Stream Communications Network & Media 20-F 2006 FY Annual report (foreign)

United States Securities and Exchange Commission

Washington, DC  20549

FORM 20-F

[  ]

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THESECURITIES EXCHANGE ACT OF 1934.

OR

[x ]

ANNUAL REPORT PURSUANT TO SECTIONS “13” OR “15(d)” OF THESECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended ………December 31, 2005…………………………………

OR

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934.

For the transition period from …………………………………………………………….…

OR

[ ]

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _________

Commission file number:          0-30942                              

STREAM COMMUNICATIONS NETWORK & MEDIA INC.

________________________________________________________________________

(Exact name of registrant as specified in its charter)

Not Applicable

(Translation of registrant’s name into English)

British Columbia, Canada

(Jurisdiction of incorporation or organization)

Suite 1400 – 400 Burrard Street

Vancouver, British Columbia, V6C 3G2

(Address of principal executive offices)

__________

-- Form 20-FR  --

-- Stream Communications Network & Media, Inc.  --

Securities to be registered pursuant to Section 12(b) of the Act.

None.

Securities registered pursuant to Section 12(g) of the Act.

Common Shares, without par value.

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 47,952,901 common shares at December 31, 2005

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes:         ü        

No:

Indicate by checkmark which financial statement item the registrant has elected to follow:

Item 17

Item 18         ü         

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes:                 

No:        ü        

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes:                 

No:        ü        

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

          Accelerated Filer           Non-Accelerated Filer          ü        

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes:                  

No:         ü        

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

FORM 20-F

INDEX

-- Form 20-FR  --

-- Stream Communications Network & Media, Inc.  --

CONVERSION TABLE

For ease of reference, the following conversion factors are provided:

1 mile = 1.6093 kilometres	1 metric ton (tonne) = 2,205 pounds
1 foot - 0.305 metres	1 troy ounce = 31.103 grams
1 acre = 0.4047 hectare	1 imperial gallon = 4.546 litres
1 long ton = 2,240 pounds	1 imperial gallon = 1.2010 U.S. gallons

GLOSSARY OF NAMES AND TERMS

Broadband	Broadband refers to telecommunication that provides multiple channels of data over a single communications medium, typically using some form of frequency or wave division
CATV	Community Antenna Television, the original name for Cable TV.
Coaxial cable	Coaxial cable is called "coaxial" because it includes one physical channel that carries the signal surrounded (after a layer of insulation) by another concentric physical channel, both running along the same axis. The outer channel serves as a ground. Many of these cables or pairs of coaxial tubes can be placed in a single outer sheathing and, with repeaters, can carry information for a great distance.
Czestochowa	A city of southern Poland north of Katowice. It is heavily industrialized. Population,  251,000
Digital	Describes any system based on discontinuous data or events. Computers are digital machines because at their most basic level they can distinguish between just two values, 0 and 1, or off and on. There is no simple way to represent all the values in between, such as 0.25. All data that a computer processes must be encoded digitally, as a series of zeroes and ones. The opposite of digital is analog. A typical analog device is a clock in which the hands move continuously around the face. Such a clock is capable of indicating every possible time of day. In contrast, a digital clock is capable of representing only a finite number of times (every tenth of a second, for example).
EU (European Union)	An economic association of European countries founded by the Treaty of Rome in 1957 as a common market for six nations. It was known as the European Community until January 1, 1994 and since 1 May 2004 comprises 25 European countries. Its goals are a single market for goods and services without any economic barriers, and a common currency with one monetary authority. The 25 countries are, Austria, Belgium, the Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovenia, Slovakia, Spain, Sweden and the United Kingdom.
Euro	The basic unit of currency among 12 European Union countries.
GSM	Global System for Mobile communications. A world standard for digital cellular communications using narrowband TDMA (Time Division Multiple Access), which allows up to eight calls at a time on 900 MHz and 1800 MHz frequencies. Introduced in 1991, it is the standard most commonly used in Europe and Asia, but not in the United States.
Headend	A headend is the originating point of a signal in a cable television system (distribution center). Headend equipment receives satellite and local broadcast TV signals and converts them to a form that can travel down coaxial cable to subscribers.
HFC	A hybrid fibre coaxial (HFC) network is a telecommunication technology in which optical fibre (glass or plastic wire) cable and coaxial cable are used in different portions of a network to carry broadband content (such as video, data, and voice). Using HFC, a local CATV company installs fibre optic cable from the cable head-end to serving nodes located close to business and residential users and from these nodes uses coaxial cable to individual businesses and homes. An advantage of HFC is that some of the characteristics of fibre optic cable can be brought close to the user without having to replace the existing coaxial cable that is installed all the way to the home and business. Both cable TV and telephone companies are using HFC in new and upgraded networks and, in some cases, sharing the same infrastructure to carry both video and voice conversations in the same system.
ISDN	Integrated Services Digital Network, a fast method of service access and transferring data world-wide and an international communications standard for sending voice, video, and data over digital telephone lines or normal telephone wires.
Katowice	A city of southern Poland 50 miles west-northwest of Krakow. Chartered in 1865, it is an important mining and industrial center. Population, 328,000.
Krakow	A city of southern Poland on the Vistula River south-southeast of Warsaw. Founded in the eighth century A.D., it was the national capital from 1305 to 1595. Population, 758,000.
KRRiT	National Council for Radio and Television in Poland.
MDU	Multiple dwelling units
PIKE	The Polish Cable Communications Chamber of Commerce with headquarters in Warsaw unites 136 companies. Its members are cable TV operators representing over 80% of the domestic cable TV market as well as manufacturers and distributors of equipment and services used by operators in their business activity. Services rendered by operators - members of the Chamber - are used by 4.5 million households in the whole country. PIKE is a member of the National Economic Chamber and the European Cable Communication Association.
Rzeszów	A city, capital of Podkarpackie Province in southeastern Poland. Population 160,000.
Silesia	Region in Southwest Poland bordering on the Sudety Mountains
UKE	Office of Electronic Communications in Poland.
UOKiK	Office of Competition and Consumer Protection in Poland.
Voice mail	A computerized system for receiving, recording, and sometimes forwarding audio messages. A voice mail system plays a pre-recorded message to the caller when the line is not answered, and may provide choices such as paging, talking to an operator, or selecting a number by touchtone to choose between message boxes.
VoIP	An acronym for Voice Over Internet Protocol. An emerging technology, voice delivered using the Internet Protocol, is a term used in IP telephony for a set of facilities for managing the delivery of voice information using the Internet Protocol (IP). In general, this means sending voice information in digital form in discrete packets rather than in the traditional circuit committed protocols of the public switched telephone network. A major advantage of VOIP and Internet telephony is that it avoids the tolls charged by ordinary telephone service.
Warsaw	The capital of Poland, in the east-central part of the country on the Vistula River. Founded in the 13th century, it replaced Kraków as Poland's capital in 1596. Warsaw was ruled by Russia as an independent kingdom (1815–1917) and became capital of Poland again in 1918. Warsaw was rebuilt after 1945 and is today a major cultural, commercial, and industrial center. Population:1,689,000.
Wroclaw	A city of southwest Poland on the Oder River, assigned to Poland by the Potsdam Conference (1945). Population, 641,000.

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

FORWARD-LOOKING STATEMENTS

Stream Communications Network & Media Inc. (“we”, “us” and “our”, as the context requires) (the “Company”) cautions you that certain important factors (including without limitation those set forth in our Form 20-F) may affect our actual results and could cause such results to differ materially from any forward-looking statements that may be deemed to have been made in this Form 20-F annual statement, or that are otherwise made by us or on our behalf. For this purpose, any statements contained in this annual statement that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “except,” believe,” anticipate,” “intend,” “could,” estimate,” or “continue,” or the negative or other variations of comparable terminolo gy, are intended to identify forward-looking statements.

PART 1

Item 1 – Identity Of Directors, Senior Management and Advisers

Not applicable

Item 2 - Offer Statistics and Expected Timetable

Not applicable

Item 3 – Key Information

A. Selected Financial Data

Financial Highlights

The following table sets forth our selected consolidated financial data for the years ended December 31, 2005, December 31, 2004, December 31, 2003, December 31, 2002, and the two months ended December 31, 2001 prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). The table also summarizes certain corresponding information prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). This selected consolidated financial data include the accounts of the parent and our subsidiaries.  

	Year ended December 31,	Year ended December 31,		Year ended December 31,		Year ended December 31,	Two months ended December 31,
	2005	2004		2003		2002	2001
	$CDN	$CDN	$CDN		$CDN		$CDN
Revenues	5,826,112	4,415,461	3,700,160		3,736,716		639,871
Net income (loss) from continuing operations
Canadian GAAP	(5,811,359)	(6,564,715)	(6,254,620)		(3,626,325)		(773,491)
US GAAP	(4,707,799)	(5,248,173)	(8,064,275)		(3,626,325)		(773,491)
Net income (loss) from discontinued operations
Canadian GAAP	-	-	-		(2,362,877)		(267,198)
US GAAP	-	-	-		(2,362,877)		(267,198)
Income (loss) per share
Canadian GAAP	(0.14)	(0.22)	(0.21)		(0.21)		(0.05)
US GAAP	(0.11)	(0.17)	(0.27)		(0.19)		(0.04)
Total assets
Canadian GAAP	13,112,108	14,131,087	10,204,158		17,582,966		16,222,495
US GAAP	13,112,108	14,131,087	10,204,158		17,582,966		16,222,495
Net assets
Canadian GAAP	4,178,167	4,553,393	4,934,090		11,733,817		13,375,490
US GAAP	4,178,167	4,553,393	4,934,090		11,733,817		13,375,490
Long-term debt	4,873,760	5,051,009	67,997		52,975		-
Capital stock	41,129,499	36,005,421	33,209,455		31,229,685		26,110,367
Cash dividends declared	-	-	-		-		-
Weighted average number of common shares outstanding	42,953,922	30,027,489	29,333,427		28,023,911		22,163,416

Exchange Rates

In this report, unless otherwise specified, all dollar amounts are expressed in Canadian dollars (“CDN”). Equivalents will be given in U.S. dollars (“USD”) or Polish zloty (“PLN”), or Canadian dollars where the first currency stated indicates that a contract, a fee or agreement was made pursuant to a currency other than the Canadian dollar.  

Since June 1, 1970, the Government of Canada has permitted a floating exchange rate to determine the value of the Canadian dollar against the U.S. dollar.  The high and low exchange rates, the average rates (average of the exchange rates on the last day of each month during the period) and the end of the period rates for Canadian dollars, expressed in U.S. dollars, from November 1, 2001 to December 31, 2005 were as follows:

U.S. DOLLARS PER $1.00 (CDN.)

	Year ended December 31,	Year ended December 31,	Year ended December 31,	Two months ended December 31,	Year ended October 31,
	2005	2004	2003	2002	2001
High	.8748	.8532	.7747	.6653	.6418
Low	.7851	.7138	.6327	.6175	.6227
Average	.8262	.7701	.7163	.63724	.6306
End of Period	.8580	.8303	.7727	.6344	.6287

The high and low exchange rates for Canadian dollars, expressed in U.S. dollars, for each month from January 1, 2006 to May 31, 2006 were as follows:

U.S. DOLLARS PER $1.00 (CDN.)

Monthly

	January 2006	February 2006	March 2006	April 2006	May 2006
High	.8746	.8788	.8850	.8957	.9115
Low	.8475	.8610	.8512	.8493	.8872

In this report, several references are made to business in Poland and the Polish currency, the zloty. The high and low exchange rates, the average rates (average of the exchange rates on the last day of each month during the period) and the end of the period rates for Polish zloty (zloty), expressed in U.S. dollars, from November 1, 2001 to December 31, 2005 were as follows:

U.S. DOLLARS PER 1 POLISH ZLOTY (zloty)

	Year ended December 31,	Year ended December 31,	Year ended December 31,	Two months ended December 31,	Year ended October 31,
	2005	2004	2003	2002	2001
High	.3442	.3366	.2825	.3065	.2538
Low	.2877	.2453	.2428	.2325	.2428
Average	.3099	.2757	.2577	.2463	.2468
End of Period	.3070	.3339	.2665	.2603	.2518

The high and low exchange rates for Polish zloty, expressed in U.S. dollars, for each month from January 1, 2006 to May 31, 2006 were as follows:

U.S. DOLLARS PER 1 POLISH ZLOTY (zloty)

Monthly

	January 2006	February 2006	March 2006	April 2006	May 2006
High	.3232	.3204	.3181	.3264	.3376
Low	.3052	.3098	.3013	.3022	.3194

On May 31, 2006 the Canadian dollar and the Polish zloty closed at the following rates:

$1.00 USD

= 1.10342 $ CDN

$1.00 USD

=  3.08089 Polish Zloty (zloty)

B. Capitalization and Indebtedness

N/A

C. Risk Factors

History of losses, likelihood of future losses and dependence on additional financing

We have not been profitable in the past. The aggregate of our net losses (accumulated deficit) of $42,401,086 CDN to December 31, 2005, has been financed by private placements and the exercise of stock options and warrants. We may not be profitable in the future.

The continued development and improvement of our business will require substantial amounts of additional financing. If we are unable to secure such financing on acceptable terms and on a timely basis, our financial results may be adversely affected.  

In addition, our future prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing new businesses, which can be characterised by intense competition and rapidly changing events. Our auditors have included an explanatory paragraph regarding our ability to continue as a going concern in the notes to the financial statements for the year ended December 31, 2005. The financial statements have been prepared on a going concern basis, however, indicating that the concern is not a probability, but a possibility.

There can be no assurance that our financial plans will be achieved.  

Further acquisitions of cable television and Internet access businesses

The completion of acquisitions and the integration of acquired cable television and Internet access businesses constitutes a material part of our growth strategy. Before acquiring a new network or operator, we endeavour to perform a detailed analysis of integration-related costs and technical requirements, the financial standing of the business to be acquired, and our own capacity to finance the additional development of the acquired networks.  We may encounter difficulties in the future in acquiring new businesses that meet growth and profitability criteria or difficulties in integrating acquired businesses, which may result in additional costs and in the frustration of our development strategy. We cannot rule out the possibility that future acquisitions of other cable television operators may be more time-consuming than originally assumed.  Furthermore, we may not be able to acquire cable operators on terms and c onditions that are advantageous.  While we seek to mitigate these risks, any of the foregoing may adversely affect our business and financial performance.

Competition

We operate in markets that are open to a variety of competitors, including large, well-established companies in the cable, satellite (the so called, digital platforms) and Internet access businesses, among others. The current legal environment makes it possible for competitors to build parallel and competing networks in the same regions in which we operate.

Currently, less than 20% of our aggregate networks are overbuilt by our competitors. Therefore, even where our competitors operate in the same markets as we do, these competitors are typically not wiring the same subscribers as we do. However, if competitors are willing to significantly overbuild our networks and are able to obtain programming that is appealing to subscribers at reasonable costs and we are unable to do so, our business may be materially adversely affected.

In addition, the cable television and Internet access businesses are subject to rapid and significant changes in technology. Currently, no single method of television signal transmission dominates in Poland. We use flexible and modern technology which enables us to adjust to technological changes with relative ease, but we cannot predict the effect of technological changes. We anticipate that the role of cable in the transmission of television signals will continue to grow.  However, the profitability of other methods of transmission may adversely affect our business. Rapid technological changes and the profitability of transmission technology other than cable may adversely affect our business.  

In addition, should competitors with better access to funding sources prove swifter in adjusting to technological changes than us, this may adversely affect our business.

We also face competition from other means of television and Internet distribution, including in the case of television direct-to-home satellite TV and terrestrial broadcasting, and from alternative forms of entertainment and information provision.

Agreements with TPSA

Approximately 30% of our network has been constructed using pre-existing conduits of the Polish national telephone company, TPSA. Compared to most of our competitors, this represents a relatively small portion of our network.  Agreements with TPSA provide that we may use TPSA conduits to offer services over our network, and gain access to the conduits to upgrade, repair, and maintain the network.

Our agreements with TPSA permit TPSA to terminate these agreements without penalty at any time either immediately (upon the occurrence of certain conditions relating principally to substantial breaches of the agreement, misuse of conduits or a change in control) or upon three to six months’ notice (without cause).  TPSA is the top provider of Internet access services in Poland; it is, therefore, a competitor of us.  We believe that it is unlikely that a termination of these agreements will occur.  Nevertheless, if these agreements were terminated, we could, at least for a period of time, be prevented from accessing its network, in which case we would have to incur significant expenditures to build or lease alternative conduits and otherwise continue providing our services.  

Loss of key personnel

We compete with other cable television providers for qualified operating, sales, marketing, administrative and technical personnel. Our success will significantly depend upon our ability to hire and retain such personnel. We may not be able to attract, recruit and retain sufficient qualified personnel. Furthermore, we are currently managed by a small number of key management and operating personnel. Our business success depends significantly on the efforts and abilities of these individuals. If we were to lose the services of key management and operating personnel, our business could be negatively affected unless suitable replacements were found.

Regulation and permitting requirements

Cable television operators in Poland are regulated by various regulatory bodies and are required to comply with laws providing for, among other things, intellectual property rights protections.  

Cable operators are required to register at the Polish telecommunications regulatory (the “UKE”, The Telecommunication and Post Regulation Office).  UKE has the right to verify the technical quality of the networks.

Our programme channels have to be registered at the National Council for Radio and Television (the “KRRiT”). A registration is valid for the periods of three years, mostly. The channels have either valid registration or appropriate application for registration have been made. KRRiT has the authority to reject applications to extend existing registrations for programme channels if any such channels violate the Radio and Television Broadcasting Act.  Our applications to register or extend the registration of the registration of programme channels have never been rejected.  In the unlikely event that a regulatory body was to refuse the extension of or amendment to our telecommunication approval, the extension of existing programme registrations or the approval of additional programme registrations, our business could be materially adversely affected.

The president of the Office of Competition and Consumer Protection(“UOKiK”)has broad powers to sanction companies in the interests of consumer protection by ordering companies to comply and by levying fines against companies that act against consumer interests.  Polish law does not clearly define the extent of the powers of this agency.  We believe we have not engaged in any activity that might subject us to such sanctions.  However, because of the broad powers of this agency, it is possible that our business may be adversely affected in the future by consumer protection related sanctions imposed against us or by sanctions directed at other businesses that in turn would indirectly affect how we conducts our business.  

We cannot be sure that existing laws and regulations affecting our operations, or the interpretation or enforcement thereof, will not change.  Some changes, including the implementation of new provisions in connection with Poland’s accession to the European Union, might have an adverse effect on our business. Changes could include rules restricting the prices that we may charge for cable television subscriptions or Internet access, or regulations concerning the level of fees we may be required to pay to organizations for collective copyright administration and protection.

Risks relating to the amended Polish Copyright Act

Before 1 May 2004 (i.e. the date of Poland’s accession to the European Union), cable operators in Poland, including us, re-transmitted works that were broadcast by radio and television stations in a given area pursuant to a so-called “statutory licence”.  In order to be effective, the statutory licence required the cable operator to broadcast all programmes simultaneously and integrally with the primary broadcast. With an effective statutory licence, it was possible to show such works without being required to enter into separate agreements with their primary broadcasters, except in the case of encoded programmes.

The amendments to the Polish Copyright Act made on 25 July 2003 removed the statutory licence scheme, making it necessary for cable operators to enter into separate agreements with broadcasters. These amendments became effective on 1 May 2004. As a result, we are required to possess agreements with the broadcasters of all radio and television programmes which are broadcast on Stream’s networks. Time and market pressure might adversely affect the terms and conditions of the agreements negotiated with these broadcasters, potentially resulting in higher fees payable by us to them.  Our operating costs and costs per viewer may be significantly increased, and our programming offerings containing its most expensive programming may be curtailed.  In addition, if broadcasters are not granted the right to broadcast their programmes within Poland, they will not be able to enter into agreements with us, also causing curt ailment of our programme offerings. Reduced programme offerings or increased costs or subscriber fees may harm our business.  

In addition, we are required to enter into agreements with organisations responsible for the collective management of copyrights and to pay through them remuneration to authors for our re-broadcasting of the authors’ works.  Pursuant to such agreements, we are obliged to pay remuneration at the rates specified in tariffs approved by the government-appointed Copyright Commission.  Polish law does not impose a ceiling on remuneration to be collected by such organisations.  

Polish law at present does not contemplate cable operators entering into one agreement for each programme channel covering the copyrights of all material broadcast over that channel.  Instead, Polish cable operators, including us, must negotiate licence agreements with the associations responsible for the collective management of copyrights of a certain category, e.g. of directors, actors, composers (in exchange for a fee set by tariff).  Even if we enter into a licence agreement with an association for a given category, we cannot be assured that such an agreement will fully cover all copyrights and related rights with respect to such category.  

We expect that any cost increase resulting from these additional fees paid to broadcasters and organisations responsible for the collective management of copyrights will be offset by the reduction of other operating costs as a result of the anticipated increase in the number its subscribers. However, there is no certainty that we will be able to offset these costs.  If our costs increase as a result of this uncertainty, we expect that the costs of our competitors also will increase for the same reasons.  The legislative process with respect to this issue is ongoing.  

Currency risk

We do not hedge currency risk. Our revenues are generated in zlotys, while our programming costs (constituting 19% compared to our revenues in 2005) and our expenditures for technical equipment purchases, among certain other costs, are denominated in foreign currencies. Accordingly, significant fluctuations of the zloty in relation to those currencies may adversely affect our business and our financial results.

Dilution of share capital

As at May 31, 2006, there exist options to purchase a total of 1,820,000 of our shares and warrants to purchase an additional 4,948,310 shares (6,768,310 shares in total). If all of these options and warrants were exercised, shares issued as a result of such exercise would constitute 17.0% of all of our outstanding shares. The exercise of these options and warrants and the resale of the resulting shares on a public market may adversely affect the market price of our shares and our ability to raise future equity financing upon favourable terms.  

As of May 31, 2006, our constituent documents authorise the issuance of up to 150,000,000 shares of common stock. Consistent with our strategy, we may issue some or all of such shares to acquire one or more businesses or other types of property or to provide additional financing. In addition, we may grant additional options and issue additional warrants in the future. The issuance of those shares may result in a reduction of the market price of our outstanding shares. The issuance of any additional shares will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change of our voting control.

No dividends

In the past, we have not paid any dividends to our shareholders in any form. We do not intend to pay any dividends in the foreseeable future.   

Conflicts between the interests of large shareholders and minority shareholders

It is possible that a holder of a large number of our shares will be able to control (individually or jointly with others) our activities or exert a significant influence on our governing bodies or our business, including the ability to effect changes to our constituent documents and other material issues.

 We believe that there presently is no shareholder able to exercise such control. However, the concentration of share ownership in the hands of a few shareholders in the future may make it impossible, without the consent of such shareholders, to effect a change in control or to appoint or remove a director. Possible conflicts among shareholders holding large numbers of our shares and possible conflicts between such shareholders and minority shareholders may adversely affect us.

Shareholders’ rights are different in Canadian corporations

We are a corporation incorporated under the laws of British Columbia, Canada. The rights of holders of our shares are governed by the laws of the province of British Columbia and the federal laws of Canada and by our constituent documents. These rights may differ in certain respects from the rights of shareholders in the United States.

Holders of our shares may not be able to obtain enforcement of civil liabilities

While most of our assets are located in Poland, a majority of the members of our board of directors and officers are residents of countries other than Poland (primarily Canada). As a result, it may be more difficult for holders of our shares to effect service of process on us, our directors and our officers and to enforce against us, our assets or these persons any judgements in civil and commercial matters. In addition, a Canadian court may not permit holders of our shares to enforce in Canada a judgement by a non-Canadian court related to claims under securities or other laws or otherwise related to their ownership of our shares. Canada is not a signatory to the Lugano Convention on Jurisdiction and Enforcement of Judgements in Civil and Commercial Matters.

We are subject to Canadian taxation

As a British Columbia corporation, income, and dividend payments to shareholders are subject to Canadian tax laws and regulations. Depending on the jurisdiction of residence of our investors and on tax treaties, laws and regulations applicable to them, our investors may be subject, directly or indirectly, to various Canadian tax laws and regulations. We advise our investors to contact their tax advisors to determine how the tax laws and regulations of Canada and other jurisdictions applicable to them apply to them and their investments in us.

Item 4 - Information on the Company

General

We have business interests in the country of Poland. Our principal business is providing cable TV and high-speed Internet access.

We were incorporated on March 28, 1979 under the name of “Clear Mines Ltd.” by registration of its Memorandum and Articles under the Company Act of British Columbia, Canada (the “British Columbia Company Act”). We consolidated our shares on a one new for 3.9 old shares basis and changed our name to “Redwood Resources Inc.” on August 16, 1985. We again consolidated our shares on a one new for three old shares basis and changed our name to “Trooper Explorations Ltd.” on May 29, 1992.

On May 4, 1995 we changed our name to “Trooper Technologies Inc.” and on October 19, 2001 we changed our name to “Stream Communications Network, Inc.”. On August 9, 2004 we changed our name to “Stream Communications Network & Media Inc.” (“Stream”). We changed our year-end from October 31 to December 31 starting in 2001.

Our authorized capital is 150,000,000 common shares without par value.

Our registered office is Suite 703-938 Howe Street, Vancouver, British Columbia, V6Z 1N9, Canada. Our principal offices are located at 1400 – 400 Burrard Street, Vancouver, British Columbia, V6C 3G2, Canada, telephone (604) 669-2826.

We have the following operating subsidiary company:

1.

Stream Communications Sp. z o.o. (“Stream Poland”) was incorporated on October 26, 1999, under the laws of Poland. We own a 100% interest in Stream Poland which is in the business of operating cable television and high-speed Internet in Poland. Stream Poland’s growth is being accomplished through acquisitions of small, independent cable TV and high-speed Internet providers and through its own marketing efforts. Stream Poland is located at al. 29 Listopada 130, 31-406 Krakow, Poland.

The following companies are subsidiaries, but no longer have operating businesses. We had previously decided to dispose of these companies as there was no purpose to have them, however, since we are expanding in the cable TV and Internet business, these companies may serve some useful purpose in the near future. Accordingly we will keep these entities as non-operating subsidiaries.

1.

Streamline Media Sp. z o.o., (formerly Polvoice.com, “Streamline”) is a wholly owned subsidiary of our Company being organized on August 11, 1999, under the laws of Poland;

2.

IEWS S.A. (formerly International Eco-Waste Systems “IEWS”) is a wholly owned subsidiary of our Company being incorporated on September 24, 1996 under the laws of Poland.  

We are a reporting issuer in the Province of British Columbia, Canada and our common shares are listed for trading on the OTC BB under the trading symbol “SCNWF”. Our shares also trade on the Frankfurt exchange under the symbol “TPJ”.

Office Space in Canada

We utilize about 1,000 square feet of office space in Vancouver, British Columbia. Our rent is $2,500 CDN per month. In addition, we pay approximately $2,000 CDN per month for office support that includes a photocopier, telephones, a fax machine, computers, printers, scanners, secretarial services, reception services and consumables.

Stream Communications Sp. z o.o.

Overview

Stream provides cable television services and high-speed Internet access in the Polish districts of Slaskie, Malopolskie, Swietokrzyskie and Podkarpackie through its hybrid fibre coax (“HFC”) networks.  Recently, it has also begun offering limited Internet telephony services based on Voice over Internet Protocol (“VoIP”). Stream Poland provides its customers with a high quality product by employing modern, reliable networks, a broad selection of programmes, professional management and customer service.  

We own and control business activities in Poland through a group of companies, in particular through our wholly owned subsidiary Stream Communications Sp. z o.o. (“Stream Poland”) with a registered office in Krakow, ul. Aleja 29 Listopada 130, 31-406 Krakow, and indirectly, through the following subsidiaries of Stream Poland:

Bielsat.com Sp. z o.o. (“Bielsat”)

Telewizja Kablowa Gimsat Sp. z o.o. (“Gimsat”)

ASK Stream Sp. z o.o.  (“ASK”)

Vega Sp. z o.o. (“Vega”)

Business Description

Stream Communications Network & Media Inc. and Stream Poland are collectively referred to as “Stream”. Stream provides cable television services and high-speed Internet access in the Polish districts of Slaskie, Malopolskie, Swietokrzyskie, and Podkarpackie through its hybrid fibre coax (“HFC”) networks.  Recently, it has also begun offering limited Internet telephony services based on Voice over Internet Protocol (“VoIP”). As of the release of the first quarter 2006 financials Stream has approximately 58,600 cable television subscribers, which represents a penetration rate of approximately 70% of homes passed in its network region. Cable television services accounted for over 92% of its consolidated net sales in 2004, and 87% in 2005 with internet services increasing to 11% in 2005. Stream has a growing number of Internet subscribers. The Company has been introducing high-speed Interne t access to its networks and currently has 5,000 Internet subscribers along with 600 premium TV subscribers for total RGU’s to 64,250 subscribers.

Stream conducts its business in Southern Poland’s most densely populated region, with approximately 11.5 million inhabitants and 3.2 million television homes but only about 0.8 million cable subscribers.  Stream has targeted this area of Poland because of the number of mid-sized cities that remain underserved by larger cable operators.  Stream has funded its growth and operations principally through equity.  Stream’s management possesses cable-business expertise and experience and, in particular, knowledge of its local target markets.

Most of Stream’s networks have an 862 MHz bandwidth and potentially are able to transmit up to 94 analogue television channels and 68 radio stations.  A portion of Stream’s networks can already be used for two-way transmission, which is necessary for Internet access and other interactive services.  Stream’s policy is to upgrade the networks it has acquired, including for the provision of two-way data transmission.

Stream Poland has made a number of cable television acquisitions, all of which have been successfully integrated into its business.  These acquisitions include:

Date	Name of acquisition	Region of operation
April 2005	Vega II	Czestochowa
April 2005	Internet in Bytom	Bytom
Oct 2004	98% of Vega	Czestochowa
Sept 2004	Miechowice	Bytom
May 2004	60% of ASK	Sosnowiec
March 2004	Channel 69	Sosnowiec
June 2001	100% of Gimsat	Jaslo, Sanok, Brzozow
July 2001	MTK	Czestochowa
July 2001	A portion of the assets of AZART S.C.:
	AZART SC Telekom	Kielce
	AZART TK Trybinowski	Busko, Zdroj
September 2000	A portion of the assets of Elektromontaz Rzeszow S.A. El-Rzeszow “Telekab”	Rzeszow, Bochnia, Sankomierz
August 2000	A portion of the assets of Bister Sp.     Z o.o.	Jaworzno, Czechowice-Dziedzice
July 2000	A portion of the assets of Telemedia Sp. Z o.o.	Czestochowa
July 2000	A portion of the assets of Marsat S.C.	Czestochowa
June 2000	51% of the shares of Bielsat	Beilsko-Biala, Czechowice-Dziedzice

Bielsat

Stream Poland is one of the founders of Bielsat and, since Bielsat was incorporated on 8 March 2000, has held 51% of its shares.  PPUH Bielsat owns the remaining 49% of its shares.  

Gimsat

Stream Poland owns 100% of Gimsat, having made the final payment in May 2004. On 5 June 2001 Stream Poland and the Gimsat Shareholders concluded the agreement to sell 0.21% of the Gimsat share capital and a preliminary agreement to sell to Stream Poland shares representing 99.79% of the Gimsat share capital.  

ASK

ASK was purchased on May 5, 2004, wherein we paid some $200,000 for a 60% interest in share capital of ASK. ASK currently has approximately 1,300 Internet subscribers.

Miechowice

Some 4,300 CATV subscribers were purchased in September 2004 in the Bytom region. In April 2005 some 2,000 Internet subscribers were purchased in the same region.

Vega

 A 98% interest in Vega was purchased in October 2004 by Stream Poland to acquire some 4,200 subscribers. The balance of the ownership consisting of a 2% interest was acquired in 2005. A provision in the 2004 agreement allowed for the successful completion of a 10 year contract with an outside party that occurred in 2005 and formed part of the purchase price in 2005.

Our operating companies consist primarily of highly penetrated, mature broadband systems that generate stable cash flow.  We also operate a number of earlier stage broadband businesses.  Our primary goal in the majority of these regions is to capitalize on the opportunity to increase revenues and cash flows through the introduction of new and expanded programming and the delivery of Internet access services and telephony over our cable communications networks.  

Stream’s Cable Television Services

Stream Poland currently offers four programme packages and one bundled package:

·

TELE Miniatura (Basic Tier): targeted to reach up to 8 channels for most subscribers, including all four Polish public television channels and Stream Poland's own information channel; and

·

TELE Krajobraz (Intermediate Tier): targeted to reach up to 18 channels for most subscribers, including all Basic Tier channels, plus Polish terrestrial channels and channels received free-of-charge;

·

TELE Panorama (Top Tier): targeted to reach up to 45 channels for most subscribers, including all Intermediate Tier channels and certain pay channels including  e.g. Viasat History and Explorer, Eurosport, National Geographic, Fox Kids, BBC Prime, Polsat Sport and three music channels of VIVA;

·

TELE Panorama Plus (Premium Tier): targeted to reach up to 45 channels for most subscribers, including all Top Tier channels and premium channels Canal+. Canal+ Film and Canal+ Sport;

·

TELE Strada:the Top Tier along with high-speed always-on Internet access.

The different programming packages are designed to attract the maximum number of subscribers in a given franchise area, in order to obtain the highest possible penetration.  Stream markets to subscribers of lower priced tiers to encourage them to move to higher priced tiers.  In the future Stream intends to offer add-on premium channel packages of additional channels.

Because Stream has acquired its cable television network through acquisitions, the exact channels in program packages offered to customers vary across the network.  One of Stream’s strategic goals is to unify channel offerings, which it has already begun doing.  Over the longer term, Stream also intends to unify pricing structures across its networks. To the extent Stream has so far unified programmes and prices, it has not experienced high levels of customer churn.  

Because regulatory authorities in Poland do not currently set or oversee retail prices for either cable television subscriptions or Internet access services, Stream is free to charge a market price for these services.

Stream performs regular audits of customer installations to prevent piracy and maintains technology to help minimize potential signal piracy.  Stream does not believe that its signals are pirated extensively enough to have a material adverse effect on its business.

Stream’s Cable Television Programmes

Polish cable television operators have more than 200 channels from which to choose when building their programme offerings.  These channels are transmitted via satellites, the most popular of which are the Eutelsat and Astra satellites.  When deciding which channels to offer its subscribers, Stream takes into account programme demand analysis, subscribers’ opinions, and cost. Most of the licence agreements that Stream has entered into relating to programme purchases will be in effect for the next three to five years and may be extended.  Most of these licence agreements also provide that as Stream’s subscriber base increases, Stream may be able to modify the agreements to obtain more favorable terms.

Cable TV attracted a rate of 22% VAT in 2003, which was reduced to 7% in 2004. Internet access was at a rate of 7% VAT and; and on March 1, 2005 it changed to 22%.

Stream’s programming providers are: (a) Polish public television; (b) Polish privateterrestrial television stations licensed by KRRiT; (c) Polish and foreign satellite programme providers; and (d) local programme producers.

The table below contains the list of programmes for which Stream has signed licence agreements or obtained broadcasting permits from programme providers.

Table: List of programmes licensed by Stream

Channel No.	Name	Characteristics	Language
1	TVP 1	public television	Polish
2	TVP 2	public television	Polish
3	TVP POLONIA	public television	Polish
4	TVP 3	public television	Polish
5	POLSAT	private terrestrial	Polish
6	TVN	private terrestrial	Polish
7	TVN 7	entertainment	Polish
8	POLSAT 2	entertainment	Polish
9	TV 4	private terrestrial	Polish
10	TV Puls	general	Polish
11	Polonia 1	entertainment	Polish
12	Tele 5	entertainment	Polish
13	TV Trwam	catholic	Polish
14	BBC World	information	English
15	BBC Prime	entertainment	English
16	POLSAT Sport	sport	Polish
17	TVN Meteo	weather	Polish
18	TVN Turbo	cars etc.	Polish
19	TVN 24	information	Polish
20	Explorer	science	Polish
21	History	science	Polish
22	MINI MINI	children	Polish
23	Kino Polska	movies	Polish
24	TVN Style	entertainment	Polish
25	Ale Kino!	movies	Polish
26	Zig Zap	children	Polish
27	National Geographic	science	Polish
28	Planete	documentary	Polish
29	VIVA  PL	music	Polish
30	VIVA	music	German
31	VIVA+	music	German
32	RTL	entertainment	German
33	RTL 2	entertainment	German
34	SAT 1	entertainment	German
35	VOX	entertainment	German
36	Club	entertainment	Polish
37	Jetix	Children	Polish
38	Eurosport	Sport	Polish
39	Canal+	Entertainment	English
40	Canal+ sport	Entertainment	English
41	Canal+ film	Entertainment	English

For most subscribers, Channels 1-6 are available in Stream’s Basic Tier and Channels 1-14 are available in Stream’s Intermediate Tier.  Stream includes all these programmes in its Top Tier offering.  These offerings are subject to change as Stream effects the licensing changes required under the recent amendments to the Polish Copyright Act.

In compliance with Polish law, Stream carries the Polish terrestrial television channels for its subscribers.  Stream is currently involved in discussions to obtain rights to new channels.  Stream is not dependent on any one programme provider.

Stream’s data services

Data transmission over HFC networks is much faster and more reliable than over telephone lines.  Stream intends to upgrade 100% of its network to make high-speed Internet access available to all individual and business customers.

Stream’s VoIP service

These services offer substantial decreases in the costs of long distance and international calls as well as calls to mobile networks due to sound compression and the use of VoIP for transmission instead of standard voice channels.  At this time Stream has some VoIP customers, and will continue to offer VoIP services based on demand.

Marketing and sales

Most of the cable television providers that Stream has acquired did not advertise or market their services.  Stream does advertise and market its services in order to both retain its subscriber base and to add more subscribers.

Stream’s marketing and sales strategy is currently delivered through the use of professionally trained salespeople working at eight permanent customer care and marketing offices and through periodicpromotions of its services.  Stream also uses a preview channel, an information channel, promotional material mailed with monthly invoices and its website (www.streamcn.pl) to inform its customers of existing and new programmes and services.  Stream undertakes a number of additional marketing initiatives, including market research, radio advertising, newspaper advertising and subscriber contests.  All these efforts are aimed at limiting customer churn, moving customers into more expensive tiers of service and helping Stream gain market acceptance.

Stream has registered its trademark, its logo, and the names of its cable television programme packages.  

Overview of the Polish cable television industry

Poland has approximately 38.2 million inhabitants and 12.5 million households with a TV set.  Prior to 1989, during the Communist political regime, the Polish government controlled and regulated the television industry.  All frequencies and channel offerings were limited principally to government broadcast programmes.  In the early years of the post-Communist era, there was no effective regulatory authority.  This led to a proliferation of small cable operators building low-cost, poorly constructed cable systems in densely populated urban areas of Poland.

In more recent years, due in part to Poland’s economic development and the introduction of cable industry regulations, Poland’s cable industry has developed rapidly.  In addition, large cable operators, such as @Entertainment (later: UPC; United Pan-Europe Communications), have constructed high-quality cable systems and offered numerous programming choices.  

Despite these developments, the Polish cable television market remains underdeveloped.  According to the PIKE, there are currently about 500 operators with 1,086 networks providing services to 4.5 million of the country’s 12.5 million TV-homes, of which 70% are passed by cable.  The average monthly salary for the year ended December 31, 2005 was just over Cdn $1,100, while the average monthly cable subscription rates of the five biggest Polish cable operators was approximately Cdn $16.00 (including VAT).

Stream believes that there is significant potential for further consolidation among Polish cable television providers. Stream believes that currently the top twelve operators (including Stream) control approximately 65% of the built-out market, with the remaining 35% serviced by about 500 operators.  Stream expects consolidation among these providers, particularly as smaller operator’s face the regulatory compliance burdens of being required to meet minimum cable television network technical standards and pay for programming produced by others.

Stream believes that there are several reasons why Poland represents a favorable market for the provision of multi-channel cable services.  First, Poland is one of the largest single-language markets in Central Europe.

Second, watching television is a significant leisure activity in Poland, partly because cable television provides relatively inexpensive entertainment. Latest research indicates that each Polish household watches an average of 252 minutes of television per day.

Third, middle-income families living in multiple dwelling units, or MDUs, account for approximately 70% of residential housing in Polish cities.  This high housing density results in comparatively low costs for building cable television networks.  Currently Stream’s average network density is about 320 homes passed per kilometre of cable plant.  By comparison, the average housing density in the United States is 48 homes per kilometre of cable plant.

Fourth, in Poland the right to build cable television networks reaching MDUs is acquired through agreement with the owner of the MDU and does not require any permits from regulatory telecommunications authorities.  Under such agreements, the operator is allowed to connect all apartments located in a given building to its network.  Stream has entered into such agreements for renewable terms varying from ten to 20 years.

Technology

One of the most important aspects of Stream Poland’s strategy is the acquisition of other cable television networks from various operators.  These networks have different organisational structures and marketing policies and use differing equipment of varying capabilities. Valid telecommunications permits are in place for all acquired networks.

At a technical level, the acquired systems are all well suited to the transmission of television and radio programmes, and about nine per cent of them (the networks in Jaslo, Sosnowiec and Bytom) are already capable of providing the two-way transmission necessary for the provision of Internet access services.  Because Stream Poland plans to increase its revenues by selling premium programme packages and data transmission services throughout its network, further modernisation of Stream Poland’s network will be necessary.

Configuration of a typical cable television network

A modern CATV network generally follows the scheme above.  Networks that are constructed as in this scheme have a hybrid structure based on both fibre-optic and coaxial cables and are referred to as HFC, or hybrid fibre coax, networks.  

When acquiring systems from other cable operators, Stream Poland also acquires the existing infrastructures of those systems. When evaluating these infrastructures, Stream Poland focuses particularly on the number of subscribers connected to each headend, the configuration of the existing network, the configuration of the network within subscribers’ buildings and the network transmission bandwidth.

So far, the operators that Stream Poland has acquired have been small, and it is inherent in small cable network systems that subscribers’ plug-ins are in close proximity to the headends.  Because of their proximity, small cable networks usually do not use fibre optic cables to connect headends with plug-ins. In the context of the figure above, this would be illustrated by replacing the headend with a fibre optic node.

As a result of past acquisitions, Stream Poland now has more headends than are required to meet its current subscriber demand. The benefits of reducing the number of headends include a substantial decrease in network maintenance costs and in the costs of adapting headends when introducing new services.

The process of merging headends is related to the construction of new fibre optic cables, which, to the extent possible, are laid in a ring as shown in the diagram above.  In this process, a part of the network and headends are being replaced with fibre optic nodes.  This will allow the number of series or cascade amplifiers to be reduced, leading to improved signal quality and reduced line maintenance costs.  Additionally, whilst modernising the network, Stream Poland intends to replace local power sources with a smaller number of power supplies equipped with stand-by power capability.  This will help eliminate power failure as the principal reason for network disruption.

Almost all of the network installations at subscribers' premises have already been modernised and now possess a "radial" structure.  A radial structure allows for the simultaneous powering of subscriber plug-ins, which both removes signal disturbance and allows Stream Poland to disconnect subscribers more easily should the need arise.

The frequency spectrum is divided into different bands that are allocated by the applicable Polish  regulatory body (UKE) for the use of telecommunications operators.  The following bands are available to cable television operators:

·

5.0 - 60.0 MHz for path return;

·

87.5 - 108.0 MHz for radio channels; and

·

110.0 - 862.0 MHz for television channels.

The nominal capacity of Stream Poland’s networks is 68 radio channels with a bandwidth of 0.3 MHz and 94 television channels with a (European) bandwidth of 8.0 MHz.  The actual capacity of the networks is smaller because some frequencies are used by governmental bodies, mobile telephone operators and terrestrial radio and television operators.

At present, 81% of Stream Poland’s networks are engineered for the 862 MHz bandwidth, 14% operate at the 606 MHz bandwidth and 5% operate at 550 MHz.  Stream Poland estimates that, by the end of 2006, 95% of its networks will have been upgraded to the maximum 862 MHz bandwidth.

As part of Stream Poland’s efforts to adopt a common set of programme offerings across its network, all channels are processed at 720 MHz and the higher band is reserved for future transmission of a digital signal.

The cable television networks purchased by Stream Poland consist of equipment of varying quality, age and manufacturers.  Stream Poland constructs and upgrades the networks using equipment of recognised manufacturers.  The growth of cable television in Poland has led to the presence of representatives in Poland of the leading manufacturers of such equipment, including Scientific Atlanta, Motorola, Cisco and Times Fibre.  As it increases the size of its networks Stream Poland expects to be able to negotiate better prices for future equipment purchases.  

Stream Poland’s customer base and market share

Stream Poland has a total of approximately 58,600 CATV subscribers, which, as Stream Poland estimates, represents a seven percent market share in the districts in which Stream Poland operates.  Nearly all of Stream Poland’s customers are in MDUs.  As of the end of December 2005, Stream Poland’s penetration rate, calculated as the number of Stream Poland’s subscribers divided by the number of homes passed by Stream Poland, was approximately 70%.  Stream Poland has generally been able to improve upon the penetration rates of it’s acquired companies shortly after their acquisition.

Stream Poland experienced customer churn of approximately 9.60% in 2005 (an average of 0.8% per month), approximately 10.18% in 2004 and approximately 11.45% in 2003.

Stream Poland’s primary market is located in south-eastern Poland and includes the following districts: Slaskie, Malopolskie, Swietokrzyskie and Podkarpackie.  The map below illustrates the locations of Stream Poland’s cable television networks.

Locations of Stream Poland’s cable television networks

Please see exhibit 99.1 for Map

Stream Poland’s market has approximately 11.5 million people and 3.2 million television households, but only about 0.8 million cable television subscribers.  The region is the most densely populated in Poland, containing roughly 30% of the nation’s population.  There are 92 towns with more than 50,000 inhabitants in all of Poland, and 35 of them are located in this region.  

Competition among cable television operators is not as strong in Stream Poland’s market as in the largest Polish towns, where the market is relatively mature and where competing networks often overlap.  Stream Poland believes that there are good acquisition opportunities in its market because the operators who initially moved into this market were, and generally remain, small and independent.

Competition

In general, the cable television market in Poland is not overbuilt. At present, Stream Poland’s competitors have overbuilt only approximately 20% of Stream Poland’s network area. The following is a list of major cable television operators in Poland, who together hold approximately 50% of the Polish cable television market but currently have limited presence in the markets where Stream Poland focuses its business. They may, however enter Stream Poland’s markets in the future, and also may compete with Stream Poland in acquiring network assets. They are:

·

UPC Telewizja Kablowa, a subsidiary of the European cable television operator UGC Europe Inc. (formerly United Pan-Europe Communications) with approximately 1,000,000 subscribers in eight out of the ten of largest cities in Poland.

·

Vectra, with approximately 600,000 subscribers in Poland and operates in Wroclaw, Walbrzych, Bielsko Biala, Elblag, Olsztyn, Slupsk, Bialystok, Radom, Zabrze, and 80 other Polish cities.

·

Aster, a subsidiary of a consortium of investments funds, with 380,000 subscribers in Warsaw (Aster), Krakow (Autocom) and Zielona Gora (ZTP).

·

Multimedia Polska, with approximately 500,000 subscribers in Poland, mainly in Kalisz, Szczecin, Gorzow Wielkopolski, Lublin, Rzeszow, Gdynia, Torun and Plock.

Direct-to-home satellite television (the so-called digital platform), which is widely accessible in Poland, also competes with cable television. Two entities provide high quality direct-to-home satellite services in Poland:

·

Cyfra+, which has approximately 650,000 subscribers, and

·

Polsat Cyfrowy, which has approximately 280,000 subscribers.

There are up to six terrestrial channels available in Poland that also compete with cable television. However, in most cases the reception of aerial signals is generally so poor that, with the exception of viewers in the largest cities, most viewers are only able to receive some of these channels. The majority of viewers require access to cable television in order to receive even these six channels.

Regulation of Stream Poland’s services

Radio and Television Act

The Polish Radio and Television Act regulates the broadcasting of radio and television programmes and of cable channels.  The Radio and Television Act established the National Radio and Television Council (“KRRiT”).  KRRiT’s mandate is to support freedom of speech in radio and television, to support the independence of broadcasting organisations, to protect viewers’ interests and to ensure the open and pluralistic nature of radio and television.  KRRiT also seeks to prevent steps aimed at the establishment of a monopoly in radio and television, to eliminate censorship and to ensure, through its licencing policy, the pluralistic nature of the audio-visual mass media.  KRRiT also functions as the oversight authority for all activities of broadcasting organisations.

The Radio and Television Act ensures the independence of broadcasting organisations as they transmit information, entertainment, cultural and artistic events and other ideas by imposing on broadcasters norms and conditions for their programming structures and by allocating broadcasting time to specific programme items.  Such norms also apply to advertising, tele-shopping and sponsoring.  In order to enforce such restrictions, KRRiT is entitled to monitor the contents and reception of all radio and television programmes broadcast in Poland.  

The Radio and Television Act requires cable operators to obtain a licence to produce and broadcast radio and television programmes.  In addition, cable operators who distribute entire channels of a domestic or foreign broadcasting organisation must register such channels in the register kept by the Chairman of KRRiT.  The Chairman of KRRiT is authorised to issue such licences and to register channels.  The registration requirement applies to all channels, except for nation-wide public radio and television and other programmes of domestic broadcasting organisations which can be received within such cable operator’s area with common aerial reception equipment.

The application for registration of a channel must be filed no later than two months prior to the start of distribution.  A cable operator may commence transmission two months after the filing of the application for registration unless the Chairman of KRRiT has denied the registration within that time.  After the registration of a channel, a cable operator is obliged to notify KRRiT within 14 days if the contents of such channel have materially changed.

KRRiT may refuse to register a channel if a cable operator does not have a valid broadcasting licence or otherwise is not in material compliance with applicable law.  KRRiT may also refuse to register a channel if the content of the channel itself is in violation of applicable law.

A broadcasting organisation is also obliged to introduce its channels into the network in a specified order.  The Chairman of KRRiT may allow for a different sequence than indicated by law under justifiable circumstances.

The Radio and Television Act also provides for the possibility that the broadcasting of a particular channel may be prohibited if such broadcasting would violate any provisions of the Radio and Television Act or if the cable operator fails to broadcast its channels in the prescribed order, introduces changes to a channel, or fails to broadcast such channel in full or simultaneously.

At present, the Polish legislature is in the process of reviewing the Radio and Television Act.  Proposed modifications would be applicable to cable network operators, specifically concerning the registration of channels, the statutory channel sequence, the contents of channel registration applications and the criteria on which denial of registration or the prohibition of a channel offering would be based.  

Copyrights

Cable operators broadcast the works of authors whose rights are protected by copyrights. The Copyright Act protects such copyrights.  

Under the Copyright Act, cable operators may broadcast protected works only pursuant to an agreement with an organisation responsible for the collective management of copyrights or related rights.  Cable operators are required to pay a fee for the use of such works as specified in tariffs approved by the Copyright Commission, which in turn is appointed by the Minister of Culture and National Heritage.  At present, Polish law does not limit the amount payable to authors under such agreements. The Arbitration Commission of the Copyright Commission settles any disputes arising from the tariffs applied and, as of 1 May 2004, also settles disputes arising from agreements entered into by cable operators and the organisations responsible for the collective management of copyrights.

Although it has been assumed that the latest amendments to the Copyright Act would fully conform its provisions to EU law, Polish law does not reflect EU law completely.  For instance, there is no clear provision for so-called “general contracts” whereby copyrights as well as related rights are collectively managed.  General contracts are permitted in EU countries to ensure that cable operators can acquire all rights associated with a work. Consequently, the lack of such regulation in Poland means that many agreements may have to be negotiated with organisations responsible for the collective management of copyrights without a cable operator being able to ascertain that such agreements would fully cover all copyrights and related rights.

The amended Copyright Act, which became effective as of 1 May 2004, removed a statutory licence that enabled cable operators to broadcast the works broadcast by other radio and television broadcasters in a given area provided the programme was broadcasted simultaneously and integrally with the primary broadcast, it being understood that the initial broadcaster retained its right to remuneration. The removal of the statutory licence follows from the approximation of the Copyright Act to EU law, in particular to the provisions of Directive No. 93/83 on the Co-ordination of Certain Rules Concerning Copyright and Rights Related to Copyright Applicable to Satellite Broadcasting and Cable Broadcasting of 27 September 1993.

As the statutory licence is no longer available, it is now necessary for cable operators, including Stream Poland, to enter into agreements with all broadcasters, organisations responsible for the collective management of copyrights and television organisations for related rights protecting programmes produced by them.

Telecommunications law

All Polish telecommunications activities are regulated by under the Polish Telecommunications Act, which took effect on September 3, 2004. The Telecommunications Act imposes regulations on telecommunications activities and technical requirements for equipment to be used for telecommunications activities.  The term “telecommunications activity” is defined as business activity consisting in the provision of telecommunications services, the provision of telecommunications networks or associated facilities.  Moreover, the Telecommunications Act contains detailed provisions concerning telecommunications permits, radio permits, frequency usage, telecommunications secrecy, the  connection of networks, the co-operation of operators, telecommunications infrastructure and the functioning and organization of the Office of Electronic Communications  (“UKE”), among other provisions. The Telecommunications Act replac ed provisions concerning telecommunications activities contained in the Communications Act of July 21, 2000.

Under the Telecommunications Act, a permit is required to use the public telephone network. To operate a public network to broadcast or retransmit radio or television programmes a registration application is required, solely.  The Telecommunications Act does not contain any detailed prohibitions or restrictions on the area of telecommunications activity or the kind of services a cable operator may provide.  

The Telecommunications Act does not separately regulate Internet telephony services, because these services are considered data transmission services rather than the operation of a public telephone network. As described above, Stream Poland needs only to notify UKE that it is providing such services. Since UKE’s President did not object to Stream Poland providing these services, Stream Poland is permitted to provide them throughout Poland.

Competition and consumer protection

The Polish Competition Protection Act regulates, among other things, conditions that further competition, procedures for counteracting competition-restraining practices and the violation of consumer interests.  The governmental office responsible for enforcing the Act is the President of the Office of Competition and Consumer Protection (“UOKiK”).  Detailed provisions applicable to entities operating in the telecommunications industry, and in particular relating to dominant or significant market positions, are also contained in the Telecommunications Act.

Competition Protection Act

The threshold question of whether the Competition Protection Act applies turns on whether the entity in question holds a dominant market position.  A dominant market position typically exists if the entity is able to prevent efficient competition in a given market by being able to operate to a large extent independently of its competitors, business partners and consumers.  The Competition Protection Act assumes that an entity holds a dominant position when its market share exceeds 40%.  The Competition Protection Act prohibits any activities that are designed to restrict competition through the acquiring or strengthening of a dominant position in the relevant market.  Therefore, the Competition Protection Act prohibits specific activities aimed at the elimination or the restriction of competition; a list of such activities is contained in the Competition Protection Act.  

Activities related to the concentration of entities are also subject to regulation.  The Competition Protection Act imposes an obligation to notify the President of UOKiK of specific transactions, including any intended merger, share exchange, acquisition, or other transaction having a consolidating effect.  The President of UOKiK may prohibit such business combinations if, following such a transaction, the entities involved would acquire or strengthen a dominant position in the affected market that would substantially restrict competition.  If an entity fails to notify the UOKiK or takes other steps that violate the Competition Protection Act, UOKiK may levy fines against all parties participating in the combination and the individual members of their governing bodies.

The above notification requirement with regard to intended mergers applies to all entities whose total sales in the financial year preceding the year of notification exceed an equivalent of EUR 50,000,000.  However, the notification requirement does not apply if the turnover of the proposed target did not exceed the equivalent of EUR 10,000,000 in the two financial years preceding the notification.  In addition, no notification is required if the combined market share of both entities does not exceed 20% or if the concentration is affected by entities belonging to the same capital group.  According to an official interpretation of UOKiK, transactions among foreign entities that exert influence on market conditions in Poland may also be required to file a notification with the President of UOKiK.

Competition and the Telecommunications Act

The Telecommunications Act contains several provisions applicable to entities that hold a dominant or significant market position.  Whether a public operator holds a dominant position in a given market is determined under the provisions of the Competition Protection Act.  In order to establish whether a cable operator holds a significant market position in a given market, a cable operator must have a market share of at least 25%.  On the basis of certain criteria, it is also possible to establish that a cable operator whose market share is less than 25% holds a significant market position.  The President of UKE, acting jointly with the President of UOKiK, decides whether a cable operator in a given area holds a dominant or significant market position.

The Telecommunications Act imposes several obligations on cable operators that hold dominant or significant market positions.  Such obligations, depending on the position of such operator, may include submission to the review of common services agreements (and amendments thereto) or of bylaws for the provision of common services (and amendments thereto).  Such obligations may also include following certain procedures to establish rates for common services or that require that services be provided in accordance with certain rules.  In connection with such obligations, the President of UKE may use several means of enforcement against operators holding a significant market position.

The President of UKE publishes a list of operators that hold a significant and dominant position once a year. Stream is not yet on this list.

Special obligations in exceptional situations

Under the Telecommunications Act, operators are required to take into consideration, while planning, constructing, developing, using or merging telecommunications networks, the possibility of force majeure events, such as the imposition of martial or emergency laws or natural calamities.  Special obligations in such situations include, among other obligations, co-operating with officials, securing networks and telecommunications equipment, maintaining continuity of operation and ensuring access for emergency services and governmental officials to telecommunications equipment.

Certain special limitations are also imposed by the Act on Common Duty to Defend the Republic of Poland (“Defence Act”) of November 21, 1967 (Journal of Laws 1992, No. 4, item, 16).  In the event of operational reviews conducted by the armed forces, military drills, training in civil defence or common self-defence in peacetime, as well as in the event of an announcement of army mobilisation or at time of war, operators may be obliged to provide material services to the armed forces, such as renting real property and movables to the armed forces or to further state defence.

Stream Poland’s Organization, Management and Personnel

As a Polish limited liability company, Stream Poland has two levels of management:

Management Board; and

Supervisory Board.

The Management Board has the responsibility of making all executive management decisions, while the Supervisory Board has the responsibility of periodically monitoring and approving the activities of the Management Board.

The Supervisory Board directors of Stream Poland are elected by the shareholders (Parent Company) at each annual general meeting, or, in the event of a vacancy, they are appointed by the Supervisory Board of Directors then in office, to serve until the next annual general meeting or until their successors are elected and ratified.

Management Board:  

Stream Poland’s Management Board comprises of:

Adam Ilczuk

- President and CEO

Supervisory Board:

Stream Poland ’s Supervisory Board currently comprises of the following members:

Jan S. Rynkiewicz

Zbigniew Tragarz

Krzysztof Czwartkiewicz

Stream Poland Locations

Stream Poland currently rents 8,000 square feet in an office building, close to the center of Kraków and is considered adequate for the company’s head office needs for the foreseeable future. The customer database and the call center (to manage customer calls) are also located here.

Stream Poland also maintains small separate offices in Rzeszów, Bielsko-Biala, Jaslo, Sanok, Sosnowiec and Czestochowa to act as a base for local customer service and sales representatives. These local offices are connected with the head-office in Kraków and are able to access its database on-line.  

Office

Stream Poland utilizes about 8,000 square feet of office space in Krakow, Poland. Stream Poland’s rent is approximately $17,512 CDN per month.

IEWS (formerly: International Eco-Waste Systems) S.A.

IEWS was in the business of constructing and operating rendering plants in Poland. IEWS does not currently have any rendering plants in operation; however, it was planned to construct three animal-waste rendering plants in Zabokliki, Torun and Rawa Mazowiecka, Poland.  

In view of developments and uncertainty with BSE issues and as a result of our focus on cable TV and the operations of Stream Poland, we decided that the operations of IEWS did not fit with our current objectives.

Stream owns 100% of shares of IEWS. Stream has liquidated the business affairs of IEWS and intends to launch new activities compatible with the telecommunication services.

Streamline Media (formerly: Polvoice.com) Sp. z o.o.  

Since October of 1999, Polvoice had been working on the development of software to offer Internet services in Poland. In November of 1999, Polvoice applied to the Ministry for Telecommunication in Poland for a license that is essential for Polvoice to operate in that sector in Poland. Polvoice received its telecommunications license as of August 22, 2000.  

Polvoice’s business objective was to become an Internet, data transmission, and VoIP provider in Poland. Polvoice services did include VoIP services, data transmission, teleconferencing, web site development, and maintenance.  Polvoice is presently inactive, but the Company may launch new activities sometime in the future.

Item 5 – Operating and Financing Review and Prospects

Overview

We prepare our financial statements in Canadian dollars and in accordance with Canadian GAAP reconciled to US GAAP.

Our core business is considered to be our cable TV operations. At December 31, 2005 some $13 million CDN had been spent on the acquisition of cable television network equipment and $7.6 million CDN on the acquisition of licenses and subscribers. Our future business growth is expected to consist of buying subscribers from independent operators, building networks in areas where existing operators are unwilling to sell us their subscribers, buying interests in existing cable operations and reconstructing old systems by preparing them for the transmission of new services, including pay-per-view, internet, and video-on-demand.

Results of Operations

Year ended December 31, 2005 compared to the year ended December 31, 2004

Revenue increased by 31.7% in the current year as compared to 2004. We are continuing to make acquisitions of subscribers; we will build out and offer new services; and increased channels for viewing and spend money on marketing campaigns. This year we have acquired approximately 8,100 subscribers. The average number of RGU’s during 2005 was 60,700, as compared to 2004 where the average number was 48,600. At the end of 2005 the total number of RGU’s was approximately 64,250.

Loss from operations for the year (before amortization and other items) was $3,079,495. Included in the loss are stock-based compensation charges of $873,983 being a non-cash expense created from the granting of stock options in 2005. Adjusting for stock-based compensation, there would be a loss from operations of some $2,258,512. The investor relations campaign was costly and it did not produce any immediate results. The program did create a lot of awareness however. It is unknown as to the long-term benefits. The expenses of running a head office in Vancouver excluding investor relations costs amounted to approximately $2 million. This includes the cost of settlement of the departure of the president for a cost of approximately $210,000. Removing the cost of head office in total gives a positive EBITDA of $1.377 million from operations. Although the cost of a head office cannot be removed in total, a combination of reduced costs in Vancouver and Poland can make a significant difference. It is the company’s objective to reduce as many costs as possible in 2006.

Summary of Quarterly Results

Results for the eight most recently completed quarters are summarized as follows:

	Total revenues	Net loss for the period	Net loss per share (basic and diluted)
December 31, 2005	$1,507,689	$826,874	$0.01
September 30, 2005	1,435,392	859,350	0.02
June 30, 2005	1,445,359	1,517,202	0.04
March 31, 2005	1,437,672	2,607,933	0.06
December 31, 2004	1,411,170	3,401,606	0.11
September 30, 2004	1,063,836	186,628	0.01
June 30, 2004	1,078,645	2,693,005	0.09
March 31, 2004	861,810	283,476	0.01

Year ended December 31, 2004 compared to the year ended December 31, 2003

Revenue increased by 32.5% in the 4^th quarter period ended December 31, 2004 and 19.3% for the current year compared with last year. In terms of the Polish zloty, the currency in which revenue is actually realized, sales increased by 20.1% in the current year as compared to the previous year. Over the comparable periods the exchange rate changed to 2.8049 from to 2.7850, or approximately 0.7%.

One of our main objectives is to increase revenue which we are achieving through continuing to make acquisitions of subscribers, building out new services, continuing to offer new services and increased channels for viewing and spending money on marketing campaigns. Last year we acquired approximately 10,000 subscribers and the full effect of these additions will be seen in 2005. Using a weighted average the effect of the 10,000 subscribers acquired in 2004 is equivalent to some 3,500 subscribers on a full-year basis. This then would account for an 8.3% increase in revenues for 2004. From the advertising campaigns carried out there was an increase in the Internet subscribers late in 2004. In May of 2004 the VAT rate on CATV services decreased from 22% to 7%; since we did not alter the prices we charged our customers this amounts to an effective price increase for us. Additional marketing campaigns target new users to take on new channels and new products not previously available to them.

Loss from operations (before amortization and other items) created a loss of $2,297,842. Included in the loss are stock-based compensation charges of $2,071,510 being a non-cash expense created from the granting of stock options in 2004. Also business development and other costs of some $680,000 were paid by the issuance of shares and represent costs that are not recurring. Adjusting these items, there would be a profit from operations of some $400,000 as compared to the previous year’s loss of some $900,000. On average there has been a decrease in the cost of line maintenance, billing, access to the Internet and customer services.

As the number of subscribers increases there are variable costs that increase, some in direct proportion and some at a lesser rate. Our fixed operating costs should support our existing subscriber base plus a 50% or better increase. The 2004 expenses show some moderation as compared to 2003 with the exception of sales and marketing that increased as a result of various cable TV and Internet sales campaigns. The sale and marketing cost will vary according to opportunity, corporate mission, and competition. As Stream operates in non-competitive areas as a result of selective acquisitions, competition is not presently a major factor.

Included in the financing expenses is the issuance of 1.1 million shares from treasury at $0.41 USD per share for a total expense of $543,365. Mr. Mazur, a previous director, received 1.1 million shares as a bonus for providing capital to the Company by way of private placements and loans at prices and rates which were very favourable to the Company. Mr. Mazur is owed a total of $4.2 million at December 31, 2004.

In addition to cable TV and Internet services, Stream does offer VoIP services and has some VoIP customers. This is a sector of unknown direction, but Stream is ready and able to handle a demand for VoIP services.

During 2004 Stream begun the development of providing television program content. The Company is in the development of various strategies to market and provide content in Poland and neighbouring areas. To this end Stream conducted various surveys. Pursuant to the development of content, Stream issued 3 million shares from treasury at a deemed price of $0.49 per share. The next phase of development will require an operating budget of $2 million per annum.

Year ended December 31, 2003 compared to the year ended December 31, 2002

In the year ended December 31, 2003, Revenue decreased 0.98% compared with last year in terms of Canadian dollars. The actual net sales increased from 9,705,000 to 10,304,982 Polish zloty in 2003.  The increase of net sales in Polish zloty was 6.18%. The difference is attributable to the change in the exchange rates between the Canadian dollar and the Polish zloty. The average exchange rate for the year increased from 2.5972 to 2.7850 in 2003. The increase in net sales is attributable to existing subscribers’ switching to more expensive programme packages and to increases in the rates charged for each programme package. Some of the increase in revenue has been offset as a result of churn. Churn is a measure of the turnover of Stream’s customer base.  Stream’s churn rate has been approximately 12% over the past year; for an average of approximately 1% of Stream’s customer base being disconnected and replaced by new customers each month.  In 2002, Stream’s churn amounted to approximately 8% (or approximately 0.65% per month) whilst significantly adding to its subscriber base through acquisitions.  The increase in churn is attributable to Stream continuing to raise prices throughout its network, to Stream vigorously applying its policy of prompt disconnection of non-paying subscribers and to the loss of some customers.

Total expenses for the current year has increased 8.95 % compare with last year. Excluding one-time write-off of deferred charges being the amount of $2,400,713, the total expenses were decreased by 18.16%.

To test for impairment of intangibles, the Company hired Evans & Evans to write a report on the carrying values for the acquisition of MTK and Gimsat. According to the report, a value of $249.50 per subscriber acquired gave a fair value below the book value of $1,960,000. This amount was written off in the statement of operations for the year ended December 31, 2003.

Year ended December 31, 2002 compared to the Two Months ended December 31, 2001

Average monthly revenue is relatively unchanged from the previous period, as the subscriber base has not materially changed in the past fourteen months. On a calendar year basis revenue has increased 41%. This growth was due principally to Stream’s take-over of subscribers of other operators through the acquisition of those operators. The increase in net sales was also attributable to existing subscribers’ switching to more expensive programme packages and to increases in the rates charged for each programme package. Although there has been an increase in rates charged to subscribers in 2002, revenue did not change as a result of churn. Churn is a measure of the turnover of Stream Poland’s customer base. In 2002, Stream’s churn rate was approximately 12%; therefore, during 2002 on average of approximately 1% of Stream’s customer base was disconnected and replaced by new customers each month. In 2001, Stream’s churn amounted to approximately 8% (or approximately 0.65% per month) whilst significantly adding to its subscriber base through acquisitions.  The increase in churn from 2001 to 2002 is attributable to Stream continuing to raise prices throughout its network, to Stream vigorously applying its policy of prompt disconnection of non-paying subscribers and to the loss of some customers in the months following Stream’s acquisition of their accounts from their former cable service providers. Bad debt expense for the year ended December 31, 2002 was approximately 1.5% of sales.

The average monthly costs of expenses for the year ended December 31, 2002 was Cdn $484,785 before amortization for a total of $5,817,419 for the year as compared to the two months ended December 31, 2001 of Cdn $645,400 per month. This shows a decrease of about 25%.  On a calendar year basis there was a decrease in the cost of line maintenance, billing, access to the internet and customer services. On the other hand, the cost of television programmes and licence fees increased, as did sales and marketing costs.

In June of 2001, Stream Poland and the Gimsat shareholders concluded a preliminary purchase and sale agreement by which Stream Poland would acquire 100% of Gimsat shares. This preliminary agreement contemplated the consummation of the purchase and sale to occur on or before June 30, 2003. Pursuant to the preliminary agreement an irrevocable power of attorney covering 99.79% of Gimsat’s shares and a registered pledge agreement covering 99.79% of Gimsat’s shares secures the repayment of Stream Poland’s advance in the event the purchase of Gimsat does not close on or before June 30, 2003. The closing date was re-negotiated to 29 May 2004. As at December 27, 2001, Stream Poland had advanced a total sum of Cdn $3.5 million to the Gimsat shareholders. Under Canadian GAAP the operations of Gimsat were consolidated as of January 1, 2002. The remaining amount of Cdn $1.6 million was paid to the Gimsat shareholders on 2 8 May 2004 thereby completing the transaction.

Liquidity, Capital Resources and Subsequent Events

Our working capital deficiency as at December 31, 2005 was $2,552,173. At December 31, 2005 we had a bank credit facility in Poland of $500,000 USD. The working capital at December 31, 2004 was a negative $2,845,579 thus there is a slight improvement in working capital. This improvement was a result of private placements and shares being issued for services.

The Company had announced a private placement of up to 1,500,000 units ("Unit") at a price of $0.75 USD per unit. Each Unit was comprised of one common share and one half non-transferable share purchase warrant, with each two warrants entitling the holder to purchase an additional common share of the Company at a purchase price of $1.00 USD per common share for a period of two years. The private placement was subject to a repricing and was closed at a rate of $0.60 USD per unit with the warrant share price at $0.80 USD expiring on August 31, 2007. A total of 2,052,600 units were sold.

On September 30, 2005 a private placement was closed for 4 million shares at a price of $0.1875 USD per share for total proceeds of $750,000 USD (equivalent to $870,000 CAD).

In addition a private placement for 1,344,014 units was completed at $0.1875 USD per unit.  Each unit  was comprised of one common share and one half non-transferable share purchase warrant, with each two warrants entitling the holder to purchase an additional common share of the Company at a purchase price of $0.28 USD per common share for a period of two years.

From the proceeds of private placements, the loan of $650,000 from Quest Capital Corp. was paid in full.

In addition to private placements, and an effort to reduce debt and pay for services, 2,492,292 shares were issued for wages, legal services and interest expense. The acquisition of the Vega network was paid partly in cash and the issuance of 2,140,229 shares. Other issuances of shares were the exercise of stock options for 340,000 shares and 691,966 shares to repay short-term loans. With the acquisition of Vega additional revenue from this acquisition started on October 1, 2005.

Stream has identified and assessed several target acquisition networks in Poland. Stream is considering financing proposals, both equity and debt, to move ahead to the next level. Presently Stream has some 65,000 subscribers, a sufficient number of subscribers to produce a cash flow to cover normal operating expenses. This means that additional subscriber numbers will create cash flow to sustain debt, a new milestone for the Company.

Our senior management establishes our overall funding and capital policies, monitors the availability of sources of financing and reviews the foreign exchange risk.

Our working capital deficiency as at December 31, 2004 was $2,845,579. As over 93% of our assets are plant, property and equipment and intangibles pursuant to the subscriber base, there is room to finance our activities with commercial loans. At December 31, 2004 we had a bank credit facility in Poland of $500,000 USD.

Most of the capital flowing into Stream during 2004 was loans of some $4 million from Edward Mazur, a former director. Mr. Mazur loaned the sum of some $3.4 million USD of which $2 million USD is secured by certain Polish cable TV networks.

In December 2004, Stream borrowed the sum of $650,000 from Quest Capital Corp. (“Quest”) to cover short-term needs. This loan was to be have been repaid on or before June 30, 2005. The loan was personally guaranteed by Stan Lis, Casey Forward and Edward Mazur. In addition, Quest had a general security over the assets of Stream and 3 million shares of Stream as collateral security. The loan attracted interest at 1% per month, with interest payable monthly. A fee of 175,000 shares of Stream was paid to Quest as a loan fee. Quest agreed to a further extension to September 30, 2005 at which time the loan was repaid.

We continue to raise cash from equity sources and we will continue with this program until we achieve sufficient cash flow to allow for debt financing and debt servicing. We believe the Company is at the threshold of being able to make acquisitions by way of debt financing.

Subsequent to December 31, 2005, on February 27, 2006 a private placement was completed for the issuance of 2,366,666 shares, at a price of $0.1875 USD per unit comprised of one common share and a non-transferable share purchase warrant, where two warrants entitled the holder to purchase an additional common share of the Company at a purchase price of $0.28 USD per common share for a period of two years.

Subsequent to December 31, 2005 on March 24, 2006 a private placement was completed for the issuance of 1,733,333 units. Each unit is comprised of one common share and a non-transferable share purchase warrant at a price of $0.1875 USD per unit, where two warrants entitle the holder to purchase an additional common share of the Company at a purchase price of $0.28 USD each for a period of two years.

Subsequent to December 31, 2005 on May 8, 2006, a private placements with two placees was completed for a total of 2,400,000 units at $0.15 USD per unit for total proceeds of $360,000. Each unit consists of one common share and a one-half warrant, wherein one warrant will enable the holder to purchase one common share at $0.225 USD for a period of two years.

Subsequent to December 31, 2005, on February 27, 2006, shares for a total of 240,000 have been issued for a debt of $51,710. On April 19, 2006, shares for a total of 105,000 have been issued for a debt of $22,500. On May 8, 2006, shares for a total of 350,000 have been issued for services of $58,625.

Investor Relations

In the period from March to May 2005 Stream embarked on an investor relations campaign. This is an area that has not received any specific funding in the past, but the Company felt it was necessary to start branding with investors and make investors aware of the goals of Stream. The total budget planned for 2005 was some $2 million. For the year ended December 31, 2005, the Company has spent $1,460,977 on investor relations. This included a new website and new corporate design materials, printing and mailing costs, and corporate development programs. The program did not produce the results expected to date, and the program has been terminated. The program has resulted in increased investor awareness that with positive corporate news could result in increased investment.

Contractual Obligations and Loans payable

Contractual obligations at December 31, 2005 are as follows:

	Total	Less than 1 year	1-3 years	4-5 years	After 5 years
Long-term debt	4,917,344	131,771	4,818,259	55,501	Nil
Capital lease obligations	256,782	168,595	88,187	nil	nil

Off-Balance Sheet Arrangements

The Company has not entered any off-balance sheet arrangements.

Critical Accounting Estimates

The preparation of financial statements in conformity with Canadian GAAP requires the Company to select from possible alternative accounting principles, and to make estimates and assumptions that determine the reported amounts of assets and liabilities at the balance sheet date, and reported costs and expenditures during the reporting period.  Estimates and assumptions may be revised as new information is obtained, and are subject to change.  The Company’s accounting policies and estimates used in the preparation of the Financial Statements are considered appropriate in the circumstances, but are subject to judgments and uncertainties inherent in the financial reporting process.

The Company follows accounting guidelines in determining the fair value of stock-based compensation, as disclosed in Note 11(c) to the Financial Statements.  This calculated amount is not based on historical cost, but is derived based on subjective assumptions input into an option-pricing mode.  The model requires that management made several assumptions as to future events: 1) estimate the average future hold period of issued stock options before exercise, expiry or cancellation; 2) future volatility of the Company’s share price in the expected hold period (using historical volatility as a reference); 3) and the appropriate risk-free rate of interest.  The resulting value calculated is not necessarily the value which the holder of the option could receive in an arm’s length transaction, given that there is no market for the options and they are not transferable.  It is management’s view th at the value derived is highly subjective and dependent entirely upon the input assumptions made.

The Company records an allowance for doubtful accounts for estimated credit losses based on the Company’s knowledge of the financial condition of its customers.  A change to these various assumptions could impact the valuation of accounts receivable.

Changes in Accounting Policies including Initial Adoption

There was no change in accounting policies in 2005. Effective January 1, 2003, the Company changed its accounting policy on a prospective basis with respect to the method of accounting for stock-based compensation. The Company adopted Canadian Institute of Chartered Accountants Handbook section 3870, Stock-based Compensation and Other Stock-based Payments, and has chosen to account for all grants of options to employees, non-employees and directors after January 1, 2003 in accordance with the fair value method for accounting for stock-based compensation as defined by accounting principles generally accepted in Canada. Stock-based compensation awards are calculated using the Black-Scholes option-pricing model ("Black-Scholes"). Previously, the Company used the intrinsic value method for valuing stock-based compensation awards granted to employees and directors where compensation expense was only recognized for the excess, if any, of the q uoted market price of the Company's common shares over the common share exercise price on the day that options are granted.

Financial Instruments and Other Instruments

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and long-term debt approximate their carrying values due to the short term or demand nature of these instruments.  It is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.  

ITEM 6 – Directors, Senior Management and Employees

Our board of directors is elected by our shareholders as indicated in our Articles. Directors have not entered into any service agreements and do not receive any remuneration. Our executive officers are appointed by our board of directors and have service agreements with us. The normal notice period for executive officers is 12 months. In the case of Stream Poland, both the Supervisory Board and the Management Board are elected by the General Meeting of Shareholders (in practice – by the only shareholder i.e. the Parent Company). The following sets out our directors and officers.

Directors and Senior Management

The Company
Iwona Kozak	President, Director
Robert Wussler	Chairman of the Board, Director
Jan Rynkiewicz	Director
Tomasz Tur	Chief Financial Officer
Stream Communications Sp. z o.o.

Adam Ilczuk	President
Dariusz Bigaj	Chief Financial Officer
Zbigniew Tragarz	Supervisory Board
Krzyztof Czwartkiewicz	Supervisory Board
Jan Rynkiewicz	Supervisory Board

Iwona Kozak since 1 March 1996 she has been a Director and Vice President for Corporate Affairs and since 23 April 1999 she has been its Secretary. Born in Poland, she has been living in British Columbia since 1984. She graduated from the British Columbia Institute of Technology with a diploma in marketing. She has a broad experience in the area of marketing and public relations. She perfected her managerial and business skills as the co-founder and president of a division of the Canadian Polish Chamber of Commerce in British Columbia. In the years 1993-1995 she published a magazine dedicated to economics called ”Partners with Poland” (“Partnerstwo z Polska”) and provided advisory services to Canadian companies in the area of investments in Polish markets.

Robert Wussler was appointed on May 4, 2004. Bringing an impressive background in broadcasting and telecommunications to the company, Mr. Wussler is currently President and Chief Executive Officer of Ted Turner Pictures and Ted Turner Documentaries. An acknowledged leader in the television industry for over three decades, he has been responsible for groundbreaking advances in news production at CBS News and CNN. The former President of both CBS Sports, and the CBS Television Network, Mr. Wussler was a co-founder of CNN, TNT and WTBS, and Senior Executive Vice President of Turner Broadcasting. Bringing an extraordinary background in cable telecommunications to his work with Stream, Mr. Wussler was also President and CEO of Comsat Video Enterprises, where he led the company through unprecedented growth.

Jan Rynkiewiczbecame a Director of the Company on January 18, 2006, having previously been a director from April 24, 1998 to February 1, 2002 and from May 29, 2003 to May 31, 2004. A graduate of the School of Banking and Insurance in Warsaw, Jan Rynkiewicz moved to the UK in 1974, residing there for the next sixteen years. In 1977, he founded Courtfield Construction Ltd., a London-based building construction company.  From 1986 through 1993, Mr. Rynkiewicz became an associate of Invesco in Poland and serves as Chair of the Board of Directors of Castle holding Ltd. of Warsaw, a consulting company with expertise in facilitating development of Polish industry privatization. Mr. Rynkiewicz was notably President of Zywiec S.A. (one of Poland’s brewing group) during a period when this company successfully undertook an expansion program, secured Heineken as a major strategic investor, and became a capitalized company on The Warsaw Stock Exchange.  

Adam Ilczuk brings more than ten years of experience in the telecommunications / multimedia business. Most recently, throughout 2004 and 2005, Mr. Ilczuk worked in Russia as the Commercial Director of Comcor-TV and as Vice President of Sales and Marketing of its holding company Moscow CableCom Corp. Mr. Ilczuk managed the project of wiring the city of Moscow to provide broadband services including cable television, high-speed Internet access and IP-based telephony to residential and business customers. Previously, Mr. Ilczuk spent 6 years working initially as a Financial Director, and later as Business Development Director and Regional Director for United Pan-Europe Communications (UPC) in Poland, and its predecessor company, Polska Telewizja Kablowa (later called @Entertainment). Mr. Ilczuk grew the business in one of his regions from 15,000 to 240,000 subscribers through aggressive acquisitions and new construction while raising the ARPU by over 200%. @ Entertainment was acquired in June 1999 by UPC, the largest cable operator in Europe for $1.1 billion. Mr. Ilczuk holds an MBA in Finance from the University of New Haven. Mr. Ilczuk also attended the Warsaw School of Economics, where he studied International Business. He is also fluent in English, Polish, German and Russian.

Tomasz Tur –Appointed on June 1, 2006, has over ten years of professional experience in private equity, venture capital, corporate finance, M&A transactions, start-ups, turn-around and crisis management across a range of various businesses. Focus on origination, structuring and transaction execution. Direct experience in company management and restructuring as well as turn-around and financial management. Exposure to information technology and high-tech sectors. From April 2004 to March 2006, Mr. Tur was with Deloitte (Financial Advisory Services Group) as Manager of the Deloitte FAS department focusing on corporate finance services to broad range of clients and sectors in Central & Eastern Europe.

Darek Bigaj - With Stream Communications Poland since June 2000. Duties: managing 7 people, implementation of SUN accounting system and management accounting. For all subsidiaries: reporting, controlling, cash flow analysis, planning and budgeting, implementation of internal control procedures, quarterly preparation of consolidated financial statements, development of central accounting department for the whole group. Due diligence review and analysis of targets considered to be taken over. From September 1996 to 2000 worked at PricewaterhouseCoopers Warsaw Poland as a Senior Associate in audit department. Main projects were connected with the audit of join stock companies WSE) carried out according to both Polish and International Accounting Standards. Graduated from MBA in School of Business at Warsaw University of Technology in 1996. A Graduate of the Mining and Metallurgy University of Technology in Krakow (AGH), engineer faculty of Min ing and Geology.

Executive Compensation

For the purpose of this annual statement, the following words and phrases shall have the following meanings:

“Equity security” means securities of a company that carry a residual right to participate in earnings of that company and, upon liquidation or winding up of that company, its assets;

“Option” means all options, share purchase warrants and rights granted by a company or any of its subsidiaries (if any) as compensation for services rendered or otherwise in connection with office or employment;

“LTIP” means a long-term incentive plan, which is any plan providing compensation intended to serve as incentive for performance to occur over a period longer than one financial year, whether the performance is measured by reference to financial performance of the company or an affiliate of the company, the price for the company’s securities, or any other measure, but does not include Option or SAR plans or plans for compensation through restricted shares or restricted share units.

The total compensation we paid during the last fiscal period to all of our directors and officers as a group for services in all capacities was $755,341 CDN.

The following table details the compensation paid to our executive officers for the year ended December 31, 2005

Summary Compensation Table
Name	Salary ($CDN)	Bonus ($)	All Other and annual Compensation and LTIP Payouts ($CDN)	Securities under Option	Restricted Shares or Restricted Share Units
Stanislaw Lis *	$66,895	Nil	$240,444	600,000	Nil
Iwona Kozak *	$104,895	$50,000	$30,087	250,000	Nil
Adam Wójcik *	$83,990	Nil	$39,480	450,000	Nil
Casey Forward *	$96,000	Nil	$2,387	400,000	Nil

*

·

A number of changes have taken place recently in the management of the Company. On August 15, 2005 Stan Lis resigned as CEO, President and a director. Iwona Kozak was appointed president on August 15, 2005.

·

On March 31, 2006 Adam Wojcik left the Company as was replaced by Adam Ilczuk.

·

On May 31, 2006 Casey Forward was replaced by Tomasz Tur as the Chief Financial Officer.

·

On June 5, 2006 the Company announced that the head office would be relocated from Vancouver, British Columbia, Canada to Warsaw, Poland reflecting the obsolescence of the Vancouver office and the need to be more centrally located.

Management Contracts

The Company has signed on August 15, 2005 an employment agreement with Iwona Kozak as President of the Company at an annual salary of $120,000 per annum for period of five years. In addition to the annual salary, she shall be entitled to a 50% bonus of the basic salary in the absolute discretion of the Board of Directors. She is also entitled to receive an annual fee of $15,000 USD as a base director’s fee and an additional fee of $1,500 USD per board meeting held outside her place of residency. The Company shall lease a vehicle not exceeding $900 per month. If Ms. Kozak dies or becomes permanently of totally disabled and the Company terminates her agreement, she is entitled to receive a one-time payment of $100,000.

Directors’ fees

Independent directors are paid an annual fee of $15,000 USD as a base director’s fee and an additional fee of $1,500 USD per board meeting held outside their place of residency. The Chairman is paid a base director’s fee of $35,000 USD.

Long-term Incentive Plans - Awards in most recently completed financial period

During its most recently completed financial year, and for the two previously completed financial years, we have not awarded or instituted any LTIP's in favour of its executive officers.

Defined Benefit Plans

We do not have, and at no time during its most recently completed financial year have had, any defined benefit or actuarial plans in respect of which any of its executive officers were eligible to participate.

Options to Purchase Securities From Our Company

In order to create a mechanism for the recruiting of and providing incentives to certain persons and to recognise and reward their contributions to our growth, the Board of Directors adopted the Stock Option Plan (“Plan”). The purpose of the Plan is to encourage such persons to acquire our shares and perceive such transaction as a long-term investment. Options to purchase shares under the Plan are granted to Directors, employees and affiliates of the foregoing.

The Board of Directors is entitled, at its own discretion, to determine which persons will be granted options under the Plan. If the Board of Directors grants any options, it will specify the number of shares that may be purchased pursuant to the option.

While the decision to grant options is in the sole discretion of the Board of Directors, they may base decisions to grant options on the following factors: the annual remuneration of the person in relation to the total of the remuneration paid by us, the duration of employment of such person and the quality of work done by such person, amongst other factors.

As a confirmation of the option grant, the option holder is issued a certificate specifying the date, number of the shares allocated, share purchase price, and the period of time during which the option may be exercised. The Plan and the granting of options constitutes neither a guarantee to potential option holders that they will continue to perform their functions nor a guarantee that we will continue to employ such persons.

The Plan was amended at the Annual General Meeting of the shareholders held on June 30, 2004 where the shareholders authorized the directors to issue up to 5,941,135 stock options to directors, employees and consultants. At the Annual General Meeting to be held on June 29, 2005, the shareholders are being asked to amend the Plan to the maximum number of stock options allowable to 7,992,212. Other than the maximum number of shares allowable for distribution there are no other changes to the Plan. In summary the basic restrictions are:

(a) One person may not receive more than 5% of the outstanding shares;

(b) Options granted to one person in a given year may not exceed 5% of the outstanding shares;

(c) Shares allocated to all persons employed in contacts with investors may not exceed 2% of the outstanding shares, unless the rules of the TSX allow for a different limit; and

(d) Shares earmarked for consultants may not exceed 2% of the outstanding shares.

In the event that an option has lapsed for any reason whatsoever without having been exercised in full, the shares with respect to which the option has lapsed may again be issued for the purposes of the Plan. The expiration date of an option is the date determined by the Board of Directors with respect to individual options, which date, however, may not be later than ten years after the option was granted.  

The Board of Directors is also exclusively entitled to determine the purchase price of shares by option holders.

Employees

The average number of employees was as follows:

	Year ended December 31, 2005	Year ended December 31, 2004	Year ended December 31, 2003
Parent	3	5	3
Stream	81	76	75

ITEM 7 – Major Shareholders and Related Party Transactions

Major Shareholders

To the best of our knowledge, we are not owned or controlled, directly or indirectly, by another corporation or by any foreign government.

As at the date of this annual statement the following persons or groups are known to us to each own more than 10% of our issued and outstanding common shares, which as of May 31, 2006 was.

Name and Address of Shareholder	Number of Securities owned	Percentage of Securities owned
CDS & Co NCI Account 25 The Esplanade Toronto, Ontario, M5W 1G5 Canada (Canadian depository for brokerage houses)	20,701,650 Common shares	39.25%
Cede & Co PO Box 20 Bowling Green Station New York, NY, 10274 (US depository for brokerage houses)	6,903,961 Common shares	13.09%
Rosewood Investments LLC 110 Woodland Barrington IL 60010	5,944,376 Common shares	11.27%

To the best of our knowledge, there are no arrangements, the operation of which at a subsequent date will result in a change in control of our company. Registered shareholders in the United States account for 1,192 holders having 16,261,160 shares or 30.8% of the total issued.

Related Party Transactions

An amount due to a former related party, Mr. Edward Mazur, a former director, was transferred to an arms-length party on December 22^nd, 2005.

ITEM 8 – Financial Information

Legal Proceedings

The Company is defending an action from Stikeman Elliot, Vancouver, British Columbia pursuant to unpaid legal invoices. The lawsuit demands the sum of $280,245 CDN. Management are prepared to settle this account but are concerned that the legal costs charged to the Company were too high, in many cases not required and not directed by the Company or on its behalf.

The company has received invoices from a creditor for amounts due for work performed in regards to an IPO on the Warsaw exchange in 2003.  The amount claimed is US$3,145,885 of which $NIL has been accrued at December 31, 2005 (December 31, 2004 - $NIL). The Company is of the opinion that these amounts are due if the IPO on the Warsaw Exchange is completed.

ITEM 9 – The Listing

Nature of Trading Market

Our common shares are listed on the OTC BB Exchange n the United States, under the symbol “SCNWF. We started trading on the OTC BB on March 11, 2004.

Trading on the OTC BB

The following table sets forth the high and low sale prices on the OTC BB for our common shares for each monthly period in the past six months.

Month Ended	High	Low	Volume
May 31, 2006	USD $0.19	USD $0.17	752,100
April 30, 2006	USD $0.26	USD $0.19	1,010,600
Mar 31, 2006	USD $0.25	USD $0.16	1,424,500
Feb 28, 2006	USD $0.20	USD $0.16	2,203,500
Jan 31, 2006	USD $0.21	USD $0.17	1,709,600
Dec 31, 2005	USD $0.16	USD $0.14	2,059,600

For the period of the start of trading to December 31, 2004, the following table following table sets forth the high and low sale prices

	High	Low	Volume
Period from March 12, 2004 (start) to December 31, 2004	USD $ 1.45	USD $ 0.30	10,711,556
For the year ended December 31, 2005	USD $1.09	USD $ 0.13	29,441,900

The Company also trades on the Frankfurt exchange under the symbol “TPJ”.

Month Ended	High	Low	Volume
May 31, 2006	Euro 0.16	Euro 0.11	52,000
April 30, 2006	Euro 0.20	Euro 0.16	175,000
Mar 31, 2006	Euro 0.18	Euro 0.12	200,000
Feb 28, 2006	Euro 0.18	Euro 0.12	25,000
Jan 31, 2006	Euro 0.18	Euro 0.11	225,000
Dec 31, 2005	Euro 0.14	Euro 0.12	200,000

For the period of the start of trading to December 31, 2005, the following table following table sets forth the high and low sale prices

	High	Low	Volume
Period from February 2005 (start) to December 31, 2005	Euro 0.65	Euro 0.11	36,000,000

Item 10 – Additional Information   

Share Capital

Our authorized share capital as at December 31, 2005 was 150,000,000 common shares without par value. Our issued and outstanding share capital at December 31, 2005 was 47,952,901. At June 2, 2006 our issued and outstanding share capital was 55,147,900.

All our shares, both issued and unissued, are common shares of the same class and rank equally as to dividends, voting powers and participation in assets upon liquidation. At any general meeting, subject to the restrictions on joint registered owners of our common shares, on a show of hands every shareholder who is present in person and entitled to vote has one vote and on a poll every shareholder has one vote for each share of which he or she is the registered owner and may exercise such vote either in person or by proxy. Our directors may, from time to time, declare and authorize payment of dividends. No common shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights. There are no provisions for surrender, sinking or purchase funds. There are no issued and outstanding escrow or performance shares.

Options to acquire common shares granted to our directors and officers are described under “Item 6 – Directors, Senior Management and Employees – Executive Compensation.

Memorandum and Articles

We are registered in British Columbia, Canada, certificate of incorporation No. 188691. We do not have any stated "objects" or "purposes" as the Company Act of the Province of British Columbia does not require it. Our memorandum (“Memorandum”) has authorized 150,000,000 common shares without par value.

Pursuant to the laws of British Columbia, the province has enacted a new company act, the Business Corporations Act. We registered our transition documents with the registrar of companies, we obtained shareholder approval at the June 30, 2004 Annual General Meeting to change to the provisions of the new company act and we filed on August 9, 2005 to be registered under the new company act. Our new articles (“Articles”) contain the following provisions:

Voting Rights

(i)

Shareholders shall have the right to receive notice of, to attend and to vote at all general meetings. Except as otherwise provided in the Articles of Association, on a show of hands each holder of shares present in person and entitled to vote shall have one vote and upon a poll each such holder who is present in person or by proxy and entitled to vote shall have one vote in respect of every share held by him.

Variation of Class Rights and Alteration of Capital

(i)

We may by ordinary resolution increase the share capital, and cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person.

(ii)

By special resolution that requires a three-fourths majority, we may consolidate and divide all or any of the share capital into shares of larger amount, sub-divide the shares into shares of smaller amount.

Transfer of Shares

(i)

Any member can transfer shares by delivering an instrument of transfer to our transfer agent.

Directors

(i)

Our business is managed by the Directors who may exercise all powers subject to the provisions of the Articles of Association and the Company Act of British Columbia.

(ii)

The number of Directors shall be not less than three. At our last annual general meeting, the number of directors was five. A Director shall not be required to hold any shares in the capital of our Company. At each annual general meeting of our Company, all of the board of directors retire and our shareholders elect a new board.

(iii)

A Director shall not vote but can be counted in the quorum present on any motion in respect of any contract, arrangement, transaction or any other proposal in which he has an interest that is to his knowledge a material interest.

(iv)

The Directors shall be paid for their services as Directors such sums (if any) as the Directors may from time to time determine.

(v)

The Directors may be paid all reasonable travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or general meetings or otherwise in connection with our business.

(vi)

Directors can vote to remove a director at a directors meeting.

Borrowing Powers

(i)

The Directors may exercise all of the powers to borrow money and to mortgage or charge its undertakings, properties, assets and uncalled capital, or any part thereof, and, subject to the provisions of the Articles of Association, to issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of us or of any third party.

Dividends and Distributions on Liquidation to Shareholders

(i)

The Directors may declare dividends, and need not give notice to any member. Subject to any priority, preference or special rights, all dividends shall be declared and paid according to the number of shares held on a specified date with respect of the period of which the dividend is paid.

(ii)

The Directors may pay such interim dividends as they may determine.

(iii)

No dividend shall bear interest.

General Meetings

(i)

Each year we hold a general meeting as the annual general meeting in addition to any other meetings in that year, and not more than 13 months shall elapse between the date of one annual general meeting and that of the next. The annual general meeting shall be held at such time and place, as the Directors shall appoint.

(ii)

All general meetings other than annual general meetings are extraordinary general meetings. The Directors may, whenever they think fit, convene an extraordinary general meeting.

Committees of the Board of Directors

Our board of directors has established an audit committee. Our audit committee will recommend a firm to be appointed as independent auditors to audit financial statements and to perform services related to the audit, review the scope and results of the audit with the independent auditors, review with management and the independent auditors our annual operating results and consider the adequacy of the internal accounting procedures and the effect of the procedures relating to the auditors' independence. In addition, the audit committee will monitor the board's corporate governance practices, propose nominees annually for election to the board, make recommendations as to the composition of the committees of the board and review the functioning of the board and the powers, mandates and performance of the committees.

Audit Committee Members:

1.

Iwona Kozak

2.

Jan Rynkiewicz – independent director with financial experience

3.

Robert Wussler – independent director with financial experience

Our board of directors has established a compensation committee to review remuneration paid to senior officers of the Company.

Compensation Committee Members:

1.

Iwona Kozak

2.

Jan Rynkiewicz

3.

Robert Wussler

Our board of directors has established a corporate governance committee to (1) identify and select qualified individuals to serve as directors of the Company and nominate such individuals for election as directors at the Company's annual meeting of shareholders (2) develop and establish corporate governance policies and procedures for the Company and (3) administer the Code of Ethics adopted by the Company

Corporate Governance Committee

1.

Iwona Kozak

2.

Jan Rynkiewicz

3.

Robert Wussler

Exchange Control and Other Limitations Affecting Security Holders

There is no law or government decree of regulation in Canada that restricts the export or import of capital, or that affects the remittance of dividends, interest or other payments to a non-resident holder of common shares, other than withholding tax requirements.

There is no limitation imposed by Canadian law or by the articles or other charter documents of a company on the right of a non-resident to hold or vote common shares of a company, other than as provided in theInvestment Canada Act, as amended (the “Investment Act”).

The Investment Act generally prohibits implementation of a reviewable investment by an individual, government, corporation, partnership, trust or joint venture that is non-Canadian unless the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. If an investment by a non-Canadian is not a reviewable investment, it requires the filing of a short notice.

An investment in common shares of a company by a non-Canadian that is a “WTO investor” would be reviewable if the value of the assets of the Company equalled or exceeded $184 million, the threshold established for 1999. In subsequent years, the threshold amount may be increased or decreased in accordance with the provisions of the Investment Act. A WTO investor is a member of the World Trade Organization, current members of which include the European Community, Germany, Japan, Mexico, the United Kingdom and the United States, or a WTO investor-controlled entity, as defined in the Investment Act.

An investment in common shares of a company by a non-Canadian, other than a WTO investor, would be reviewable under the Investment Act if it were an investment to acquire control of a company and the value of the assets were $5.0 million.

The Investment Act would not apply to certain transactions in relation to our common shares, including:

An acquisition of common shares of a company by any person made in the ordinary course of that person’s business as a trader or dealer in securities;

An acquisition of control of a company by an amalgamation, merger, consolidation or corporate reorganization following which the control of the Company remains unchanged.

A company with foreign share holdings formed in Poland is under Polishlaw andtreated in the same manner as a company with Polish share holdings. Full repatriation of after-tax profits and capital is allowed, and companies with 100% foreign participation are permitted. Capital introduced into Poland by foreign investors may be freely withdrawn. Full repatriation of profits and divided payments is allowed without obtaining a permit. Companies must account for withholding tax to the Polish Tax authorities on any distributed dividends unless a treaty provided otherwise. To avoid double taxation, Poland has devised tax treaties with more than 60 countries.

Taxation - Certain Canadian Federal Income Tax Consequences to United States Investors

This section is to make United States persons aware and caution them as to some of the consequences of investing in the Company (a Canadian company). Taxation of our Company in Poland from a business perspective is discussed in the immediately following section.

A brief description of certain provisions of the tax treaty between Canada and the United States is included below. The consequences of state and local taxes are not considered. The following information is general and security holders should seek the advice of their own tax advisors.

TAXATION OF DIVIDENDS

A holder of a common share who is not resident in Canada for purposes of the Income Tax Act will be subject to Canadian withholding tax on dividends paid or credited to the holder of the common share. The rate of withholding tax on dividends is 25% of the amount of the dividend. This rate may be reduced under the provisions of an international tax treaty to which Canada is a party. Under the tax treaty that Canada has entered into with the United States, the rate of Canadian withholding tax is generally reduced to 15%, or 5% in the case of a corporate holder which owns 10% or more of the voting shares. A foreign tax credit for the tax withheld may be available to a holder resident in the United States against U.S. federal income taxes.

DISPOSITION OF COMMON SHARES

A non-resident holder of a common share will not be subject to tax under the Income Tax Act in respect of a capital gain realized on the disposition of a common share unless the common share is a "taxable Canadian property" (as defined in the Income Tax Act). Shares of a corporation that are listed on a prescribed stock exchange are generally not considered to be taxable Canadian property. Taxable Canadian property includes any common share held by a non-resident if used in carrying on a business (other than an insurance business) in Canada. A non-resident whose common shares constitute taxable Canadian property will realize upon disposition, a capital gain (or a capital loss).

One-half of any capital gain realized by a holder (a taxable capital gain) will be included in computing the holder's income.

Non-residents are advised to consult their tax advisers with regard to the availability of a treaty exemption and their own particular circumstances.

Passive Foreign Investment Company

A foreign corporation with one or more U.S. shareholders is a PFIC if 75% or more of its income is passive income or if at least 50% of its assets would be invested in instruments which produce interest, dividends and/or capital gains. Unlike a controlled foreign corporation or a foreign personal holding company, there is no minimum percentage ownership by U.S. shareholder to trigger application of the PFIC rules. If a foreign corporation has a high enough percentage of passive income or assets, it is a PFIC as regards any U.S. shareholder no matter how small their ownership percentage of the foreign corporation and regardless of whether the U.S. shareholders, individually or in the aggregate, have the ability to control the business or investments of the foreign corporation.

If a person owns shares in a PFIC and sells them for a profit, that person must generally pro-rate its profit over all the years it held the shares in the PFIC, pay U.S. income tax on the profit allocated to each year at the highest U.S. rate in effect for that year, and pay interest on all the prior year’s tax, computed from the tax return due date for the year to which the income is attributable.

The above rule may not apply if a person elects to treat its investment as a "Qualified Electing Fund" (QEF). This election is made by attaching Form 8621 to the annual tax return. This will permit the annual inclusion of the QEF in a person’s pro-rata share of ordinary income and long-term capital gains.

We do not believe the Company was a passive foreign investment company during the fiscal period ended December 31, 2001 or any other year.

Future Developments

The foregoing discussion is based on existing provisions of the United States tax laws, existing and proposed regulations thereafter, and current administrative rulings and court decisions, all of which are subject to change. Any such changes could affect the validity of this discussion. In addition, the implementation of certain aspects of the PFIC rules requires the issuance of regulations which in many such instances have not yet been promulgated and which may have retroactive effect. Furthermore, legislation has been proposed which would replace the PFIC provisions with a consolidated anti-deferral regime. While this legislation was vetoed, it may be re-introduced in subsequent years.

ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES.

Taxation in Poland

The Polish tax system has been modernized in recent years. In 1992, corporate income tax and personal income tax were introduced, followed by value-added tax (VAT) in 1993. Poland also taxes real property, transport vehicles, inheritance and gifts.

Corporate Profits Tax

Polish resident companies are subject to corporate income tax on their worldwide income, while non-residents are subject to corporate income tax only on income derived in the territory of Poland. Worldwide income is a tax base for business entities with registered offices or seats or places of management in Poland. Other entities are taxed on profits earned in Poland only.

Corporations are subject to corporate income tax at a rate of 19% in 2004 and in 2005.

Depreciation and depletion

Tax depreciation is carried out in accordance with the Corporate Income Tax Act. Tax depreciation generally follows the straight - line method, although accelerated depreciation may be available in some circumstances.

Net operating losses

 A Polish corporate has the right to carry forward a loss incurred in an accounting period by deducting the loss from its taxable income over the next five years to a maximum of 50% in any one year. No loss carry backs are allowed.

Payments to foreign affiliates

A Polish corporate can deduct royalties, management services and interest charges paid to foreign affiliates, provided exchange control regulations and transfer-pricing restrictions are observed.

Deduction for taxes paid

Taxes on income are not deductible. However, input VAT is deductible for corporate income tax purposes if it cannot be offset against the company's output VAT. Other taxes that are part of expenses are deductible in full.

Non-deductible expenditures

A Polish corporate may not deduct certain expenditures, including the following:

Costs of assets subject to depreciation,

Expenditure borne on abandoned investments,

Unrealised foreign exchange losses,

Non-public advertising costs in excess of 0.25 percent of turnover.

Value-Added Tax

VAT applies to the goods sold and the services provided. The standard rate is 22% and may be reduced to rate of 7% for e.g. food products, children's clothing, and other goods and services. Exports are not taxed, however a number of conditions must be met for export of services to have zero tax rate. Exempt from VAT are e.g. agricultural products and finance and insurance services.

Cable television services were subject to 22% VAT till 30 April 2004. Since 1 May 2004, cable television services are subject to 7% VAT.

Internet services were subject to 7% VAT till 30 April 2004. Since 1 May 2004, Internet services were either exempt from VAT for individual subscribers or subject to 22% VAT for the other subscribers. Since 1 March 2005, all Internet services are subject to 22% VAT.

Item 11 - Quantitative and Qualitative Disclosures about Market Risk

Currency and Exchange Rate Risk

We are exposed to changes in financial market conditions as a result of transacting in various foreign currencies and funding of foreign operations.

We determine our market risk utilizing sensitivity analysis, which measures the potential losses in fair value resulting from one or more selected hypothetical changes in foreign currency exchange rates.

We do not hedge currency risk. All of the business operations are in Poland. The functional currency is the Polish zloty.

If there were a large fluctuation in the exchange rates between Poland and Canada this will impact on the operating results of the company. This could impact in a positive or negative manner. If the Canadian dollar increased against the zloty, then any Canadian funds invested in Poland would be exchanged for a larger number of zloty, thereby making more money available in Poland for the businesses. The converse would create a shortfall of funding. We have no control over currency rates and the results of operations will be subject to the swings in currency rate changes. In the case of funding either for acquisition or building out, it is important to minimize the time interval from when the money is raised and when it is spent to avoid issues of being short as a result of currency swings. The Company intends to grow by acquisition, so this aspect of funding is important where funds are raised other than in zloty

We do not presently believe we have material exposure to potential change in fair value of market sensitive instruments, near-term losses in future earnings and/or cash flows from reasonably possible near-term changes in market rates.

We did not have any foreign currency derivatives outstanding at December 31, 2005. Accordingly, no market risk existed for such instruments at this date.

Stream is exposed to the risk of exchange rate fluctuations. Programming costs, which constituted about 18.8% of revenue in 2005, are incurred primarily in US dollars, while all revenues are realised in Polish zlotys. Certain other costs such as head office costs are incurred in Canadian dollars. Under its subscription agreements, Stream may modify its subscription rates to adjust for major fluctuations of currency exchange rates. However, high increases in subscription rates could decrease demand for Stream’s services. Most of Stream’s technical equipment is purchased locally, but some prices in Poland tend to be indexed in US dollars.

The largest currency risk is a loan in the amount of $3,690,761 USD that at December 31, 2005 was translated into $4,303,427 CDN. Using the December 31, 2004 rate of exchange the loan in terms of Canadian dollars would be $4,446,629 CDN reflecting a difference of 3.3%.

The table below reflects changes in the exchange rates of the currencies in which Stream conducts its operations as at the end of and as average during each year.

Rates of exchange in the years 2004-2005

	31 December 2005	Average Rate for 2005	31 December 2004	Average Rate for 2004
USD/PLN	3.2673	3.2382	2.9987	3.6523
EUR/PLN	3.8634	4.0288	4.0914	4.5338
CAD/PLN	2.8033	2.6757	2.4898	2.8049
USD/CDN	1.1660	1.2117	1.2048	1.3015

The effect of foreign currency fluctuations has affected the book value of property, plant and equipment and intangibles. The operations of the Company are situated in the country of Poland along with most of its assets. The foreign exchange rates for the Canadian dollar and the Polish zloty are as follows:

	Rate at the end of the year	Average rate for the year
2005	2.8033	2.6757
2004	2.4898	2.8049
2003	2.9029	2.7850
	2.4351	2.5945

The following table shows the effect of the change in exchange rates and the resulting change in the cumulative translation account for the year ended December 31, 2005, and the foreign exchange effect on cash and cash equivalents:

	December 31, 2004 balance (Polish zloty)	December 31, 2004 balance ($CDN) at 2004 exchange rate	December 31, 2004 balance ($CDN) at 2005 exchange rate	Exchange loss (gain) on translation into 2005
Rate: Polish zloty to Canadian dollars		2.4898	2.8033
Accounts receivable	zl      630,975	$      253,424	$      225,083	$         28,341
Inventory	16,883	6,781	6,023	758
Prepaid expenses and advances	206,145	82,796	73,537	9,259
Property, plant and equipment	25,474,478	10,231,536	9,087,318	1,144,218
Intangibles	7,261,362	2,916,444	2,590,291	326,153
Accounts payable and accrued liabilities	(3,528,460)	(1,417,166)	(1,258,681)	(158,485)
Current portion of long-term debt	(252,789)	(101,530)	(90,176)	(11,354)
Long-term debt	(2,028,457)	(814,707)	(723,596)	(91,111)
Non-controlling interest	(1,768,866)	(710,445)	(630,994)	(79,451)
Total exchange gain on translation				$    1,168,328
Deduct: Cumulative translation account, beginning of year				(944,701)
Cumulative translation account, end of year				(158,859)
Foreign exchange effect				$         64,768

The following table shows the effect of the change in exchange rates and the resulting change in the cumulative translation account for the year ended December 31, 2004, and the foreign exchange effect on cash and cash equivalents:

	December 31, 2003 balance (Polish zloty)	December 31, 2003 balance ($CDN) at 2003 exchange rate	December 31, 2003 balance ($CDN) at 2004 exchange rate	Exchange loss (gain) on translation into 2004
Rate: Polish zloty to Canadian dollars		2.9029	2.4898
Accounts receivable	zl      407,082	$      140,233	$      163,500	$        (23,267)
Inventory	24,138	8,315	9,695	(1,380)
Prepaid expenses and advances	70,982	24,452	28,509	(4,057)
Deposits	449,999	155,017	180,737	(25,720)
Property, plant and equipment	20,954,915	7,218,614	8,416,305	(1,197,691)
Intangibles	6,444,815	2,220,130	2,588,487	(368,357)
Accounts payable and accrued liabilities	(7,875,886)	(2,713,110)	(3,163,261)	450,151
Current portion of long-term debt	(187,272)	(64,512)	(75,216)	10,704
Long-term debt	(197,388)	(67,997)	(79,279)	11,282
Non-controlling interest	(1,994,945)	(687,225)	(801,247)	114,022
Total exchange gain on translation				$   (1,034,313)
Deduct: Cumulative translation account, beginning of year				371,841
Cumulative translation account, end of year				944,701
Foreign exchange effect				$       282,229

The following table shows the effect of the change in exchange rates and the resulting change in the cumulative translation account for the year ended December 31, 2003, and the foreign exchange effect on cash and cash equivalents.

	December 31, 2002 balance (Polish zloty)	December 31, 2002 balance ($CDN) at 2002 exchange rate	December 31, 2002 balance ($CDN) at 2003 exchange rate	Exchange loss (gain) on translation
Rate: Polish zloty to Canadian dollars		2.4351	2.9029
Accounts receivable	zl        475,970	$         195,462	$         163,964	$           31,498
Inventory	35,000	14,373	12,057	2,316
Prepaid expenses and advances	144,735	59,437	49,859	9,578
Deposits	458,999	188,493	158,117	30,376
Property, plant and equipment	22,361,173	9,182,856	7,703,046	1,479,810
Intangibles	12,972,968	5,327,489	4,468,968	858,521
Accounts payable and accrued liabilities	(7,805,183)	(3,205,282)	(2,688,754)	(516,528)
Current portion of long-term debt	(265,000)	(108,825)	(91,288)	(17,537)
Long-term debt	(128,999)	(52,975)	(44,438)	(8,537)
Non-controlling interest	(2,162,999)	(888,259)	(745,117)	(143,142)
Total exchange loss on translation				$      1,726,355
Deduct: Cumulative translation account, beginning of year				(1,437,814)
Cumulative translation account, end of year				(371,841)
Foreign exchange effect on cash and cash equivalents				$       (83,300)

Item 12 – Description of Securities Other than Equity Securities

Warrants

In the past, we issued warrants as part of our private placements. The terms and conditions governing these warrants are provided for in applicable subscription agreements and warrant certificates. Shares that will be issued pursuant to these warrants contain certain restrictions, including resale restrictions. The following table shows the number of shares to which each warrant holder is entitled after exercise of the warrants:   

The changes in warrants were as follows:		Number of common shares permitted to be purchased
	Number of warrants		Price per share	Expiry date	Fair value of Warrants
Total Balance December 31, 2003	3,126,579	2,976,579			$   2,025,447
Outstanding December 31, 2003	300,000	150,000	1.80	28-Dec-04	103,962
	2,701,579	2,701,579	1.80	28-Dec-04	1,872,405
	125,000	125,000	2.25 USD	28-Dec-04	49,080
Total Balance December 31, 2003	3,126,579	2,976,579			$   2,025,447
Expired	nil
Exercised	nil
Total Balance December 31, 2004	3,126,579	2,976,579		28-Dec-05	$   2,025,447
Granted	2,052,600	1,026,300	0.98	27-Jul-07	287,851
Granted	1,344,014	672,010	0.33	30-Sep-07	126,386
Expired	(3,126,579)	(2,976,579)	1.84		-
Exercised	-	-	-		-
Total Balance December 31, 2005	3,396,614	1,698,310	$           0.72		$    2,439,684
Outstanding December 31, 2005:
	2,052,600	1,026,300	$           0.98	27-Jul-07	287,851
	1,344,014	672,010	0.33	30-Sep-07	126,386
Total Balance December 31, 2005	3,396,614	1,698,310	$           0.72		$       414,237

Shares issued upon exercise of a warrant may not be resold until the hold period on the private placement has ended. There are no hold periods on the above-mentioned warrants.

PART II

ITEM 13 – Defaults, Dividends, Arrearages and Delinquencies

Not applicable

ITEM 14 – Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable

IITEM15 - Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this Annual Report on Form 20-F, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange of 1934 (the “Exchange”) ) are effective to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in Securities and Exchange Commission rules and forms.  There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

It should be noted that while management of the Company believes that its disclosure controls and procedures provide a reasonable level of assurance, management does not expect that its disclosure controls and procedures or internal financial controls will prevent all errors or fraud.  A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

There were no changes in the Company’s internal control over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 16A - AUDIT COMMITTEE FINANCIAL EXPERT

The chairman of our audit committee is Mr. Robert Wussler. is an independent director of the Company. His attributes as an audit committee expert are:

(1) An understanding of US generally accepted accounting principles and financial statements;

(2) The ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;

(3) Experience preparing, auditing, analysing or evaluating financial statements;

(4) An understanding of internal controls and procedures for financial reporting; and

(5) An understanding of audit committee functions.

ITEM 16B - CODE OF ETHICS

Our Principal Executive Officer, Chief Financial Officer, and other senior executives and principal accounting officers are bound to adhere to the company’s Code of Ethics, which applies to Senior Financial Officers and all employees.

A copy of the Code of Ethics is available upon request.

ITEM 16C - PRINCIPAL ACCOUNTANT FEES AND SERVICES

During the financial years ended 2003 to 2005 we employed the following auditing firms. Their remunerations and services performed are as follows:

Year ended December 31, 2005

Firm	Services	Fees
MacKay LLP, Chartered Accountants	Audit services Disbursements	$65,000 CDN $5,031 CDN

Year ended December 31, 2004

Firm	Services	Fees
MacKay LLP, Chartered Accountants	Audit services Disbursements	$60,000 CDN $7,665 CDN

Year ended December 31, 2003

Firm	Services	Fees
MacKay LLP, Chartered Accountants	Audit services Disbursements	$60,000 CDN $5,286 CDN

PART III

ITEM 17 - FINANCIAL STATEMENTS

See Financial Statements attached hereto.

ITEM 18 - FINANCIAL STATEMENTS

Not applicable.

ITEM 19 - FINANCIAL STATEMENTS AND EXHIBITS

Financial Statements

1.

Auditors’ Report;

2.

Consolidated Balance Sheet;

3.

Consolidated Statement of Operations and Deficit;

4.

Consolidated Statement of Cash Flow; and

5.

Notes to Consolidated Financial Statements.

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Board of Directors

Stream Communications Network & Media Inc.

Commerce Place

PO Box 20

#1020 -400 Burrard Street

Vancouver BC V6C 3A6

Dear Sirs:

We consent to the incorporation in the Registration Statement on Form 20F of our report dated March 27, 2006 except for notes 15 and 16 dated June 5, 2006 relating to the consolidated balance sheets of Stream Communications Network & Media Inc., and the related statements of operations, changes in shareholders’ deficit and cash flows for the years ended December 31, 2005 and 2004.

“MacKay LLP”

Chartered Accountants

Vancouver, Canada

June 8, 2006

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

 Stream Communications Network & Media Inc.

Consolidated Financial Statements

For the year ended December 31, 2005

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Auditors' Report

To the Shareholders of

Stream Communications Network & Media Inc.

We have audited the consolidated balance sheet of Stream Communications Network & Media Inc. as at December 31, 2005 and 2004 and the consolidated statements of operations and deficit, and cash flows for the years then ended.  These financial statements are the responsibility of the company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in Canada and the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at December 31, 2005 and 2004 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.  

“MacKay LLP”

Vancouver,  Canada.

Chartered Accountants

March 27, 2006, except for notes

15 and 16 dated June 5, 2006

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

 Stream Communications Network & Media Inc.

 Consolidated Balance Sheets

 (in Canadian dollars)

		December 31, 2005	December 31, 2004
ASSETS
Current Assets
	Cash and cash equivalents	$       439,937	$       640,308
	Accounts receivable - net (note 4)	293,898	267,020
	Inventory	8,459	6,781
	Prepaid expenses and advances	75,035	56,552
		817,329	970,661
	Property, plant and equipment (note 5)	9,367,012	10,243,982
	Intangibles - (note 6)	2,927,767	2,916,444
		$  13,112,108	$  14,131,087
LIABILITIES
Current Liabilities
	Trade accounts payable and accrued liabilities	$    2,565,017	$    2,062,001
	Accounts payable pertaining to financing costs	477,113	1,002,709
	Corporation income taxes payable	11,577	-
	Deferred revenue	15,430	-
	Loans payable and leasing contracts - current portion (note 7)	300,366	751,530
		3,369,503	3,816,240
Long-term Liabilities
	Loans payable and leasing contracts - (note 7)	4,873,760	5,051,009
		8,243,263	8,867,249
	Non-controlling interest	690,678	710,445
		8,933,941	9,577,694
SHAREHOLDERS' EQUITY
Capital stock		-
	Authorized
	150,000,000 common shares of no par value
	Issued and fully paid (note 9)	41,129,499	36,005,421
	Contributed surplus (note 9e)	2,877,474	2,167,551
	Private placement subscriptions	291,455	-
	Warrants (note 9f)	2,439,684	2,025,447
	Cumulative translation account (note 8)	(158,859)	944,701
	Deficit	(42,401,086)	(36,589,727)
		4,178,167	4,553,393
		$  13,112,108	$  14,131,087

Contingency (note 13)

Subsequent events (note 15)

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Stream Communications Network & Media Inc.

 Consolidated Statements of Operations and Deficit

 (in Canadian dollars)

	For the year ended December 31, 2005	For the year ended December 31,  2004	For the year ended December 31,  2003
Revenues	$    5,826,112	$    4,415,461	$    3,700,160
Expenses
Administration and services	1,154,785	913,510	1,045,244
Interest, long-term	312,918	322,224	-
Interest, short-term	218,822	71,972	-
Investor relations	1,498,363	142,947	-
Legal and accounting	388,531	305,967	357,636
Occupancy costs	496,390	342,202	328,348
Programming	1,092,913	899,438	887,157
Sales and marketing	219,861	207,241	180,145
Stock-based compensation	873,983	2,071,510	-
Travel and automotive	329,712	217,483	260,677
Wages for ongoing operations	2,319,329	1,613,005	1,501,308
	8,905,607	7,107,499	4,560,515
Loss before undernoted items	(3,079,495)	(2,692,038)	(860,355)
Amortization of property, plant and equipment	911,346	719,171	730,616
Amortization of intangibles	1,738,793	678,933	243,023
	2,650,139	1,398,104	973,639
Loss before other items	(5,729,634)	(4,090,142)	(1,833,994)
Other items
Interest income	30,232	18,446	94,829
Recovery of IPO costs	525,596	-	-
Financing expenses	(540,987)	(1,423,157)	(275,428)
Content development	-	(1,481,904)	-
Impairment of intangibles and goodwill	-	-	(1,960,000)
Write off of deferred charges	-	-	(2,400,713)
Foreign exchange gain (loss)	(69,605)	415,411	-
	(54,764)	(2,471,204)	(4,541,312)
Loss before non-controlling interest	(5,784,398)	(6,561,346)	(6,375,306)
Non-controlling interest	(11,805)	(3,369)	120,686
	(5,796,203)	(6,564,715)	(6,254,620)
Provision for income taxes (note 11)	(15,156)	-	-
Net loss for the year	(5,811,359)	(6,564,715)	(6,254,620)
Deficit, beginning of year	(36,589,727)	(30,025,012)	(23,770,392)
Deficit, end of year	$ (42,401,086)	$ (36,589,727)	$ (30,025,012)
Loss per share, basic and diluted
Loss per share	$           (0.14)	$           (0.22)	$           (0.21)
Weighted average number of shares
Basic and diluted	42,953,922	30,027,489	29,333,427

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

Stream Communications Network & Media Inc.

 Consolidated Statements of Cash Flows

 (in Canadian dollars)

	For the year ended December 31, 2005	For the year ended December 31,  2004	For the year  ended December 31,  2003
Operating Activities
Net loss for the year	$   (5,811,359)	$   (6,564,715)	$   (6,254,620)
Items not involving cash
Amortization	2,650,139	1,398,104	973,639
Unrealized foreign exchange	232,014	(243,842)	-
Stock-based compensation	873,983	2,071,510	-
Issuance of shares for business development	-	1,969,461	-
Issuance of shares for services and financial expenses	1,057,573	826,505	-
Impairment of intangibles and goodwill	-	-	1,960,000
Write off of deferred charges	-	-	2,400,713
Non-controlling interest	(11,805)	(3,369)	(57,892)
Change in non-cash working capital
Accounts receivable	(215,744)	(26,913)	35,055
Inventory	(2,436)	2,914	3,742
Prepaid expenses and advances	(27,742)	31,407	(19,150)
Accounts payable and accrued liabilities	555,777	(1,652,247)	(170,100)
Corporation income taxes	11,577	-	-
Deferred revenue	15,430	-	-
Net cash provided (used) by operating activities	(672,593)	(2,191,185)	(1,128,613)
Financing Activities
Issuance of shares and warrants for cash	3,018,162	-	1,264,553
Subscriptions received for private placements to be issued	291,455	-	-
Proceeds from loans and leasing contracts	210,190	-	-
Proceeds from (repayment of) Quest loan	(650,000)	650,000	-
Loans from related parties	-	-	337,867
Repayment of loans and leasing contracts	(86,138)	4,918,760	(3,217)
Net cash provided by financing activities	2,783,669	5,568,760	1,599,203
Investing Activities
Purchase of property, plant and equipment	(1,729,926)	(2,226,804)	(192,714)
Deferred charges	-	-	(381,452)
Acquisition of subsidiaries, net of cash acquired	(646,289)	(1,000,050)	-
Net cash used in investing activities	(2,376,215)	(3,226,854)	(574,166)
Foreign exchange effect on cash and cash equivalents	64,768	282,229	(83,300)
Change in cash and cash equivalents	(200,371)	432,950	(186,876)
Cash and cash equivalents at beginning of year	640,308	207,358	394,234
Cash and cash equivalents at end of year	$       439,937	$       640,308	$       207,358

Supplemental cash flow information (note 14)

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

1.

NATURE OF OPERATIONS & GOING CONCERN

Stream Communications Network & Media Inc. (“Stream” or the “Company”) mainly provides cable television services and high-speed internet access in the country of Poland.

The Company was incorporated on March 28, 1979  by registration of its Memorandum and Articles under the Company Act of British Columbia, Canada.  On October 19, 2001 the Company changed its name from Trooper Technologies Inc. to Stream Communications Network, Inc. and on August 9, 2004 to Stream Communications Network & Media Inc.

These financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The Company has recurring operating losses, an accumulated deficit of $42,401,086 and negative working capital of $2,552,174 at December 31, 2005. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future.

The Company is actively pursuing additional funding to continue its current projects. Management continues to develop the Company’s operating capabilities in order to improve cash flow from operations.

Although there is no assurance that the Company will be successful in these actions, management is confident that it will be able to continue as a going concern. Accordingly, these financial statements do not reflect adjustments to the carrying value of assets and liabilities, the reported revenues and expenses and balance sheet classifications used that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material.

2.

SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. A summary of the significant accounting policies are as follows:

Consolidation

These consolidated financial statements include the accounts of the Company and the following subsidiaries. All intercompany transactions and balances have been eliminated.

Percentage ownership

 Country of Incorporation

December 31, 2005

December 31, 2004

EES Waste solutions Limited

Cyprus

100.0%

100.0%

Stream Communications Sp. z o.o. ("Stream Sp.")

Poland

100.0%

100.0%

Gimsat Sp. z o.o. ("Gimsat")

Poland

100.0%

100.0%

IEWS S.A.

Poland

100.0%

100.0%

Streamline Media Sp. z.o.o. ("Streamline") –

 (formerly Polvoice.com Sp. z o.o.)

Poland

100.0%

100.0%

Bielsat.com Sp. z o.o. ("Bielsat")

Poland

51.0%

51.0%

ASK Stream Sp. z o.o. ("Ask") (note 3)

Poland

60.0%

60.0%

Vega Sp. z o.o.("Vega")  (note 3)

Poland

100.0%

98.0%

Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of accounts receivable; property, plant and equipment; intangibles, stock-based compensation; accounts payable and the disclosure of contingent assets and liabilities at the date of the financial statements and expenses for the periods reported. Actual results could differ from those estimates, and it is reasonably possible, based on existing knowledge that changes in future conditions in the near term could require a material change in the recognized amount.

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid investments with maturities of less than three months.

Inventory

Inventory is stated at the lower cost or market.

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

2.

SIGNIFICANT ACCOUNTING POLICIES (continued)

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated amortization. Amortization is provided for using the declining-balance method at the following rates per annum:

Automobiles

20% - 30%

Computer software

20% - 100%

Cable television network equipment and conduit

4.5% - 45%

Furniture, fixtures and equipment

20% - 30%

Plant construction-in-progress consists of assets not yet in use and accordingly no amortization is recorded.

Revenue recognition

Substantially all revenues are derived from cable TV subscriber fees. Subscriber fees are recorded as revenue in the period the service is provided. Funds received in advance are deferred. At present initial hook-up fees are minimal and are recorded as revenue when charged. If this policy should change the Company will limit initial hook-up revenue to the extent of direct selling costs and amortize the remainder over the estimated period that subscribers are expected to remain connected to the network.

Foreign currency translation

The Company’s significant assets, revenues and expenses are in Poland; accordingly, the Company’s functional currency is the Polish Zloty. The Company follows the current rate method of translation which translates foreign assets and liabilities, into Canadian dollar equivalents, at the rate of exchange at the balance sheet date.  Revenues and expenses are translated into Canadian dollar equivalents at the average rate of exchange throughout the period.  Gains and losses arising from translation of the financial statements are disclosed as a separate component of shareholders' equity.

Transactions that are denominated in foreign currency are initially recorded at the rate of exchange prevailing at the date of the transaction.  Thereafter, monetary assets and liabilities are adjusted to reflect the exchange rate in effect at the balance sheet dates.  Gains and losses resulting from the adjustment are included in earnings.

The exchange rate of the Polish zloty to the Canadian dollar at December 31, 2004 was 2.4898 as compared to 2.8033 at December 31, 2005. The Company follows the current rate method translating balance sheet items at the current rate. Accordingly balances at December 31, 2004 in Polish zloty are reduced by 12.6% in terms of Canadian dollars at December 31, 2005.

Loss per share

The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments.  Under this method the dilutive effect on loss per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments.  It assumes that the proceeds would be used to purchase common shares at the average market price during the period. For all periods presented, the effect of the assumed conversion of stock options and warrants was anti-dilutive.

Basic loss per share is calculated using the weighted-average number of shares outstanding during the period.

Income taxes

The Company follows the asset and liability method of accounting for income taxes whereby future income taxes are recognized for the future income tax consequences attributable to differences between the financial statement carrying values and their respective income tax bases (temporary differences) and loss carry forwards.  Future income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.  The effect on future income tax assets and liabilities of a change in tax rates is included in income in the period in which the change occurs.  The amount of future income tax assets recognized is limited to the amount that is more likely than not to be realized.

Acquisitions, intangible assets and goodwill

All business combinations use the purchase method of accounting.  Also, the Company follows an impairment-only approach for the accounting for goodwill and other intangible assets that have an indefinite life.  The Company performed an initial benchmark test of impairment within six months of adoption, and annual tests of impairment at the reporting unit level. Based on the existing structure and geographical location the reporting unit is the operations in Poland.  If the carrying value of goodwill and other intangible assets of a reporting unit exceeds the fair value of the reporting unit, the carrying value of the asset must be written down to fair value.  

The Company has evaluated its existing intangible assets and concluded that no provisions for impairment were required. The subscriber base is amortized using the straight-line method at a rate of 20% for the current year.

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

2.

SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-based Compensation

The Company uses the fair value method for accounting for stock-based compensation as defined by accounting principles generally accepted in Canada. Stock-based compensation awards expense is calculated using the Black-Scholes option pricing model and is charged to operations with an offsetting credit to contributed surplus.

Option pricing models require the input of highly subjective assumptions including the expected price volatility.  Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options.

3.

ACQUISITIONS

(a)  The Company has completed the acquisition of 60% of ASK. The acquisition was accounted for by the purchase method.  The effective date of the acquisition was May 5, 2004, after which the operations of ASK are included in these consolidated financial statements. ASK has cable TV networks in Sosnowiec, Poland.

At the time of acquisition the fair value of the assets and liabilities of ASK were:
Cash and cash equivalents	$       122,027
Accounts receivable	36,543
Property, plant and equipment	113,740
Intangible assets (subscriber base)	92,622
Accounts payable and accrued liabilities	(94,856)
Minority interest	(67,768)
Purchase price	$       202,308
Consideration paid in cash	$       202,308

(b)  The Company has completed the acquisition of 100% of Vega. The acquisition was accounted for by the purchase method.  The Company acquired 98% of Vega on October 2, 2004,  after which the operations of Vega were included in these consolidated financial statements. The balance of the ownership consisting of a 2% interest was acquired in 2005. A provision in the 2004 agreement allowed for the successful completion of a 10 year contract with an outside party that occurred in 2005 and forms part of the purchase price in 2005. Vega has cable TV networks in Sosnowiec, Poland.

At the time of acquisition the fair value of the assets and liabilities of Vega were:

	2004	2005	Total
Cash and cash equivalents	$         3,273	$              -	$          3,273
Accounts receivable	25,505	-	25,505
Property, plant and equipment	51,165	-	51,165
Intangible assets (subscriber base)	913,377	1,523,174	2,436,551
Accounts payable and accrued liabilities	(52,736)	-	(52,736)
Current portion of long term debt	(6,748)	-	(6,748)
Long term debt	(9,033)	-	(9,033)
Minority interest	(1,762)	1,762	-
Purchase price	$      923,041	$   1,524,936	$    2,447,977
Consideration paid in cash	$      923,041	$      646,289	$    1,569,330
Consideration paid from issuance of shares	-	878,647	878,647
Consideration	$      923,041	$   1,524,936	$    2,447,977

(c)  The Company purchased additional internet and cable TV subscribers for cash for a total cost of $619,805. The equipment cost was estimated to be $315,424 with the balance of the cost considered to be intangible subscriber cost.

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

4.	ACCOUNTS RECEIVABLE		December 31, 2005	December 31, 2004
		Accounts receivable	$      420,394	$       464,012
		Allowance for doubtful accounts	(126,496)	(196,992)
		Accounts receivable - net	$      293,898	$       267,020

5.	PROPERTY, PLANT AND EQUIPMENT				Accumulated amortization
		December 31, 2005		Cost		Net book value
		Automobiles		$      408,786	$      122,563	$       286,223
		Cable television network equipment and conduit		13,076,881	4,276,677	8,800,204
		Furniture and equipment		426,619	400,287	26,332
		Computer software		74,933	74,374	559
		Plant construction-in-progress		253,694	-	253,694
				$ 14,240,913	$   4,873,901	$    9,367,012
		December 31, 2004
		Automobiles		$      444,227	$      188,622	$       255,605
		Cable television network equipment and conduit		13,752,676	3,808,765	9,943,911
		Furniture and fixtures		412,360	377,992	34,368
		Computer software		82,288	74,116	8,172
		Plant construction-in-progress		1,926	-	1,926
				$ 14,693,477	$   4,449,495	$  10,243,982
6.	INTANGIBLE ASSETS			Accumulated amortization
		December 31, 2005	Cost		Impairment	Net book value
		Subscriber base	$   7,568,120	$   2,757,621	$   1,882,732	$    2,927,767
		December 31, 2004
		Subscriber base	$   6,585,678	$   1,549,440	$   2,119,794	$    2,916,444

During 2005 the company acquired additional subscribers at a cost of $1,827,555; see Note 3(b)(c) Acquisitions.

7.	LOANS PAYABLE AND LEASING CONTRACTS		December 31, 2005	December 31, 2004
		Loan from Quest Capital Corp. in the amount of $650,000 was paid in full. Pursuant to the terms of the loan an additional 1,450,000 shares were issued in the 3rd quarter. The 3,000,000 shares held as security and an additional 1,450,000 shares issued during the third quarter were returned to treasury.	$              -	$       650,000
		Bank loan secured by the fixed assets of the Company repayable monthly at a rate of $5,376 per month. Interest is charged WIBOR plus 5% approximately 9.85% per annum. Maturity date is September 5, 2009.	510,492	729,275
		Bank loan secured by the fixed assets of the Company repayable at a rate of $3,333 per month at an interest rate of 7.12% per annum. Maturity date is June 14, 2010.	64,203	-
		Bank credit facility secured by the accounts receivable of Vega for up to $356,000 to be drawn by June 30, 2006 at an interest rate of 9.62% per annum and amortized over a 55 month period. Maturity date is December 31, 2010.	39,222	-
		Automotive and equipment leasing contracts secured by the asset being leased and a guarantee by the Company, monthly payments at December 31, 2005 were $12,483 at an average interest rate of 11.3%. Maturity dates vary from April 1, 2006 to December 8, 2007.	256,782	186,962
		A loan bearing interest at 5%, compounded annually. The total amount due (including accrued interest) is $3,690,761 USD (equivalent to $4,303,427 CDN). The loan is secured by the shares in Stream Sp. (which includes all of the assets in Poland) but allows for $14 million USD in subordinated loans. The Company accrued $288,039 USD in interest (equivalent to $335,854) CDN) up to December 31, 2005.	4,303,427	4,236,302
		Total	$   5,174,126	$    5,802,539

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

7.	LOANS PAYABLE AND LEASING CONTRACTS continued
		Deduct current portion:
		Loan from Quest Capital Corp.			$              -	$       650,000
		Bank loans			131,771	6,747
		Automotive and equipment leasing contracts			168,595	94,783
		Total current portion			300,366	751,530
		Long-term portion			$   4,873,760	$    5,051,009
	Principal repayments due in the next five years are:
			2006	$      300,366
			2007	518,373
			2008	1,177,786
			2009	3,158,117
			2010	19,484
				$   5,174,126

8.

CUMULATIVE TRANSLATION ACCOUNT

The operations of the Company are situated in the country of Poland along with most of its assets. The foreign exchange rates for the Canadian dollar and the Polish zloty are as follows:

	Rate at the end of the year		Average rate for the year
2005		2.8033		2.6757
2004		2.4898		2.8049
2003		2.9029		2.7850

The following table shows the effect of the change in exchange rates and the resulting change in the cumulative translation account for the year ended December 31, 2005, and the foreign exchange effect on cash and cash equivalents:

	December 31, 2004 balance (Polish zloty)	December 31, 2004 balance ($CDN) at 2004 exchange rate	December 31, 2004 balance ($CDN) at 2005 exchange rate		Exchange loss (gain) on translation into 2005
Rate: Polish zloty to Canadian dollars		2.4898	2.8033
Accounts receivable	zl      630,975	$      253,424	$      225,083		$         28,341
Inventory	16,883	6,781	6,023		758
Prepaid expenses and advances	206,145	82,796	73,537		9,259
Property, plant and equipment	25,474,478	10,231,536	9,087,318		1,144,218
Intangibles	7,261,362	2,916,444	2,590,291		326,153
Accounts payable and accrued liabilities	(3,528,460)	(1,417,166)	(1,258,681)		(158,485)
Current portion of long-term debt	(252,789)	(101,530)	(90,176)		(11,354)
Long-term debt	(2,028,457)	(814,707)	(723,596)		(91,111)
Non-controlling interest	(1,768,866)	(710,445)	(630,994)		(79,451)
Total exchange gain on translation					$    1,168,328
Deduct: Cumulative translation account, beginning of year				(944,701)
Cumulative translation account, end of year				(158,859)
Foreign exchange effect				$         64,768

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

8.

CUMULATIVE TRANSLATION ACCOUNT continued

The following table shows the effect of the change in exchange rates and the resulting change in the cumulative translation account for the year ended December 31, 2004, and the foreign exchange effect on cash and cash equivalents:

	December 31, 2003 balance (Polish zloty)	December 31, 2003 balance ($CDN) at 2003 exchange rate	December 31, 2003 balance ($CDN) at 2004 exchange rate		Exchange loss (gain) on translation into 2004
Rate: Polish zloty to Canadian dollars		2.9029	2.4898
Accounts receivable	zl      407,082	$      140,233	$      163,500		$       (23,267)
Inventory	24,138	�� 8,315	9,695		(1,380)
Prepaid expenses and advances	70,982	24,452	28,509		(4,057)
Deposits	449,999	155,017	180,737		(25,720)
Property, plant and equipment	20,954,915	7,218,614	8,416,305		(1,197,691)
Intangibles	6,444,815	2,220,130	2,588,487		(368,357)
Accounts payable and accrued liabilities	(7,875,886)	(2,713,110)	(3,163,261)		450,151
Current portion of long-term debt	(187,272)	(64,512)	(75,216)		10,704
Long-term debt	(197,388)	(67,997)	(79,279)		11,282
Non-controlling interest	(1,994,945)	(687,225)	(801,247)		114,022
Total exchange gain on translation				$   (1,034,313)
Deduct: Cumulative translation account, beginning of year				371,841
Cumulative translation account, end of year				944,701
Foreign exchange effect				$       282,229

9.

CAPITAL STOCK

(a) Authorized: 150,000,000 common shares of no par value  

(b) Issued

	Number of Shares	Price	Share Capital
Balance - December 31, 2003	29,705,675		33,209,455
Shares issued for business development	500,000	$         0.980	487,557
Shares issued for loan security (note 7)	3,000,000	-	-
Financial expenses	1,275,000	0.494	629,809
Issued for services	78,125	0.780	60,855
Issued for services	275,000	0.494	135,841
TV programming and content development	3,000,000	0.494	1,481,904
Balance - December 31, 2004	37,833,800		36,005,421
Settlement of debts	850,000	0.494	419,873
Guarantees by directors for loans payable	400,000	0.679	271,524
Services	792,258	0.669	529,655
Interest and financing costs	682,000	0.371	252,882
Directors fees	18,000	0.195	3,511
Acquisition of subsidiary	2,140,229	0.411	878,647
Private placement	2,052,600	0.664	1,363,174
Private placement	4,000,000	0.218	870,000
Private placement	1,344,014	0.217	291,398
Repayment of loans	500,000	0.484	242,225
Stock options exercised	340,000	0.739	251,366
Fair value of stock options exercised	-	-	164,060
Net returned to treasury on repayment of loan (note 7)	(3,000,000)	-	-
Value of warrants for private placements	-	-	(414,237)
Balance - December 31, 2005	47,952,901		$  41,129,499

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

9.

CAPITAL STOCK continued

(c) Private placement

On July 27, 2005 a private placement was completed for the issuance of 2,052,600 shares, Originally the private placement was proposed at a price of $0.75 USD per unit comprised of one common share and a non-transferable share purchase warrant, where two warrants entitled the holder to purchase an additional common share of the Company at a purchase price of $1.00 USD per common share for a period of two years. The placement was repriced at $0.60 USD per unit with the warrants at $0.80 USD per share, as a result of a repricing clause.

On September 30, 2005 a private placement was completed for the issuance of 4,000,000 shares at a price of $0.1875 USD per share with no warrants.

On September 30, 2005 a private placement was completed for the issuance of 1,344,014 units. Each unit is comprised of one common share and a non-transferable share purchase warrant at a price of $0.1875 USD per unit, where two warrants entitle the holder to purchase an additional common share of the Company at a purchase price of $0.28 USD each for a period of two years.

(d) Options

At the Annual General Meeting held on June 29, 2005,  the shareholders approved the amendment to the stock option plan whereby the directors  are  authorized  to  issue  stock  options from time to time to employees,  officers, consultants and directors of the Company up to 7,992,212 common shares of the Company at the time of such issue,  at the minimum price allowed under the applicable securities laws.

Common share purchase options are issued to directors, officers, employees and non-employees of the company with exercise prices which approximate market values at the time the option is granted.

Summary of directors' and employees' stock options, warrants and convertible securities outstanding:

	Shares	Weighted average         exercise  price $
Balance of options at December 31, 2003	4,370,000	$          1.88
Cancelled	(4,370,000)
Granted	2,490,000	0.60	USD
Balance of options at December 31, 2004	2,490,000
Granted	1,770,000	0.60	USD
Granted	100,000	0.65	USD
Exercised	(300,000)	0.60	USD
Exercised	(40,000)	0.65	USD
Cancelled	(900,000)	0.60	USD
Cancelled	(60,000)	0.65	USD
Balance of options at December 31, 2005	3,060,000	$           0.60	USD

Stock-based compensation expense

Pursuant to the granting of options in the current period, stock-based compensation expense has been determined using a Black-Scholes option pricing model assuming no dividends were paid, a weighted average volatility of 85.6% over an expected life of two to five years and a weighted average annual risk free rate of 3.93%.

Based on the above assumptions the average fair value for each option is $0.467 which for a total of 1,870,000 stock options granted equals a total of $873,983 in stock-based compensation expense. The fair value of stock options accumulates in the contributed surplus account. During the year there was 340,000 stock options exercised of the which the fair value was $164,060 which has been transferred from contributed surplus to share capital.

The following table summarizes information about fixed stock options outstanding at December 31, 2005:

	Options Outstanding			Options Exercisable
Range of exercise prices (USD$)	Number outstanding at December 31, 2005	Weighted average remaining contractual life (years)	Weighted average    exercise        price (USD$)	Number exercisable at December 31, 2005	Weighted average    exercise        price (USD$)
$                0.60	3,060,000	3.7	$           0.60	3,060,000	0.60

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

9.

CAPITAL STOCK continued

(e) Contributed surplus

The changes in contributed surplus were as follows:	Contributed surplus
Balance December 31, 2003	$         96,041
Fair value of stock options granted during year	�� 2,071,510
Stock options exercised during year	-
Outstanding December 31, 2004:	2,167,551
Fair value of stock options granted during year	873,983
Stock options exercised during year	(164,060)
Outstanding December 31, 2005:	$    2,877,474

(f) Warrants

The changes in warrants were as follows:

	Number of warrants	Number of common shares permitted to be purchased	Weighted average price per share	Expiry date	Fair value of Warrants
Outstanding December 31, 2003	3,126,579	2,976,579	$           1.84	28-Dec-05	$    2,025,447
Granted	-	-	-		-
Exercised	-	-	-		-
Outstanding December 31, 2004:	3,126,579	2,976,579	$           1.84	28-Dec-05	$    2,025,447
Granted	2,052,600	1,026,300	0.98	27-Jul-07	287,851
Granted	1,344,014	672,010	0.33	30-Sep-07	126,386
Expired	(3,126,579)	(2,976,579)	1.84		-
Exercised	-	-	-		-
Total Balance December 31, 2005	3,396,614	1,698,310	$           0.72		$    2,439,684
Outstanding December 31, 2005:
	2,052,600	1,026,300	$           0.98	27-Jul-07	287,851
	1,344,014	672,010	0.33	30-Sep-07	126,386
Total Balance December 31, 2005	3,396,614	1,698,310	$           0.72		$       414,237

10.

SEGMENTED INFORMATION

The Company operates primarily in one segment, being cable TV services and in two geographic locations, being Canada and Poland.

Geographic information

Revenues are attributed to countries based on location of customer.

Revenues		For the year ended December 31, 2005	For the year ended December 31,  2004
	Canada	$              -	$               -
	Poland	5,826,112	4,415,461
		$   5,826,112	$    4,415,461
Interest expense, short term
	Canada	$      218,822	$         71,972
	Poland	94,096	-
		$      312,918	$       322,224
Interest expense, long term
	Canada	$      204,925	$       145,310
	Poland	13,897	176,914
		$      218,822	$         71,972
Amortization of property, plant and equipment
	Canada	$         3,991	$          4,015
	Poland	907,355	715,156
		$      911,346	$       719,171

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

10.	SEGMENTED INFORMATION continued
		Amortization of intangibles		For the year ended December 31, 2005	For the year ended December 31,  2004
			Canada	$              -	$               -
			Poland	1,738,793	678,933
				$   1,738,793	$       678,933
		Total expenditures for property, plant and equipment
			Canada	$         5,783	$          2,295
			Poland	1,208,417	2,576,228
				$   1,214,199	$    2,578,523
		Total expenditures for intangibles
			Canada	$   1,523,174	$               -
			Poland	304,381	1,028,928
				$   1,827,555	$    1,028,928
		Property, plant, equipment and intangibles		December 31, 2005	December 31, 2004
			Canada	$         9,606	$         12,446
			Poland	12,285,173	13,147,980
				$ 12,294,779	$  13,160,426

11.	INCOME TAXES
	The Company has tax losses in Canadian dollars available for offset against future taxable income in various jurisdictions for the following approximate amounts:
		Canada		$ 15,841,000
		Poland		1,215,000
	The income tax losses in Poland can be carried forward and deducted from taxable income for the next five years, but not exceeding 50% of the loss in any of these years. The non-capital losses in Canada begin to expire from 2006 to 2015.  As at December 31, 2005, the Company has approximately $15,841,000 non-capital losses for tax purposes available at various dates until 2015.
	Tax losses in Canada expire as follows:
			2006	$   1,239,500
			2007	1,748,000
			2008	345,500
			2009	3,073,000
			2010	2,208,000
			2014	3,764,000
			2015	3,463,000
				15,841,000
	Tax losses in Poland expire as follows:
			2006	$      230,000
			2009	440,000
			2010	545,000
				$   1,215,000

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

11.	INCOME TAXES continued
	The following is a reconciliation of income taxes:
			For the year ended December 31, 2005	For the year ended December 31,  2004
	Statutory rates in Canada		34.10%	35.62%
		Recovery (income taxes) at Canadian statutory rates	$   1,981,673	$    2,338,351
		Difference in tax rates in other jurisdictions	(208,220)	(525,609)
		Non-deductible expenses for tax purposes	313,587	753,431
			2,087,041	2,566,173
	Tax effect of tax losses not recognized		(2,071,885)	(2,566,173)
	Current and future tax expense (recovery)		$        15,156	$               -
	Future income taxes
	Future income tax assets
		Tax losses	$   5,401,781	$    4,746,721
		Property, plant and equipment	(39,592)	(28,716)
		Intangible assets	265,208	(752,980)
		Share issuance costs	243,940	243,940
	Future income tax assets		5,871,337	4,208,965
	Valuation allowance		(5,871,337)	(4,208,965)
	Net future income tax assets		$              -	$               -

12.

FINANCIAL INSTRUMENTS

(a) Fair Value

Financial instruments consist of cash and cash equivalents, accounts receivable, trade accounts payable and accrued liabilities, accounts payable pertaining to financing costs, deferred revenue, and loans payable and leasing contracts, the fair value of which are considered to approximate their carrying value due to their short-term maturities or ability of prompt liquidation.

(b) Credit Risk

The Company is exposed to credit risk only with respect to uncertainties as to the timing and amount of collectibility of accounts receivable.  The Company mitigates credit risk through standard credit and reference checks.

(c) Currency Risk

The Company is exposed to financial risk arising from fluctuations in foreign exchange rates and the degree of volatility of these rates.  The Company does not use derivative instruments to reduce its exposure to foreign currency risk.

The Company had the following financial assets and liabilities in foreign currencies:

	December 31, 2005		December 31, 2004
	Polish zlotys	$USD	Polish zlotys	$USD
Exchange rates to the Canadian dollar	2.8033	0.8542	2.4898	0.8142
Cash	653,163	$      190,140	871,011	$        -
Accounts receivable	745,326	-	630,975	-
Accounts payable	5,058,621	45,000	3,781,290	507,313
Due to related parties	-	-	-	3,516,187
Long term debt	1,598,816	$   3,690,761	2,028,457	-

13.

CONTINGENCY

The company has received invoices from  a creditor for amounts due for work performed in regards to an IPO on the Warsaw exchange in 2003.  The amount claimed is US$3,145,885 of which $NIL has been accrued at December 31, 2005 (December 31, 2004 - $NIL). The Company is of the opinion that these amounts are due if the IPO on the Warsaw Exchange is completed.

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

14.	SUPPLEMENTAL CASH FLOW INFORMATION
	The following non-cash transactions and financing activities were recorded during the year ended December 31:
		Shares issued for:	2005	2004
		TV programming and content development	$              -	$    1,481,904
		Acquisition of subsidiary	878,647	-
		Shares for services	533,167	196,696
		Business development	-	487,557
		Accounts payable	419,873	-
		Financial expenses	193,984	452,895
			$   2,025,671	$    2,619,052
	The following cash transactions involving financing activities were recorded during the year ended December 31:
			2005	2004
		Cash paid for interest	$      330,422	$       176,914
		Cash paid for income taxes	24,175	-
			$      354,597	$       176,914

15.

SUBSEQUENT EVENTS

Subsequent to December 31, 2005, on February 27, 2006 a private placement was completed for the issuance of 2,366,666 shares, at a price of $0.1875 USD per unit comprised of one common share and a non-transferable share purchase warrant, where two warrants entitled the holder to purchase an additional common share of the Company at a purchase price of $0.28 USD per common share for a period of two years.

Subsequent to December 31, 2005 on March 24, 2006 a private placement was completed for the issuance of 1,733,333 units. Each unit is comprised of one common share and a non-transferable share purchase warrant at a price of $0.1875 USD per unit, where two warrants entitle the holder to purchase an additional common share of the Company at a purchase price of $0.28 USD each for a period of two years.

Subsequent to December 31, 2005 on May 8, 2006, a private placements with two placees was completed for a total of 2,400,000 units at $0.15 USD per unit for total proceeds of $360,000. Each unit consists of one common share and a one-half warrant, wherein one warrant will enable the holder to purchase one common share at $0.225 USD for a period of two years.

Subsequent to December 31, 2005, on February 27, 2006, shares for a total of 240,000 have been issued for a debt of $51,710. On April 19, 2006, shares for a total of 105,000 have been issued for a debt of $22,500. On May 8, 2006, shares for a total of 350,000 have been issued for services of $58,625.

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

16.

SUMMARY OF MATERIAL DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES

The consolidated financial statements of the company have been prepared in accordance with accounting principles generally accepted in Canada (Canadian "GAAP") which conform in all material respects with accounting principles generally accepted in the United States ("U.S. GAAP") except as set out below:

Consolidated Balance sheets

		December 31, 2005			December 31, 2004
		Canadian    GAAP		U.S.               GAAP		Canadian    GAAP		U.S.               GAAP
Deficit		$(42,401,086)		$(42,401,086)		$(36,589,727)		$ (36,589,727)
Total assets		13,112,108		13,112,108		14,131,087		14,131,087
Consolidated statements of operation				For the year ended December 31, 2005		For the year ended December 31,  2004		For the year ended December 31,  2003
Loss under Canadian GAAP				$  (5,811,359)		$  (6,564,715)		$   (6,254,620)
Foreign exchange income (loss) (note 20 (a))				(1,103,560)		1,316,542		(1,809,655)
Comprehensive income under US GAAP				$  (6,914,919)		$  (5,248,173)		$   (8,064,275)
Basic/diluted loss per share, U.S. GAAP			$          (0.16)		$          (0.17)		$           (0.27)
Consolidated statements of cash flow
		2005				2004
		Canadian    GAAP		U.S.               GAAP		Canadian    GAAP		U.S.               GAAP
Cash flows from
	Operating activities	$     (672,593)		$     (672,593)		$  (2,191,185)		$   (2,191,185)
	Financing activities	2,783,669		2,783,669		5,568,760		5,568,760
	Investing activities	(2,376,215)		(2,376,215)		(3,226,854)		(3,226,854)
Increase (decrease) in cash and cash equivalents		(265,139)		(265,139)		150,721		150,721
Foreign exchange effect on cash		64,768		64,768		282,229		282,229
Cash and cash equivalents - beginning of period		640,308		640,308		207,358		207,358
Cash and cash equivalents - end of period		$      439,937		$      439,937		$      640,308		$       640,308

(a) Comprehensive income

Under SFAS 130, the Company is required to record certain gains and losses as a component of Stockholders' Equity, with the current changes in the component balances comprising the balance sheet figure disclosed in a separate statement or in a financial statement note.  The only item in the Company's financial statements impacting comprehensive income is the unrealized gains and losses from foreign exchange.

(b) Stock based compensation

Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value.  The company has chosen to account for stock-based compensation using Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”).  Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the company's stock at the date of the grant over the amount an employee is required to pay for the stock.

In December 2002, FASB issued SFAS No. 148, “Accounting for Stock–Based Compensation – Transition and Disclosure”.  SFAS 148 amends SFAS No. 123, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  SFAS 148 is effective for fiscal years beginning after December 15, 2002.  the interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002.  The company adopted SFAS No. 148, as required, on January 1, 2003 with no material impact on it s financial statements.

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

16.

SUMMARY OF MATERIAL DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES cont'd

(d) New accounting pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), Share-Based Payment, which establishes accounting standards for all transactions in which an entity exchanges its equity instruments for goods and services. SFAS No. 123(R) focuses primarily on accounting for transactions with employees. SFAS No. 123(R) eliminates the intrinsic value measurement objective in APB Opinion 25 and generally requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the date of the grant. The standard requires grant date fair value to be estimated using either an option-pricing model which is consistent with the terms of the award or a market observed price, if such a price exists. Such cost must be recognized over the period during which an employee is required to provide service in exchange for the award i n the requisite service period (which is usually the vesting period). The standard also requires the Company to estimate the number of instruments that will ultimately be issued, rather than accounting for forfeitures as they occur.

The Company is required to apply SFAS No. 123(R) beginning with its fiscal year beginning January 1, 2006. SFAS 123(R) allows for either the “modified prospective method” or the “modified retrospective method” of recognizing compensation expense. Under the modified retrospective method, the Company must restate its previously issued financial statements to recognize the amounts the Company previously calculated and reported on a pro forma basis, as if the prior standard had been adopted. Under both methods, the Company is permitted to use either a straight line or an accelerated method to amortize the costs as an expense for awards with graded vesting.

The implementation of these new standards is not expected to have a material effect on the Company’s financial statements.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets an amendment of APB No. 29. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Statement specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date this Statement is issued. Retroactive application is not permitted. The Company is analyzing the requirements of this new Statement and believes that its adoption will not have any signific ant impact on the Company’s financial position, results of operations or cash flows.

In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which nullified 2004 guidance issued by the EITF on determining whether an impairment is other-than-temporary, and effectively reverted back to previous guidance in this area. The FSP generally encompasses guidance for determining when an investment is impaired, how to measure the impairment loss, and what disclosures should be made regarding impaired securities. This FSP is effective for the first quarter of 2006 is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2004, the FASB issued an exposure draft of a proposed Statement, “Fair Value Measurements” to provide guidance on how to measure the fair value of financial and non-financial assets and liabilities when required by other authoritative accounting pronouncements. The proposed statement attempts to address concerns about the ability to develop reliable estimates of fair value and inconsistencies in fair value guidance provided by current U.S. GAAP, by creating a framework that clarifies the fair value objective and its application in GAAP. In addition, the proposal expands disclosures required about the use of fair value to remeasure assets and liabilities. The standard will be effective for fiscal years beginning after December 15, 2006, and interim periods in those fiscal years, except that the disclosure requirements will be effective for fiscal years ending after December 15, 2006.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”, which requires that changes in accounting principle be retrospectively applied as of the beginning of the first period presented as if that principle had always been used, with the cumulative effect reflected in the carrying value of assets and liabilities as of the first period presented and the offsetting adjustments recorded to opening retained earnings. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 with early adoption permitted. The Company is reviewing the guidance to determine the potential impact, if any, on its consolidated financial statements.

In June 2005, the FASB published an Exposure Draft containing proposals to change the accounting for business combinations. The proposed standards would replace the existing requirements of the FASB’s Statement No. 141,  Business Combinations . The proposals would result in fewer exceptions to the principle of measuring assets acquired and liabilities assumed in a business combination at fair value. Additionally, the proposals would result in payments to third parties for consulting, legal, audit, and similar services associated with an acquisition being recognized generally as expenses when incurred rather than capitalized as part of the business combination. The FASB also published an Exposure Draft that proposes, among other changes, that noncontrolling interests be classified as equity within the consolidated financials statements. The FASB’s proposed standard would replace Accounting Research Bulletin No. 51, &nbs p;Consolidated Financial Statements .

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

Stream Communications Network && Media Inc.

Notes to Consolidated Financial statements

December 31, 2005 and 2004

(in Canadian dollars)

16.

SUMMARY OF MATERIAL DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES cont'd

On July 14, 2005, the FASB published an exposure draft entitled Accounting for Uncertain Tax Positions — an interpretation of FASB Statement No. 109. The proposed interpretation is intended to reduce the significant diversity in practice associated with recognition and measurement of income taxes by establishing consistent criteria for evaluating uncertain tax positions. The proposed interpretation would be effective for the first fiscal year beginning after December 15, 2006. Earlier application would be encouraged. Only tax positions meeting the probable recognition threshold at that date would be recognized. The transition adjustment resulting from application of this interpretation would be recorded as a cumulative-effect change in the income statement as of the end of the period of adoption. Restatement of prior periods or pro forma disclosures under APB Opinion No. 20,  Accounting Changes , would not be permitted. Man agement is in the process of reviewing the requirements of this recent exposure draft.

On September 30, 2005, the FASB issued an Exposure Draft that would amend FASB Statement 128, Earnings per Share, to clarify guidance for mandatorily convertible instruments, the treasury stock method, contracts that may be settled in cash or shares and contingently issuable shares. The proposed Statement would be effective for interim and annual periods ending after June 15, 2006. Retrospective application would be required for all changes to Statement 128, except that retrospective application would be prohibited for contracts that were either settled in cash prior to adoption or modified prior to adoption to require cash settlement. Management is in the process of reviewing the requirements of this recent exposure draft.

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --

Exhibits

12.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act by CEO

12.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act by CFO

13.1

Certification pursuant to Section 906 of the Sarbanes-Oxley Act by CEO and CFO

-- Form 20-F  --

-- Stream Communications Network & Media  Inc.  --

SIGNATURE PAGE

Pursuant to the requirements of Section 12 of theSecurities Exchange Act of 1934, the Company certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual statements to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:

June 7, 2006

ON BEHALF OF THE COMPANY,

STREAM COMMUNICATIONS NETWORK & MEDIA INC.

Per:

“Iwona Kozak”

- Form 20-F  --

-- Stream Communications Network & Media, Inc.  --