Antonov plc, develops a range of unique and innovative automatic gearbox technologies.

Key Highlights
Loss before tax of £1.3m is in line with expectations as Company focuses on technology commercialisation

Board restructured and strengthened to support this objective

Significant progress achieved in pursuit of this strategy during the period

Strategic Heads of Agreement signed with a tier 1 manufacturer to develop the Group's six-speed technology for series production beginning in 2005/6.

A fifth generation six-speed AAD prototype gearbox is scheduled for delivery to the Group's tier 1 partner in September 2004 and will be demonstrated at the Paris Motor Show later that month.

Initial development phase completed for a new automatic gearbox, to be known as the DCA ("Dual Clutch Antonov"). The DCA is designed for larger (+2 litre) automatic drive motor vehicles and can have six or more speeds.

Successful collaboration with Rotrex A/S to commercialise the Group's new two and three speed fully mechanical automatic gearboxes.

Roumen Antonov, chairman, said:
"I am pleased to report that significant progress has been made in the commercialisation of our innovative technology. We are working with our tier 1 partner to bring our six-speed AAD gearbox into production in 2005/6 and, with the initial development phase of the DCA completed, we are now able to offer the motor industry a complete range of automatic gearboxes. While automotive transmission remains our core focus, the collaboration with Rotrex demonstrates the Company's ability to adapt our technology to new markets and increase our potential customer base. I look forward to updating shareholders in due course"

Chairman's Statement

Commercialisation
The first six months of 2004 saw the Group make considerable progress in commercialising its innovative technology. A key element of this process has been the formation of a partnership with an automotive industry tier 1 manufacturer to develop our prototype AAD technology into a mass production gearbox. We announced in February that we had signed "Heads of Agreement" with a tier 1 manufacturer with a wealth of knowledge and expertise in adapting and refining new transmission technology such that it is suitable for mass-production processes. Our partner will ensure that the required build quality is achieved, cost estimates are realistic and performance criteria are reached.
Since February the focus of our engineers in Paris has been completing the detailed design work on the fifth generation of our AAD technology and producing the manufacturing drawings for a prototype thereof, which will be fitted in to a small 1,200 cc car manufactured by a customer of our tier 1 partner. The prototype is currently being assembled and we anticipate demonstrating the vehicle fitted with our new gearbox at the Paris Motor Show in late September 2004.

We are also working with Rotrex A/S, a member of the A.P Moller Group, the largest Danish group of companies, to commercialise our new two and three speed fully mechanical automatic gearboxes. The new gearboxes, to be known as the "Antonov Mechanical Module" or "AMM", will be used in both automotive and non-automotive applications in combination with a Rotrex supercharger.

The AMM is based on Antonov's patented technology. The AMM is a small stand-alone, self-supporting step up drive module, which will be used to adapt engine output to the optimum required input of a supercharger and also potentially of the generator. This will significantly improve the efficiency of both devices at a very competitive cost.

Antonov and Rotrex have already made a number of joint presentations to prospective customers for both automotive and non-automotive applications. The joint product offering has been well received, with the next step in the sales process being the demonstration of the efficacy of the system through the development of a fully operational prototype. The first AMM prototype is nearly completed and will be delivered to Rotrex in the very near future.

Sitma, an existing Antonov licensee, will be the initial manufacturer of the AMM. They are a producer of small-specialised gearboxes, focusing on sports performance applications. Sitma have confirmed that they will be in a position to meet the initial expected demand for the AMM.

The Antonov and Rotrex combined product offering will also be presented at the Paris Motor Show.


Technical update
During the first six months of 2004 the Group focused its research resources on completing the design of a new dual clutch product to be known as the DCA ("Dual Clutch Antonov"). The DCA encompasses fundamental new inventions for which patent protection has been sought. It is designed for larger
(+2 litre) automatic drive motor vehicles and can have six, seven or even more speeds if required.

The new automatic gearbox, which is based on a dual clutch design, will be both smaller and lighter than existing offerings. These advantages translate into a wider application base and lower manufacturing costs. The design is also easily adaptable to four-wheel drive applications, which will for the first time allow Antonov to target the expanding SUV market. It is also suitable for installation in high-speed direct injection diesel engined motor vehicles, another rapidly expanding market segment.

As part of the Company's evolving strategy, the DCA will also be developed as a manual gearbox, again with the option of six, seven or even more speeds. The main attraction of the manual DCA will be its small size and lower weight when compared to existing manual gearboxes. From a manufacturing point of view an important advantage will be the large number of common components that it will share with the automatic DCA, which will positively influence the costs of both units.

The Company is now positioned to offer the motor industry a complete range of automatic gearboxes:

the AAD range for smaller cars with torque capacities of less than 250 NM's.
the DCA range for motor vehicle with torque capacities greater than 250 NM's.

We are confident that we will be in a position to demonstrate that our technology will substantially assist car manufacturers in meeting the challenging ACEA fuel consumption targets by 2008. As the manufacture of both the AAD and DCA will not require massive investment in new production facilities, they will be available for installation well before the 2008 deadline for compliance with the ACEA targets.


Board changes
Martin Schinzig(CEO) stepped down from the Board in March having successfully led the company through its recent transition process, which has focused our activities firmly on the commercialisation of our technology. Chief executive duties will now be the responsibility of Armand Dahi(COO), and David Bovell(FD), who together combine a wealth of sector and financial experience.

Armand Dahi, formerly the Group's Commercial Director joined the Board on Martin Schinzig's departure. He has significant experience of working within the automotive industry and prior to joining Antonov held senior management positions with Peugeot and Michelin.

The Board was further strengthened by the appointment of Christopher Ross as a Non Executive Director. Christopher is currently Deputy Chairman of Manganese Bronze plc and a Non-Executive Director of Carclo Plc, both UK listed automotive sector companies. Previously, he was Chief Executive of Ricardo plc. He is widely credited in the automotive industry for having transformed Ricardo into the world's No. 1 powertrain design and development business.

I would like to take this opportunity to thank Martin for his contribution to the Group and to welcome Armand and Christopher to the Board.



Financials
Group losses during the first six months were £1.3 million (2003: £1.1 million). Loss per share for the period was 1.3p (2003: 1.0p). Cash balances as at 30th June 2003 were £0.01 million.

A successful fund raising was completed in March with the placing of a convertible loan note of approximately £700,000 (Euro 1,050,000) with the same Dutch/German investment Group that underpinned the Company's November 2003 fund raising.

This fund raising was followed later on in March with the exercise of 1 million warrants, which raised approximately £250,000 (Euro 375,000).

Antonov have just completed a further fund raising by placing 3 million shares at a price of Euro 0.50 per share raising a total of approximately £1 million (Euro 1.5 million).