13 September 2002

Company Announcements Office
The Australian Stock Exchange Limited
Exchange Centre
20 Bond Street
Sydney NSW 2000

By Facsimile: 1300 300 021

Dear Sir/Madam

PRELIMINARY FINAL REPORT FOR THE YEAR ENDING 30 JUNE 2002

Advanced Engine Components Limited (AEC) is pleased to submit its preliminary final report for the year ending 30 June 2002. The Company has continued to progress commercial activities, with highlights of the period including:

• Revenues from contracts increased to $2.5 million;
• $15 million contract awarded by Irisbus for the supply of AEC's Transcom NGVS;
• Completion of the first three phases of a $5 million contract with the Department for Planning and Infrastructure (WA); and
• Development of Ford 300+ concept cars.

The Company reports a net loss for the full year of $5.0 million of which $3.0 million was attributable to activities in the first six months of the fiscal year including the expensing of costs associated with the establishment of production activities for the supply of Transcom NGVS kits to Irisbus, and the establishment of manufacturing facilities and systems for the production of AEC Bullet supercars.

With commercial programs gearing up, the loss for the second half of the fiscal year was contained to $2.0 million and revenues increased to $2.1 million, resulting in total revenues for the year of $2.5 million.

Highlights of major commercial programs include:

Irisbus Europe
AEC has executed a long term contract worth over $15 million for the supply of our multi point sequential EFI gas system to Irisbus France, a joint venture company formed by engine manufacturers Renault (France) and Iveco (Italy) to build and market buses and coaches.

The contract term is 3½ years to July 2005. AEC expects to deliver 427 units in the first year bringing the anticipated total first year contract value to $6 million. AEC has been delivering kits since December 2001 and we have already delivered 156 Transcom NGVS kits for a contract value of $2.755 million, with a further 271 to be delivered prior to the end of the year with a contract value of $3.3 million.

Department for Planning and Infrastructure (DPI) Western Australia
AEC has successfully completed the first three phases of the four phase $5 million project with the Australian Greenhouse Office (AGO) WA's Department for Planning and Infrastructure (DPI) - previously Department of Transport - and DaimlerChrysler involving the development, certification, on road trialing and supply of 25 natural gas buses utilizing AEC's Transcom NGVS components.

Department of Transport South Australia (TSA)
Following the delivery of six Transcom NGVS converted MAN buses for service in Adelaide, Australia, the TSA conducted operational trials earlier this year. The buses exceeded all technical and operational targets and AEC is negotiating with TSA on the next stage of the project involving an order for a further 94 NGVS fitted MAN buses. This phase of the program is expected to generate income of approximately $3.6 million.

Ford
Following development of its 300+ concept, AEC has confirmed special order, limited volume production of the 300Kw AEC Coupe and Sedan. Both vehicles are powered by a 4.6 litre quad cam V8 and the engine is fitted with AEC's patented Sprintex Series III supercharger and Electronic Control Unit (ECU) system.

In addition to marketing to the performance car market, the vehicles will showcase AEC's Sprintex Supercharger and ECU technology and demonstrate to Original Equipment Manufacturers (OEMs) that AEC has a proven capacity to provide performance solutions. Production is expected to commence in the coming year.

Bullet Supercars
During the period, vehicle manufacturing operations and systems were developed and implemented in our Queensland factory, and AEC prepared to commence production of the Bullet range of supercars. We also undertook rigorous testing of the Bullets as part of a program to comply with Australian Design Rules.

Directors are pleased with the Company's strengthening financial position, driven from improving financial performance of the Transcom NGVS and performance vehicle divisions, particularly increased contract revenues and improving cash flows.

Yours faithfully

ANTONY MIDDLETON
MANAGING DIRECTOR

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