Strømme Foundation Annual Report 2006

STRØMME FOUNDATION ANNUAL REPORT 2006

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Contents

Introduction 2006 Programme Highlights Asia Report East Africa Report West Africa Report South America Report Strømme Foundation (SF) Communications From housemaid to student Lucia Tapna redeems her land Intercultural Bilingual Education for children Microfinance solution to unemployment Report from the Strømme Foundation Board for 2006 Strømme Foundation Activity Account Strømme Foundation Balance Sheet 31.12 Strømme Foundation Balance Sheet 31.12 Strømme Foundation Cashflow Accounting Principles Notes Auditor´s Report for 2006

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The will, the ability and the strength to create lasting change

3 4 5 6 7 8 9 10 11 12 13 14 17 18 19 20 21 22-30 31

In 2006 Strømme Foundation (SF) celebrated its 30 year anniversary. Through the work that pastor Olav Kristian Strømme established and was continued through the Foundation from autumn 1976 SF now stands out as an efficient, cost-effective professional development organisation. SF was proud to mark the occasion by awarding the “Help for Self-help” prize to Olaf Hodne for his lifetime dedication to working with the poorest of the poor in India and Bangladesh. This was also the year in which NORAD through the Nordic Consulting Group confirmed that SF was the largest and most professional microfinance organisation in Norway, and the income from private donors reached over 60 million Norwegian Kroner (NOK) for the first time. The awarding of the Nobel Peace Prize to Dr. Muhammad Yunus, a friend and partner of SF for over 10 years renewed our inspiration and motivation.

Our vision is a world without poverty. The vision is our all embracing ambition, it is the reason that we go to work. It deals with our ultimate goals. We cannot achieve it alone, but it is a HUGE ambition that drives us further in all our work and every choice we make every day. The vision is a picture of the future that we want to see. It is clear where we are going. It is a visionary description of a state that we dream of and which we believe is possible to achieve.

Our mission is to eradicate poverty. The mission expresses our mandate, Strømme Foundation’s specific role in realising the vision. The mission has a simple formulation – because our task is simple both to express and understand, but it is certainly demanding to fulfil: In 2006 we gave 159 278 families a micro finance loan, and 283 000 individuals were a part of one of our education programs.

With for instance five members in each family, we gave in 2006 2 211 390 individuals a just chance. Together with NORAD, our international donors, Strømme Business Partners, schools, artists and our individual donors in Norway we gave them possibility to help themselves. That is help for self-help. That is about “getting people started”. That is a clear, large and inspiring contribution – that helps the world a step closer to the grand vision that we have formulated for our activities.

The promises are what we clearly vow to deliver to our target group. The promises describe our most important deliverables, both to shareholders, partners, customers and colleagues. We certainly promise many things, but the promises are knit together.

This is because the way in which we work and the results we want to achieve are so closely related.

We believe than no-one places more emphasis on the long-term thinking, participation and results than Strømme Foundation. We place these demands on the poor, on our partners and not least on ourselves. We do this because we have a fundamental belief in every single individual’s potential and responsibility to better their own situation. Therefore we don’t give any soft gifts. We help people get started so that they can help themselves.

Values are like personality traits, they describe us. Values are the personality traits that we wish to be distinct, to strive for and choose to adopt. Values should not be simply a litany of fine words. Values are a description of the qualities that we think are

important and which we wish to characterise us. They build our culture. We can’t live without them.

For activity out in the field, Strømme Foundation has defined our fundamental values; Sustainability, Responsibility, Justice, Openness, Participation, Gender and Human Rights. These are good tools and means at the grass roots level in the Global South. But they are not necessarily suitable for describing the personality we want to emerge in communication here at home, among staff members internationally, partners and among donors worldwide.

We also need brand values: These also should not be a litany of fine words. They can, but don’t have to be, the values we communicate strongest in the Global South. They must be a headline under which we can gather together all of the other related characteristics in a logical manner.

The two values are: Focussed: This deals with being result oriented, direct, right on target, professional, effective and demanding. In our opinion this word embraces our “international values” of Responsibility, Justice, Human Rights and Sustainability in more than just a loose synonymous fashion. Everything we do, we do with a clear eye on the goal. We know what we want to achieve and we won’t hold on endlessly to partners or projects if they don’t quickly show some results.

Motivated: Motivated sums up our optimism, aggression and generosity, and focuses us on the fact that we are able to inspire people to make the right choices, effect development work’s possibilities and results, give value back to our donors and energy to our partners and beneficiaries. This value has a lot of connection to Openness, Participation and Gender.

It is only by combining determined work with motivating communication, context and explanation, that we can realise our desired goals.

Geir Magnus Nyborg Dr. polit.

Board Chairman

Lars-Ivar Gjørv Cand polit; M.Sc. CEO

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2006 Programme Highlights

Asia

This has been a significant year for Strømme Foundation(SF) and its partner organisations in their efforts to find innovative ways to empower people to be free from poverty. We use microfinance as a tool for economic empowerment and education in promoting life with dignity but the way in which we use these tools has differed from one country to another.

In Asia, SF works in six countries – Bangladesh, India, Sri Lanka, East Timor, Cambodia and Myanmar. The outreach during the year was to 218 000 people (1.2m) of whom 83 percent were female.

The development education approach of SF in Bangladesh creates model schools for quality education in primary schools, capacity building of adolescent girls and women, and the building of civil society institutions. Pilot projects for quality education in primary schools have shown 100 percent enrolment of children, with a very small dropout rate of 1-2 percent.

SF’s Regional Directors and their staff play a vital role in bringing local knowledge and competence to development work. In each Region that we work; Asia, East Africa, West Africa and South America; SF have employed highly competent local expertise that enables us to work closely with carefully selected education and microfinance partners in an effective manner. In Bangladesh we have promoted an integrated approach through our partners targeting the same groups with education and microfinance. In West Africa, on the other hand, the focus had been on developing basic microfinance through women’s groups and motivating them to save money. This has been a very effective way to strengthen the local civil society and empower women. In other countries, there are over-riding priorities that our interventions must address, for example in conflict areas like the North East of Sri Lanka the focus has been on promoting peace and harmony with all the interventions.

Educating children continues to be an important priority but here again the approach needs to vary from one area to another. In West Africa the most significant accomplishment was the design, development and implementation of accelerated learning curricula for the drop out boys and girls in the age group of 8-12, so that given a 8-month training, they were able to acquire proficiency and join the formal educational institutions in classes 3 or 4.

Many such boys and girls have excelled in the formal schools. In East Africa the focus has been on community-based education by mobilising communities and motivating them to understand the rights of the children’s access, especially girls, to basic education.

Some countries where there are large numbers of deprived children in metropolitan areas the approach needs to be different.

The focus in Bolivia was to reach out to the most vulnerable children – street children, orphans and juvenile delinquents. With care, love and psycho-social interventions many of the street children have been re-united with their families and/or relatives and many others given proper vocational training to enable them to find gainful occupation and lead normal lives. In Peru, the major thrust has been on education, especially promoting dignity among adolescent mothers who had been victims of rape and other forms of violence.

The year 2006 was a significant land mark for SF in Sri Lanka., when Strømme Microfinance Asia Guarantee Ltd was launched. It aims to provide on a sustainable basis market responsive financial services and capacity building support to financial and business service providers in order to enhance access to financial services by the enterprising poor.

During the year the microfinance portfolio increased considerably. At the end of 2006, a preliminary survey of microfinance partners by utilisation of PRA tools, revealed that 41.8 percent of the project participants have crossed the poverty-line over the last 3-5 years of operation, and there was a growth of family income to the tune of NOK 729.

Outreach Statistics During 2006 SF continued to try to find ways to improve the measurement of the effectiveness and efficiency of our interventions. There is much work still to be done but in microfinance SF are reporting an estimate of clients directly reached through SF funding and loans, rather than using the total number of clients for our partners as is standard practice in the industry. In the figures that are reported below the estimate of direct SF outreach will be shown first and the outreach including total microfinance partner clients will be given in brackets for comparison.

During the year, SF worked in 17 countries with 144 partner organisations that have had 168 projects and programmes with a total direct out reach to 559 000 people (2.17m) of whom 70 percent were female. Some of the highlights from the four regions are described below:

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very young. In recognition of this problem, SF together with its partners in Bangladesh and assisted by consultancy services, developed the Shonglap (Dialogue) programme in June/July of 2006 to provide capacity building for life education with occupational skills for economic empowerment to these young adolescent girls..

Shonglap program is divided into three sections – in the first 6 months girls receive life preparing skills and learn about physical transformation into puberty and self hygiene, need for cleanliness of their homes and environment, how to protect themselves from repression and abuse, and to develop self-confidence. They also learn about the effects of early marriage and the threat it can create sometimes to their own lives and that of the new born babies. They learn about the dowry system, superstitions and other social taboos. The next 3 months offer literacy from where they had left off school and for illiterates help to learn functional literacy. The last 3 months offer occupational training to take up an economic activity either individually or in a group. They are exposed to choices of occupational training that are available in the area with market demands. They also have access to small loans to start their own income generation activities. By the end of the year, 7 Partner NGOs trained 240 animators and started 230 centres providing life education to 5,800 adolescent girls in the country.

Shonglap -An example of our work from Bangladesh UNFPA reports that South Asia has the largest concentration of adolescents in extreme poverty (106 million) with 62% of them being girls. This group of girls is in constant danger of gender-based violence and sexual trafficking. For many girls, particularly those living in poverty, adolescence means more risks and fewer freedoms.

Fifty seven percent of adolescent girls do not go to primary school and about 30% dropout before completing high school. In rural Bangladesh adolescent girls are normally married off at an early age. Unaware of the facts of life these adolescent girls become mothers when

From a classroom in one of the slums in Dacca, Bangladesh.

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East Africa

West Africa

In Eastern Africa, SF works in six countries – Uganda, Tanzania, Sudan, Kenya, Rwanda and Madagascar. Microfinance and community-based education played the vital role in creating access to financial services and opportunities to basic education for girls in particular and adult education for women. During the year, a total of 190 000 people (714 000) had direct benefit from the interventions, and 58 percent of them were female.

Most of the microfinance interventions were implemented through Strømme Microfinance East Africa Ltd., which aims at providing on a sustainable basis market responsive financial services and capacity building support to financial and business service providers in order to enhance access to financial services by the enterprising poor in East Africa region.

In community-based education, the focus was on girl-child education, HIV/AIDS orphans, child-headed households, youth sports, culture, health education and street children’s education.

The goal of the education sector is to increase opportunities to access quality education at community level and active participation in social, cultural and economic development of the societies.

were trained in small business management and were linked to MFIs, where they got small loans for businesses to improve their livelihood conditions. Home visits were also conducted so as to create rapport with the families that had taken up the children.

Children who did not manage to get foster families, but were very dynamic got jobs which included being night watch men, porters and the like. Some were trained in small business management and were linked to MFIs from which they too got small loans for their businesses. They live in rooms that they rent as a group of 3 or 4 people.

After the children were properly settled in the families and others had found suitable occupations for survival and where to live, various school heads were sensitized on the catch up concept and its advantages, a special program for children beyond normal school age, accelerated - taking half the normal primary school period, and with a lot of leniency towards the children. The school situation was then assessed and the schools were supported in accordance with the identified needs. Training for teachers in teaching methods was facilitated, as this was a special program.

The teachers were also trained in guidance and counselling as the children that they deal with have many different problems, and they need special handling, care and attention.

The Catch up Program, an example of our work from Rwanda There are many children in Rwanda that never had a chance of getting an education and they have gone beyond the normal age of primary school. This state of affairs has largely been attributed to the 1994 war/genocide or HIV/AIDS. Some of the children became orphans during the war, and the parents of others are either in prison or in exile due to their participation in the genocide.

Other children were orphaned by HIV/AIDS or their parents are alive but are sick with AIDS.

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Municipalities are singled out for competence on education in the Mali educational system. It is the reason why municipalities are becoming close partners of SF. The municipality funding lines has expanded in the education sector in 2006. From 8 municipalities in 2005, 15 municipalities were supported in 2006. All the projects are concerned with access to primary education by supporting the building of new classrooms and providing equipments with at least 60% of community contribution and improvement in the quality of primary education by training teachers and providing school materials.

Boys in a speed school in Mali.

In West Africa, SF works in three countries – Mali, Burkina Faso and Mauritania.

The main geographical area of focus is Mali, where the Regional Office is located in Bamako. A total of 101,000 people (179 000) benefited directly in the year 2006, and 76 percent of them were female.

Saving for Change (SfC) in Mali is designed to meet the needs of poor villagers who often need a safe place to save more than they need a loan. Members save what they can and then lend their savings at interest to the group. Members use these loans to buy goods to sell at the market, purchase medicine for a sick child, procure food during the lean season, grow vegetables, or raise animals. This is “savings led” microfinance, where the money lent is the money saved in small groups, with the interest from loans building the fund. Groups receive three months of intensive training and then progressively less frequent monitoring until they can operate on their own.

With 13.5 million inhabitants on double the surface area of France, Mali has one of the lowest development levels in the world. Based on the human development index established by the UNDP, it is 174th among 177 countries. 2/3 of its population lives below the poverty level and more than 80% of adults are illiterate. The crude schooling rate barely reaches 71%. Average annual income for its 13 million citizens is around $300, and three quarters of them live on about a dollar a day. Mali’s population also faces near epidemic levels of malaria, and more people die of malaria each year than of HIV/AIDS.

With this background in mind UNICEF Rwanda initiated an accelerated catch up program, which is friendly to children in their teens or twenties who could not attend normal primary school.

The government readily supported this program, but with no funds. The government of Rwanda designed a curriculum in partnership with UNICEF and DFID and trained trainers. It also sold the concept to other education partners. AEE Rwanda, a partner of SF, saw that the concept fits well into the community based education approach, and in particular with interventions being supportive of street children.

Volunteers working with the street children were trained and they started visiting the children on the streets so as to build a relationship with them. They advised the children to leave the streets and wherever possible, the children were reconciled to their parents or surviving relatives. As for the children whose parents died, the volunteers facilitated them to get foster parents, who were children-friendly and most of them were from churches. The situation in the families that received the children was then assessed to see whether they were economically sound. Where the situation was found wanting, the family heads

During the year SF had six partners who had 108 speed schools with 2 900 children, 66% of whom representing 1 930 children were admitted in formal educational institutions.

Speed Schools, an example of our work from Mali The speed school is an accelerated curriculum that allows children who have either left school or never been to school because of questions of vulnerability to enter school as late as the fourth year of primary school. In Mali it is specifically aimed at the 880 000 children (boys and girls) who would usually be excluded from ordinary school enrolment because of their age. SF is the only NGO in Mali today promoting speed schools.

Woman, Musoma in Tanzania.

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South America

Strømme Foundation Communications SF’s Communication Department is based in our Head Office in Kristiansand. The department is responsible for raising money from Norwegian individuals, companies and groups and for raising awareness of development issues within Norway to promote North/South co-operation.

In South America, SF works in two countries – Bolivia and Peru.

A total of 50 000 people (62 000) benefited of whom 52% were female.

and discovered her capacity as a young leader, so she participates together with other kids in the different meetings promoted by the Bolivian Network Project.

In Bolivia two of our partner organisations were actively involved in reaching out to children at risk – street children and orphans.

Daisy, a thirteen year old girl and her brother Alex aged two are two such children benefiting from the interventions.

The Bolivian Network Project benefits around twelve thousand children in the whole of Bolivia and Daisy is one of them. Every morning at 8 a.m. Daisy carries her little brother Alex and leaves the prison to attend school and education programmes in “Casita de la Amistad”, which is located strategically right in front of the park that separates the house from the prison.

“Casita de la Amistad” (Friendship House) is the name of the center, where Daisy (13) and her brother Alex (2) are educated, fed and sheltered during daytime from Monday to Friday because in the night and weekends they are in jail. The Friendship House is a member of the Bolivian Network Project, which is implemented

by Viva Network with Strømme Foundation’s support.

Daisy lives in jail together with her younger brother Alex and her mother, who was accused of being a drug dealer. Her mother has already been 3 years in prison and because of lack of money she was not able to pay a lawyer to prove her innocence. Daisy’s father was a drug dealer. But Daisy does not stay in jail the whole day; instead she attends the primary school in the morning, where she learns more than reading and writing.

During her stay in the project she has regained her self-esteem

”Here we go to school, receive help to do our homework, play, talk, eat and have a nice time with other kids and teachers”, explains this girl. Although Daisy and her little brother live in prison they are able to receive a good education and formative support.

As a result of this Daisy is able to have dreams about her future. ”I would like to be a veterinarian in the future and also an artist”.

Her mother also receives support from the Project. ”There are meetings here, in which we talk about our children and their upbringing. We also pray and reflect on our past, present and future.

That helps us a lot”, says the mother.

In Peru the projects are in line with the State national plans and policies dealing with improvement of the living standards of the poorest sector of the population, which are mainly directed towards educational and social issues. Through legislation these processes are called the New Law of Education, the Law of Decentralization, the Law for people displaced by Political Violence, and those which are being developed in a more decentralized manner in the various departments of the country.

The microfinance projects directly targeted towards promotion of women’s participation in their family economy and their capacity for negotiation in the labour market. Two other projects placed emphasis on the responsible use and conservation of natural resources. Indigenous Quechua speaking population of the central Andean region were also targeted during the year with formal and non-formal education in their own language. Adolescent mothers continued to receive support in terms of capacity building and psycho-social interventions. The centre for teenage mothers has been working on raising awareness among the public with respect to the problem of teenage mothers and children at risk, and has taken this problem into the public arena.

The work of empowering the community and area leaders in SF’s interventions has succeeded in developing their ability to negotiate and link up with those institutions which play a decisive role in the locality (municipal councils, participative budget assemblies). This has contributed to the achievement of interesting investments for the benefit of the community

School girl in Lima, Peru.

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SF has worked systematically with its positioning in Norway for the last three years. All our internal and external communication is now about our slogan “Getting people started”. The slogan is a reflection of the respect that SF has for the individual living in poverty and in partnerships rather than hand-outs. It is designed to shape the thoughts of our stakeholders in Norway. In recent years our main challenge has been to give information about microfinance, our most important tool for empowering the individual to help themselves out of the poverty trap using their own skills and initiative. Microfinance can change the life of human beings to something better, especially for the poor people who really are fighting for a better life. When the Nobel committee in 2006 decided to give Dr. Mohammad Yunus the peace price because of his invaluable contribution to microfinance, we also felt honoured. The peace price was in a way also a handshake to SF for the focus on microfinance for the last ten years.

When it comes to donations from private individuals, 2006 is the best year in SF’s history. For the first time the income from private individuals and companies was more than NOK 60 mill. For the period of the last five years the growth has been approximately 22 %, from about NOK 50 mill to about NOK 61 mill. At the same period the fundraising cost has decreased by about 8.5%. We are very pleased with this and we would like to thank all of our donors, partners and friends for this good result.

Most of our income still comes from traditional fundraising through direct mail, giros in our magazine, and first and foremost by the regular donations of which the sponsorship program Friend at Heart (FAH) is the biggest. In 2006 the share of the FAH sponsorship program was about 53 % of private income. Even though the income from the FAH has increased by more than NOK 6 mill since 2002 and the yearly average donations through the program has increased by about NOK 500 there are challenges. The tendency shows a decline when it comes to the number of regular donors. SF has therefore in 2006 started work to develop and upgrade the FAH program. Our intention is to create an even more cost effective and attractive product for our donors.

SF is keenly aware of the development of communications technology and the effect it will have on fundraising. Our opinion is that the digital media will play a more and more important role when it comes to raising money for development. Gradually the more traditional fundraising and communications activities through print media will be replaced by internet and mobile phone. In 2006 we therefore have expand our focus on digital media. Hopefully you will notice the result of this in the second part of 2007.

Another focus area is a sustainable collaboration with trade and industry - Strømme Business Partner (SBP). SBP was established as a strategic business area in 2002. Its mandate is to generate funds from the corporate sector and through solid partnerships that bring added value to our Business Partners. Our goal is to get partners to join SF in our fight against poverty, and through partnerships to generate vital and enthusiastic co-workers as well as a strengthened reputation and trademark for the Business Partners. Since the start in 2002 the number of SBP partners has reached 17 and through the companies we are in a position to communicate with more than 8 000 employees.

SF believes in networking to develop the value chain in resource mobilisation for development issues. Schools, sport clubs, festivals and artists are key partners in this work. Development education is one of the aims in SF’s “Network Group”, trying to create compassionate and tolerant attitudes by passing on information about our partners in the South. Through our Norwegian partners we have managed to reach about 19 000 youngsters with information about SF and the work involved in eradicating poverty.

This is twice as many as in 2005. The income from this kind of work has increased from NOK 1.5 mill in 2002 to more than NOK 4 mill in 2006.

In 2006 the Network Group of SF launched with support from NORAD and in co-operation with Damaris Trust England, the computer game “President for a day”. This game is played for four to five hours with up to 200 hundred participants at the same time in Secondary-, High- and Folk High School. The educational game enables youngsters to become President of Mobesi, a fictional African country, discover problems such countries face and make many important decisions. The game fits with the school curriculum as nature, English, geography, economy and politics.

Major Partners Agder Energi ABCenter Expert Norge ASA Mosvold & Co Partner level 2 Dale+Bang Formuesforvaltning Hotel Norge Kjeldsberg Kaffebrenneri Nordea region Sør Scan Trade Ltd Ventelo Norge AS Shop By Heart Partner level 3 Basecamp Explorer Lauvland Øyeoptikk Lillesand Produkter AS Preventor TeamWorks

Every type of development work involves a meeting of cultures and SFs is based on a fundamental belief in the essential worth and equality of human beings. This is the basis for cultural exchange in the areas of literature, music, theatre and films between North and South. The artists and story tellers of our time communicate experiences and knowledge from the countries in which we work in an innovative and special way. SF wants to promote a message of solidarity in an overcrowded media and in reality this can only can be done by art.

SF takes no income from lotteries or slot machines. We want and believe in supporters with engagement and involvement in the work of eradicating poverty. We thank you all for the commitment and support in 2006.

Income through Communications Department Private Individuals Donations (ex Tsunami) Corporate Sector (SBP) Other Income from Communications dept Total

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2006 55 643 4 222 1 148 61 013

From housemaid to student

Lucia Tapna redeems her land

Niamankolo Coulibaly was 3 years old when her father died. Four years later her mother had to do as so many other mothers had done before her. She had to find a work for her daughter, and send her away to work as a house maid.

Her economic situation became worse and Niamankolo never got the opportunity to go to school. At the age of 8 she was sent away to her aunt to work as a housemaid. With her she at least could get 3 meals a day.

“I always wanted to go to school and learn. I want to become a teacher, says Niamankolo. At the age of 12 she could see her dream come true. She started in 4th grade in one of the so called speed schools Strømme Foundation is operating together with our local partner ”Development Holistic Africa” (DHA) in Torokorobougou.

The speed school is for children from 8 to 12 years, who for different reasons have never had the opportunity to start school.

There are many reasons why this happens. Family poverty often means that children have to work and there is a long distance between school and home.

The school has a very intensive curriculum, and the children have to be highly motivated to be able to pick up with in 8 months with those who started in grade one. After 8 months each pupil has to take a test and if they manage to pass they can continue in the public school.

Niamankolo Coulibaly managed and has moved back to her own village where she to day is a school girl. And since there are not enough schools in the area, Niamankolo and eight of her friends is attending a private school. The government pays the school fees – and Niamankolos dream about going to school has become a reality.

I always wanted to go to school and learn. I want to become a teacher, says Niamankolo. At the age of 12 she could see her dream come true.

Niamankolo Coulibal is from the village of Senou outside the capital Bamako in Mali. Her age is now twelve, but she still remembers the days she worked as a housemaid with her aunt.

She spent most of her days washing dishes, cleaning the floors, cooking, washing linen and look after her younger cousins. She was busy from early morning to late evening every day. Most of all she remembers how she envied her brothers and sisters who could go to school.

“Now she has got a chance to show that she can succeed. The speed schools are a great motivation for the children and parents. If we were not given that opportunity our children would never get the chance to attend school, and our public schools would never open that possibility for them. Those of us living in the rural area have many children who will benefit from this, and DHA did a great job helping Niamankolo to a place in school.

But now she also has to work hard to show that this is really what she wants. We will promise to support her and assist her as best we can to see to that she can manage to complete primary school, says Niamankolos stepfather, Fousseini Coulibaly.

Her father died when she was 3 years old. At that time 3 of her 5 brothers and sisters went to school. It was a difficult time for her mother, her income was not enough to cover food and school money. Following tradition she became the second wife of one of her late husbands brothers and she gave birth to another 2 children.

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Lucia Tapna applied for a loan of 10 000 taka and released 33 decimal of land from the moneylender.

She started cultivating rice as her first crop and potato, and from the sale of the two harvests Lucia could repay the loan of Tk.10 000 with the interest.

Lucia Tapna is 45 years old and lives with her husband Sebastian Soren in the village Nizpara in Dinajpur District in Bangladesh.

Lucia and Sebastian are from the Santal community both are illiterate. Their 16 year old son studies in grade 10, while their ten year old daughter studies in grade 3.

Right after her marriage, Lucia had to shoulder all responsibilities of running her family. Her husband worked as a casual laborer and sharecropper. Very often Lucia also had to work alongside her husband in addition to taking care of her household chores. Some days there was no work and the family did not have any income. To meet the needs the family had to borrow money from others. The situation worsened when her husband got sick and his illness prevented him from working. The family needed money for his treatment, and they had to borrow more.

More costs without income meant more borrowing and poverty started settling upon their life. The need for food and treatment was pressing and they could not find any way out from this vicious cycle. The family succumbed to the pressure and they approached the moneylender. They borrowed 6 000 taka (90 USD) at an exorbitant interest rate as high as 120 percent!

The loan started snowballing with the interest. The moneylender frequently approached the family to get back the money with the interest which was quite impossible for them to gather and the moneylender started to eye their land.

000 taka which they had borrowed 16 years back.

Using the modern method of cultivation the moneylender was harvesting record quantity of crops from the mortgaged land.

In the face of continuous poverty and economic pressure, Lucia was forced to mortgage their remaining land to another moneylender. All she and her family had left was their small homestead land and an increasingly growing debt to the moneylender.

In 2002 Lucia Tapna became a member of ‘Nizpara Nishi Female Group’ under Tribal Empowerment Project of RDRS in Bangladesh. The program is supported by Strømme Foundation. Lucia learned about RDRS land redemption program and sighted a gleam of hope to regain their lost land! She applied for a loan of 10 000 taka from the project at 8 percent service charge and released 33 decimal of land from the moneylender.

Lucia started cultivating rice as her first crop and potato as second crop in the redeemed land in this season. From the sale of the two harvests Lucia could repay the loan of Tk.10 000 with the interest.

Now the living conditions for Lucia and Sebastian have changed tremendously. Lucia now has plans to take a new loan from the project to release the remaining one acre land. And in the future she is hoping for a loan to repair their house!

Lucia’s family owned two acres including their homestead. To save them from the continuous pressure from the moneylender and harassment, they mortgaged one acre of their land for the 6 S T R Ø M M E F O U N D AT I O N A N N U A L R E P O RT 2 0 0 6

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Intercultural Bilingual Education for children

Microfinance solution to unemployment

“Micro Finance was the best thing that happened to me. When I failed to continue with my education, I learnt how to sew. I’m now a tailor and my whole life and that of my family depends on tailoring”, says Edison.

Eight year old Evelyn likes her school where she meets her friends with whom she can play and study and have fun.

Evelyn Rojas Vargas (8) is one of the 1 469 children who participate and receive education from the Intercultural Bilingual Education Program promoted by Tierra de Ninos in Anchonga, Huancavelica. The village is located in the central highland of Peru. This program is carried out only with children from 1st to 4th grade. Currently the program does not include the whole primary school because the project plans a progressive growth until it reaches the whole primary school group.

Evelyn is one of the pupils in Rantay school and she is now in 3rd grade. Rantay community is located one hour driving distance from Anchonga and it is located at 2 700m above sea level.

Evelyn studies in a multi grade classroom, which means that in her classroom there are children from 3rd and 4th grade of primary. This is very common in the schools in the in the highlands, where classes are composed as multi grade classrooms due to the lack of budget provided by the government to supply teachers’ salaries.

Evelyn likes her school. At school she meets her friends with whom she can play and study. They learn with music, songs, and poems and have fun. She says that now her teacher even sings and dances with them in class.

In Andean communities like Rantay most people only speak Quechua and it is rare to find children and women who understand Spanish. The fathers of the families are normally the ones who know Spanish and Quechua.

The program emphasizes the importance of learning in your own

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mother tongue, and Evelyn and her friends and classmates are now being educated in Quechua and learn to read and write in the language they use at home.

Evelyn’s mother says that her child has learned fast and that she is happy because her child’s teacher is patient and friendly. She also says that parents feel more confident with the teacher, who is working with their children. The teacher has a dialogue, not only with the children, but also with the parents, and can assist the children if they are not treated well at home. They can talk to their parents and tell them not to yell, beat and harm their children. And now also the teacher has a dialogue with the children in class, and talks to them with respect and the learning situation for the children is much better.

Tumwijukye Edison (32) dropped out of school just after he had joined secondary school at the age of sixteen.

“My dream was to study up to university and become a doctor.

Doctors are few and they never fail to get jobs”, Edison explains.

But things did not turn out the way he wanted. He dropped out of school and his fear was unemployment but today, 16 years later, life goes on for Edison.

“Micro Finance was the best thing that happened to me”, says Edison smiling and looking at his products all around him in his workshop.

Now married to Naturinda Miliba (22), Edison is blessed with four children aged between 8 and 13 years old.

“All my children are in school. I’m able to pay their school fees.”

Evelyn’s mother realizes that without education there is no possibility to get job.

“It is very important that our children get education and are educated because our parents did not educate us. For us as parents we are happy. Now our children learn to read and write in Quechua. That is our own language. Compared to previous years when children had to attend school and learn in “Castellano” (Spanish), a language that was not used in our villages. There where only few children who could understand and learn well at that time. Now things are different. By learning in our own language it is easier. Today all children learn and they learn faster and better” affirms a happy mother.

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Edison’s life Edison rents a two roomed house at Ug Shs 80 000 (about USD 52 per month) in Kiwatule, a suburb in Kampala, the capital city of Uganda. His family of six stays in one of the rooms. The second room is used for business.

“When I failed to continue with my education, I learnt how to sew. I’m now a tailor and my whole life and that of my family depends on tailoring”, he says adding that his wife also is a tailor and that they work together.

“I buy materials and some ready made clothes from traders who send their goods mainly from the Democratic Republic of Congo and Rukungiri town”, he says. The readymade clothing he sells as it is and makes a profit.

Edison is happy to have his wife involved in his daily business. Naturinda Miliba is most of the time the one who sews and Edison deals with design. They sell both already made clothes and those they make to customers who come looking for them and for a special design, at the business premise which also doubles as a shop. Some of the clothes they are making are sent to the market for sale.

How Micro finance changed Edison’s life Edison confesses that since he started his business, he had never bought goods for his business worth Ug Shs 150 000 (about 87USD). Therefore it was a great boost when he got a loan of Ug Shs 200 000 (about 116 USD) from Pearl Uganda, a local Micro Finance Institution.

“After paying back the loan and interest I was able to save 300 000 Ug Shs (about USD 174), and after seven months I had made a profit of 650 000Ug shillings (USD 378)”, says Edison. He is now abele to pay for his children’s education and maintaining his family’s needs. And on top of that he can save about 29 USD a month.

And now he and his wife want to build their own house, and stop paying rent for a house they do not own.

With 2 sewing machines neatly placed in the middle of the room, a table on the left side and a bench close to this table for guests, Edison’s business room has customers’ clothes and materials hanged everywhere on the walls.

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Report from the Strømme Foundation Board for 2006

The purpose of Strømme Foundation (SF) is to eradicate poverty and we work in East and West Africa, Asia and South America.

and closer interaction between departments and between Head Office and the Regional Offices.

Through our Head Office in Kristiansand and Regional offices in Uganda, Mali, Sri Lanka and Peru SF develops partnerships with carefully selected local NGOs and works closely with them to build their capacity and closely monitor their work. In all its work SF places strong emphasis on empowering people and on promoting the rights of the poor and building civil society institutions that will enable them to help themselves. SF works with partners that demonstrate a strong commitment to our values of human dignity, justice, participation and transparency.

Development work in 2006 SF is dedicated to long term development work and to “getting people started” on the road to a life free from poverty through interventions that do not breed dependency but promote the responsibility and self esteem of the individual, the family and the community. SF have chosen two areas of interventions: education, and microfinance. The overall policy and principles of Education and Microfinance together with regional and/or country strategies form the basis for interventions in these two sectors.

The Boards work The Board has had 7 meetings in 2006 and dealt with 48 issues.

Three Board members were re-elected; Chairman Geir Magnus Nyborg and Board members Liv Næss and Solfrid Lind. The Board’s work has concentrated on reviewing the structure of the organisation and on reconsidering the assumptions driving the allocation of resources. To become better acquainted with the work of the organisation in the field the Board planned a trip to Sri Lanka and Bangladesh which will take place in early 2007.

During the year, SF has worked in 17 countries with 144 partner organisations that have had 168 projects and programmes with a total direct out reach to 823,000 people of whom 70 percent were female. The approach that has been taken in the field is, working through our partners, to adapt the use of microfinance and education to local circumstances as is illustrated and explained elsewhere in this annual report.

Resignation of Secretary General Øistein Garcia de Presno handed in his resignation in August 2006. His 15 years of service have seen significant developments and considerable growth in the organisation and the Board wishes to thank him and wish him well in his future endeavours. The Board asked the marketing director Lars-Ivar Gjørv to serve as acting Secretary General through 2006 while recruitment for a replacement was undertaken. The Board would like to express their thanks to him for the very professional manner in which he has lead the organisation through a challenging time. In January 2007 Øyvind Aadland, currently the Director of the Extension Studies and Consultancy Department at the School of Journalism and Communication (Mediehøgskolen Gimlekollen), was appointed as the new Secretary General and will start work on June 1st 2007.

Leadership Team Strømme Foundation is a diverse and multi-national organisation and building a more effective leadership team has been one of the main focuses for 2006, strengthening and clarifying departments, functions and director level mandates and authority. The Leadership team have been working together to update the strategy for the organisation and identify goals, processes and significant indicators at all levels that will improve monitoring of the effectiveness of our interventions and enable better planning

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2006 has been an exceptional year for Microfinance in general and for Strømme Microfinance in particular. In April 2006 the Nordic Consulting Group published its latest report on Microfinance activities supported by Norway and speaks very highly of Strømme Foundation: “The clearly biggest and most active organisation is Strømme Foundation….The introduction of an Apex level of funding in Strømme is one reason why loans are the norm in SF. It is an instrument that in many cases provides better performance incentives than pure grants to an MFI. This is also more in line with best practice and recent CGAP guidelines.”

On December 10th 2006 the Nobel Peace Prize for 2006 was awarded to Professor Mohammed Yunus and Grameen Bank for their efforts to create economic and social development from below. This is probably the highest recognition of Microfinance by the international Community ever, and caused a great and increasing interest in Microfinance from all stakeholders.

SF has been discussing and exchanging ideas with NORAD and leading financial institutions and strengthening the ties to fellow players in the MF field. We believe that by working together we can develop the strategic partnerships and funding mechanisms that will increase the value of our contribution to poverty eradication.

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Financial Headlines The 2006 financial year is the first year in which the new accounting standard produced by the Norwegian Accounting Standards Board is fully implemented and this means that in place of a Profit and Loss account there is an Activity Account. An explanation of how SF has allocated expenditure between administration, fundraising and purpose costs is shown in the Accounting Principles. The key figures for SF as a percentage of total costs in 2006 are; Administration 6%, Fundraising 10% and Purpose 84%.

The total income in 2006 was 127.0 million kroner compared to 142,9 million kroner in 2005. This difference is almost entirely attributable to the exceptional income in 2005 for Tsunami rehabilitation. There is also a 3.5 million kroner decrease in the income from credit components, the repaid element of microfinance loans in the field, that masks the fact that 2006 has in fact been the best year ever for regular income from private donors which increased from 54.0 million kroner in 2005 (ex Tsunami) to 55.6 million kroner in 2006. Public Sector income increased from 52.3 million kroner in 2005 to 53.3 million kroner in 2006.

SF had active partnerships with 19 “Strømme Business Partners” and received 7 legacy gifts.

Financial support to projects in 2006 totaled 111 million compared to 128 million in 2005. The decrease is mostly related to the exceptional Tsunami related expenditure in 2005. The result for the year after change in earmarked capital was a deficit of 0.2 million kroner compared to a 6.5 million kroner deficit in 2005.

The Board and Secretary General feel it is correct to present the annual report under the going concern assumption. The organization is in a good economic and financial position with its footing in the Norwegian fundraising market and its good relations with NORAD and the Ministry of Foreign Affairs.

Total equity decreased by 0.2 million kroner and totals 10.1 mill. at the year end. In addition the acquired microfinance funds increased from 82.5 mill. in 2005 to 97.6 million in 2006 and the total loan portfolio in microfinance increased from 69.2 million kroner in 2005 to 80.6 million kroner in 2006. The cashflow from operational activities is satisfactory; total liquid funds at the year end were 8.5 million kroner and there is satisfactory liquidity in the new year.

Working environment and Staff The working environment in the SF is considered to be good. The

cooperation with the employee’s unions has been constructive and has contributed positively to the development work.

Absence due to illness at the head office was approximately 7.55 % (5.77 % in 2005) of the total working time largely attributable to long term sickness. The organization has a company doctor agreement. There were no serious accidents at work resulting in material damages or personal injuries during the year.

In 2006 there were 4 women and 3 men in the Board. Among the employees at the head office at the end of the year there were 12 women and 21 men, and 17 women and 39 men worked in the regions. SF strives for a balance of gender at all levels and is conscious about this when employing new staff.

The organizations contamination of the external environment will mostly be of an indirect nature. The Board considers this to have minimal contamination effect on the external environment.

During 2006 the Board worked on the development of ethical guidelines that will further improve the indirect impact on the environment. The organization has no order from the public authorities that has not been complied with.

Risk During 2006 every Regional Office received an internal audit visit from Head Office with the aim of checking and strengthening internal controls, the Board reviewed the results and noted with satisfaction that although improvements were suggested there were no significant issues to report. During the year a policy on the level of reserves was approved by the Board and will guide future budgeting decisions.

The Board continue to monitor the SF`s financial risk, which is first and foremost tied up in currency variations. Our currency strategy is normally not to undertake any currency hedging, as we find this to be most profitable in the long run. SF has economic ability and liquidity to stand the variation in result of this practice.

The organization has no external borrowing, so there will be no serious consequence for the organization if the interest rates should increase considerably. The credit risk is tied up to the microfinance business.

Future Perspective The future perspectives are considered to be good both for private and public funding, although SF is constantly looking for new

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sources of funds. In 2006 we began discussions with Geneva Global, a US based fund for philanthropists interested in international development work, as this relationship develops it will provide an important and significant new sources of funds for SFs work. SF continues to work with other international organizations.

NORAD has agreed that SF has disposal rights over repaid loan funds from the microfinance programs and the new framework agreement is expected to clarify the position. The microfinance

accounts will not be consolidated with SFs ordinary accounts until this agreement has been finalized.

The Board would like to thank the leadership team and all the employees for excellent results in 2006. Collaboration with local partners has been extremely good and through continual competence building at all levels of the organization we have reason to believe that even more people have been given the chance they deserve to come out of poverty.

Allocation of the result The year`s deficit of NOK 154 239 is covered by retained earnings.

Kristiansand, 15 May 2007

Geir Magnus Nyborg Chairman of the Board

Gunnleik Seierstad

Solfrid Lind

Gunvor K. Andresen

Dorothy Katantazi

Jon Østby

STRØMME FOUNDATION ACTIVITY ACCOUNT

Note

2006

2005

´000 NOK

´000 NOK

Acquisition of funds Public Sector grants 2 53 268 52 313 Private Donations 1 55 643 63 124 Corporate Sector 4 222 4 215 Contributions from other organisations 626 5 422 Other Income 522 1 501 Credit Components 18 12 265 15 799 Financial Income 6 405 515 Total Acquisition of funds

126 951 142 889

Cost of funds acquisition -13 074 -15 461

Gross Available funds 113 877 127 429

Administration costs -7 889 -5 861

Available for purpose activities 105 988 121 568

Purpose Activities Direct Project Support -82 913 -90 355 Credit Components 18 -28 204 -37 653 Total purpose activities 17 -111 117 -128 008

Result before change in restricted equity -5 129 -6 440

Change in Restricted Equity 14 4 975 -26

Result after Change in Restricted Equity -154 -6 466

Allocations Transferred to/(from) reserves 8 -154 -6 466 Total Allocations -154 -6 466

Liv Næss

Lars-Ivar Gjørv Acting Secretary General

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STRØMME FOUNDATION BALANCE SHEET 31.12

STRØMME FOUNDATION BALANCE SHEET 31.12

ASSETS Note 2006 2005

000 NOK 000 NOK Long term assets Fixed Assets Property 4 9 589 9 874 Office furniture and equipment 4 471 527 Total fixed assets 10 060 10 402

EQUITY AND LIABILITY Note 2006 2005

000 NOK 000 NOK EQUITY

Founding Capital 8 3 326 3 326

3 326 3 326

Financial assets Investment in subsidiaries 9 700 700 Loan to subsidiaries 9 3 000 3 000 Pension scheme (overfinanced) 10 1 594 1 252 Total financial assets 5 294 4 952 Current Assets 15 353

Property development 11 2 962

15 353 2 842

Receivables Trade debtors 729 1 009 Prepaid expenditure 235 305 Prepaid project transfers 1 033 Public duties 12 1 086 1 285 Other receivables 16 1 330 1 376 Total receivables 4 412 3 975 Investments in shares and bonds

7

3 074

3 698

Bank and cash

13

8 534

10 591

Total current assets

18 983

21 106

TOTAL ASSETS

34 336

36 459

Acquired equity Restricted equity 14 11 471 16 446 Unrestricted retained earnings 8 6 965 6 965 Result for the year -154 Total Acquired equity 18 281 23 410

TOTAL EQUITY 21 607 26 736

LIABILITY Long Term Debt Pension obligations 10 2 133 1 714 Legacy obligations 150 150 Staff Gratuities in Regional Offices 484 280 Total long term debt 2 766 2 144

Short term debt Creditors

2 339 1 707 Unused public grants 1 800 1 500 Employees tax, social security 1 678 1 545 Intercompany debt 2 321 945 Other accounts payable 1 825 1 882 Total current liability 9 962 7 579

TOTAL LIABILITY 12 728 9 723

TOTAL EQUITY AND LIABILITY 34 336 36 459

Kristiansand, 15 May 2007

Geir Magnus Nyborg Chairman of the Board Solfrid Lind

Gunnleik Seierstad

Dorothy Katantazi

Gunvor K. Andresen

Jon Østby

Liv Næss Lars-Ivar Gjørv Acting Secretary General

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Accounting Principles

STRØMME FOUNDATION CASHFLOW

Note 2006

000 NOK

Result -154 Profit/Loss from sale of securities -152 Ordinary depreciation 4 503 Adjustment in the value of securities 7 4 Changes in accounts payable 632 Difference between pension costs and payments 76 Profit from sale of property Non cash income (not including gifts in kind) -155 Changes in restricted equity -4 975 Changes in other current assets and liabilities 1 407

2005 000 NOK -6 466 -105 463 -20 -753 540 -800 - 26 1 487

Net cashflow from operational activity -2 813 -5 627

Acquisition of fixed assets 4 -164 -2 298 Disbursement of property investement loan - Proceeds from the sale of property 1 000 Proceeds from the sale of securities 7 1 946 2 718 Acquisition of securities -1 025 -2 078

Net cashflow from investment activities 756 -658 Cashflow from financing activities

Opening balance of cash and cash equivalents Net change in cash and cash equivalents

0

0

10 591 -2 057

16 876 -6 286

Closing balance of cash and cash equivalents 13 8 534 10 591

The balance consists of bank deposits and cash holdings

Unused overdraft facility 1 000 1 000

The financial statements of the Strømme Foundation are prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles. The financial statements have also been prepared in accordance with the “Accounting Standard for Not-for-Profit organisations” for 2006 produced by The Norwegian Accounting Standards Board. This means that, in place of a traditional Profit and Loss Account, there is an Activity Account which should give the reader a better understanding of how Strømme Foundation has used the resources at its disposal in 2006.

As the activity of the subsidiary company; Strømme Micro Finance AS, is small and regarded as immaterial for the accounts, no consolidated accounts have been compiled.

Principles of allocating costs to Purpose Activites Fundraising and Information All expenditure directly connected to personnel employed as fundraisers and to solely fundraising activity is classified 100% as a fundraising cost. This includes all direct marketing costs and all costs associated with our main fundraising products “Friends at Heart” and “Bridge Builders”.

Strømme Foundation has information work in Norway as a part of our purpose, specifically to engage the Norwegian public and business community in contributing to development work in the South, whether through financial or other means and through whatever channels are appropriate. All expenditure on personnel and activity whose prime purpose is connected to this information provision is allocated to purpose activity. This includes for example 100% of our schools and youth work and 50% of the work of Strømme Business Partners.

The Regional Offices Strømme Foundation has four regional offices in West Africa (Mali); East Africa (Uganda); South America (Peru) and Asia (Colombo) plus two satellite offices in Sudan and Bangladesh.

Strømme Foundation works very closely with partner organisations through these regional offices so that the vast majority of our partner-facing work is conducted by staff in these offices and they are therefore considered primarily purpose costs. This includes the majority of the salary for both the regional directors and the accountants who spend most of their time building the capacity and competence of partner organisations and performing audit work to ensure that the money is properly utilised.

We have allocated 12.5% of the regional office costs to administration to allow for the costs of administration and accounts for the office itself.

Support for Program work from Head Office Education and Microfinance specialists are employed to build capacity and competence at the regional office level and ensure quality, they are 100% purpose.

Other head office program department activity is related to report writing and applications with a smaller capacity building role, this is 25% purpose, 75% administration.

We also allocate a small percentage of admin salaries and activity costs to purpose in proportion to time spent training regional staff in financial and administrative competence so that they can pass this knowledge on to the partners.

Recognition of income in the accounts.

Income is entered in the accounts according to the gross method. Costs are entered as they accrue, and income when it is realised. Bequests or donations are recorded as income when there is indisputable confirmation of receipt. Strømme Foundation follows strict guidelines concerning earmarked funds, which ensures that these funds cannot be used for activities other than those for which they were donated without specific authority. The Board has set regulations for the handling of earmarked funds when a project is closed. Unused earmarked funds are shown as restricted capital in the balance sheet.

Classification and Valuation of Balance Sheet Items Current assets and short-term liabilities contain items due for payment within one year after purchase. Other items are classified as fixed/financial assets or long-term liabilities.

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Current assets are valued at the lowest of procurement cost and actual value. Other accounts receivable are included in the balance sheet at face value after deduction of provision for expected loss. Items in foreign currency are valued at year end exchange rates. Short-term liabilities are recorded at the nominal amount at the time of accrual.

Fixed/financial assets are valued at procurement cost, but are depreciated to actual value if the fall in value is not expected to be temporary. Long-term debt is entered at the nominal amount at the time of establishment.

Presentation of Microfinance Activities Grants from NORAD are channelled by Strømme Foundation to partners in the South, partly as grants and partly as loans (credit components). Grants received are shown as Public Sector grants and transfer to partners as specific project-related cost elements in the activity account.

In agreement with NORAD, Strømme Foundation has the disposition rights of repaid loan funds from the microfinance programs (credit components). Thus the credit components, being a new source of income for Strømme Foundation, can be revolved for further microfinance purposes in the region. In the financial statements these credit components are shown as income and are also countercharged to “Support to projects”.

Strømme Foundation has, over the years, accumulated substantial financial assets from loans to microfinance institutions in the regions. The total financial assets from microfinance are not included in the balance sheet as of 31/12/06; details are found in Note 18.

Furniture and Equipment These fixed assets are entered in the balance sheet and depreciated over their life span if the life span is more than 3 years and the cost is higher than NOK 50 000. Maintenance of fixed assets is charged to operating costs, while renovation or upgrading is added to the cost value and is depreciated along with the asset.

Shares in Subsidiary Companies and Affiliated Companies Shares in subsidiary companies and affiliated companies are recorded at historic cost.

Short-term Investments Short-term investments (shares and share units considered to be current assets) are valued at the lowest of average procurement cost and actual value in the balance-sheet. Received interest and dividend from the companies are entered as other financial income.

Pensions Pension costs and the pension obligations are calculated according to the principle of linear earning based on estimated factors for the discount rate; future regulation of salary, pensions and contributions from Social Security, future earnings on the pension fund as well as the actuarial conditions concerning death rate, voluntary resignations, etc. The pension fund is valued according to actual value and is deducted from the net pension obligations in the Balance Sheet. Changes in the obligation due to changes in the pension plans are allocated over the expected remaining contribution period. The same applies to estimate deviations to the extent they exceed 10% of the greater of the gross pension obligations and the pension funds. Arrangements with net obligation are shown as liability and arrangement with net over-financing is shown as financial asset.

Note 2 - Public Sector Grants Donor Purpose 2006 2005

’000 NOK Norwegian Agency for Dvlpm. Coop. (NORAD) Framework Agreement - Development Programs 36,620 Norwegian Agency for Dvlpm. Coop. (NORAD) Framework Agreement - Information Activities 976 Norwegian Ministry of Foreign Affairs (MFA) Education Programs - Sudan 5,849 7,920 Norwegian Ministry of Foreign Affairs (MFA) Improvement of Livelihood - Myanmar 1,500 Norwegian Ministry of Foreign Affairs (MFA) Restoration and Recovery - Sri Lanka (tsunami) 4,244 Norwegian Ministry of Foreign Affairs (MFA) Other Programs (2005 - Education Ivory Coast) 23 Fredskorpset - Young Act Now Exchange Program - Hald International Centre 1,760 Fredskorpset - Norway South/South Exchange Program - East Africa 1,246 Fredskorpset - Norway South/South Exchange Program - Asia 766 Regional Governments, Agder Cultural Centre / Art for the UN-house, Arendal 285 Total

53,268,196

Note 3 – Salaries and Personnel Expenses /other allowances Note 6 Salaries and Personnel Expenses/other allowances

2006 2005

’000 NOK ’000 NOK Salaries Norway 11,365 9,751 Social Insurance Payment 1,805 1,554 Pension Costs 1,556 1,350 Other Costs Norway 877 656 Salaries and allowances Regional Offices.

4,901 4,550 Total 20,504 17,861 The average number of employees at the head office was 29. This amounts to 29 man-labour years in 2006, compared to 26 in 2005. In the Regional offices the average number was 38, equivalent to 40 man-labour years.

In addition there were 9 employees in microfinance in the South, their salaries are shown in Note 18, and 2 employees in Sudan, the cost of whom is allocated directly to the program.

The total salary cost for the Secretary General in 2006 was NOK 609 160 plus pension contributions of NOK 91 245.

The Board members have received no remuneration other than travelling costs.

Audit Fees: The cost of the annual statutory audit was NOK 161 550.

Note 1 – Private Donations

Fees for certification services primarily connected to NORAD and MFA financed projects were NOK 235 366.

2005 ’000 NOK 11 696 39 860 3 343 739 5 55 643

2006 ’000 NOK 10 600 40 414 2 005 1 023 9 083 63 124

500 1,000 643 2,230 1,704 594 100 52,313,130

These grants are earmarked to specific projects and are shown gross including the administrative support element. Settlement with the donor is made in arrears once a year. Unused capital must be returned.

The current framework agreement with NORAD (2003/2007) requires a minimum contribution of 10 % from Strømme Foundation, and allows up to 8% administration support on the project cost. For MFA funded programmes, the self-contribution requirement varies from 0 to 30% and the administration support varies from 0 to 8%.

The Cash-flow Statement is calculated using the indirect method.

Individual donations Fixed-term donations Events, schools and artists Testamentary donations Tsunami Relief & Rehabilitation Total

’000 NOK 36,620 1,002

Other non-audit services totalled NOK 47 000. In addition amounts payable for services provided by an affiliated company were NOK 29 600.

All amounts are excluding VAT.

Friend at Heart-sponsorship, registered under fixed-term donations, represents the largest source of income with MNOK 32.6 in 2006 compared to MNOK 33.1 in 2005.

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Note 4 – Fixed Assets All figures in ‘000 NOK Cost price 01//01/06 Additions 2006 Cost price 31/12/06 Accumulated depreciation 31/12/06 Book value 31/12/06 The year’s ordinary depreciation Depreciation rate

Note 7 – Investments in Shares and Bonds L and 414 0 414 0 414 0 0 %

Business Premises 14 278 58 14 336 -4 985 9 351 291 2 -10%

Furniture and equipment Total 840 15 531 106 164 945 15 695 -651 -5 636 295 10 060 212 503 20-30 %

Strømme Micro Finance AS is titleholder for the building site and part of the business premises.

Market based shares Market based bonds Total

78 3 620 3 698

-78 -550 -628

0 30 30

0 -26 -26

Note 8 – Changes in Equity

Note 5 – Other Running Expenses

Initial Fund Retained Earnings Unrestricted Equity as of 31/12/05 3 326 6 965 Result of the year -154 Unrestricted Equity as of 31/12/06 3 326 6 811 Restricted Equity Total Equity

2006 ‘000 NOK 11 060 3 425 4 264 1 899 7 566 28 214

2005 ‘000 NOK 9 603 2 495 4 545 1 647 18 798 37 088

Other Interest income 2006

’000 NOK Interest from subsidiaries 79 Other interest income 159 Total 239

Other financial income 2006 Currency exchange gains 298 Net financial income in Regional Offices Other financial income 167 Total 465

Other financial costs 2006 Currency exchange losses -404 Net financial costs in Regional Offices -29 Other financial costs -15 Total -448

2005 ’000 NOK 54 126 179 2005 574 104 121 799 2005 -97 0 -250 -347

Reported income of MNOK 0.405 is total other interest income MNOK 0.239 + total other financial income MNOK 0.465 less currency exchange gains of MNOK 0.298. Net Currency exchange losses gains are shown as purpose costs.

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0 3 182 3 182

Total 10 291 -154 10 137 11 470 21 608

In addition total assets from Strømme Foundation’s microfinance activities as of 31/12/06 is MNOK 97.7. For specifications see note 18.

Note 9 a – Investments in Subsidiary Companies All figures in ‘000 NOK Name Number Strømme Micro Finance AS 500

Note 6 – Other Financial income/expenditure

0 3 074 3 074

Investments are only made with a view to getting a better return on unused funds, and are all placed in such a way that they can be easily realised if necessary. The Strømme Foundation takes a very cautious approach with regard to risk in such investments. The bond holdings and the other market based financial instruments are guaranteed minimum repayment of invested amount at the date of expiry.

Since Strømme Foundation operates with an accounting principle to expense all equipment under NOK 50 000, the majority of the inventory is not included under fixed assets in the balance sheet. For the same reason fully depreciated assets do not appear here. All equipment in the Regional Offices is shown as project cost.

Running expenses Head Office Running expenses Regional Offices Travel expenses Head Office Travel expenses Regional Offices Fund-raising and marketing expenses Total

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All fig. in ‘000 NOK Book val. 31.12´05 Net changes´06 Change revaluation´06 Write-downs 31.12´06 Book val. 31.12´06 Market val. 31.12´06

Nominal value 1

Book value Result 2006 Equity 31/12/06 500 -181 148

Strømme Micro Finance AS (SMF) with its main office in Kristiansand is a wholly-owned subsidiary company of Strømme Foundation.

A long-term loan without a specific instalment plan of 3.0 MNOK as been given to SMF. This has been utilized for purchase of office premises in Skippergata 3 – 5, Kristiansand, Norway.

At the year end there is MNOK 3.0 outstanding.

Note 9 b – Investments in Associated Companies All figures in ‘000 NoK Name Hald International Centre BA

Book value 200

Results 2006 -118

Equity 31/12/06 2 259

Hald International Centre (HIS) was in 2004 officially registered as a company with limited liability with its Head Office in Mandal. Strømme Foundation’s share in ownership and votes is 1/3. The objective of HIS is giving courses and training for work within missionary organisations, for evangelism and development work, as well as for exchange-programs in different parts of the world.

HIS is a Not-for-Profit organisation and cannot give dividends to the owners. Strømme Foundation had accounts receivable of NOK 448 680 from HIS as of 31/12/2006.

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Note 10 – Pension Obligations The Strømme Foundation has a pension scheme that is comparable to the State pension fund. For 2006, the scheme covers 34 people. The Foundation has also signed an agreement for an AFP-plan. This agreement applies for 30 people and is included in the list below. In addition, there is an unsecured plan for the Secretary General equivalent to 60% of his salary.

Actuarial calculations have been applied for calculating the obligations and costs in connection with the payment plans. The following assumptions have been used for the calculations:

Discount rate Expected dividend Salary adjustments / year Yearly G-regulation / inflation Expected pension escalation Withdrawal probability AFP

2006 4,35% 5,40 % 4,50% 4,25 % 1,6 % 30,0 %

2005 5,5 % 6,0 % 4,3 % 3,0 % 3,0 % 30,0 %

Secured Secured Un-secured Un-secured system system system system 2006 2005 2006 2005

’000 NOK ’000 NOK ’000 NOK ’000 NOK Gross pension obligations at 31.12 calculated at 11 096 10 044 2 009 1 556 - Value of pension funds at 31.12 calculated at -10 681 -8 935 0 0 + Deferred obligation in case of (loss) / profit -2 009 -2 361 - 140 -54 = Calculated net pension obligations at 31.12 -1 594 -1 252 1 869 1 503 + Social Insurance contributions 263 533 211 869 = Pension obligation as at 31.12 -1 594 -1 252 2 133 1 714

Net over-financing 1 594 1 251 Net contractual obligation 2 133 1 714

The year’s pension accrual 1 250 1 104 212 162 + interest cost 417 474 75 73 + amortisation 61 82 79 + administration cost 39 31 - Return on capital -515 -489 = Net pension cost 1 252 1 202 366 235 + Social Insurance 225 131 52 33 - Employees pension deductions -202 -191 = Total pension cost 1 275 1 142 418 268 The amount is included in Salaries and personnel expenses in the accounts

Note 13 – Liquidity and Restricted Assets

Employees tax deducted account Restricted projects and public grant accounts Memorial Fund Restricted funds at the Regional Offices Total Restricted bank balance Free funds available in Norway Free funds available at Regional Offices Free available funds Total liquidity

2006 557 1,603 178 452 2,790 3,315 2,429 5,744 8,534

2005 520 2,470 173 81 3,244 3,947 3,400 7,347 10,591

* See also note 7 for specification of investments in shares and bonds.

Note 14 – Restricted Equity / Project Commitments A substantial part of fund-raised capital is linked directly to projects. Many of these are also financed through public sector grants. After the allocation of public sector grants according to the terms of the cooperation agreements, the fund-raised capital is used to cover Strømme Foundation’s own share. From year to year the usage of fundraised capital for this purpose will vary. Balance of closed projects will be reallocated to other projects according to agreed guidelines. After covering the project costs for 2006, the capital earmarked for projects decreased by MNOK 4.9.

Region Asia East Africa West Africa South America Totalt

2006 2,349 3,527 0 5,594 11,471

2005 6,258 4,836 71 5,280 16,446

Change 2006/2005 -3,909 -1,309 -71 314 -4,975

Partner agreements are usually signed in local currency, but contributions are limited to agreed budget in NOK. This is done to minimise exchange rate risk in the development sector.

Note 15 – Collateral Security Part of the business premises and the building site are collateral for the overdraft facilities (limit MNOK 1.0).

Book value as of 31/12/06 is MNOK 6.6.

Note 11 – Property under development In 2002 the Strømme Foundation took over a property in Lillesand which had been left to us as a legacy gift.

The property was valued and entered into our accounts at MNOK 2.5 in 2004. Strømme Foundation has chosen to retain the property and seek to regulate it for residential use. In 2005 a portion of land was sold for MNOK 0.2 and the balance reduced accordingly. Up to this point the cost of the planning work has been MNOK 0.66.

Note 12 - Public duties – VAT compensation As a result of the introduction of VAT on public services from July 2001, the Storting (Norwegian Parliament) has approved a VAT-compensation to NGOs. The entry Public expenses includes claims in this regard of MNOK 1.1. The amount is calculated on basis of real additional expense connected to this scheme, as the intention of the Storting was for 100% compensation.

It is anticipated that the whole amount will be refunded, but it is not guaranteed.

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Note 16 – Connected Parties

Note 18 – Microfinance Activities

Balances with subsidiary and associated companies are disclosed in Note 9.

The microfinance activities are organised in a separate microfinance department which provides loans via Strømme Foundations Regional Offices to microfinance partners in Asia, West Africa and South America. In East Africa we have established a wholesale lending institution called “Strømme Microfinance East Africa Ltd” through which all microfinance activity in East Africa is channelled. During 2006we established a similar wholesale lending institution in Sri Lanka called “Strømme Microfinance Asia Guarantee Ltd”.

Strømme foundation’s microfinance activities which are not shown on the face of the accounts are disclosed in Note 18.

With the exception of salaries and travel claims, there are no financial transactions with employees or connected persons in Strømme Foundation Norway.

Outstanding loans to employees in the Regional Offices totalled NOK 275 811 at the year end compared to NOK 495 326 at the end of 2005. These are included in other assets in the balance sheet under other receivables.

NOK 88 688 of the outstanding balance is for loans of more than one years duration.

Note 17 – Purpose / Project Support costs Madagascar

2006 ’000 NOK 262

Uganda 4,528 Tanzania 4,483 Sudan 7,966 Kenya 8,091 Rwanda 1,975 East Africa 27,305

Mauritania 660 Mali 13,101 Burkina Faso 262 Ivory Coast 0 West Africa 14,023

India 634 Bangladesh 12,040 Sri Lanka 5,930 Sri Lanka - Tsunami Rehab.

6,326 East Timor 2,108 Cambodia 613 Myanmar 2,538 Asia 30,190

Peru 4,961 Bolivia 3,688 South America 8,649

Total 80,167

Norwegian information and public awareness 10,947

Global programs 7,634

Net Currency Gain/loss (on transfers to projects) 105

Credit Components 12,265

Total Purpose Costs 111,117

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2005 ’000 NOK 166 6,432 3,329 8,258 7,824 1,732 27,740 623 11,632 1,038 413 13,706 1,451 12,900 4,710 12,833 2,129 326 2,963 37,312 6,047 3,555 9,601 88,358 17,025

The figures below are a consolidated view of all microfinance activities and show good growth in 2006.

In addition loans to partners in Sri Lanka working with survivors of the tsunami are included in these figures.

BALANCE SHEET:

ASSETS 2 006

´000 NOK Deposits in financial institutions 26 238 Gross Loan Portfolio 80 609 (Loan loss reserve) -4 789 Other Short term assets 2 205 Total current assets: 104 263 Total non-current assets: 5 355 TOTAL ASSETS 109 618

LIABILITIES

Total current liabilities: 702 Total non-current liabilities: 11 237 Total liabilities 11 939 TOTAL EQUITY 97 679

2005 ‘000 NOK 16 810 69 248 -1 616 390 84 831 818 85 649

292 2 822 3 072 82 534

PROFIT AND LOSS STATEMENT 2 006 Interest income from external loans 5 811 Income from investments/deposits 637 Other operating income 0 Total operating income 6 448 Total financing expenses -344 Gross financial margin 6 104 Provision for loan losses + Write-offs -5 477 Recovered write-offs Net financial margin 628

Personnel expenses -2 126 Travel expenses -2 152 Total operating expenses -4 278

Net income from operations -3 651 Net income (deficit) from non financial services -5 957 Grant income for loan capital 21 907 Grant income for operations 1 789 Total grants received 23 696 Net income after grants for the period 14 088

2 005 4 640 301 356 5 297 1 832 7 130 -2 487 71 4 714 -2 005 -1 996 -4 001 712 -4 624 21 854 2 364 24 218 20 307

7,302 -477 15,799

Changes in Total Equity Total Equity as of 01/01 Result of the year Net difference in total assets due to exchange rate conversions Total Equity as of 31/12

2 006 82 534 14 088 1 057 97 679

2 005 55 637 20 307 6 591 82 534 145

128,007 Regional distribution of loan portfolio at the end of the year:

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Outstanding loans Asia East Africa West Africa South America Total

2006 41 378 26 316 2 960 250 70 913

2005 31 916 28 427 5 201 3 704 69 248

The loan terms depend on the legal and economic conditions in each country, corresponding to the conditions of the commercial financing market. Most of the loans to microfinance institutions (MFIs) have two year terms with one year interest only. Interest and instalments are paid quarterly. Rate of interest varies between 8 % and 15 %. All loans are in local currency. This is a development policy. Strømme Foundation takes the exchange rate risk, protecting the borrower.

Changes in exchange rates have varied strongly from year to year and from country to country. Normally the microfinance activity counts on a yearly 10 % loss due to exchange rates for the loan portfolio and bank deposits. As our loans are denominated in US dollars there were exchange rate losses in a number of areas.

However in 2006 the Norwegian kroner performed well against the US dollar and consequently we are showing overall 1% exchange rate gain on our asset base equivalent to 1.1 MNOK. This is shown in the table above in Net difference in total assets due to exchange rates.

Support to Projects includes MNOK 28.2 lending from the current years grant from NORAD (initial credit component) and the current years repayment of loans to the microfinance activity MNOK 12.3 (credit component/financial support)

Strømme Foundation is member of the Norwegian Control Committee for Fundraising Strømme Foundation is a signatory to the Code of Conduct for the International Red Cross and Red Crescent Movement and NGO’s in Disaster Relief.

Editors: Mark Bechmann Hansen and Egil Mongstad Lay-out and graphic design: Oddvar Paulsen, Strømme Foundation All photos: Strømme Foundation

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Skippergaten 3 • Box 414 • N-4664 Kristiansand Norway Tel +47 38 12 75 00 • Fax +47 38 02 57 10 • Org. no 952 002 139 E-mail: post@stromme.org • www.stromme.org