As always at year end, the accounting firm Raymond Chabot Grant Thornton (RCGT) audited a sample of statements from our trustee National Bank NBCN. You were contacted to validate the investment values indicated on this statement.
You also received your consolidated statement of December 30, 2016 and noted a difference between the values on the statement audited by RCGT and those on your consolidated statement.
The variation in value you noted is not an error: it is due to different valuation dates for the mutual funds that you hold in your portfolio.
The explanation is rather complex, so we will try to simplify it here.
- First, if you compare the two statements, you will note that there is no difference between them in terms of stock and bond values.
- However, there is a difference in terms of the values of the mutual funds you hold.
- If you look at the statement audited by RCGT (which is the statement from our trustee National Bank NBCN), you will note that the valuation date for our mutual funds is December 29. On this same statement, you will also note that the valuation date for the stocks and bonds is December 30. Why the different dates? Because stock and bond values are quoted instantly, which is not the case for our mutual funds.
Explanation of the valuation date
According to regulatory requirements, year-end mutual fund distributions must be done on the last business day of December which, in this case, fell on December 30.The time it took to send the valuations of certain funds – including their distributions – to NBCN and to its subcontractor did not allow them to adjust these values in time for their final audited statements. The value of the mutual fund units shown on the NBCN statement is therefore that of the previous day (December 29).
- Since the stock markets fell by 0.6% to 1.0% on December 30, 2016, your NBCN statement is overvalued compared to your consolidated statement of December 30.
- The time required to prepare our consolidated statement enabled us to indicate on it the real value of the funds as at December 30, including the distributions of these funds.
- RCGT’s job was to audit the securities held by our trustee NBCN as at December 30, but using the fund values then available (December 29). The auditor RCGT did its job well.
Our consolidated statement shows you the real value of your portfolio at year-end 2016.
This explanation reflects the reality of the markets when securities and mutual funds appear on the same account statement.