AEC Education Annual Report and Accounts

Aec Education Annual Report and Accounts
RNS Number:5066F
AEC Education plc
30 June 2006

For immediate release

Stock Exchange Announcement

30th June 2006

                 AEC Education PLC and its subsidiary companies

      Chairman's statement and Accounts for the year to 31st December 2005


Introduction

I have pleasure in announcing the Company's results for the year to 30 December
2005.  The Asian educational markets, where AEC operates, continued to be very
competitive during the second half of the year.  Despite this, overall revenues
increased by 2.1%  to #1,542,684.  During the period the Company also made
significant investment in marketing and product development staff in order to
review non - profitable lines and develop new products and partnerships for
launch during 2006.  This investment increased operating costs significantly,
with the result that post tax earnings for the year fell to #202,346 (2004 -
#547,628).

Review of 2005 Operations

2005 was a year of many challenges. Competition was keen. Government rules and
regulations in our main markets of Malaysia and Singapore were changing and the
demand pattern continued to move towards degree courses.

The Company viewed these changes as an opportunity and devoted its efforts both,
in terms of manpower and finance, to identify niche programmes to meet the
changing demand in the Asian environment.  At the same time it also took
immediate steps to run down those programmes that were no longer viable.

A major portion of the investment focused on the development of proprietary
educational courses. These included a Hospitality programme leading to the award
of an Advanced Diploma, a Diploma and Advanced Diploma in Travel & Tourism and
other Business Management Programmes to meet the changing requirements in the
region.

     Early childhood education is a strongly growing market and the Company is
now positioned to avail itself of this opportunity by the introduction of an
Early Childhood Education Programme.

In addition to the above, greater collaboration with various universities was
developed.  A Diploma and Advanced Diploma in Business Administration were
successfully introduced in collaboration with the UK's James Watt College.  This
programme is recognized by Scotland's Napier's University. These programmes are
being promoted internationally and are currently being offered in China,
Malaysia, Myanmar, India, Sri Lanka and Vietnam.

The Company was also able to secure the rights to conduct doctoral programmes in
education provided by the University of Leicester.

ACCA accounting courses and the London Chamber of Commerce (LCCI) Graduate
Access Programme have also been introduced.

Future Plans

Education continues to grow both in the region and internationally.

AEC is well placed to face the challenges that this growth will bring.
Considerable effort has been put in, in 2005, to strengthen the management and
structure of the Company. The recent appointment of David Ho as Managing
Director of the Asian operations brings a wealth of experience in international
education and commercial development to the Company.

Apart from organic growth, the Company is continuously looking at acquisitions
that have niche education programmes in both the UK and overseas.

Recently, the Company announced the acquisition of 64.8% of the equity of
BrainBox Limited.  This company operates in Vietnam, in a prestigious centre in
Ho Chi Min City, providing a range of foreign languages and management studies.
The Directors believe that this acquisition puts AEC in a strong position to be
able to penetrate the lucrative education market in Vietnam and also use the
company to recruit students for its operations in Singapore and Malaysia.

Outlook

Over the last year the Group has gone through a period of review and is now
ready to push forward with the initiatives it started in 2005.  The operations
in Singapore and Malaysia will remain stable and are the shop window for a range
of high quality programmes that can be delivered around the world.  The Company
will continue with its strategy of continuous product development and
collaboration with relevant Universities and partners around the globe.   It
will continue to seek suitable acquisitions of schools and through this strategy
steadily grow its student base and profitability.

The Board expect the Company's plans to grow the revenue and profitability, to
provide shareholders with steady growth from the current position. At the same
time the Board are seeking acquisition opportunities that will add to steady
underlying growth during the coming years.

The Board would like to express its appreciation of the loyal support and
dedication of the staff during what was a challenging year.


William Swords
Chairman



The directors present their report and the audited financial statements of AEC
Education Plc (the "Company") and its subsidiary companies for the year ended 31
December 2005.

PRINCIPAL ACTIVITY

The principal activities of the Company are that of investment holding and
provision of educational consultancy services. The principal activities of the
subsidiary companies are set out in note 14 to the financial statements. There
have been no significant changes in the nature of these activities during the
year.

REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS.

The markets that the company operate in were challenging in 2005. Nonetheless,
revenue increased by 2.1%. Investment in staff for product development and
marketing combined with the slow growth in the market caused earnings to fall to
#202,346 (2004 - #547,628). The Board expect the new products for launch during
2006 to provide steady growth in revenue and earnings while it continues so seek
suitable niche acquisitions. The financial risks for the Group are set out in
note 31.

RESULTS AND DIVIDENDS

 The consolidated profit and loss account for the year is set out on page 6.
The consolidated profit for the year on ordinary activities after taxation
amounted to #202,346 (2004: #547,628). An interim dividend of 1.6p per share was
paid in July 2005. The directors do not recommend the payment of a final
dividend (2004: #Nil).

DIRECTORS

The names of the directors who held office during the period and to date were:



William Joseph Swords (Chairman)      (Appointed 21 July 2004)

Tunku Iskandar Bin Tunku Abdullah     (Appointed 21 July 2004)

Ramasamy Jayapal                      (Appointed 21 July 2004)

Gopinath Pillai                       (Appointed 21 July 2004)

Ravi Manchanda                        (Appointed 21 July 2004; Resigned 1August 2005)



DIRECTORS' INTERESTS

The directors holding office at the end of the financial year and their
interests in the share capital of the Company and its related corporations as
recorded in the register of directors' shareholdings were as follows:


            

Name of directors and company in which interests are held         At the beginning                  At the end
                                                                      of the year                   of the year

                                                                      Shares of                      Shares of
                                                                       #0.10 each                   #0.10 each

William Joseph Swords                                                    -                                   -

Tunku Iskandar Bin Tunku Abdullah                                        -                                   -

Ramasamy Jayapal                                                   574,047                             574,047

Gopinath Pillai                                                          -                                   -


Indirect Interest

William Joseph Swords                                                    -                                   -

Tunku Iskandar Bin Tunku Abdullah                                  399,000                             399,000

Ramasamy Jayapal                                                         -                                   -

Gopinath Pillai                                                     25,000                              25,000





SUBSTANTIAL SHAREHOLDINGS



At 23rd June 2005, notification had been received of the following holdings of
more than 3% of the issued capital of the Company.  Apart from these, the
directors are not aware of any individual interests or group of interests held
by persons acting together, which exceeds 3% of the issued share capital.


                                                       Shares of                      %
                                                       #0.10 each

Asian Excellence Conglomerate Pte Limited                2,174,127                  14.58

KSP Investments Pte Limited                              5,526,048                  37.05

Ravi Manchanda                                             654,318                   4.39

Naboobalan s/o Ramasamy Naidu                              874,968                   5.87

Ramasamy Jayapal                                           574,047                   3.85





CREDITOR PAYMENT POLICY AND PRACTICE

Group policy is to pay creditors in line with agreed credit terms and generally
this policy is adhered to. On average, creditors were settled within 60 days of
their due date except on disputed items. Trade creditor days of the Group for
the tear ended 31 December 2005 were 52 days, calculated in accordance with the
requirements set down in the Companies act 1985. This represents the ratio,
expressed in days, between the amounts invoiced to the Group by its suppliers in
the year and in the amounts due, at the year end to trade creditors within one
year.

AUDITORS

On 3 October 2005 Moore Stephens, the Company's auditor transferred its entire
business to Moore Stephens LLP, a limited liability partnership incorporated
under the Limited Liability Partnership Act 2000.  The directors have consented
to treating the appointment of Moore Stephens as extending to Moore Stephens LLP
with effect from 3 October 2005.

A resolution to reappoint Moore Stephens LLP as the Company's auditors will be
proposed at the annual general meeting.

BY ORDER OF THE BOARD

William Swords

DIRECTOR
30 June 2006


STATEMENT OF DIRECTORS' RESPONSIBILITIES

Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and of the Group and of the profit and loss of the Group for that
period.  In preparing those financial statements, the directors are required to:

  * select suitable accounting policies and then apply them consistently;

  * make judgements and estimates that are reasonable and prudent;

  * state whether applicable accounting standards have been followed, subject
    to any material departures disclosed and explained in the financial
    statements;

  * prepare the financial statements on the going concern basis unless it is
    inappropriate to presume that the company will continue in business

The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and of the Group and to enable them to ensure that the financial
statements comply with International Financial Reporting Standards and with the
Companies Act 1985.  They are also responsible for the system of internal
control, safeguarding the assets of the Group and hence for taking reasonable
steps for the prevention and detection of fraud, error and non-compliance with
laws and regulations.


INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF AEC EDUCATION PLC

We have audited the group and parent company financial statements ("the "
financial statements") of AEC Education plc (the "Company") for the period from
8th July 2004 (date of incorporation) to 31st December 2005 which comprise the
Group and Company Income Statement, Balance sheets, Changes in Shareholder
Equity and the Group and Company Cash Flow Statements and the related notes.
These financial statements have been prepared under the accounting policies set
out therein.

This report is made solely to the company's members, as a body, in accordance
with Section 235 of the Companies Act 1985.  Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As described in the Statement of Directors' Responsibilities the company's
directors are responsible for the preparation of the financial statements in
accordance with applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.

Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you if, in our opinion, the Directors' Report is not
consistent with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and other transactions is not disclosed.

We read the other information in the Annual Report and consider the implications
for our report if we become aware of any apparent misstatements within it. The
other information accompanying the financial statements comprises the Chairman's
Statement and the Directors' Report. Our responsibilities do not extend to any
other information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the group and the company's circumstances, consistently applied and
adequately disclosed.

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.



INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF AEC EDUCATION PLC (CONTINUED)

Opinion

In our opinion the financial statements

*    give a true and fair view, in accordance with IFRSs as adopted by the 
     European Union, of the state of the group's and the parent company's 
     affairs as at 31 December 2005 and of its result for the year then ended; 
     and

*    have been properly prepared in accordance with the Companies Act 1985.


St. Paul's House                 MOORE STEPHENS LLP
London, EC4M 7BP
England                          Registered Auditors

30 June 2006                     Chartered Accountants





                             CONSOLIDATED PROFIT AND LOSS ACCOUNT

                             FOR THE YEAR ENDED 31 DECEMBER 2005




                                                             Note           2005                  2004
                                                                             #                      #

Revenue
Sale of services                                             (4)             1,402,518               1,417,049

Other income                                                 (5)               140,166                  93,903

                                                                             1,542,684               1,510,952



Administrative expenses

Cost of services sold                                                          635,763                 473,841
Salaries and employees' benefits                             (6)               334,426                 236,976
Amortisation of deferred expenditure                                             9,135                   8,624
Depreciation of plant and equipment                                             32,055                  22,962
Finance costs                                                (7)                 2,939                   2,321
Other operating expenses                                                       393,307                 222,617
Total operating costs and expenses                                           1,407,625                 967,341

Operating profit                                             (8)               135,059                 543,611

Other income                                                 (9)                     -                   6,685
Share of results of associated companies                                        67,620                  10,566

Profit before income tax                                                       202,679                 560,862

Income tax                                                   (10)                (333)                (13,234)


Profit for the year                                                            202,346                 547,628



Earnings per share (in pence)
Basic                                                          (11)                1.4                     4.6

Diluted                                                        (11)                1.4                     4.6






                                                                BALANCE SHEETS

                                                            AS AT 31 DECEMBER 2005


                                                             Group                          Company
                                          Note       2005            2004            2005            2004
                                                       #               #               #               #
Non-Current Assets

Plant and equipment                       (12)        128,815          50,809               -               -
Development expenditure                   (13)         28,414          34,501               -               -
Investment in a subsidiary company        (14)              -               -       1,308,639       1,308,639
Investment in associated companies        (15)      1,393,934       1,248,509               -               -
                                                    1,551,163       1,333,819       1,308,639       1,308,639

Current Assets
Inventories                               (16)         86,370          88,112               -               -
Trade receivables                         (17)        252,288         140,353               -               -
Other receivables                         (18)         55,260         139,763          52,140         125,050
Deferred expenditure                      (19)         31,054          12,747               -               -
Due from subsidiary company               (14)              -               -         343,000               -
Due from associated companies             (15)         67,106         154,190               -               -
Due from related parties                  (20)        484,210         344,652               -               -
Cash and bank balances                    (21)         89,679         421,172           4,280         408,246
                                                    1,065,967       1,300,989         399,420         533,296

Total Assets                                        2,617,130       2,634,808       1,708,059       1,841,935

EQUITY AND LIABILITIES
Non Current Liabilities
Deferred taxation                         (10)            480          12,877               -               -

Current Liabilities
Trade payables                            (22)         90,283         205,613               -               -
Deferred income                           (23)        156,478          42,446               -               -
Other payables and accruals               (24)        111,174         290,465          23,598         130,596
Bank overdraft                            (25)        120,549              31               -               -
Due to related parties                    (20)         50,639          12,522               -               -
Finance lease obligations                 (26)          1,755               -               -               -
Loans payable                             (27)              -         105,828               -               -
Provision for income tax                               35,511          28,459               -               -
                                                      566,389         685,364          23,598         130,596
Share Capital and Reserves
Share capital                             (28)      1,491,604       1,491,604       1,491,604       1,491,604
Share premium                                         242,519         238,094         242,519         238,094
Reserves                                              316,138         206,869        (49,662)        (18,359)
                                                    2,050,261       1,936,567       1,684,461       1,711,339

Total Equity and Liabilities                        2,617,130       2,634,808       1,708,059       1,841,935



The financial statements were approved by the Board of Directors on 30 June 2006
and were signed on its behalf by:


William Swords                                     Chairman



                                 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2005



                                       Share      Share      Retained   Translation      Capital
                                      Capital    Premium     Earnings     Reserves       Reserves        Total
                                         #          #           #            #              #              #
Group

At 1 January 2004                             -          -      789,961    (101,633)          170,560      858,888


Issue of shares on incorporation              2          -            -            -                -            2

Issue of shares in consideration
for the acquisition of the entire
share capital of AEC.Edu Group Pte
Ltd                                   1,308,639          -            -            -                -    1,308,639

Issue of shares for cash on             182,963    567,185            -            -                -      750,148
Admission to AIM

Cost of issue of shares                       -  (329,091)            -            -                -    (329,091)

Profit for the year                           -          -      547,628            -                       547,628

Dividends paid (a)                            -          -  (1,271,456)            -                -  (1,271,456)

Gains not recognised in the profit
and loss
 account - Currency translation               -          -            -       71,809                -       71,809
difference

Balance at 31 December 2004           1,491,604    238,094       66,133     (29,824)          170,560    1,936,567



Balance at 1 January 2005             1,491,604    238,094       66,133     (29,824)          170,560    1,936,567


Profit for the year                           -          -      202,346            -                -      202,679

Dividends paid (b)                            -          -    (238,657)            -                -    (238,657)


Cost of share issue  - prior year             -      4,425            -            -                -        4,425
overstated
Gains not recognised in the profit
and loss
 account - Currency translation               -          -            -      145,580                -      145,247
difference

Balance at 31 December 2005           1,491,604    242,519       29,822      115,756          170,560    2,050,261





(a)                  In 2004, a special dividend of #1,271,586 was paid by
AEC.Edu Group Pte Ltd and its subsidiary companies prior to the acquisition of
the entire share capital by the Company.



(b)           During the year, the Company paid an interim dividend of 1.6p per
share amounting to #238,657.



                                    CONSOLIDATED CASH FLOW STATEMENT

                             FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2005


                                                                                           Group
                                                                                   2005               2004
                                                                                     #                 #
Cash Flows from Operating Activities
Profit before income tax                                                             202,679            560,862

Adjustments for:
 Amortisation of deferred expenditure                                                  9,135              8,624
 Depreciation of plant and equipment                                                  32,055             22,962
 Interest expense                                                                      2,939              2,321
Gain on disposal of subsidiaries                                                           -            (6,686)
 Share of results of associated companies                                           (67,620)           (10,566)
Operating cash flow before working capital changes                                   179,188            577,517

Changes in working capital:
 Receivables                                                                       (145,770)            (7,330)
 Payables                                                                           (49,990)          (359,578)
 Inventories                                                                           1,742           (88,112)
 Related parties                                                                     (6,746)          1,228,498
Net cash generated (used in)/from operations                                        (21,576)          1,365,655
 Interest paid                                                                       (2,939)            (2,321)
 Tax paid                                                                            (5,678)             (2000)
Net cash generated (used in)/from operating activities                              (30,193)          1,361,334


Cash Flows from Investing Activities

 Purchase of plant and equipment                                                   (103,130)            (4,218)

 Payments to a related party for acquisition of an associate                               -        (1,271,456)

 Investment in associates                                                                  -           (14,940)

 Net cash flow on disposal of interests in subsidiary companies (A)                        -              1,413

Net cash used in investing activities                                              (103,130)        (1,211,276)


Cash Flows from Financing Activities
Proceeds from issue of shares                                                        100,031            625,097
Costs of issue of shares                                                           (126,174)          (198,492)
 Dividend paid                                                                     (238,657)                  -
 Loan advances from third parties                                                          -            105,828
 Repayment of loan from third parties                                              (105,828)           (79,698)
 Repayment of finance lease creditor                                                 (2,671)                  -
 Repayment of amount due to a director                                               (7,611)          (118,322)

Net cash generated (used in)/from financing activities                             (380,910)            334,413




                  CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)

                 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2005


                                                                                            Group
                                                                                    2005              2004
                                                                                      #                #
Balance brought forward                                                             (514,233)          406,546

Effect of foreign exchange rate changes on consolidation                               62,222          (5,673)

Net decrease in cash and cash equivalents                                           (452,011)          400,873
Cash and cash equivalents at beginning of the year                                    421,141           20,268

Cash and cash equivalents at end of the year                                         (30,870)          421,141





Cash and cash equivalents comprise the following:
                                                                                   2005              2004
                                                                                     #                 #

Cash and bank balances                                                                89,679           421,172
Amount due to banker                                                               (120,549)              (31)

                                                                                    (30,870)           421,141



(A)              Summary of the Effect of the Disposal of Subsidiary Companies



The effect on the individual assets and liabilities is set out below:
                                                                                  2005               2004
                                                                                    #                  #

Cash and cash equivalent                                                                  -                 704
Other payable                                                                             -             (1,429)
Amount due to related parties                                                             -             (3,844)
Net liabilities disposed of                                                               -             (4,569)
Gain on disposal of subsidiaries                                                          -               6,686
                                                                                          -               2,117
Less: Cash and cash equivalents of disposed subsidiaries (net)                            -               (704)
                                                                                          -               1,413







                        COMPANY PROFIT AND LOSS ACCOUNT

  FOR THE PERIOD FROM INCORPORATION ON 8TH JULY 2004 TO  31ST DECEMBER 2005

                                                                                           Period from
                                                                                         Incorporation
                                                                                           On 8th July
                                                                                               2004 to
                                                                                         31st December
                                                             Note                                 2005
                                                                                                    #
Administrative expenses

Other operating expenses                                                                             (136,801)
Operating loss                                               (8)                                     (136,801)
Other operating income                                                                                   3,799

Interest receivable
Dividends received                                                                                     321,997
Loss before taxation                                                                                   188,995
Income tax expense                                           (11)                                           -
Dividends paid                                                                                       (238,657)

Loss for the year                                                                                     (49,662)






                       COMPANY STATEMENT OF CHANGES IN EQUITY

  FOR THE PERIOD FROM INCORPORATION ON 8TH JULY 2004 TO  31ST DECEMBER 2005



                                       Share      Share     Retained    Translation      Capital
                                      Capital    Premium    Earnings     Reserves        Reserves       Total
                                         #          #           #            #              #             #


Issue of shares on incorporation              2          -           -             -                -          2


Issue of shares in consideration
for the acquisition of the entire
share capital of AEC.Edu Group Pte
Ltd                                   1,308,639          -           -             -                -  1,308,639

Issue of shares for cash on
Admission to AIM                        182,963    567,185           -             -                -    750,148

Cost of share issue                           -  (324,666)           -             -                -  (324,666)

Profit for the period                         -          -     188,995             -                     188,995

Dividends paid                                -          -   (238,657)                                 (238,657)

Balance at 31 December 2005           1,491,604    242,519    (49,662)             -                -  1,684,461






                           COMPANY CASH FLOW STATEMENT

FOR THE PERIOD FROM INCORPORATION ON 8TH JULY 2004 TO  31ST DECEMBER 2005

                                                                                               Period from
                                                                                              incorporation
                                                                                           on 8th July 2004 to
                                                                                              31st December
                                                                                                  2005
                                                                                                    #
Cash Outflows from Operating Activities
Loss from operations                                                                                 (133,002)
                                                                                                     (133,002)
Changes in working capital
Receivables                                                                                           (27,120)
Payables                                                                                                23,598

Related parties                                                                                      (343,000)
Net cash generated used in operating activities                                                      (479,524)


Cash Flows from Financing Activities
Proceeds from issue of shares                                                                          725,130
Costs of issue of shares                                                                             (324,666)
Dividends received                                                                                     321,997
Dividends paid                                                                                       (238,657)
Net cash generated used in financing activities                                                        379,693



Net decrease in cash and cash equivalents                                                                4,280

Cash and cash equivalents at start of period                                                                 -

Cash and cash equivalents at end of the period                                                           4,280







1                    General

            AEC Education plc (the "Company") is a limited liability company
incorporated in England and Wales on 8 July 2004. The Company was admitted to
AIM on 10 December 2004. Its registered office is 1 Park Row, Leeds LS1 5AB and
its principal place of business is in Singapore.

            The principal activities of the Company are that of investment
holding and provision of educational consultancy services.  On 17th November
2004, the Company acquired the whole of the issued share capital of AEC Edu
Group Pte Limited, a company incorporated in Singapore. The principal activities
of the subsidiary companies are set out in Note 14 to the financial statements.
There have been no significant changes in the nature of these activities during
the year.



The directors of the Company are considered to be key management.

            The Board of Directors have authorised the issue of these financial
statements on the date of the Statement by directors set out on page 9.



2                    Significant Accounting Policies

(a)                Basis of Preparation

The financial statements have been prepared in accordance with applicable
International Financial Reporting Standards ("IFRS") as adopted by the EU. The
Group has not adopted early IFRS 7, Financial Instruments: Disclosures, which
was published in August 2005 and is effective for accounting periods beginning 1
January 2007. The impact on the accounts had this standard been adopted early is
disclosed in note 31.

(b)                Basis of Consolidation

            The Company acquired AEC Edu Group Pte Limited by way of a share for
share exchange. The consolidated financial statements have been prepared on the
basis of the pooling of interest method to reflect the effective Group
re-structure by way of a share for share exchange with common shareholders.  On
this basis, the Company has been treated as the holding company of its
subsidiary company for the financial years presented rather than from the date
of its acquisition.  Accordingly, the consolidated results of the Group for the
financial year ended 31 December 2005 include the results of the Company and its
subsidiary with effect from 1 January 2005.  The comparative combined balance
sheet and profit and loss account for the financial year ended 31 December 2004
has been prepared on the basis that the existing Group had been in place at 1
January 2004.


            All significant intercompany transactions and balances within the
Group are eliminated in the preparation of the consolidated financial
statements.




2          Significant Accounting Policies (continued)

(b)                Subsidiary Company

A subsidiary company is an entity in which the Group, directly or indirectly,
holds more than 50% of the issued share capital, or controls more than half of
the voting power, or controls the composition of the board of directors or which
the Group has power to govern the financial and operating policies.

Investment in subsidiaries is stated in the financial statements of the Company
at cost less impairment losses.  The financial statements of subsidiaries
acquired are consolidated in the financial statements of the Group from the date
that control commences until the date control ceases, using the acquisition
method of accounting.

(c)                Associated Companies

Associates are those entities  in which the Group has an interest of not less
than 20% of the equity and in whose financial and operating policy decisions the
Group exercises significant influence.

The consolidated financial statements include the Group's share of the total
recognised gains and losses of associates on an equity accounted basis, from the
date that significant influence commences until the date that significant
influence ceases.

(d)                Functional and Presentation Currency

The consolidated financial statements have been presented with United Kingdom

sterling as the presentation currency as the Company is incorporated in England
and Wales with sterling denominated shares which are traded on AIM.

Items included in the financial statements of each subsidiary of the Group are
measured using the currency of the primary economic environment in which the
subsidiary operates ("the functional currency").  In the opinion of the
directors, Singapore dollars is the most appropriate functional currency.

(e)                Foreign Currency Translations

Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Foreign currency monetary assets and liabilities are
translated using the exchange rate prevailing at the balance sheet date.
Non-monetary assets and liabilities are measured using the exchange rates
prevailing at transaction dates, or in the case of the items carried at fair
value, the exchange rates ruling when the values were determined. Foreign
exchange gains and losses resulting from the settlement of foreign currency
transactions and translation of foreign currency denominated assets and
liabilities are recognised in the income statement.

Assets and liabilities of the entities having functional currency other than the
presentation currency are translated into sterling equivalents at exchange rates
ruling at balance sheet date. Revenues and expenses are translated at average
exchange rates for the year, which approximates the exchange rates at the dates
of transactions. All resultant differences are taken directly to equity. On
disposal


2          Significant Accounting Policies (continued)

of a foreign entity, accumulated exchange differences are recognised in the
income statement as part of the gain or loss on disposal.

The following rates of exchange have been applied:

                                                                 2005                   2004

1# to 1 Singapore Dollar

            Closing rate                                         2.87                   3.15

            Average rate                                         2.97                   3.15

1Malaysian Ringgit to 1 Singapore Dollar

            Closing rate                                         2.25                   2.31

            Average rate                                         2.27                   2.23



(f)                 Revenue Recognition

Revenue is recognised on the following basis:

(i)                  Course fees in respect of courses offered with no
obligation to impart lessons are recognised when the students register for the
course and collect the study materials.

            All other course fees are recognised as income based on classes
conducted during year.

(ii)                Revenue from sub-letting of office space is recognised over
the period of the lease.

(iii)               Consulting income is recognised on an accruals basis.

(iv)              Commission income is recognised when services are rendered.

(v)                Dividend income from investments in associated companies is
recognised when the shareholders' rights to receive payment have been
established.

(vi)              Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate applicable.

(g)                Borrowing Costs

Borrowing costs incurred to finance the development of plant and equipment are
capitalised during the period of time that is required to complete and prepare
the asset for its intended use. The capitalised costs are depreciated over the
useful life of the plant and equipment.



Other borrowing costs including interest cost and foreign exchange differences,
on short term borrowings are recognised on a time-apportioned basis in the
profit and loss account using the effective interest method.


2          Significant Accounting Policies (continued)



(h)                Plant and Equipment



Plant and equipment are stated at cost less accumulated depreciation and any
impairment losses.  Depreciation policy, useful lives and residual values are
reviewed at least annually, for all asset classes to ensure that the current
method is the most appropriate.

Expenditure incurred after the plant and equipment have been put into operation,
such as repairs and maintenance is charged to the income statement. Expenditure
for additions, improvements and renewals is capitalised when it can be clearly
demonstrated that the expenditure has resulted in an increase in the future
economic benefits expected to be realised from the use of the items of plant and
equipment beyond their originally assessed standard of performance.



Depreciation is calculated based on the straight-line method to write off the
cost of plant and equipment over their estimated useful lives as follows:



Furniture and fittings                                          -      5 - 10
years

Classroom and office equipment                         -      4 - 10 years

Computers                                                        -      4 - 5
years

Renovation                                                        -      5 years

Motor vehicles                                                  -      5 years

Library books                                                    -      5 - 10
years





(i)                  Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand and bank deposits.  Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.

(j)                  Trade and Other Receivables

Trade and other receivables, which generally have 30 to 90 days terms, are
initially measured at fair value, and subsequently measured at amortised cost,
using the effective interest method, less allowance for impairment. An allowance
for impairment of trade receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to
the original term of the receivables. The amount of the allowance is the
difference between the asset's carrying amount and the present value of the
estimated cash flows discounted at the original effective interest rate. The
amount of the allowance is recognised in the income statement.

(k)                Trade and Other Payables

Trade and other payables, which are normally settled on 30 to 90 days term, are
initially measured at fair value, and subsequently measured at amortised cost,
using the effective interest method.


2          Significant Accounting Policies (continued)

(l)                  Deferred Income

Deferred income relates to course fees received in advance and is recognised in
the income statement based on classes conducted.

(m)              Deferred Income Tax

Current tax is the expected tax payable on the taxable income for the year based
on the tax rate enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of prior years.


Deferred tax is provided, using the liability method, on all temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred tax assets and
liabilities are offset when they relate to income taxes levied by the same tax
authority.  Tax rates enacted or substantively enacted by the balance sheet date
are used to determine deferred income tax.



Deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be
utilised.



Deferred income tax is provided on temporary differences arising on investments
in subsidiary companies and associated companies, except where the timing of the
reversal of the temporary difference can be controlled by the Group and it is
probable that the temporary difference will not reverse in the foreseeable
future.



(n)             Development Expenditure



Development expenditure represents direct expenditure and related costs incurred
in developing new courses and are capitalised and deferred only when there is a
clearly defined project and the outcome of the project has been assessed with
reasonable certainty as to its technical feasibility and its ultimate commercial
viability. These costs are amortised over the expected course duration of not
more than five years, starting in the year when the course commences.



(o)                Impairment of Assets



An assessment is made at each balance sheet date of whether there is any
indication of impairment of an asset, or whether there is any indication that an
impairment loss previously recognised for an asset in prior years may no longer
exist or may have decreased.  If any such indication exists, the asset's
recoverable amount is estimated.  An asset's recoverable amount is calculated as
the higher of the asset's value in use or its net selling price.


2          Significant Accounting Policies (continued)



(o)        Impairment of Assets (continued)



Where it is not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the cash-generating unit to
which the asset belongs.  If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its
recoverable amount.  Impairment losses are recognised as an expense immediately,
unless the relevant asset is at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.



Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years.  A reversal of an
impairment loss is recognised as income immediately, unless the relevant asset
is carried at a revalued amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.



(p)                Leases



Leases where the lessor effectively retains substantially all the risks and
rewards of ownership of the leased item are classified as operating leases.
Operating lease payments are recognised as rental expenses in the income
statement in equal annual amounts over the lease terms.



(q)                Provisions



Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation.



            (s)        Employees' Benefits



Defined contribution plans



As required by Singapore law, the Group makes contributions to the Singapore
state pension scheme, the Central Provident Fund ("CPF"). CPF contributions are
recognised as compensation expense in the same year as the employment that gives
rise to the contribution.



Employee leave entitlement



Employee entitlements to annual leave are recognised when they accrue to
employees. A provision is made for the estimated liability for annual leave as a
result of services rendered by employees up to the balance sheet date.


2          Significant Accounting Policies (continued)



(t)                 Fair Value Estimation



The carrying amount of current receivables and payables are assumed to
approximate their fair values. The fair value of financial liabilities for
disclosure purposes is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Group for
similar financial instrument.



(u)                Goodwill



Goodwill arising on a business combination represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of the acquired subsidiary/associated company at the date
of acquisition. All business combinations are accounted for using the purchase
method.  Goodwill is recognised as an asset and is tested annually for
impairment and carried at cost less any impairment losses. Any impairment is
recognised immediately as a charge to the income statement and is not
subsequently reversed.



(v)                Deferred Expenditure



Deferred expenditure relates to course fees and related expenses paid in advance
and is recognised in the income statement based on classes conducted.



Critical accounting judgements and key sources of estimation uncertainty



In the process of applying the Group's accounting policies above, management
necessarily make judgements and estimates  that have a significant  effect on
the amounts recognised in the financial statements.  Changes in the assumptions
underlying the estimates could result in a significant impact to the financial
statements.  The most critical of these accounting judgement and estimation
areas are noted.



            (i)         Estimated Impairment of Goodwill



The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in Note 2(v). The recoverable
amount of goodwill of #907,680 stated in Note 15 is determined from value in use
calculation. The key assumption for the value in use calculation are those
regarding expected discounted future cash flows of the associated company. In
the opinion of the directors, as at 31 December 2005 there is no indication of
impairment in the value of goodwill.



            (ii)        Income Taxes



The Group is subject to income taxes in numerous jurisdictions. Significant
judgement is required in determining the capital allowance, deductibility of
certain expenses and taxability of certain income during the estimation of the
provision for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain during the ordinary course of
business. The Group recognises liabilities based on estimates of whether
additional taxes will be due. Where the final tax outcome is different from the
amounts that were initially recorded, such differences will impact the income
tax and deferred income tax provisions in the period in which such determination
is made.



                       (iii)       Allowance for receivables



The directors exercises their judgement in making allowances for receivables. A
special provision allowance for receivables is made if the receivables are not
collectible. There is no policy on general provision for receivables.



(iv)       Impairment of assets/(other than goodwill)



The Group reviews the carrying amounts of assets as at each balance sheet date
to determine whether there is any indication of impairment.  If any such
indication exists, the assets' recoverable amount or value in use is estimated.
Determining the value in use of plant and equipment, which requires the
determination of future cash flows expected to be generated from the continued
use and ultimate disposition of such asset, requires the Company to make
estimates and assumptions that can materially affect the financial statements.
Any resulting impairment loss could have a material adverse impact on the
Group's financial condition and results of operations.





3                    Segmental Information



All revenue and profit before taxation arises from operations in the education
sector, and in South East Asia.





4                    Sale of Services
                                                                                       Group

                                                                            2005                  2004
                                                                             #                      #

          Course fees                                                          926,503                916,392
          Sales of systems and support services                                476,015                500,657
                                                                             1,402,518              1,417,049


In 2004, included in course fees is an amount of #97,902 pertaining to revenue
earned arising from an exchange of goods (Note 16).






5                    Other Income

                                                                                       Group

                                                                            2005                  2005
                                                                             #                      #

          Application fees and registration fees                                37,306                  9,680
          Commission income                                                        344                 49,545
          Consultancy fees                                                      40,404                      -
          Training and support income                                                -                  4,523
          Rental and related income                                             20,816                      -
          Sale of material and textbooks                                         2,698                  2,482
          Summer camp income                                                    22,980                 26,996
          Miscellaneous income                                                  15,618                    677
                                                                               140,166                 93,903





6                    Salaries and Employees' Benefits
                                                                                      Group

                                                                           2005                   2004
                                                                             #                      #
         Staff salaries and related costs                                      246,978                184,852
         Director's fee                                                         22,500                 38,273
         Directors' remuneration                                                64,948                 13,851
                                                                               334,426                236,976




7                    Finance Costs
                                                                                      Group

                                                                           2005                   2004
                                                                             #                      #

         Interest on bank overdraft                                              1,303                      -
         Interest on loan from third party                                       1,536                  2,321
         Interest on hire purchase                                                 100                      -
                                                                                 2,939                  2,321







8                    Operating profit/loss



Operating profit /loss is stated after charging the following:


                                                               Group                          Company

                                                       2005            2004            2005            2004
                                                         #               #               #               #

         Auditor's remuneration:
             In respect of audit services                12,000               -          12,000               -
             In respect of other services*                7,375          57,000           7,375          57,000
         Amortisation of pre-operating expenses          16,748               -               -               -
         Bad debts written off                           48,452           7,448               -               -
         Exchange (gain)/loss                          (22,752)          11,650               -               -
         Office and equipment rental                     39,916          25,824               -               -
         Write back of allowance for

         Impairment of trade receivables                (1,703)         (6,101)               -               -



* Other services include acting on the Admission of the Company to AIM in 2004.



9                    Other Income
                                                                                      Group

                                                                           2005                   2004
                                                                             #                      #

         Gain on disposal of investment in
           subsidiary companies                                                      -                  6,685
                                                                                     -                  6,685








10                Income Tax



Tax expense attributable to the results is made up of:


                                                             Group                           Company

                                                     2005             2004             2005            2004
                                                      #                #                #                #

         Current income tax                                 -           16,514                -               -
          Deferred tax                                      -          (5,146)                -               -
                                                            -           11,368                -               -

         Underprovision in respect of prior years:
         Current income tax                            13,464            1,593                -               -
         Deferred tax                                (13,131)              273                -               -
         Office and equipment rental                      333           13,234                -               -





The reconciliation of the current year tax expense and the product of accounting
profit multiplied by the Singapore statutory tax rate is as follows:


                                                                  Group

                                                    2005       2005        2004        2004
                                                     #           %          #           %

     Profit before income tax                        194,378                560,862

     Income tax at the statutory rate of 30%          58,313      30.0      168,259       30.0
     Difference arising from foreign tax rate         20,224      10.4     (24,592)      (4.4)
     Non allowable items                              23,375      12.0        9,461        1.7
     Tax exempted income                            (95,296)    (49.0)    (121,778)     (21.7)
     Singapore statutory stepped income              (2,040)     (1.0)      (8,020)      (1.4)
     exemption
     Future tax benefits not recognised              (4,577)     (2.4)        1,082        0.1
     Under/(over) provision of income tax in          13,464       6.9      (5,147)      (0.9)
     respect of prior years
     (Over)/under provision of deferred tax in      (13,131)     (6.8)          273          -
     prior years
     Utilisation of previously unrecognised tax            -         -      (6,304)      (1.1)
     benefits
                                                         333     (0.1)       13,234        2.3



At the balance sheet date, the Group had unabsorbed tax losses amounting to
#16,727 (2004: #16,727) from pre-pioneer status year carried forward available
for off-setting against future taxable profits for its subsidiary company in
Malaysia. The utilisation of these tax losses is subject to the agreement with
the tax authorities and compliance with certain provisions of the tax
legislation. The




10        Income Tax (continued)



deferred tax benefit arising from the unutilised tax losses has not been
recognised in accordance with the accounting policy in Note 2(m) to the
financial statements.



Temporary differences arising from investment in subsidiary and associated
companies are considered to be insignificant to the Group.


                                                            Group                            Company
                                                    2005             2004              2005            2004
                                                     #                 #                #                #
         Composition of deferred taxation:
          On the excess of the net book value
          over tax written down value of

          plant and equipment                            480            12,877                -               -


         Analysis of provision for deferred taxation:
          Balance at the beginning of the year        12,877            12,877
          Overprovision of deferred taxation        (12,397)                 -                -               -
          Balance at the end of the year                 480            12,877                -               -





11                Earnings Per Share



The earnings per ordinary share is based on profit attributable to shareholders
amounting to #194,045 (2004:# 547,628) and the weighted average number of
ordinary shares in issue of 14,916,042 (2004: 11,903,557) shares.



There is no dilution as the Group did not have any potential ordinary shares
outstanding as at 31st December 2005 and 2004.



12                Plant and Equipment

                                                                         Classroom
                                                                        and office
                                                             Furniture                Motor    Library
                                                                         equipment
                                     Renovation   Computers  & fittings              vehicle    books     Total
         Group                            #           #          #           #          #         #         #
         2005
         Cost
          As at 1 January 2005            15,658      34,888      3,522      73,346       392     1,993    129,799
          Additions                       71,199      12,716     21,776       1,865         -         -    107,556
          Currency realignment              1244       3,418        396       5,271        30       233     10,592
          As at 31 December 2005          88,101      51,022     25,694      80,482       422     2,226    247,947

         Accumulated depreciation
          As at 1 January 2005             6,929      27,295      2,194      41,366       196     1,010     78,990
          Charge for the year             10,692       4,798      2,147      13,916        82       420     32,055
          Currency realignment             1,068       2,849        293       3,765        18        94      8,087
          As at 31 December 2005          18,689      34,942      4,634      59,047       296     1,524    119,132

         Net book value
          At 31 December 2005             69,385      16,080     21,086      21,409       126       729    128,815





                                                                         Classroom
                                                                        and office
                                                             Furniture                Motor    Library
                                                                         equipment
                                     Renovation   Computers  & fittings              vehicle    books     Total
         Group                            #           #          #           #          #         #         #
         2004
         Cost
          As at 1 January 2004            13,454      34,510      3,250      73,587       401     2,064    127,266
          Additions                        2,465         751        272         730         -         -      4,218
          Disposal                             -           -          -       (216)         -         -      (216)
          Currency realignment             (261)       (373)          -       (755)       (9)      (71)    (1,469)
          As at 31 December 2004          15,658      34,888      3,522      73,346       392     2,020    129,799

         Accumulated depreciation
          As at 1 January 2004             4,036      23,937      1,734      26,822       120       619     57,268
          Charge for the year              2,979       3,358        460      15,682        79       404     22,962
          Disposal                             -           -          -       (216)         -         -      (216)
          Currency realignment              (86)           -          -       (922)       (3)      (13)    (1,024)
          As at 31 December 2004           6,929      27,295      2,194      41,366       196     1,010     78,990

         Net book value
          At 31 December 2004              8,729       7,593      1,328      31,980       196       983     50,809





            At the balance sheet date, the Group's net book value of computers
under finance lease arrangements amounted to #3,615 (2004: #Nil).






13        Development Expenditure
                                                                                          Group
                                                                                 2005              2004
                                                                                   #                 #
          Cost

          At 1st January 2005                                                       43,125            43,125
          Addition                                                                       -                 -
          Currency alignment                                                         4,226                 -
          At 31st December 2005                                                     47,351            43,125


          Amortisation

          At 1st January 2005                                                        8,624                 -
          Charge for the year                                                        9,135             8,624
          Currency alignment                                                         1,178
          At 31st December 2005                                                     18,937             8,624

          Net Book Value

          At 31st December 2005                                                     28,414            34,501






14        Investment in Subsidiary Company


                                                                                           Company

                                                                                   2005              2004
                                                                                     #                 #
         Investment in a subsidiary  - AEC.Edu Group Pte Ltd

         Unquoted equity shares, at cost                                           1,308,639         1,308,639

         Due from subsidiary company                                                 343,000                 -


AEC Edu Group Pte Ltd is the Company's immediate subsidiary.  The details of AEC
Edu Group Pte Ltd and the subsidiaries and associates it held at 31 December
2005 are as follows:


       Subsidiary companies
       and country of                              Principal activities               Equity held by
       incorporation                               (Place of business)                 the Company
                                                                                    2005          2004
                                                                                     %              %
       AEC.Edu Group Pte Ltd                       Investment holding and
       (Singapore)                                 provision of education
                                                   consultancy services                 100           100
                                                   (Singapore)
       Subsidiaries  held by AEC Edu.Group Pte Ltd

       AEC Resource Development Pte Ltd            Education, training and              100           100
       (Singapore)                                 human resource consultancy
                                                   (Singapore)

       AEC Accountancy & Business School Pte Ltd   Education, training and              100           100
       (formerly known as Melewar Business School  human resource consultancy
        Pte Ltd)                                   (Singapore)
       (Singapore)


       The McGregorr Consultancts Pte Ltd            Advisors and consultants for          100              100
       (Singapore)                                   further learning and dealing
                                                     in study kits and manuals
                                                     (Singapore)

       Flexi Learning Systems Pte Ltd                Operator and agent of schools,        100           100
       (Singapore)                                   colleges, institutions, and
                                                     professional associations in
                                                     promoting training and
                                                     Educational programmes and
                                                     courses (Singapore)

       AEC Internet Education Technology Pte Ltd     E-learning applications               100              100
                                                     service
       (Singapore)                                   provider to develop,
                                                     distribute
                                                     and implement dynamic
                                                     Educational content and
                                                     innovative learning processes
                                                     and software tools (Singapore)


14        Investment in Subsidiary Company (continued)



The details of the subsidiary company as at 31 December 2005 are as follows:
       Subsidiary companies
       and country of                              Principal activities               Equity held by
       Incorporation                               (Place of business)                 the Company
                                                                                    2005          2004
                                                                                     %              %
       Subsidiaries  held by AEC Edu.Group Pte Ltd
       AEC Edutech Sdn Bhd                         Development, management,             100               100
       (Malaysia) *                                and provision of consultancy
                                                   and market educational
                                                   technology solutions
                                                   related products
                                                   (Malaysia)

       Brighton Commercial Training Centre Pte Ltd Technical, vocational and            100                 -
       (Singapore)                                 commercial education
                                                   (Singapore)


       AEC Business School Pte Ltd                 Technical, vocational and            100                 -
       (Singapore)                                 commercial education
                                                   (Singapore)


            In 2005, the subsidiary company, AEC.Edu Group Pte Ltd converted 2
sole-proprietors, Brighton Commercial Training Centre and AEC Business School to
limited liability companies with a paid up capital of S$1 equivalent to 0.3367
pence each respectively.



15       Investment in Associated Companies

                                                                                    Group
                                                                           2005              2004
                                                                             #                 #

           Unquoted shares, at cost                                        1,386,694         1,386,694
          Goodwill transferred to capital reserves                            14,038            14,038

           Share of net postacquisition reserves
              Balance at beginning of year                                 (152,223)         (162,789)
              Share in profits for the year                                   99,283            28,640
             Share of taxes                                                 (31,663)          (18,074)
              Dividends received                                            (45,263)                 -
              Currency alignment                                             123,068
              Balance at end of year                                         (6,798)         (152,223)

                                                                           1,393,934         1,248,509

          Due from associated company                                     67,106               154,190





15        Investment in Associated Companies (continued)



The carrying amount of the investment in associated companies includes goodwill
of #907,680 (2004: #907,680).The amounts due from associated companies are trade
in nature, unsecured, interest-free and payable within the next twelve months.



Summarised financial information in respect of the Group's associated companies
is set out below:
                                                                                   2005              2004
                                                                                     #                 #

         Total assets                                                              2,558,434         2,562,990
         Total liabilities                                                         (984,883)       (1,152,224)
         Net assets                                                                1,573,551         1,410,767

         Revenue                                                                   2,952,900         2,435,418

         Profit for the year                                                         220,462            98,133


Details of associated companies are as follows:


        Associated
        companies and
        country of                  Principal activities                               Equity held by
        Incorporation               (Place of business)                                   the Group
                                                                                    2005            2004
                                                                                      %               %
        Held by AEC.Edu Group Pte Ltd

        Keris Murni Sdn Bhd         Provides education services and the                   30              30
                                    operation
        (Malaysia)                  of education tuition centres
                                     (Malaysia)

        Pusat Tiusyen Kasturi Sdn   Provides education services and the                   30              30
                                    operation
        Bhd                         of education tuition centre
        (Malaysia)                  (Malaysia)

        Educational Resources Pte   Provides consultancy services in education         34.96           34.96
        Ltd                         related services and business training
        (Singapore)



In the prior year, the a subsidiary company, AEC.Edu Group Pte Ltd acquired a
34.96% interest in Educational Resources Pte Ltd for a consideration of S$4
million (#1,271,459) from a related party (common directors/shareholders). The
consideration was settled by a novation of related party balances, amounting to
S$3,953,000 (#1,256,516) with the balance paid in cash.


15        Investment in Associated Companies (continued)



In the opinion of the directors, the recoverable amount of the investment in
associated companies is not less than the carrying amount of the investment on
the basis that the present value of the estimated future cash flows expected to
arise from the associated companies' operations over the next few years will
exceed the carrying amount of the investment in these associated companies.



16        Inventories



Inventories pertains to the net realisable value of goods received in exchange
for the rendering of training services in the previous financial year.



17        Trade Receivables

                                                                                          Group

                                                                                 2005              2004
                                                                                   #                 #
         Trade receivables are stated after deducting allowance for
         impairment of
                                                                                    37,529            17,298





                                                                                                 Group

                                                                                          2005           2004
                                                                                            #              #

         Trade receivables are denominated
           in the following currencies:
           Singapore dollars                                                               250,728        135,863
           Pound sterling                                                                        -              -
           Malaysian ringgit                                                                 1,560          4,490
                                                                                           252,288        140,353



18        Other Receivables

                                                              Group                          Company

                                                       2005           2004            2005            2004
                                                         #              #               #               #

          Deposits                                        1,795          1,179               -               -
          Prepayments                                       227            459               -               -
          Other debtors                                  53,238        138,125          52,140         125,050
                                                         55,260        139,763          52,140         125,050


          Other  receivables are denominated in the following currencies:

            Singapore dollars                             2,145          8,873               -               -
            Pound sterling                               52,140        125,050          52,140         125,050
            Malaysian ringgit                               975          5,840               -               -
                                                         55,260        139,763          52,140         125,050





19                Deferred Expenditure



Deferred expenditure relates to consultancy and course fees paid in advance.


                                                             Group                          Company

                                                     2005            2004            2005            2004
                                                       #               #               #               #
       Deferred expenditure is denominated
         in the following currencies:
         Singapore dollars                             31,054          12,747               -               -



20        Due from/(to) Related Parties



Related parties are entities (except for holding company and associated company)
with common direct/indirect shareholders and directors. Parties are considered
to be related (directly or indirectly) if one party has the ability to control
or exercise significant influence over the other party in making financial and
operating decision.



            The related parties are companies with common shareholders or
directors.


                                                                                           Group

                                                                                   2005            2004
                                                                                     #               #
       Due from related parties
       Trade                                                                        223,527          66,270
       Non-trade                                                                    260,673         278,382
                                                                                    484,210         344,652
          Due to related parties
          Trade                                                                    (27,407)               -
          Non-trade                                                                (23,232)         (5,337)
                                                                                   (50,639)         (5,337)

          Total                                                                     433,571         339,315


20        Due from/(to) Related Parties (continued)


                                                                                              Group

                                                                                      2005            2004
                                                                                        #               #
           Balances with related parties are denominated in the following
          currencies:

            Singapore dollar                                                           186,920         233,715
            Pound sterling
            Malaysian ringgit                                                          246,651         105,600
                                                                                       433,571         339,315



The amount due from/(to) related parties are unsecured, interest-free and due
within the next twelve months





21        Cash and Bank Balances

                                                             Group                          Company

                                                     2005            2004            2005            2004
                                                       #               #               #               #

       Cash and bank balances are denominated

         in the following currencies:

         Singapore dollars                             65,764          10,916               -               -
         Pound sterling                                 4,280         408,246           4,280         408,246
         Malaysian ringgit                             19,635           2,010               -               -
                                                       89,679         421,172           4,280         408,246



22        Trade Payables

                                                             Group                          Company

                                                     2005            2004            2005            2004
                                                       #               #               #               #
       Trade payables balances are denominated
         in the following currencies:
         Singapore dollars                             90,283         205,613               -               -






23                Deferred Income



Deferred income relates to course fees received in advance.


                                                             Group                          Company

                                                     2005            2004            2005            2004
                                                       #               #               #               #
       Deferred income is denominated
         in the following currencies:
         Singapore dollars                            156,478          42,446               -               -





24        Other Payables

                                                              Group                          Company

                                                       2005           2004            2005            2004
                                                         #              #               #               #

          Advance from staff                                  -            497               -               -
          Other creditors                                61,480        206,962          23,598         130,596
          Accrued expenses                               49,694         83,006               -               -
                                                        111,174        290,465          23,598         130,596

           Other payables are denominated in the following currencies:

            Singapore dollars                            84,329        159,866               -               -
            Pound sterling                               23,598        141,131          23,598         130,596
            Malaysian ringgit                             3,247              -               -               -
                                                        111,174        300,997          23,598         130,596







25        Bank Overdraft



The bank overdraft facility of the Group is secured by a personal guarantee by a
director and incurs interest of prime rate plus 2% per annum. The bank overdraft
is payable within 12 months from the balance sheet date.





26        Finance Lease Obligations

                                                          Group                             Group
                                                                                        Present value
                                                         Minimum                          of minimum
                                                     lease payments                     lease payments
                                                 2005             2004              2005             2004
                                                   #                #                 #                #

          Within one year                           1,806                 -             1,755                -

          Less: Future finance charges               (51)                 -                 -                -
          Present value of lease obligations        1,755                 -             1,755                -

          Effective rate of interest per                                                        -
           annum for hire purchase                                                       4.5%              Nil

           Finance lease creditors are denominated in the following currency:

            Singapore dollars                                                         1,755                -
                                                                                      1,755                -





27        Loans Payable

                                                                                            Group

                                                                                   2005              2004
                                                                                     #                 #


         Secured                                                                           -            71,415
         Unsecured                                                                         -            34,413
                                                                                           -           105,828


         Loan Payables are denominated in the following currency:



         Singapore dollars                                                                 -           105,828




In the prior year, the secured loan represented the amount extended to a
director of the Group by The 1 Group Plc (on behalf of Yourway Limited), a
company incorporated in the United Kingdom, amounting to #75,000 to be used as a
temporary advance to the Group for amounts owing to its creditors. The loan was
repayable monthly at #3,500 commencing February 2005 and the balance (including
unpaid interest fees and other sums payable) by 15 May 2005. The loan carried
interest at 18% per annum.




27        Loans Payable (continued)



The 1 Group Plc is a related party by virtue of a common director with the
Group's ultimate holding company. This loan is secured by:-



(a)                a personal guarantee by a director;

(b)                shares of the ultimate holding company, AEC Edu Group PLC,
amounting to #85,000



This secured loan was fully paid subsequent to year end by the ultimate holding
company on behalf of the Group.



            The unsecured loans were from third parties, interest-free, and were
fully repaid during the year.



28        Share Capital

                                                                                         Group and Company

                                                                                       2005            2004
                                                                                         #               #
         Authorised
         50,000,000 ordinary shares of 10p each                                       5,000,000       5,000,000

         Allotted, called up
         14,916,042 ordinary shares of 10p each                                       1,491,604       1,491,604



The Company was incorporated on 8 July 2004 with the name Spurlynx public
limited company, and changed its name to AEC Education plc on 11 November 2004.
On incorporation, the Company had an authorised share capital of #100,000
divided into 100,000 shares of #1 each, of which 2 ordinary shares of #1 each
were issued at par for cash.



On 10 November 2004 the authorised share capital of the Company was increased by
#1,300,000  by the creation of an additional 1,300,000 ordinary shares of #1
each, and subsequently each authorised and issued ordinary share of #1 was
sub-divided into 10 Ordinary shares of 10p.



On 17 November 2004 the authorised share capital of the Company was increased by
#3,600,000 by the creation of an additional 36,000,000 Ordinary Shares of 10p
each.



On 19 November 2004, the Company was granted a certificate to trade under
section 117 Companies Act 1985.



On19 November 2004, the Company acquired the whole of the issued share capital
of AEC Edu Group Pte Ltd, a company incorporated in the Republic of Singapore,
in consideration for the issue of 13,086,394 Ordinary Shares of 10p each in the
Company at par.





29        Related Party Transactions



In addition to the related party information disclosed elsewhere in the
consolidated financial statements, the Group had significant transactions with
related parties on terms agreed between the parties as follows:


                                                                                          Group
                                                                                 2005               2004
                                                                                   #                  #
          With a related party with common directors
          OLOL Management Service Pte Ltd
           - Course fees income                                                     343,952            217,980
           - Commission paid and payable                                          (343,748)          (171,322)

          Savant Infocomm Pte Ltd

           - Consultancy fees income                                               (41,880)                  -


          AEC Property Management Pte Ltd

           - Office rental expenses                                                   (904)           (22,359)
           - Air-conditioning and electricity charges expenses                            -           (10,436)

          Integrative Organisational Learning Sdn Bhd - revenue

           - Royalty and Licensing                                                    1,563              1,228
           - Computer software and hardware                                           2,863              2,352
           - Implementation, training and testing                                     2,978              2,238
           - Management and consultancy fees                                            391                307

          Open Learning Agensi Malaysia Sdn Bhd - revenue

           - Royalty and Licensing                                                   16,877             15,665
           - Computer software and hardware                                          30,920             30,006
           - Implementation, training and testing                                    32,159             28,541
           - Management and consultancy fees                                          4,219              3,916


          QLA Learning Agency Malaysia Sdn Bhd -revenue

           - Royalty and Licensing                                                      199                413
           - Computer software and hardware                                             365                790
           - Implementation, training and testing                                       379                752
           - Management and consultancy fees                                             50                236

          Intellectual Challenge Sdn Bhd -revenue

           - Royalty and Licensing                                                    3,128              5,699
           - Computer software and hardware                                           5,731             10,916
           - Implementation, training and testing                                     5,961             10,383
           - Management and consultancy fees                                            782              1,425




29        Related Party Transactions (continued)


                                                                                          Group
                                                                                 2005               2004
                                                                                   #                  #
          With related parties with associated companies

          Genting Mutiara Sdn Bhd -revenue

           - Royalty and Licensing                                                   10,238              8,316
           - Computer software and hardware                                          18,756             15,929
           - Implementation, training and testing                                    19,507             15,359
           - Management and consultancy fees                                          2,559              2,079

          Indo Pelangi Tegas Sdn Bhd - revenue

           - Royalty and Licensing                                                    5,417              4,311
           - Computer software and hardware                                           9,924              8,257
           - Implementation, training and testing                                    10,321              7,854
           - Management and consultancy fees                                          1,354              1,078

          Jaguh Suria  Sdn Bhd - revenue

           - Royalty and Licensing                                                    3,608              3,533
           - Computer software and hardware                                           6,609              6,768
           - Implementation, training and testing                                     6,874              6,437
           - Management and consultancy fees                                            902                883

          Keris Murni Sdn Bhd -revenue

           - Royalty and Licensing                                                   28,688             23,008
           - Computer software and hardware                                          52,557             44,072
           - Implementation, training and testing                                    54,663             41,921
           - Management and consultancy fees                                          7,172              5,752

          Pusat Tuiysen Sdn Bhd -revenue

           - Royalty and Licensing                                                   19,422             19,925
           - Computer software and hardware                                          35,582             38,166
           - Implementation, training and testing                                    37,008             36,095
           - Management and consultancy fees                                          4,856              4,848

          Pelangi Tegas Sdn Bhd - revenue

           - Royalty and Licensing                                                    6,376              5,594
           - Computer software and hardware                                          11,681             10,715
           - Implementation, training and testing                                    12,149             10,192
           - Management and consultancy fees                                          1,594              1,398


29        Related Party Transactions (continued)


                                                                                          Group
                                                                                 2005               2004
                                                                                   #                  #
          Key management personnel
           - Short term benefits                                                     87,420             52,124
           - post employment benefit                                                  1,102                  -
                                                                                     88,522             52,124





30        Operating Lease Commitments



The Group leases its office premises for a period of 2 years, renewable for such
period and under such terms and conditions as may be agreed upon with the
lessor. There are no restrictions placed upon the Group in entering into these
lease arrangements. At the balance sheet date, the future minimum rental payable
under these non-cancellable operating leases are as follows:-
                                                                                            Group

                                                                                   2005              2004
                                                                                     #                 #
         Payable:
          Within one year                                                              4,387            17,546
          Between two to five years                                                        -             4,387
                                                                                       4,387            21,933



31       Financial Instruments





IFRS 7 Financial Instruments: Disclosure was issued in August 2005, but comes
into force for accounting periods beginning on or after 1 January 2007. The
Company is not intending to adopt the standard early. IFRS 7 will have no impact
on the net assets of the Company or Group, but will require increased disclosure
in respect of the credit, liquidity and market risks faced by the Company and
Group.



At the same time as IFRS 7 comes into force, IAS 1 is also amended to require
additional disclosure in respect of capital. The impact of the revision of IAS 1
on the Company and Group will be limited, as neither the Company nor the Group
is subject to externally imposed capital requirements.




31        Financial Instruments (continued)



(a)        Financial Risk Management Objectives and Policies



The Group does not have written risk management policies and guidelines.
Generally, the Group adopts conservative strategies in its risk management. The
directors believe that the Group's exposure associated with these risks is
minimal.



(i)                  Credit risk



The carrying amount of trade and other debtors, subsidiary companies and related
parties' balances and cash represent the Group's maximum exposure to credit
risk.



The Group has no significant concentration of credit risk.



(ii)                Liquidity risk



The Group adopts prudent liquidity risk management by maintaining sufficient
cash and having adequate amount of credit facilities. Due to the nature of the
Group's operations, the Group aims at maintaining flexibility in funding by
keeping committed credit facilities available.



(iii)       Foreign exchange risk



The Group incurs foreign currency risk on commission payable to universities,
the sale of system and support services, and loan advanced from a third party
are primarily denominated in currencies other than Singapore dollars. The
currencies giving rise to this risk are Australian dollar, Singapore dollar and
Malaysian ringgit.



The Group does not use derivative financial instruments to hedge against the
volatility associated with foreign currency transactions as the directors
believe that the risks arising from fluctuations in foreign currency exchange
rates are not significant.




31                    Financial Instruments (continued)



(iv)       Interest risk



The Group's exposure to market risk for changes in interest rates relate
primarily to the Group's bank overdraft facility.



The tables below set out the Group's exposure to interest rate risks. Included
in the tables are the assets and liabilities at carrying amounts, categorised by
the earlier of contractual re-pricing or maturity dates.

                                                             Fixed rates
                                                                 Less         Non-interest
                                                                 than
                                                                                                   Total
                                                                   6            Bearing
                                                                months                               #
                                                                                   #
                                                                     #
At 31.12.2005
Assets
 Trade and other receivables                                         -         858,864     858,864984,100
 Cash and bank balances                                              -          89,679             89,679
 Non-financial assets                                                -       1,668,587          1,668,587
Total assets                                                         -       2,617,130          2,617,130

At 31.12.2005
Liabilities
 Trade and other payables                                            -         252,096            252,096
 Borrowings                                                    122,304               -            122,304
 Non-financial liabilities                                           -         192,469            192,469
Total Liabilities                                              122,304         444,565            566,869






31                    Financial Instruments (continued)



(a)        Financial Risk Management Objectives and Policies



(iv)       Interest risk



                                                               Fixed rates
                                                                  Less          Non-interest
                                                                  than

                                                                    6            Bearing         Total
                                                                 months
                                                                                     #                #
                                                                      #
At 31.12.2004
Assets
 Trade and other receivables                                           -         791,705        791,705
 Cash and bank balances                                                -         421,172        421,172
 Non-financial assets                                                  -          88,112         88,112
Total assets                                                           -       1,300,989      1,300,989

Liabilities
 Trade and other payables                                              -         561,578        561,578
 Borrowings                                                      105,859               -        105,859
 Non-financial liabilities                                             -          28,459         28,459
Total Liabilities                                                105,859         590,037        695,896





(b)        Fair Values



The fair value of financial assets and liabilities are not materially different
from their carrying amounts because of the immediate or short-term maturity of
these financial instruments.



32.   Post  Balance Sheet Events





On 27 April 2006, AEC Edu Group Pte Ltd, a wholly owned subsidiary of the
Company, entered into a sale and purchase agreement with a third party for the
acquisition of 64.8% of the issued share capital of Brainbox Limited, a company
incorporated in the British Virgin Islands, for a total purchase consideration
of S$50,000 in cash. Pursuant to this agreement, the subsidiary has agreed to
provide a loan of US$11,160 to Brainbox Limited for its business operation
purposes.


                              FINANCIAL STATEMENTS

                      FOR THE YEAR ENDED 31 DECEMBER 2005
                                                                                                         Page


Chairman's Statement                                                                                      1


Directors' Report                                                                                         3


Independent Auditors' Report                                                                              6


Profit and Loss Account                                                                                   8


Balance Sheets                                                                                            9


Statement of Changes in Equity                                                                            10


Cash Flow Statement                                                                                       11



Company Profit and Loss Account                                                                           13


Company statement of Changes in Equity                                                                    13


Company Cash Flow Statement                                                                               14


Notes to the Financial Statements                                                                         15


                              FINANCIAL STATEMENTS

                      FOR THE YEAR ENDED 31 DECEMBER 2005



                      This information is provided by RNS
            The company news service from the London Stock Exchange

END

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