---

# UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

# FORM 20-F

(Mark One)

|[  ] | REGISTRATION  STATEMENT
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|---- | -----------------------------------------------------------------------------------------------

# OR

|[X] | ANNUAL  REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
|--- | ---------------------------------------------------------------------------------------------------------------------------------

# OR

|[  ] | TRANSITION  REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to   ___________________
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commission file number  333-49153

NB FINANCE, LTD.(Exact name of Registrant as specified in its charter)

NB FINANCE, LTD.(Translation of Registrants name into English)

Bermuda (Jurisdiction of
incorporation or organization)

Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
(Address of principal executive offices)

Securities registered or to be
registered pursuant to Section 12(b) of the Act:   None

Securities registered or to be registered
pursuant to Section 12(g) of the Act:   None

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:

12,000 shares of common stock, par
value $1.00 per share

_________________

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during 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:

[X]    Yes
      No [  ]

Indicate by check mark which
financial statement item the registrant has elected to follow.

[X]    Item 17      Item 18 [  ]

---

FORWARD-LOOKING
STATEMENTS

This
report contains certain forward-looking statements and information relating to NB
Finance, Ltd. (the Company or NB Finance) that are based on the
beliefs of the Companys management as well as assumptions made by and information
currently available to the Companys management. When used in this report, the words
anticipate, believe, estimate, expect and
similar expressions, as they relate to the Company or the Companys management, are
intended to identify forward-looking statements. Such statements reflect the current view
of the Companys management with respect to future events and the Companys
future performance and are subject to certain risks, uncertainties and assumptions.
Should managements current view of the future or underlying assumptions prove
incorrect, actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward-looking statements.

-1-

---

PART I

ITEM 1:  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not
Applicable.

ITEM 2:  OFFER STATISTICS AND
EXPECTED TIMETABLE

Not
Applicable

ITEM 3:   KEY INFORMATION

Selected Financial Data

|                                   | Year Ended
December 31,
2002 | Year Ended
December 31,
2001 | Year Ended
December 31,
2000 | Year Ended
December 31,
1999 | Year Ended
December 31,
1998
|---------------------------------- | ---------------------------- | ---------------------------- | ---------------------------- | ---------------------------- | ----------------------------
|Statement of Income Data:          |                              |                              |                              |                              |                             
|Operating revenues                 |                              | $  43,385,203                |                              | $  41,962,693                |                             
|Income from Continuing Operations  |                              | $    6,117,624               |                              | 5,136,962                    |                             
|Net income                         |                              | $    6,117,624               |                              | 5,136,962                    |                             
|Income from Continuing Operations  |                             
|per Common Share                   |                              | $         509.80             |                              | 428.08                       |                             
|Balance Sheet Data:                |                             
|Total assets                       |                              | $633,703,172                 |                              | $579,818,559                 |                             
|Total liabilities                  |                              | $482,468,806                 |                              | 434,701,817                  |                             
|Shareholder's Equity               |                              | $151,234,366                 |                              | 145,116,742                  |                             
|Capital Stock                      |                              | $         12,000             |                              | 12,000                       |                             
|Number of Shares                   |                              | $         12,000             |                              | 12,000                       |                             
|Cash Dividends Declared per Common |                             
|Share                              |                              | N/A                          |                              | N/A                          |                             

-2-

---

Exchange Rate

References
to $ are to United States dollars; references to C$ are to Canadian dollars. As of
December 31, 2002, the Canadian dollar exchange rate was C$1.5776= $1.00 and certain
amounts stated herein reflect such exchange rate. All financial statements are
denominated in United States dollars.

|               | High | Low   
|-------------- | ---- | ------
|July 2002      |      | 1.5965
|August 2002    |      | 1.6010
|September 2002 |      | 1.5915
|October 2002   |      | 1.5990
|November 2002  |      | 1.5917
|December 2002  |      | 1.5801

|              | Year Average
|------------- | ------------
|December 1997 |             
|December 1998 |             
|December 1999 |             
|December 2000 |             
|December 2001 |             
|December 2002 |             

Risk Factors

There
is no risk factors relevant to the Company other than the fact of having to manage
Mortgage Loans insured by Canada Mortgage and Housing Corporation, an agency of the
Government of Canada (CMHC). As the Company has no public security holders
there are no other applicable risk factors.

ITEM 4:   INFORMATION ON THE COMPANY

Background

NB
Finance, Ltd. a wholly owned subsidiary of National Bank of Canada (the Bank).
There are no securities of the Company currently registered or expected to be registered
pursuant to the Securities Act of 1933, as amended, or traded publicly on any exchange.
The Bank owns and, pursuant to the OSFI Order (as defined below), will continue to own,
all 12,000 issued and outstanding shares of common stock, par value $1.00 per share (the
Common Stock) of the Company. The Common Stock is the only outstanding class
of securities of the Company. The Company has issued no other securities.

General

The
Company was incorporated on September 3, 1997 under the laws of Bermuda. The Company does
not have any subsidiaries. The Companys business objective is to acquire
residential first mortgages insured by CMHC, that are secured by real property located in
Canada and to issue obligations secured by such real property (the Promissory notes)
and other similar obligations to NB Capital Corporation (NB Capital). The
Promissory notes currently consist of fifty-three hypothecation loans issued
to NB Capital by the Company that are recourse only to

-3-

---

the Mortgage Loans. Hypothecation
loans are loans secured by the pledge of mortgages as security therefor. The Mortgage
Loans consist of fifty-three pools of, at December 31, 2002, an aggregate 15,823
CMHC-insured residential first mortgages. Pursuant to an order (the OSFI Order),
dated September 2, 1997, of the Office of the Superintendent of Financial Institutions
Canada, the Company is not permitted to incur any indebtedness or engage in any business
activities other than ownership of Mortgage Loans and activities incidental thereto.

As
of December 31, 2002, the Company has issued Promissory notes to NB Capital in the
aggregate principal amount of approximately $470 million. The proceeds from the issuance
of the Promissory notes, in addition to a capital contribution from the Bank, have been
used to acquire the Mortgage Loans from the Bank for approximately C$899 million ($570
million). Accordingly, as of December 31, 2002, the Promissory notes were
overcollateralized by $100 million. The Company has acquired all or substantially all of
such Mortgage Loans from the Bank and/or affiliates of the Bank on terms comparable to
those that could be obtained by the Company if such Mortgage Loans were purchased from
unrelated parties. As of the date of this Form 20-F, the Company has not entered into any
agreements with any third parties with respect to the purchase of Mortgage Loans.

On
December 4, 1998, September 7, 1999, April 14, 2000, September 28, 2000, January 30,
2001, June 12, 2001, September 24, 2001, January 29, 2002, June 20, 2002 and December 16,
2002, the Company and NB Capital entered into separate Mortgage Loan Assignment
Agreements (together, the Mortgage Loan Assignment Agreements) pursuant to
which the Company assigned its entire right, title and interest in, to and under the
Mortgage Loans to NB Capital and permitted NB Capital to administer, perform and enforce
the Mortgage Loans. Accordingly, no interest or principal payments with respect to the
Mortgage Loans are made directly to the Company. Pursuant to a Servicing Agreement, dated
September 3, 1997, between the Company and the Bank (the Servicing Agreement),
the Mortgage Loans are serviced by the Bank. Pursuant to the Assignment of Servicing
Agreement, dated September 3, 1997, between the Company, NB Capital and the Bank, the
Company has assigned to NB Capital all of its right, title and interest in the Servicing
Agreement.

For
information regarding the Companys revenue and operating profit, see the
Companys financial statements, beginning on page F-1.

# Description of the
Mortgage Loans

All of
the Mortgage Loans were originated in accordance with underwriting policies customarily
employed by the Bank, or with underwriting policies acceptable to the Bank. With respect
to its underwriting policies, the Bank will not make any residential mortgage loans that
exceed a loan to value ratio of 75% unless such loan is insured. If the residential
mortgage loan is CMHC-insured (i) a cash down payment of between 5% and 24.9% is required,
(ii) the monthly payment for capital, interest, taxes and heating must not exceed 32% of
the gross monthly revenue of the borrower and (iii) the monthly payment for capital,
interest, taxes, heating and all other monthly payments (including, without limitation,
personal loans, lease payments and credit card debt service) must not exceed 40% of the
net monthly revenue of the borrower. Additionally, for all mortgage loans, an external
credit check must be positive. When a loan is insured, an additional amount may be added
to the principal amount of the mortgage loan representing the premium related thereto. The
premium rates vary in accordance with the principal amount of the loan. Generally, the
greater the loan to value ratio, the greater the premium rate. As is generally the case in
the Canadian residential mortgage business, such underwriting policies are derived from
CMHC-approved underwriting criteria.

As
a CMHC-approved lender, the Bank has access to the National Housing Act mortgage insurance
program. All of the Mortgage Loans are insured by CMHC pursuant to that program. The bulk
of those loans were insured at origination. Whether a loan is insured at origination or
through the CMHC portfolio insurance program, the insurance is valid until the expiration
of the loan.

-4-

---

All
of the Mortgage Loans are balloon mortgages. Accordingly, the Mortgage Loans do not
provide for the amortization of the principal balance thereof equally over their term to
maturity and a principal payment equal to the original balance less any principal amount
paid will be due on each Mortgage Loan at maturity. Balloon mortgages are the most
prevalent type of mortgage offered by Canadian mortgage lenders. At the expiration of the
term, the mortgage is generally renewed, based on then current market conditions, for a
new term. Although the Bank offers terms varying from 3 months to 10 years, terms
exceeding 5 years are relatively rare. Moreover, although the Bank offers monthly,
semi-monthly and weekly pay mortgages, most of the Mortgage Loans are monthly pay
mortgages. In general, loans are amortized over a period not exceeding 25 years.

The
Mortgage Loans provide for limited prepayment rights. For example, typically up to 10% of
the original principal amount of a Mortgage Loan may be prepaid once annually without
penalty. Moreover, a Mortgage Loan may also be prepaid without penalty if the mortgaged
property is sold and the mortgagor enters into a new mortgage with the same terms and
conditions as the Mortgage Loan. In most other circumstances, prepayments or
renegotiations of either the interest rate or the term of a Mortgage Loan will be
subjected to prepayment penalties. During the first three years following the most recent
interest adjustment date, such penalties are tantamount to a yield maintenance clause.
After three years, such penalties will be limited to three months of interest.

# Description of the
Promissory notes

The Promissory
notes issued by the Company to NB Capital are comprised of fifty-three hypothecation
loans. As of December 31, 2002, the principal amount of the Promissory notes was
approximately $470 million. Each of the fifty-three hypothecation loans comprising the
Promissory notes issued by the Company is secured by a pool of Mortgage Loans. As of
December 31, 2002, there were 15,823 Mortgage Loans in an aggregate amount of
approximately C$899 million ($570 million). The value of each pool of Mortgage Loans
comprising the Mortgage Loans exceeds the principal amount of the hypothecation loan that
it secures. Accordingly, the Mortgage Assets issued by the Company are overcollateralized
by the Mortgage Loans. The aggregate amount of such overcollateralization is, as of
December 31, 2002, approximately $100 million. NB Capital acquired the Promissory notes
issued by the Company pursuant to the terms of certain loan agreements.

Each
Promissory note issued by the Company is recourse only to the Mortgage Loans securing such
Promissory note. Each pool of Mortgage Loans is comprised of entirely CMHC-insured
residential first mortgages. Each Promissory notes issued by the Company is further
secured by the residential real properties underlying such CMHC-insured residential first
mortgages. Such residential real properties are located primarily in Quebec, Ontario and
New Brunswick. Since the Mortgage Loans are insured, the Company expects little or no loss
of principal or interest. However, CMHC insurance does not guarantee timely payment of
interest and principal. The Promissory notes have maturities ranging from January, 2003 to
December, 2012. The Promissory notes pay interest at rates ranging from 7.31% to 10.21%,
with an average rate of approximately 8.51% per annum.

Payments
of interest are made monthly out of payments on the Mortgage Loans. Pursuant to the
Mortgage Loan Assignment Agreements, NB Capital receives all scheduled payments made on
the Mortgage Loans, retains a portion of any such payments equal to the amount due and
payable on the Promissory notes issued by the Company and remits the balance, if any, to
the Company. NB Capital also retains a portion of any prepayments of principal in respect
of the Mortgage Loans equal to the proportion of such prepayments that the outstanding
principal amount of the Mortgage Loan bears to the outstanding principal amount of the
Promissory notes issued by the Company, which amount would be applied to reduce the
outstanding principal amount of the Promissory notes issued by the Company. Repayment of
the Promissory notes issued by the Company is secured by an assignment of the Mortgage
Loans to NB Capital pursuant to the Mortgage Loan Assignment Agreements, which are
governed by the laws of Bermuda.

The
assignment of the Mortgage Loans by the Company to NB Capital is without recourse. NB
Capital has a security interest in the real property securing the Mortgage Loans and,
subject to fulfilling certain procedural requirements under applicable Canadian law, is
entitled to enforce payment on the Mortgage Loans in its own name if a mortgagor should
default thereon. In the event of such a default, NB Capital has the same rights as the
Company to force a sale of the mortgaged property and satisfy the obligations of the
Company out of the proceeds. In the

-5-

---

event of a default in respect of a
Mortgage Loan, the amount of the Promissory notes issued by the Company will be reduced by
an amount equal to the portion thereof allocable to the defaulting mortgage.

Following
repayment of the Promissory notes issued by the Company, NB Capital will reassign any
outstanding Mortgage Loans (without recourse) and deliver them to, or as directed by, the
Company. All payments in respect of the Mortgage Loans are made in Canadian dollars. The
amounts due on the Promissory notes issued by the Company are retained by NB Capital free
and clear of and without withholding or deduction for or on account of any present or
future taxes imposed by or on behalf of Bermuda or any political subdivision thereof or
therein.

# Description of Property

The
registered offices of the Company are located at Clarendon House, 2 Church Street,
Hamilton HM11, Bermuda. The Company neither owns nor leases any properties.

ITEM 5:   OPERATING AND
FINANCIAL REVIEW AND PROSPECTS

# General

The
Companys sole business purpose is to acquire Mortgage Loans and to issue the
Promissory notes, and other similar obligations, to NB Capital. Pursuant to the OSFI
Order, the Company is not permitted to incur any indebtedness or engage in any business
activities other than ownership of the Mortgage Loans and activities incidental thereto.

# Results of Operations

Income
from continuing operations for the year ended December 31, 2002 increased by $980,662 or
19.1% over the year ended December 31, 2001 which increased by $1,398,113 or 29.6% over
the prior year ended December 31, 2000. Operating revenues for the year ended December 31,
2002, the year ended December 31, 2001 and the year ended December 31, 2000 were
$43,385,203, $41,962,693 and $36,372,519.

Ninety-one
percent of revenues were derived from the Mortgage Loans. The Promissory notes issued by
the Company are collateralized by the Mortgage Loans that consist of fifty-three pools of
CMHC-insured residential first mortgages and which are secured by real property located in
Canada. The balance of the revenues resulted from cash and cash equivalent assets.

Expenses
for the year ended December 31, 2002, the year ended December 31, 2001 and the year ended
December 31, 2000 totaled $37,267,579, $36,825,731 and $31,653,008, respectively, of which
$37,246,933, $36,806,319 and $31,632,389, respectively, represent interest on Promissory
notes.

During
the year ended December 31, 2002, no dividend was authorized on the Companys Common
Stock.

# Capital Resources and
Liquidity

The
Companys revenues are derived from its Mortgage Loans. The Companys principal
short-term liquidity needs are, with respect to the Promissory notes, to pay principal
when due (maturity dates range between January, 2003 to December, 2012) and monthly
interest payments. Pursuant to the OSFI Order, the Company is not permitted to incur any
indebtedness or engage in any business activities other than ownership of Mortgage Loans
and activities incidental thereto.

-6-

---

As
of December 31, 2002, approximately $470 million of Promissory notes issued by the Company
were overcollateralized by the approximately C$899 million ($570 million) of Mortgage
Loans. The Company believes that the amounts generated from the payment of interest and
principal on such Mortgage Loans will provide more than sufficient funds to make full
payments with respect to the Promissory notes issued by the Company and sufficient funds
to meet its operating expenses. Pursuant to the Mortgage Loan Assignment Agreements, all
payments made in respect of the Mortgage Loans are made to NB Capital (through the Bank as
servicer under the Servicing Agreement). Any such amount in excess of the amount due and
payable on the Promissory notes is remitted to the Company and used to fund the
acquisition of additional Mortgage Loans.

The
Company does not require any capital resources for its operations and, therefore, it is
not expected to acquire any capital assets in the foreseeable future.

Critical
Accounting Policies

In
December 2001, the SEC requested that all registrants discuss their most critical
accounting policies in managements discussion and analysis of financial
condition and results of operations. The SEC indicated that a critical accounting
policy is one which is both important to the portrayal of the Companys
financial condition and results and requires managements most difficult, subjective
or complex judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. We believe, based on our current business, that
there are no critical accounting policies in connection with the preparation of the
financial statements of NB Capital Corporation.

ITEM 6:   DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEE

# Directors and Executive
Officers

The
Board of Directors of the Company consists of the individuals set forth below. The Company
currently has seven officers and no employees. The Company does not anticipate that it
will require any employees.

As
of February 2003, the persons who are directors of the Company are as follows:

|Name           | Age | Position and Offices Held | Director Since | Term of Office     
|-------------- | --- | ------------------------- | -------------- | -------------------
|Donna Goral    |     | 45                        |                | Director           
|Martin Ouellet |     | 49                        |                | Director, President
|Lina Tomac     |     | 53                        |                | Director           
|Serge Lacroix  |     | 45                        |                | Director           

The
only other executive officers of the Company are Jean Dagenais (Chief Financial Officer),
Joan L.K. Barnes (Secretary), Michael Ashford (Assistant Secretary) and Sophie Clermont
(Assistant Secretary).

Donna
Goral has been Vice-President  Taxation, USA Operations for National Bank of Canada
since 1992. Ms. Gorals tax experience also includes positions with KPMG Peat Marwick
and Ernst & Whinney. She is a member of the American Institute of Public Accountants,
the New York State Society of CPAs and the Institute of International Bankers.

-7-

---

Serge
Lacroix has been Chairman and President of NB Capital Corporation since June 2002 but has
been with National Bank of Canada since 1998 in various positions most recently, General
Manager and President and CEO of NBC Financial (UK) Ltd. Prior to that, he was Senior
Vice-President at National Bank Financial between 1993 and 1998. He held various positions
at Wood Gundy in London England, Montreal and Vancouver from 1982 to 1993. Prior to that,
he was a Trader at Nesbitt Thompson Inc. and he started his career in 1976 as a Foreign
Exchange Trader with Banque Canadienne Nationale.

Lina
Tomac has been with National Bank of Canada since 1987 during which time she has held
various positions such as Supervisor Treasury, Manager of Treasury Operations, Senior
Manager Securities, Vice President Treasury Operations in New York and since September
2002 is Vice President Administration in New York. Ms. Tomac started her career in 1967 at
a junior position with Mercantile Bank of Canada and evolved to management positions in
various departments.

Jean
Dagenais joined the National Bank of Canada in 1990 as Manager and Chief Accountant. In
1998, he was promoted to vice-president. As such, he is responsible for the preparation of
the Banks consolidated financial statements as well as other financial information
presented to management, shareholders and regulatory authorities. He began is career in
1980 as external auditor with a major international accounting firm. From 1985 to 1990, he
held various positions in accounting and financial reporting with large corporations. He
studied at the University of Sherbrooke, where he obtained a Bachelor in Administration.
He was admitted to the Order of Certified management Accountants in 1982 and to the Order
of Chartered Accountants in 1983.

Martin
Ouellet has been an employee of the National Bank of Canada since 1980. He has held
different positions within the Treasury and Financial Markets division of the Bank.
Recently, he has acted as the Vice-President and Treasurer, responsible for Asset and
Liability Management, funding and liquidity management. He is a Director and President of
NB Finance, Ltd. and Vice-President of NB Capital Corporation.

# Compensation of
Directors and Officers

The
Company is a wholly owned subsidiary of the Bank. Each director and officer of the Company
is also an employee of the Bank except for Michael Ashford and Joan L.K. Barnes. The
Company did not pay any form of compensation to its officers or directors for the year
ended December 31, 2002. Any compensation paid to the directors and officers of the
Company is paid to such individual by the Bank as compensation for all functions performed
for the Bank and its subsidiaries. The Company did not set aside or accrue any amount
during the year ended December 31, 2002 to provide pension, retirement or similar benefits
for directors and officers pursuant to any existing plan provided or contributed to by the
Company.

# Options to Purchase
Securities from Registrant

See
 "Background"  under Item 4:  INFORMATION  ON THE  COMPANY  above.  No options,  warrants
 or rights  were  granted to any individual with respect to the Common Stock or other
securities of the Company.

# Audit Committee

The
Company does not have an audit committee. As a result, all functions ordinarily performed
by an audit committee are performed by the entire Board of Directors. There are no
committees of the Board of Directors.

-8-

---

ITEM 7:   MAJOR SHAREHOLDERS AND
RELATED PARTY TRANSACTIONS

# Control of the Company

The Company is a wholly owned
subsidiary of the Bank. Pursuant to the OSFI Order, the Bank will at all times continue to
hold all outstanding shares of Common Stock. The Common Stock is the only outstanding
voting security of the Company. The Common Stock is not registered with the United States
Securities and Exchange Commission. There are no arrangements known to the Company the
operation of which may at a subsequent date result in a change in control of the Company.

# Interest of Management
in Transactions

On
January 29, 2002, June 20, 2002 and December 16, 2002 the Company acquired from the Bank,
its direct parent, twenty pools of Mortgage Loans pursuant to twenty Deeds of Sale of
Mortgage Loans, dated January 29, 2002, June 20, 2002 and December 16, 2002 between the
Bank and the Company. During the fiscal year ended December 31, 2002, there were no other
material transactions (completed or proposed) to which the Company and any director or
officer of the Company, any relative or spouse thereof or the Bank had any direct or
indirect material interest.

ITEM 8:   FINANCIAL
INFORMATION

# Consolidated Statements
and Other Financial Information

See
page F-1 to F-7 hereto.

# Legal Proceedings

The Company
is not the subject of any material litigation. The Company is not currently involved in
ongoing or pending nor, to the Companys knowledge, currently threatened with, any
material litigation with respect to the Mortgage Loans or the Promissory notes issued by
the Company, other than routine litigation arising in the ordinary course of business,
most of which is expected to be covered by liability insurance.

# Significant changes

There
have been no significant changes since the date of the Financial Statements included in
this report.

ITEM 9:   THE OFFER AND LISTING

# Nature of Companys
Securities

See
 "Background"  under Item 4:  INFORMATION ON THE COMPANY above. No trading market exists
with respect to the securities of the Company.   All Common Shares of the Company are
held by the Bank.

ITEM 10:   ADDITIONAL
INFORMATION

# Exchange Controls and
other Limitations Affecting Security Holders

See
"Background"  under Item 4: INFORMATION ON THE COMPANY above.  There are no governmental
 laws,  decrees or regulations in Bermuda or Canada that restrict the export or import of
capital or that

-9-

---

affect the remittance of dividends,
interest or other payments to nonresident holders of the Common Stock. Pursuant to the
OSFI Order, the Bank will at all times continue to hold all outstanding shares of Common
Stock. None of the Companys Memorandum of Association, Bye-laws or Bermuda law limit
the right of nonresident or foreign owners to hold or vote securities.

# Taxation

See
Background under Item 4: INFORMATION ON THE COMPANY above. United States
security holders are not subject to any taxes under existing laws and regulations of
Bermuda with respect to the Depositary Shares. No tax treaty exists between the United
States and Bermuda.

ITEM 11:   QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Any
market risk to which the Company would be exposed would result from fluctuations in (a)
interest rates related to Mortgage Loans and (b) currency exchange rates related to
Promissory notes, each affecting the interest payments made by the Company in respect of
the Promissory notes. Since the Promissory notes are significantly overcollateralized by
the Mortgage Loans, interest rate fluctuations should not present significant market risk.
The Company expects that the interest and principal generated by the Mortgage Loans should
enable full payment by the Company of all of its obligations as they come due. Since the
Mortgage Loans are guaranteed by a fixed ratio of exchange predetermined on the date of
purchase and applicable until the maturity of the Mortgage Loans pursuant to the Mortgage
Loan Assignment Agreements, fluctuations in currency exchange rates should not present
significant market risk.

ITEM 12:   DESCRIPTION OF SECURITIES
OTHER THAN EQUITY SECURITIES

Not
Applicable.

ITEM 13:   DEFAULTS , DIVIDEND
ARREARAGES AND DELINQUENCIES

There
have been no material defaults in the payment of principal, interest, a sinking or
purchase fund installment or with respect to any indebtedness of the Company. There have
been no material arrearages in the payment of dividends or any material delinquency with
respect to the Common Stock.

ITEM 14:   MATERIAL MODIFICATION TO
THE RIGHTS OF SECURITY HOLDERS AND USE OF 
            
       PROCEEDS

There
have been no material modifications to any constituent instruments that define the rights
of holders of the Common Stock. The rights evidenced by the Common Stock have not been
materially limited or qualified.

ITEM 15:   CONTROL AND
PROCEDURES

Based
on their evaluations as of a date within 90 days of the filing date of this report, the
Companys President and Chief Financial Officer have concluded that the
Companys disclosure controls and procedures (as defined in Rule 13a-14(c) and
15d-14(c) under the Securities and Exchange Act of 1934, as amended (the Exchange
Act)) are effective to ensure that information required to be disclosed by the
Company in reports that it files or

-10-

---

submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms.

There
were no significant change 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.

ITEM 16:   [RESERVED]

ITEM 17:   FINANCIAL
STATEMENTS

The
Financial Statements contained herein were prepared in accordance with accounting
principles generally accepted in Canada and are expressed in United States dollars. There
are no material differences between Canadian and United States generally accepted
accounting principles. The Financial Statements are contained on pages F-1 through F-7 of
this Form 20-F.

ITEM 18:   FINANCIAL
STATEMENTS

Not
applicable.

ITEM 19:   EXHIBITS

The
following documents are filed as part of this report:

|(a) |  | The report of auditors and financial statements appearing in Item 18.
|--- |  | ---------------------------------------------------------------------

|(b) |  | The exhibits required by this item are listed in the Exhibit Index which appears
                    elsewhere in this Form 20-F and is incorporated herein by reference. The Company
                    is not a party to any management contracts or compensation plans or arrangements
                    required to be filed as exhibits to this Form 20-F.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-11-

---

|NB FINANCE LTD.
Table of Contents          | 
|------------------------------------------ | 
|                                          
|                                          
|Independent Auditors' report               | 
|                                          
|Statements of income and retained earnings | 
|                                          
|Balance sheets                             | 
|                                          
|Statements of cash flows                   | 
|                                          
|Notes to the financial statements          | 

---

Deloitte & Touche, LLP
Assurance and Advisory Services
1 Place Ville-Marie 
Suite 3000
Montréal QC H3B 4T9
Canada 


Tel.:  (514) 393-7115
Fax:  (514) 390-4111
www.deloitte.ca

# Independent
Auditors report

To the Board of Directors and
Shareholder of NB Finance, Ltd. (theCompany)

We have audited the accompanying
balance sheets of NB Finance, Ltd. as of December 31, 2002 and 2001 and the related
statements of income and retained earnings and cash flows for the each of the three years
in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the 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. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such financial
statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2002 and 2001 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in Canada.

Montreal, Canada

February 4, 2003

---

# NB FINANCE, LTD. 
Statements of income and retained earnings
years ended December 31, 2002, 2001 and 2000
(in U.S. dollars)

|                                       
|---------------------------------------
|
|                                       
|
|Revenue                                
|Interest - mortgage loans              
|Amortization of the premium paid or the
|discount received on mortgage loans    
|Interest - bank                        
|                                       
|                                       
|                                       
|Expenses                               
|Interest - promissory notes            
|Professional fees                      
|Other                                  
|                                       
|                                       
|                                       
|Net income                             
|Retained earnings, beginning of year   
|                                       
|Retained earnings, end of year         
|                                       

F-1

---

# NB FINANCE, LTD. 
Balance sheets 
as at December 31, 2002 and 2001
(in U.S. dollars)

|                                                  
|--------------------------------------------------
|
|                                                  
|
|Assets                                            
|Cash and cash equivalents                         
|Mortgage loans (Note 3)                           
|Premium paid on mortgage loans (Note 4)           
|Interest receivable                               
|Assets related to derivative financial instruments
|                                                  
|                                                  
|                                                  
|Liabilities                                       
|Promissory notes (Note 5)                         
|Due to an affiliated company (Note 6)             
|Discount received on mortgage loans (Note 4)      
|Accounts payable                                  
|                                                  
|                                                  
|                                                  
|Shareholder's equity                              
|Capital stock (Note 7)                            
|Contributed surplus                               
|Retained earnings                                 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  

F-2

---

# NB FINANCE, LTD. 
Statements of cash flows
years ended December 31, 2002, 2001 and 2000
(in U.S. dollars)

|                                                   
|---------------------------------------------------
|
|                                                   
|
|Cash flows from operating activities               
|Net income                                         
|Item not affecting cash resources                  
|Amortization of the premium paid or the            
|discount received on mortgage loans                
|Changes in non-cash operating working capital items
|Interest receivable                                
|Due to an affiliated company                       
|Accounts payable                                   
|                                                   
|                                                   
|                                                   
|Cash flows from financing activities               
|Issue of promissory notes                          
|Reimbursements of promissory notes                 
|                                                   
|                                                   
|                                                   
|Cash flows from investing activities               
|Increase in mortgage loans                         
|Repayments of mortgage loans                       
|Discount received on mortgage loans                
|                                                   
|                                                   
|                                                   
|Net increase in cash and cash equivalents          
|Cash and cash equivalents, beginning of year       
|                                                   
|Cash and cash equivalents, end of year             
|                                                   
|Additional cash flow information                   
|Interest paid                                      

Cash and cash equivalents comprise
cash on hand and temporary investments.

F-3

---

# NB FINANCE, LTD. 
Notes to the financial statements 
years ended December 31, 2002 and 2001
(in U.S. dollars)

---

|1. | Incorporation
and nature of operations
|-- | --------------------------------------

| | NB
Finance, Ltd. (the Company) is a wholly-owned subsidiary of National Bank of
Canada and was incorporated in Bermuda on September 3, 1997. The Companys
principal activity is holding mortgage loans.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Summary
of significant accounting policies
|-- | ------------------------------------------

| | Financial
statements
| | --------------------

| | The
financial statements are prepared in accordance with accounting principles generally
accepted in Canada and are expressed in U.S. dollars.
| | ----------------------------------------------------------------------------------------------------------------------------------------------

| | Mortgage
loans
| | --------------

| | Mortgage
loans are recorded at their principal amounts less allowances for credit losses.
| | -----------------------------------------------------------------------------------------

| | Estimates
| | ---------

| | The
preparation of financial statements in accordance with accounting principles generally
accepted in Canada requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Although these
estimates are based on managements best knowledge of current events and actions that
the Company may undertake in the future, actual results could differ from the estimates.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Translation
of foreign currencies
| | ---------------------------------

| | Monetary
assets and liabilities denominated in foreign currencies are translated into U.S. dollars
at year-end rates of exchange. Revenue and expense items are translated at rates
prevailing at the transaction dates. Gains and losses resulting from translation are
reflected in the statement of income.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Derivative
financial instruments
| | --------------------------------

| | The
Company used cross currency swaps to manage the currency risk exposure of the mortgage
loans. The gains and losses resulting from the changes in valuation of these instruments
as well as the gains and losses resulting from the changes in valuation of the hedged
assets are reflected in the statement of income.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Income
taxes
| | ------------

| | The
Company is not subject to any income taxes on the Bermuda income.
| | ---------------------------------------------------------------------

| | Premium
paid or discount received on mortgage loans
| | ---------------------------------------------------

| | The
premium paid or discount received on mortgage loans is amortized on a straight-line basis
on the residual term of mortgage pools.
| | -------------------------------------------------------------------------------------------------------------------------------------

F-4

---

# NB FINANCE, LTD. 
Notes to the financial statements 
years ended December 31, 2002 and 2001
(in U.S. dollars)

---

|3. | Mortgage loans
|-- | --------------

| | The
Company acquired mortgage loans expressed in Canadian dollars from National Bank of
Canada. The mortgage loans are secured by residential first mortgages and insured by the
Canada Mortgage and Housing Corporation.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
mortgage loans have maturity dates varying from January 2002 to December 2012. These
loans bear interest at rates ranging from approximately 6.44% to 8.38% with a weighted
average rate of 7.24% per annum.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cross
currency swaps with the parent company convert the Canadian dollars exposure of the
mortgage loans to U.S. dollars. The maturity dates and notional amounts of the cross
currency swaps agree with the maturity dates and principal amounts of the mortgage loans.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | 2002 | 2001        
|--------------------------------- | ---- | ------------
|                                  |     
|
|Mortgage loans, beginning of year |      | 492,440,883 
|Acquisitions                      |      | 235,177,014 
|Principal repayments              |      | (167,722,873
|Foreign exchange difference       |      | 10,211,870  
|                                 
|Mortgage loans, end of year       |      | 570,106,894 
|                                 

| | The
scheduled principal repayments are as follows:
| | --------------------------------------------------

|     | $
|---- | -
|2003 |  
|2004 |  
|2005 |  
|2006 |  
|2007 |  
|2008 |  
|2009 |  
|2010 |  
|2011 |  
|2012 |  

| | The
mortgage loans are insured by the Canada Mortgage and Housing Corporation so that the
credit risk is negligible. Moreover, based on the current financial structure, the
exposure to interest rate risk is minimal.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-5

---

# NB FINANCE, LTD. 
Notes to the financial statements 
years ended December 31, 2002 and 2001
(in U.S. dollars)

---

|4. | Premium
paid or discount received on mortgage loans
|-- | ---------------------------------------------------

| | The
premium paid or discount received is amortized on a straight-line basis on the residual
term of mortgages acquired. The amortization amounts to $3,077,260 in 2002 ($2,452,926 in
2001 and ($2,192,059) in 2000).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | Promissory notes
|-- | ----------------

| | The
promissory notes are issued to NB Capital Corporation, a wholly-owned subsidiary of the
parent company.
| | -----------------------------------------------------------------------------------------------------------

|                                                      | 2002 | 2001       
|----------------------------------------------------- | ---- | -----------
|                                                      |     
|
|Promissory notes, interest rate ranging between 7.31% |      |            
|and 10.21%, repayable by monthly variable             |     
|instalments until December 2012                       |      | 469,846,279
|                                                     

| | The
scheduled principal repayments for the next five years are as follows:
| | --------------------------------------------------------------------------

|     | $
|---- | -
|2003 |  
|2004 |  
|2005 |  
|2006 |  
|2007 |  
|2008 |  
|2009 |  
|2010 |  
|2011 |  
|2012 |  

|6. | Transactions
with an affiliated company
|-- | ---------------------------------------

| | During
the year, the Company incurred interest expenses to NB Capital Corporation in an amount of
$37,246,933 ($36,806,319 in 2001 and $31,632,389 in 2000).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
amount due to an affiliated company as at December 31, 2002 and 2001 represents
interest and principal reimbursements due on the promissory notes to NB Capital
Corporation.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-6

---

# NB FINANCE, LTD. 
Notes to the financial statements 
years ended December 31, 2002 and 2001
(in U.S. dollars)

---

|7. | Capital stock
|-- | -------------

| | Authorized
| | ----------

| | 12,000
 common shares, $1 par value
| | -----------------------------------

|                      | 2002 | 2001  
|--------------------- | ---- | ------
|                      |     
|
|Issued and fully paid |      |       
|12,000 common shares  |      | 12,000
|                     

|8. | Fair
values of financial instruments
|-- | ------------------------------------

| | The
fair values of the financial instruments do not differ significantly from their carrying
values in the financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------

|9. | Reconciliation of Canadian and United States generally accepted accounting           principles
|-- | -----------------------------------------------------------------------------------------------

| | The
financial statements of the Company are prepared in accordance with accounting principles
generally accepted in Canada. There are no material differences between accounting
principles generally accepted in Canada and those generally accepted in the United States
of America.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-7

---

# SIGNATURES

The
Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and has duly caused and authorized the undersigned to sign this annual report on its
behalf.

| | NB FINANCE, LTD.

By:  
/s/ Martin Ouellet
        Name:      Martin Ouellet
        Title:     President
| | ---------------------------------------------------------------------------------------------------------

Dated: June 23, 2003

-12-

---

# CERTIFICATIONS

I,
Martin Ouellet, certify that:

1.
     I have reviewed this annual report
on Form 20-F of NB Finance, Ltd.;

2.
     Based on my knowledge, this annual
report does not contain any untrue statement           of a material fact or omit to
state a material fact necessary to make the           statements made, in light of the
circumstances under which such statements were           made, not misleading with
respect to the period covered by this annual report;

3.
     Based on my knowledge, the
financial statements, and other financial information           included in this annual
report, fairly present in all material respects the           financial condition,
results of operations and cash flows of the registrant as           of, and for, the
periods presented in this annual report;

4.
     The
registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

| | (a)    designed
 such disclosure controls and procedures to ensure that material
               information relating to the registrant, including its consolidated
subsidiaries,                is made known to us by others within those entities,
particularly during the                period in which this annual report is being
prepared;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)    evaluated
the effectiveness of the registrants disclosure controls and
               procedures as of a date within 90 days prior to the filing date of this
annual                report (the Evaluation Date); and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)    presented
in this annual report our conclusions about the effectiveness of the
               disclosure controls and procedures based on our evaluation as of the
Evaluation                Date;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.                 The
registrants other certifying officers and I have disclosed, based on           our
most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent functions):

| | (a)    all
significant deficiencies in the design or operation of internal controls
               which could adversely affect the registrants ability to record,
process,                summarize and report financial data and have identified for the
               registrants auditors any material weaknesses in internal controls;
and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)    any
fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls;
and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6.               The
registrants other certifying officers and I have indicated in this           annual
report whether there were significant changes in internal controls or in           other
factors that could significantly affect internal controls subsequent to           the
date of our most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.

Date:
June 23, 2003

| | /s/ Martin Ouellet
Martin Ouellet
Principal Executive Officer
| | -------------------------------------------------------------

-13-

---

I,
Jean Dagenais, certify that:

1.     I have reviewed this annual report on Form 20-F of NB Finance, Ltd.;

2.     Based on my knowledge, this annual report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this annual report;

3.     
          Based on my knowledge, the financial statements, and other financial information
          included in this annual report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this annual report;

4.     
          The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

| | (a)    designed
such disclosure controls and procedures to ensure that material
               information relating to the registrant, including its consolidated
subsidiaries,                is made known to us by others within those entities,
particularly during the                period in which this annual report is being
prepared;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)    evaluated
the effectiveness of the registrants disclosure controls and
               procedures as of a date within 90 days prior to the filing date of this
annual                report (the Evaluation Date); and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)    presented
in this annual report our conclusions about the effectiveness of the
               disclosure controls and procedures based on our evaluation as of the
Evaluation                Date;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.     
          The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent functions):

| | (a)    all
significant deficiencies in the design or operation of internal controls
               which could adversely affect the registrants ability to record,
process,                summarize and report financial data and have identified for the
               registrants auditors any material weaknesses in internal controls;
and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)    any
fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls;
and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6.     
          The registrants other certifying officers and I have indicated in this
          annual report whether there were significant changes in internal controls or in
          other factors that could significantly affect internal controls subsequent to
          the date of our most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.

Date:
June 23, 2003

| | /s/ Jean Dagenais
Jean Dagenais
Principal Financial Officer
| | -----------------------------------------------------------

-14-

---

INDEX TO EXHIBITS

|Exhibit Number | Description
|-------------- | -----------
|
|10.3           |            
|
|10.5           |            
|
|10.6           |            
|
|10.7           |            
|
|10.10          |            
|
|10.12          |            
|
|10.13(i)       |            
|
|10.13(ii)      |            
|

-15-

---

|Exhibit Number | Description
|-------------- | -----------
|               |            
|10.14(i)       |            
|
|10.14(ii)      |            
|
|10.15          |            
|
|10.16          |            
|
|10.17          |            
|
|10.18          |            
|
|10.19          |            
|
|10.20          |            
|
|10.21          |            
|
|10.22          |            
|

-16-

---

|Exhibit Number | Description
|-------------- | -----------
|               |            
|10.23          |            
|
|10.24          |            
|
|10.25          |            
|
|10.26          |            
|
|10.27          |            
|
|10.28          |            
|
|10.29          |            
|
|10.30          |            
|
|10.31          |            
|
|10.32          |            
|

-17-

---

|Exhibit Number | Description
|-------------- | -----------
|               |            
|99.1           |            
|
|99.2           |            

*      As previously filed. 
**   As filed herewith.

-18-

---