Financial policy

Operating costs
Operating costs include all expenditure by the Net4kids Organisation in the execution of its tasks on behalf of the Net4kids Aid Foundation and Continuity Fund. This includes all fundraising, operational and management costs for all three foundations.

Despite the fact that financing these costs is not covered by donations, we closely monitor the relationship between the costs and donations. As the overview below shows, operating costs as a percentage of total donations have undergone positive development over the past four years. In the early years, we had high start-up costs and relatively low donations. The costs then decreased and donations grew explosively. Over the past year, operating costs came to 20.7% of donations.

The goal is to keep operating costs as a percentage of donations below 25% in the long term. However, Net4kids is an organisation experiencing swift growth. In order to manage this growth in a professional manner, paid employees will need to be appointed to certain key positions rather than use volunteers. Therefore, we will accept incidental cost percentages over the maximum goal of 25% in order to professionally support our growth.

1. Covering shortfalls in the operation of the Net4kids Organisation caused by lacking organisation sponsors and/or lack of earnings on capital from the Net4kids Continuity Fund for at least three years.
2. All current and planned project commitments for which project costs have not yet been covered by donor commitments for the duration of the project, taking into account donations received in advance.
3. Cover unforeseen shortages in potential future project commitments for the coming three years.

Items 1 and 2 may be estimated accurately based on the current situation. The required reserves for these two items amounts to about € 427,935. A conservative estimate based on a risk analysis for point 3 returns an amount of around € 414,400. This brings the total required reserve to € 842,335, well within the freely available own capital of € 1,064,259. This is commented on in further detail in chapter 12.3 (Risks).

Investment policy and results
The investment policy is aimed at achieving adequate returns with the security of the principal sum being of key importance. Additionally, the liquidity of the portfolio is important. The investments consist of fixed rate values with a Moody’s rating of A3 or better. These fixed rate values can be traded on a daily basis. Practically no funds are fixed for the shorter or longer term.

The invested capital generated € 59,647 in interest in 2007. The good news is that the contribution from the Continuity Fund to the Net4kids Organisation could be covered entirely by the coupon interest generated. We were not forced to sell any fixed-interest generating capital to balance shortfalls in the operational costs of the Net4kids Organisation.

The restlessness on the financial markets, however, did affect the value of the fixed-interest values in our portfolio. The coupon interest is mirrored by negative stock losses of € 190,189. Overall return on investments came to a negative result of 11.9%. Independently of this negative stock development, the expectation is that the fixed-interest values will return 100% on the investment at the end of the – relatively brief – term, allowing us to adhere to the principle of complete protection of the primary capital.