best of our knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare
and present the above said statements in conformity with the approved accounting standards and the requirements of the
Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that
we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the above said statements. An audit also includes assessing the accounting policies and significant estimates made by
management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit
provides a reasonable basis for our opinion and, after due verification, we report that -
1 .    As referred in note 1 .2 these financial statements have been prepared on a going concern basis. The Company has
shut down its operations effective from March, 2003. The continuous losses, net liability position and closure of
operations lead us to believe that the use of going concern assumption for the preparation of these financial
statements is not appropriate. Consequently assets and liabilities should have been stated at their realisable and
settlement values respectively.
a)    in our opinion, proper books of account have been kept by the Company as required by the companies Ordinance,
1984;
b)    in our opinion :
i)     the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity
with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in
accordance with accounting policies consistently applied, except for change stated in note 2.2 with which we
concur;
ii)    the expenditure incurred during the year was for the purpose of the Company's business; and
iii)   the business conducted, investments made and the expenditure incurred during the year were in accordance
with the objects of the Company;
c)    in view of paragraph 1 above, in our opinion and to the best of our information and according to the explanations
given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity
together with the notes forming part thereof do not conform with approved accounting standards as applicable in
Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and
respectively do not give a true and fair view of the state of the Company's affairs as at June 30, 2004 and of the
loss, its cash flows and changes in equity for the year then ended; and
d)    in our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).
The financial statements of the Company for the year ended June 30, 2003 were audited by another firm of auditors,
whose report dated August 15, 2003 expressed an adverse opinion.
Cosh Flow Statement
For the Vear Ended 30 June 2004
				2004	2003
				Rupees	Rupees
CASH FLOW FROM OPERATING ACTIVITIES
Loss before taxation				-30,768,947	-28,570,050
Adjustments for :
Depreciation				16,441,873	18,768,654
Amortization'of deferred income				-789,279	-263,093
Financial charges				756,261	17,103,448
Provision against assets				10,165,767	-
Liabilities written back				-1,210,097	-
Profit on sale of fixed assets				-436,893	-11,059,435
				24,927,632	24,549,574
Loss before working capital changes				-5,841,315	-4,020,476
(Increase) / decrease in current assets:
Stores and spares				316,045	3,257,409
Stock-in-trade				1,685,200	72,728,594
Trade debts-unsecured considered good				3,933,342	13,600,023
Loans, advances, prepayments and
other receivables (excluding advance tax)				160,490	6,841,212
				6,095,077	96,427,238
Increase/(decrease) in current liabilities:
Creditors, accrued and other liabilities				-14,692,524	-42,749,893
Net cash (used in) / generated from operations				-14,438,762	49,656,869
Income tax paid				-61,297	-2,384,010
Net cash (outflow)/inflow from operating activities				-14,500,059	47,272,859
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditure				-	-2,990,878
Proceeds from disposal of fixed assets				544,500	11,977,760
Long-term deposits				642,535	589,794
Net cash generated from investing activities				1,187,035	9,576,676
				-13,313,024	56,849,535
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long term loans-unsecured				118,988,348	-
(Repayment oft/proceeds from loan from director-unsecured				-15,000,000	15,000,000
Lease rentals paid				-37,088,316	-19,917,380
Financial charges paid				-1,226,324	-10,680,913
Repayment of long term loan and financial arrangements					-10,000,000
Net cash inflow/(outflow) from financing activities				65,673,708	-25,598,293
Net increase in cash and cash equivalents				52,360,684	31,251,242
Cash and cash equivalents at the beginning of the year				-52,266,922	-83,518,164
Cash and cash equivalents at the end of the year				93,762	-52,266,922
Profit and Loss Account
For The Vear Ended 30 June 2004
			Note	2004	2003
				Rupees	Rupees
Sales			18	1,426,311	257,670,924
Cost of sales			19	1,668,777	257,991,942
Gross Loss				-242,466	-321,018
Administrative expenses			21	2,438,988	9,377,080
Selling expenses			21	-	4,590,974
Post operation closure cost			22	19,138,413	8,635,886
				21,577,401	22,603,940
Operating loss				-21,819,867	-22,924,958
Other Income / (Charges)
Other income			23	1,262,851	13,631,470
Financial charges			24 •	-756,261	-17,103,448
Other charges / reversals			25	-8,955,670	-2,173,114
Delisting and buyback of shares			26	-500,000	-
				-8,949,080	-5,645,092
Loss before taxation				-30,768,947	-28,570,050
Taxation			27	9,340	-6,220,470
Loss after taxation				-30,778,287	-22,349,580
Accumulated loss brought forward				-26,025,813	-3,676,233
Accumulated loss carried forward				-56,804,100	-26,025,813
Loss per share			28	-4.55	-3.31
Notes to the Financial Statements
For The Vear ended 30 June 2004
I.           THE COMPANY AND ITS OPERATIONS
approval/confirmation from stock exchange for de-listing is awaited.
1.2    The Company closed down its manufacturing operations in March, 2003. This closure was necessitated
by the losses being suffered due to fiscal policies of the Government adversely affecting locally
manufactured polyester yarn.
The new management has taken charge w.e.f August 22, 2003. The management are considering a
number of options for restructuring the production facilities and running the Company and if this is not
viable may consider to sell off whole or part of assets. The management believes they will have no
difficulty in obtaining new working capital and fixed financing as the assets of the Company are free of
charge after the repayment of loan and lease liabilities. As such the management feels that the company
is a going concern.
2.           SIGNIFICANT ACCOUNTING POLICIES
2.1    Basis of preparation and accounting convention
These financial statements have been prepared in accordance with the requirements of the Companies
Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives
issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these
standards, the requirements of Companies Ordinance, 1984 or the requirements of the said directives
take precedence.
These financial statements have been prepared under the historical cost 'convention', unless otherwise
disclosed.
2.3    Fixed assets