**UNITED
        STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





**Washington
      D.C. 20549**


______________________ **_______________________** _______




**FORM
      20-F**





 ̈
            Registration
                Statement pursuant to Section 12(b) or 12(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,
                2007.


or





 ̈
            Transition
                Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934.


For
      the
      transition period from _______________ to _______________.





or





 ̈
            Shell
                Company Report pursuant to Section 13 or 15(d) of the Securities
                Exchange
                Act of 1934.


Date
                of event requiring this shell company report
                ____________________.




Commission
      file number 333-49153-02.


_____________ **_____________________________**


**NB
      FINANCE, LTD.**


(Exact
      name of Registrant as specified in its charter)


_ **_________________________________________**


**Bermuda**


(Jurisdiction
      of incorporation or organization)




**Clarendon
        House**
 **2
        Church Street**
 **Hamilton
        HM 11**
 **Bermuda**
 
 **Susie
        Grant, Secretary**
 **Tel:
        (441) 299-4949**


(Addresses
      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 if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.




Yes  ̈ No x





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




Yes  ̈ No x




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 :




Yes x No  ̈




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




Large
                accelerated filer  ̈
            Accelerated
                filer  ̈
            Non-accelerated
                filer x





Indicate
      by check mark which basis of accounting the registrant has used to prepare
      the
      financial statements prepared in this filing:


U.S.
                  GAAP ̈
              International Financial Reporting Standards as issued   ̈
                by the International Accounting Standards Board
              
              
              Other x


If
      “Other” has been checked in response to the previous question, indicate by check
      mark which financial statement item the registrant has elected to follow.




Item
        17 x
        Item
        18  ̈




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




Yes  ̈ No x





**FORWARD-LOOKING
      STATEMENTS**





This
      annual report on Form 20-F of NB Finance Ltd (the “Company”) contains
“Forward-looking statements” within the meaning of Section 27A of the Securities
      Act of 1933, as amended, and Section 21E of the Securities and Exchange Act
      of
      1934, as amended. All such statements are made pursuant to the “safe harbor”
provisions of the United States Private Securities Litigation Reform Act of
      1995. These forward-looking statements include, among others, statements with
      respect to the performance of mortgage loans held by the Company, the economy,
      market changes, the achievement of strategic objectives, certain risks as well
      as statements with respect to our beliefs, plans, expectations, anticipations,
      estimates and intentions. These forward-looking statements are typically
      identified by the words “may”, “could”, “should”, “would”, “suspect”, “outlook”,
“believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, and words and
      expressions of similar import.





By
      their
      very nature, such forward-looking statements require us to make assumptions
      that
      involve inherent risks and uncertainties, both general and specific. There
      is
      significant risk that express or implied projections contained in such
      statements will not materialize or will not be accurate. A number of factors
      could cause actual future results, conditions, actions or events to differ
      materially from the targets, expectations, estimates or intentions expressed
      in
      the forward-looking statements. Such differences may be caused by factors,
      many
      of which are beyond the Company’s control, which include, but are not limited
      to, changes in North American and/or global economic and financial conditions
      (particularly fluctuations in interest rates, currencies and other financial
      instruments), mortgage default rates, liquidity, market trends, regulatory
      developments and the Company’s anticipation of and success in managing the risks
      implied by the foregoing.





The
      Company cautions that the foregoing list of important factors is not exhaustive.
      Investors and others who intend to base investment decisions on the Company’s
      forward-looking statements should carefully consider the above factors as well
      as the uncertainties they represent and the risk they entail. The Company
      therefore cautions readers not to place undue reliance on these forward-looking
      statements. The Company does not undertake to update any forward-looking
      statements, whether written or oral, that may be made from time to time by
      or on
      behalf of the Company.


2


**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**





The
      selected historical income statement data for the years ended December 31,
      2005,
      2006 and 2007 and the selected historical balance sheet data as of December
      31,
      2006 and 2007 set forth below are derived from the Company’s audited financial
      statements included elsewhere in this annual report on Form 20-F. The selected
      historical income statement data for the years ended December 31, 2003 and
      2004
      and the selected historical balance sheet data as of December 31, 2003, 2004
      and
      2005 set forth below are derived from the Company’s audited financial statements
      not included in this annual report on Form 20-F.





(Per
      Canadian GAAP)


**Year Ended**
                  **December 31,**
                  **2007**
                
                **Year Ended**
                  **December 31,**
                  **2006**
                
                **Year Ended**
                  **December 31,**
                  **2005**
                
                **Year Ended**
                  **December 31,**
                  **2004**
                
                **Year Ended**
                  **December 31,**
                  **2003****Statement
                    of Income Data:**Operating
                    Revenues
                
                $139,743,827
                
                $43,917,560
                
                $67,190,810
                
                $95,211,882
                
                $44,484,134Income
                    (loss) from Continuing Operations
                
                $15,148,984
                
                $11,884,249
                
                $4,010,926
                
                $(7,937,023
                )
                $6,915,778Net
                    Income (loss)
                
                $15,148,984
                
                $11,884,249
                
                $4,010,926
                
                $(7,937,023
                )
                $6,915,778Income
                    (loss) from Continuing Operations per Common Share
                
                $1,262.42
                
                $990.35
                
                $334.24
                
                $(661.42
                )
                $576.32**Balance
                    Sheet Data:**Total
                    Assets
                
                $738,911,077
                
                $607,930,510
                
                $671,047,829
                
                $675,579,983
                
                $700,113,693Total
                    Liabilities
                
                $556,329,941
                
                $441,822,214
                
                $516,823,782
                
                $525,366,862
                
                $541,963,549Shareholder’s
                    Equity
                
                $182,581,136
                
                $166,108,296
                
                $154,224,047
                
                $150,213,121
                
                $158,150,144Capital
                    Stock
                
                $12,000
                
                $12,000
                
                $12,000
                
                $12,000
                
                $12,000Number
                    of Shares
                
                
                12,000
                
                
                12,000
                
                
                12,000
                
                
                12,000
                
                
                12,000Cash
                    Dividends Declared per Common Share
                
                
                N/A
                
                
                N/A
                
                
                N/A
                
                
                N/A
                
                
                N/A


3


ITEM  3:
      KEY
      INFORMATION (continued)





(Per
      U.S.GAAP)


**Year Ended**
                **December 31,**
                **2007**
              
              **Year Ended**
                **December 31,**
                **2006**
              
              **Year Ended**
                **December 31,**
                **2005**
              
              **Year Ended**
                **December 31,**
                **2004**
              
              **Year Ended**
                **December 31,**
                **2003****Statement of Income Data:**Operating
                  Revenues
              
              $139,743,827
              
              $42,700,646
              
              $66,556,625
              
              $94,420,042
              
              $44,484,134Income
                  (loss) from Continuing Operations
              
              $15,148,984
              
              $10,667,335
              
              $3,376,741
              
              $(8,728,863
              )
              $(3,860,503
              )Net
                  Income (loss)
              
              $15,148,984
              
              $10,667,335
              
              $3,376,741
              
              $(8,728,863
              )
              $(3,860,503
              )Income
                  (loss) from Continuing Operations per Common Share
              
              $1,262.42
              
              $888.95
              
              $281.40
              
              $(727.41
              )
              $(321.71
              )**Balance
                  Sheet Data:**Total
                  Assets
              
              $738,911,077
              
              $607,930,510
              
              $671,047,829
              
              $675,579,983
              
              $700,113,693Total
                  Liabilities
              
              $556,329,941
              
              $440,498,358
              
              $514,283,012
              
              $522,191,907
              $537,996,754Shareholder’s
                  Equity
              
              $182,581,136
              
              $167,432,152
              
              $156,764,817
              
              $153,388,076
              
              $162,116,939Capital
                  Stock
              
              $12,000
              
              $12,000
              
              $12,000
              
              $12,000
              
              $12,000Number
                  of Shares
              
              
              12,000
              
              
              12,000
              
              
              12,000
              
              
              12,000
              
              
              12,000Cash
                  Dividends Declared per Common Share
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A




**Exchange
      Rates**




References
      to $ are to United States dollars; references to C$ are to Canadian dollars.
      As
      of December 31, 2007, the Canadian dollar exchange rate was C$0.9913 = $1.00
      and
      certain amounts stated herein reflect such exchange rate. The exchange rates
      were obtained from the Bank of Canada. All amounts presented in the Company’s
      financial statements are denominated in United States dollars. The following
      table sets forth the high and low closing buying rates between the Canadian
      dollar and the US dollar for the periods specified.





**Exchange
                Rate in C$ per $**High
            
            LowJuly
                2007
            
            
            1.0684
            
            
            1.0378August
                2007
            
            
            1.0778
            
            
            1.0487September
                2007
            
            
            1.0562
            
            
            0.9914October
                2007
            
            
            0.9984
            
            
            0.9447November
                2007
            
            
            1.0000
            
            
            0.9215December
                2007
            
            
            1.0201
            
            
            0.9805





The
      following table sets forth the average noon buying rates between the Canadian
      dollar and the US dollar for each of 2003, 2004, 2005, 2006 and 2007, calculated
      by averaging the noon buying rates of each day during the relevant
      year.


4





ITEM  3:
      KEY
      INFORMATION (continued)





Year Average in C$ to $1.002003
            
            
            1.401461752004
            
            
            1.301520242005
            
            
            1.211632402006
            
            
            1.134093602007
            
            
            1.07478127





**Risk
      Factors**





There
      are
      no risk factors relevant to the Company other than those associated with
      servicing and administering Mortgage Loans insured by Canada Mortgage and
      Housing Corporation, an agency of the Government of Canada
      ("CMHC").





In
      the
      context of its day-to-day operations, the Company exposes itself to certain
      categories of risk, as credit, interest rate and currency risks. Those risks
      are
      monitored and covered especially by cross currency swaps to manage the Company’s
      exposure to fluctuations in the United States – Canadian dollar exchange rate.
      All derivatives instruments are recorded on the Company’s balance sheet at their
      fair value. Derivative transactions are expressed in terms of notional amounts,
      which serve as a point of reference for calculating payments. Notional amounts
      are not presented on the balance sheet and do not reflect the credit risk
      related to the derivative financial instruments.





ITEM  4:
      INFORMATION ON THE COMPANY





**History
      and Development of the Company**





The
      Company is 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.





The
      Company was incorporated on September 3, 1997 under the *Bermuda*  *Companies
      Act 1981* .
      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 ( " Mortgage
      Loans " )
      and to
      issue obligations secured by such real property (the "Promissory Notes") and
      other similar obligations to NB Capital Corporation ( " NB
      Capital " ),
      an
      affiliated company. The Promissory Notes currently consist of fifty-one
      hypothecation loans issued to NB Capital by the Company that have recourse
      only
      to the Mortgage Loans. Hypothecation loans are loans secured by the pledge
      of
      mortgages as security therefor. The Mortgage Loans currently consist of
      fifty-one pools of, at December 31, 2007, an aggregate of 10,727  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 to engage
      in
      any business activities other than ownership of Mortgage Loans and activities
      incidental thereto. The Company’s registered offices are located at Clarendon
      House, 2 Church Street, Hamilton HM 11, Bermuda.


5





ITEM  4:
      INFORMATION ON THE COMPANY (continued)





As
      of
      December 31, 2007, the Company has issued Promissory Notes to NB Capital in
      an
      aggregate principal amount of approximately $450 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$641 million ($647 million). Accordingly, as of December 31,
      2007, the Promissory Notes were overcollateralized by $197 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 annual report on Form 20-F, the Company has
      not
      entered into any agreements with any third parties other than the Bank with
      respect to the purchase of Mortgage Loans.





The
      Company and NB Capital have 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 originally dated September 3, 1997 and renewable annually,
      with its last renewal on May 4, 2007 for a one-year period beginning on June
      28,
      2007 and ending on June 28, 2008, between NB Capital and the Bank (the
      "Servicing Agreement"), the Mortgage Loans are serviced by the
      Bank.





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





**Business
      Overview**





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. In accordance with its underwriting policies, the Bank will not make
      any residential mortgage loans that exceed a loan to value ratio of 80% 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 is, 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 Canadian 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 through the CMHC portfolio insurance program, at
      origination or during the term of the loan, the insurance is valid until the
      expiration of the loan.





All
      of
      the Mortgage Loans are balloon mortgages. Accordingly, the Mortgage Loans do
      not
      provide for the full 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, Mortgage Loans are
      amortized over a period not exceeding 25 years.


6





ITEM  4:
      INFORMATION ON THE COMPANY (continued)





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 five years following the most recent interest adjustment date, such
      penalties are determined by a yield maintenance clause. After five 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-one
      hypothecation loans. As of December 31, 2007, the principal amount of the
      Promissory Notes liability was approximately $450 million. Each of the fifty-one
      hypothecation loans comprising the Promissory Notes issued by the Company is
      secured by a pool of Mortgage Loans. As of December 31, 2007, there were
      10,727 Mortgage Loans in an aggregate amount of approximately C$641 million
      ($647 million). The value of each pool of Mortgage Loans comprising the Mortgage
      Loans exceeds the principal amount of the Promissory Note that it secures.
      Accordingly, the Promissory Notes issued by the Company are overcollateralized
      by the Mortgage Loans. The aggregate amount of such overcollateralization is,
      as
      of December 31, 2007, approximately $197 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 entirely
      of CMHC-insured residential first mortgages. Each Promissory Note 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 February 2008
      to
      January 2015. The Promissory Notes pay interest at rates ranging from 5.37%
      to
      10.15%, with an average rate of approximately 6.21% per annum.





Payments
      of interest on the Promissory Notes 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 corresponding 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 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.


7





ITEM  4:
      INFORMATION ON THE COMPANY (continued)





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 (in $US) 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.





Advisory
      Agreement





The
      Company is party to an Advisory Agreement with the Bank to administer the
      day-to-day operations and affairs of the Company. Under the terms of the
      Advisory Agreement, the Bank, among other things, (i) monitors the credit
      quality of the real estate mortgage assets (Mortgage Loan) acquired, managed,
      financed, held and/or disposed of by the Company and (ii) advises the Company
      with respect to the acquisition, management, financing and disposition of the
      Company’s real estate mortgage assets. The Bank may, with the approval of a
      majority of the Board of Directors, subcontract all or a portion of its
      obligations under the Advisory Agreement to one or more related or unrelated
      third parties. The Bank will not, in connection with the subcontracting of
      any
      of its obligations under the Advisory Agreement, be discharged or relieved
      in
      any respect from any of its obligations under the Advisory Agreement. As of
      the
      date of this annual report on Form 20-F, the Bank has not subcontracted any
      of
      its obligations under the Advisory Agreement.





The
      Advisory Agreement was entered into on May 11, 2004 for an initial term of
      one
      year, and has been renewed each year since the expiry of its initial term for
      additional one-year periods. The last renewal for an additional one-year period
      became effective on June 9, 2008. The Company may terminate the Advisory
      Agreement at any time upon 60 days’ prior written notice. The Company paid the
      Bank an advisory fee of $50,000 for fiscal year 2007 and will pay $50,000 for
      fiscal year 2008, payable in quarterly installments, for the advisory and
      management services provided by the Bank to the Company. Also, since December
      2007, the Bank is entitled to receive a variable fee for investment services
      equal to 0.025% multiplied by the average daily value of the Company’s deposits
      for each quarter. For the fiscal year 2007, the Bank has earned a variable
      fee
      for investment services equal to $3,387.





**Description
      of Property**





The
      registered offices of the Company are located at Clarendon House, 2 Church
      Street, Hamilton HM 11, 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.


8





ITEM  5:
      OPERATING AND FINANCIAL REVIEW AND PROSPECTS (continued)





**Operating
      Results**





Net
      income from continuing operations for the year ended December 31, 2007 was
      $15,148,984, which represents an increase of $3,264,735 or 27.47% over the
      year
      ended December 31, 2006 when the net income from continuing operations was
      $11,884,249, which represented an increase of $7,873,323 or 196.30% over the
      year ended December 31, 2005. The increase for 2007 was principally attributable
      to an increase of the foreign exchange gain on mortgage loans transactions
      of
      $98,464,058 which was partially offset by an increase of the change in fair
      value on derivative financial instruments of $94,457,242. Revenues for the
      year
      ended December 31, 2007, December 31, 2006 and December 31, 2005, were
      $139,743,827, $43,917,560 and $67,190,810, respectively. The variation from
      year
      to year is due to the variation of the foreign exchange gain.





Twenty-five
      percent of the Company’s revenues during 2007 were derived from the Mortgage
      Loans. The Promissory Notes issued by the Company are collateralized by the
      Mortgage Loans that consist of fifty-one pools of CMHC-insured residential
      first
      mortgages and which are secured by real property located in Canada. The
      remaining balance of the revenues for the year ended December 31, 2007, December
      31, 2006 and December 31, 2005 resulted from a foreign exchange gain on mortgage
      loans transactions of $98,695,956, $231,898 and $20,217,335 respectively,
      interests on cash and temporary investments and amortization of the discount
      received on the purchase of mortgage loans of $5,582,867, $3,245,721 and
      $1,810,982 respectively.





Expenses
      for the year ended December 31, 2007, December 31, 2006 and December 31, 2005
      totaled $124,594,843, $32,033,311 and $63,179,884, respectively, of which
      $28,611,321, $30,546,845 and $33,995,506, respectively, represent interest
      on
      Promissory Notes. As well, during the year ended December 31, 2007, December
      31,
      2006 and December 31, 2005, losses of $95,890,935, $1,433,693 and $28,489,363,
      respectively, were recorded related to the valuation of derivative financial
      instruments at their fair value.





During
      the year ended December 31, 2007, no dividend was authorized on the Company’s
      Common Stock.





**Liquidity
      and Capital Resources**





The
      Company's revenues, net of the impact of the foreign exchange gain, are
      primarily derived from its Mortgage Loans. The Company's principal short-term
      liquidity needs are to pay principal when due (maturity dates range from
      February 2008 to January 2015) and monthly interest payments on the Promissory
      Notes. 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.





As
      of
      December 31, 2007, approximately $450 million of Promissory Notes issued by
      the
      Company were overcollateralized by approximately C$641 million ($647 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.


9







ITEM  5:
      OPERATING AND FINANCIAL REVIEW AND PROSPECTS (continued)





**Critical
      Accounting Policies**





Changes
      in accounting policies and a summary of the significant accounting policies
      used
      by the Company are presented in Notes 2 and 3 of the financial statements
      included in this annual report on Form 20-F. Certain of these accounting
      policies are considered significant because they are important to the
      presentation of the Company’s financial condition and operating results and
      require difficult, subjective and complex judgments and estimates because they
      relate to matters that are inherently uncertain. Any change in these judgments
      and estimates could have a material impact on the financial statements of NB
      Finance.





The
      Company records at fair value derivative financial instruments. Changes in
      unrealized gains and losses are recorded in the statement of income. Fair value
      is the amount at which a financial instrument could be exchanged in an arm’s
      length transaction between willing parties who are under no compulsion to act,
      based on quoted market prices. If quoted market prices are not available, fair
      value is determined using estimates. The valuation techniques used to make
      these
      estimates consider current market prices, the contractual prices of underlying
      instruments, the time value of money, yield curves and volatility factors.
      If
      necessary, fair value is adjusted to take market, model and credit risks into
      account, as well as the related costs.





**Off-Balance
      Sheet Arrangements**





In
      the
      normal course of business, the Company is party to various financial
      arrangements that under Canadian generally accepted accounting principles are
      not required to be recorded on the Balance Sheet or are recorded under amounts
      other than their notional or contractual values. Those arrangements consist
      of
      derivative financial instruments.





The
      Company uses cross currency swaps to manage the currency risk exposure of the
      mortgage loans. These derivative financial instruments do not qualify for hedge
      accounting and are carried at fair value as assets or liabilities with changes
      in fair value recorded in the statement of income. Fair value is determined
      using estimates. The valuation techniques used to make these estimates consider
      current market prices, the contractual prices of underlying instruments, the
      time value of money, yield curves and volatility factors. If necessary, fair
      value is adjusted to take market, model and credit risks into account, as well
      as the related costs.





**Tabular
      Disclosure of Contractual Obligations**





The
      Promissory Notes are issued to NB Capital, a wholly-owned subsidiary of the
      Bank, and represent the Company’s only contractual obligations.





Payments due by periodLess
            
            
            
            
            
            Morethan 1
            
            1-3
            
            3-5
            
            than 5Total
            
            year
            
            years
            
            years
            
            yearsPromissory
                Notes
            
            $450,080,450
            
            $297,724,722
            
            $80,270,502
            
            $54,987,803
            
            $17,097,423




10




ITEM  6:
      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES





**Directors
      and Officers**





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





The
      following table sets forth the Company’s directors and executive officers as at
      December 31, 2007:





**Name**
            
            **Age**
            
            **Position and Offices Held**
            
            **Director Since**Donna
                Goral
            
            50
            
            Director,
                Vice-President
            
            May
                2001Martin
                Ouellet
            
            54
            
            Director,
                President
            
            November
                1997Monique
                Baillergeau
            
            49
            
            Director
            
            May
                2003Vincent
                Lima
            
            50
            
            Director
            
            May
                2006Jean
                Dagenais
            
            49
            
            Chief
                Financial Officer
            
            N/A





Susie
      Grant (Secretary), Michael Ashford (Assistant Secretary), Martin-Pierre
      Boulianne (Assistant Secretary), Vanessa Fontana (Assistant Secretary) and
      Valérie Pelletier (Assistant Secretary) are the other officers of the
      Company.





Since
      March 21, 2006, Ms. Goral has been President and Chairman of the Board of NB
      Capital Corporation. She is also a director of NB Finance and has held the
      position of Vice-President – Taxation, USA Operations for the Bank since
      1992. Ms. Goral’s prior tax experience includes positions with KPMG Peat Marwick
      and Ernst & Whinney. She is a Certified Public Accountant (CPA) and a member
      of the American Institute of Certified Public Accountants and the New York
      State
      Society of CPAs.





Mr.
      Lima
      was appointed Director of NB Capital in March 2006 and Director of NB Finance
      in
      May 2006. He joined the Bank in December 1987, and over the years has held
      several positions, including Assistant Controller, Assistant
      Vice-President/Credit Analyst – Commercial Financing Group, and
      Vice-President – Cross Border Financing Group. He started his career in
      1978 with a major international bank in the Money Transfer/Cash Management
      Dept., and over the years has held various positions in both operations and
      accounting with various international banks.





Ms.
      Baillergeau was appointed Director of NB Capital and NB Finance in May 2003.
      She
      has been with the Bank’s New York branch since February 1986. In 1998, she was
      assigned to manage the Operations of the Bank’s London branch. In May 2003, she
      accepted the position of Vice-President in charge of Operations and
      Administration in New York.





Mr.
      Dagenais joined the Bank in 1990 as Manager and Chief Accountant and was
      promoted to Vice-President in 1997. Since June 2007, he was appointed Senior
      Vice-President and Chief Financial Officer. As such, he is responsible for
      investor relations, budget and regulatory capital planning, financial reporting,
      taxation and accounting. He began his 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.




11




ITEM
      6:
      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES (continued)





Mr.
      Ouellet has been an employee of the Bank since 1980. He has held different
      positions within the Treasury and Financial Markets division of the Bank. Since
      May 2007, he has acted as the Senior Vice-President, Corporate Treasury,
      responsible for Asset and Liability Management, funding and liquidity
      management. He is a Director and the President of NB Finance.





**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 or consultant of the Bank, except for Michael
      Ashford  and  Susie
      Grant. The Company did not pay any form of compensation to its officers or
      directors during the year ended December 31, 2007. 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, 2007 to provide pension, retirement or similar benefits for directors and
      officers pursuant to any existing plan provided or contributed to by the
      Company. In addition, there are no benefits payable on termination for any
      directors and officers.





**Options
      to Purchase Securities from Registrant**





No
      options, warrants or rights have been granted to any individual with respect
      to
      the Common Stock or any 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.





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 SEC. 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.





**Related
      Party Transactions**





On
      February 22, 2007, April 25, 2007, August 27, 2007, September 26, 2007 and
      December 18, 2007, the Company acquired from the Bank, its direct parent, eleven
      pools of Mortgage Loans pursuant to eleven Deeds of Sale of Mortgage Loans,
      dated February 22, 2007, April 25, 2007, August 27, 2007, September 26, 2007
      and
      December 18, 2007 respectively, between the Bank and the Company. During the
      fiscal year ended December 31, 2007, 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.




12




ITEM
      7:
      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS (continued)





As
      of
      December 31, 2007, the Company issued Promissory Notes to NB Capital, an
      affiliated company, in the aggregate principal amount of approximately $450
      million. The proceeds from the issuance of Promissory Notes, in addition to
      a
      capital contribution from the Bank, were used to acquire the Mortgage Loans
      from
      the Bank for approximately C$641 million ($647 million). See " History
      and Development of the Company " under
      Item 4: INFORMATION ON THE COMPANY above.





On
      February 22, 2006 and August 17, 2006, the Company acquired from the Bank,
      its
      direct parent, nine pools of Mortgage Loans pursuant to nine Deeds of Sale
      of
      Mortgage Loans, dated February 22, 2006, and August 17, 2006 respectively,
      between the Bank and the Company. During the fiscal year ended December 31,
      2006, 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.





As
      of
      December 31, 2006, the Company issued Promissory Notes to NB Capital, an
      affiliated company, in the aggregate principal amount of approximately $381
      million. The proceeds from the issuance of Promissory Notes, in addition to
      a
      capital contribution from the Bank, were used to acquire the Mortgage Loans
      from
      the Bank for approximately C$597 million ($512 million).





On
      February 24, 2005 and August 29, 2005, the Company acquired from the Bank,
      its
      direct parent, nine pools of Mortgage Loans pursuant to nine Deeds of Sale
      of
      Mortgage Loans, dated February 24, 2005, and August 29, 2005 respectively,
      between the Bank and the Company. During the fiscal year ended December 31,
      2005, 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.





As
      of
      December 31, 2005, the Company issued Promissory Notes to NB Capital, an
      affiliated company, in the aggregate principal amount of approximately $410
      million. The proceeds from the issuance of Promissory Notes, in addition to
      a
      capital contribution from the Bank, were used to acquire the Mortgage Loans
      from
      the Bank for approximately C$682 million ($587 million).





The
      interest on bank accounts held with National Bank of Canada (International)
      Limited received by the Company in 2007 was $3,704,248 ($3,190,346 in 2006
      and
      $1,810,982 in 2005).





The
      advisory fees expense for the fiscal year ended December 31, 2007 is $53,387
      ($50,000 in 2006, $83,333 in 2005) with National Bank of Canada.





ITEM
      8:
      FINANCIAL INFORMATION





**Financial
      Statements and Other Financial Information**





See
      pages
      F-1 to F-11 hereto.




13


*Financial
        statements of*
 
 **NB
        FINANCE, LTD.**
 
 *December
        31, 2007, 2006 and 2005*
  
  **NB
        FINANCE, LTD.**
 **Table
        of contents**
 
 Report
                  of Independent Registered Chartered AccountantsStatements
                  of Income, Comprehensive Income and Retained Earnings
              **F-1**Balance
                  Sheets
              **F-2**Statements
                  of Cash Flows
              **F-3**Notes
                  to the Financial Statements
              **F-4
                  to F-11**
  
  
 Deloitte
                    & Touche LLP1
                    Place Ville MarieSuite
                    3000Montreal
                    QC H3B 4T9CanadaTel:
                    (514) 393-7115Fax:
                    (514) 390-4111www.deloitte.ca
  **Report
        of Independent Registered Chartered Accountants**
 
 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, 2007 and 2006 and the related statements of income,
        comprehensive income and retained earnings and cash flows for each of the
        three
        years in the period ended December 31, 2007. 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 the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance whether the financial
        statements are free of material misstatement. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audits included consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the Company's internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, 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, the financial statements referred to above present fairly, in all
        material respects, the financial position of the Company as of December 31,
        2007 and 2006, and the results of its operations and its cash flows for each
        of
        the three years in the period ended December 31, 2007, in conformity with
        accounting principles generally accepted in Canada.
  
 
 Montreal,
        Canada
 
 June
        6,
        2008
   
 
  **NB
        FINANCE, LTD.**
 **Statements
        of** **Income,
        Comprehensive Income and Retained Earnings**
 **years
        ended December 31, 200** **7,
        2006 and 2005**
 **(in
        U.S. dollars)**
 
 **2007**
              
              **2006**
              
              **2005**$
              
              $
              
              **$****Revenue**Interest
                  - mortgage loans
              
              
              35,465,004
              
              
              40,439,941
              
              
              45,162,493Foreign
                  exchange gain
              
              
              98,695,956
              
              
              231,898
              
              
              20,217,335Amortization
                  of the premium paid or the discount received on mortgage loans,
                  net
              
              
              1,646,391
              
              
              55,375
              
              
              -Interest
                  – cash and cash equivalents
              
              
              3,936,476
              
              
              3,190,346
              
              
              1,810,982139,743,827
              
              
              43,917,560
              
              
              67,190,810**Expenses**Interest
                  - promissory notes
              
              
              28,611,321
              
              
              30,546,845
              
              
              33,995,506Change
                  in fair value on derivative financial instruments
              
              
              95,890,935
              
              
              1,433,693
              
              
              28,489,363Amortization
                  of the premium paid or the discount received on mortgage loans,
                  net
              
              
              -
              
              
              -
              
              
              510,494Professional
                  fees
              
              
              36,152
              
              
              25,000
              
              
              91,933Advisory
                  fees to the parent company
              
              
              53,387
              
              
              50,000
              
              
              83,333Other
              
              
              3,048
              
              
              (22,227
              )
              
              9,255124,594,843
              
              
              32,033,311
              
              
              63,179,884**Net
                  income and comprehensive income**
              
              
              15,148,984
              
              
              11,884,249
              
              
              4,010,926Retained
                  earnings, beginning of year
              
              
              33,760,738
              
              
              21,876,489
              
              
              17,865,563Impact
                  of initial adoption of financial instruments standards (Note
                  2)
              
              
              1,323,856
              
              
              -
              
              
              -Retained
                  earnings, end of year
              
              
              50,233,578
              
              
              33,760,738
              
              
              21,876,489
  F-1
  **NB
        FINANCE, LTD.**
 **Balance
        S** **heets**
 **as
        at December 31, 200** **7
        and 2006**
 **(in
        U.S. dollars)**
 
 **2007**
              
              **2006**$
              
              $**Assets**Cash
              
              
              14,206,804
              
              
              90,256,712Temporary
                  investments
              
              
              74,267,364
              
              
              -Mortgage
                  loans (Note 4)
              
              
              646,520,945
              
              
              512,225,046Premium
                  paid on mortgage loans (Note 5)
              
              
              1,949,278
              
              
              3,759,545Interest
                  receivable
              
              
              1,962,561
              
              
              1,685,082Prepaid
                  expenses
              
              
              4,125
              
              
              4,125738,911,077
              
              
              607,930,510**Liabilities**Promissory
                  notes (Note 6)
              
              
              450,080,450
              
              
              380,522,681Due
                  to an affiliated company (Note 7)
              
              
              11,629,977
              
              
              8,800,848Due
                  to the parent company
              
              
              15,887
              
              
              12,500Discount
                  received on mortgage loans (Note 5)
              
              
              6,468,271
              
              
              4,042,931Liabilities
                  related to derivative financial instruments
              
              
              88,109,356
              
              
              47,094,398Deferred
                  transition gain on derivative financial instruments
              
              
              -
              
              
              1,323,856Accounts
                  payable
              
              
              26,000
              
              
              25,000556,329,941
              
              
              441,822,214**Shareholder’s
                  equity**Capital
                  stock (Note 8)
              
              
              12,000
              
              
              12,000Contributed
                  surplus
              
              
              132,335,558
              
              
              132,335,558Retained
                  earnings
              
              
              50,233,578
              
              
              33,760,738182,581,136
              
              
              166,108,296738,911,077
              
              
              607,930,510
  F-2
  **NB
        FINANCE, LTD.**
 **Statements
        of Cash F** **lows**
 **years
        ended December 31, 200** **7,
        2006 and 2005**
 **(in
        U.S. dollars)**
 
 **2007**
              
              **2006**
              
              **2005**$
              
              $
              
              **$****Cash
                  flows related to operating activities**Net
                  income
              
              
              15,148,985
              
              
              11,884,249
              
              
              4,010,926Items
                  not affecting cash resourcesAmortization
                  of the (discount received) or the premium paid on mortgage loans,
                  net
              
              
              (1,646,391
              )
              
              (55,375
              )
              
              510,494Amortization
                  of deferred transition gain on derivative financial
                  instruments
              
              
              -
              
              
              (1,216,914
              )
              
              (634,185
              )Foreign
                  exchange gain
              
              
              (97,232,256
              )
              
              (1,455,510
              )
              
              (20,234,501
              )Change
                  in fair value on derivative financial instruments
              
              
              41,014,958
              
              
              (42,882,497
              )
              
              (10,731,752
              )Changes
                  in non-cash operating working capital itemsInterest
                  receivable
              
              
              (277,479
              )
              
              319,535
              
              
              56,130Prepaid
                  expenses
              
              
              -
              
              
              2
              
              
              (2
              )Due
                  to an affiliated company
              
              
              2,829,129
              
              
              (879,289
              )
              
              205,777Accounts
                  payable
              
              
              1,000
              
              
              (41,173
              )
              
              46,173Due
                  to a parent company
              
              
              3,387
              
              
              -
              
              
              12,500(40,158,667
              )
              
              (34,326,972
              )
              
              (26,758,440
              )**Cash
                  flows related to financing activities**Issue
                  of promissory notes
              
              
              463,399,685
              
              
              174,603,983
              
              
              170,774,678Reimbursements
                  of promissory notes
              
              
              (393,841,916
              )
              
              (204,060,289
              )
              
              (170,701,502
              )69,557,769
              
              
              (29,456,306
              )
              
              73,176**Cash
                  flows related to investing activities**Increase
                  in mortgage loans
              
              
              (579,249,606
              )
              
              (218,254,979
              )
              
              (213,468,347
              )Repayments
                  of mortgage loans
              
              
              542,456,244
              
              
              294,327,945
              
              
              247,110,114Discount
                  (Premium) on mortgage loans
              
              
              5,611,716
              
              
              2,013,049
              
              
              (320,845
              )(31,181,646
              )
              
              78,086,015
              
              
              33,320,922Net
                  increase in cash and cash equivalents
              
              
              (1,782,544
              )
              
              14,302,737
              
              
              6,635,658Cash
                  and cash equivalents, beginning of year
              
              
              90,256,712
              
              
              75,953,975
              
              
              69,318,317**Cash
                  and cash equivalents, end of year**
              
              
              88,474,168
              
              
              90,256,712
              
              
              75,953,975Additional
                  cash flow informationInterest
                  paid
              
              
              28,485,427
              
              
              30,968,200
              
              
              34,093,118
 
 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, 2007 and 2006**
 **(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.**
              **Changes
                  in accounting policies**
  The
        following accounting policies were adopted during the year:
 
 *Financial
        instruments*
 
 On
        January 1, 2007, the Company retroactively adopted the standards set out
        in the
        new sections of the CICA Handbook relating to financial instruments: Section
        1530 *Comprehensive
        Income* ;
        Section
        3855, *Financial Instruments - Recognition and Measurement* ;
        and
        Section 3861 *Financial
        Instruments - Disclosure and Presentation.* The
        comparative figures for the fiscal year ended December 31, 2006 have not
        been
        restated, in accordance with specified transitional provisions. The Company
        proceeded with a classification of its financial instruments, as mentioned
        in
        Note 3, “Summary of significant accounting policies”.
 
 *Deferred
        transition*
 
 In
        accordance with Section 3855, *Financial
        Instruments - Recognition and Measurement,* the
        reversal of the deferred transition gain on derivative financial instruments
        of
        $1,323,856 was recorded as an adjustment to the opening balance of retained
        earnings. There is no impact to the accumulated other comprehensive income.
 
 *Embedded
        derivatives*
 
 The
        Company selected January 1, 2003 as the transition date for embedded
        derivatives. As at December 31, 2007, the Company did not have any embedded
        derivatives.
 
 These
        changes in accounting policies did not impact the Company’s financial statements
        as at December 31, 2006 and for the year then ended.
  **3.**
              **Summary
                  of significant accounting
                  policies**
  The
        financial statements are prepared in accordance with accounting principles
        generally accepted (“GAAP”) in Canada and are expressed in U.S.
        dollars.
  *Classification
        and measurement of financial instruments*
 
 The
        new
        accounting framework for financial instruments requires that all financial
        assets and liabilities be classified based on their characteristics, the
        administrative agent's intention, or the choice of category in certain
        circumstances. On and after January 1, 2007, when they are initially recognized,
        all financial assets are classified as held for trading, held to maturity,
        available for sale or loans and receivables, while financial liabilities
        are
        classified as held for trading or not held for trading.
  F-4
  **NB
        FINANCE, LTD.**
 **Notes
        to the Financial Statements**
 **years
        ended December 31, 2007 and 2006**
 **(in
        U.S. dollars)**
 
  **3.**
              **Summary
                  of significant accounting policies
                  (continued)**
  The
        Company has used the following classifications:
 
 Cash
              Held
                  for tradingTemporary
                  investments
              Available
                  for saleMortgage
                  loans, premium paid or discount received on Mortgage loans and
                  interest
                  receivable
              Loans
                  and receivablesPromissory
                  notes
              Not
                  held for tradingDue
                  to an affiliated company and to the parent company
              Not
                  held for tradingAccounts
                  payables
              Not
                  held for tradingLiabilities
                  related to derivative financial instruments
              Held
                  for trading
 
 *Held
        for trading*
 
 Held
        for
        trading financial assets or liabilities are measured at fair value at the
        balance sheet date. Fair value fluctuations as well as interest earned, interest
        accrued, gains and losses realized on disposal and unrealized gains and losses
        are recorded in the statement of income.
 
 *Available-for-sale*
 
 Available-for-sale
        financial assets are carried at fair value with unrealized gains and losses,
        if
        any, included in accumulated other comprehensive income until realized when
        the
        cumulative gain or loss is transferred to other revenue.
 
 *Cash
        and cash equivalents*
 
 Cash
        and
        cash equivalents include cash and temporary investments maturing within three
        months.
  *Mortgage
        loans and premium paid or discount received on mortgage loans*
 
 Mortgage
        loans are recorded at their principal amounts less allowances for credit
        losses.
        The premium paid or discount received on mortgage loans is amortized using
        the
        effective yield method on the residual term of mortgage pools.
 
 *Liabilities
        not held for trading*
 
 Liabilities
        not held for trading are recorded at amortized cost using the effective interest
        method and include all non-derivative financial liabilities.
  F-5
  **NB
        FINANCE, LTD.**
 **Notes
        to the Financial Statements**
 **years
        ended December 31, 2007 and 2006**
 **(in
        U.S. dollars)**
 
  **3.**
              **Summary
                  of significant accounting policies
                  (continued)**
  *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. The most important estimates are related to fair value
        of
        the mortgage loans, the promissory notes and the derivative financial
        instruments. 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 curr* *encies*
  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 uses cross currency swaps to manage the currency risk exposure of
        the
        mortgage loans. These derivative financial instruments do not qualify for
        hedge
        accounting and are carried at fair value as assets or liabilities with changes
        in fair value recorded in the statement of income. Fair value is determined
        using estimates. The valuation techniques used to make these estimates consider
        current market prices, the contractual prices of underlying instruments,
        the
        time value of money, yield curves and volatility factors. If necessary, fair
        value is adjusted to take market, model and credit risks into account, as
        well
        as the related costs.
 
 *Income
        taxes*
  The
        Company is not subject to any income taxes on the Bermuda income.
  *Transaction
        costs*
  Transaction
        costs related to financial assets and liabilities are expensed as
        incurred.
  **4.**
              **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 2008 to January
        2015. These loans bear interest at rates ranging from approximately 5.12%
        to
        8.42% with a weighted average rate of 6.00% per annum.
  F-6
  **NB
        FINANCE, LTD.**
 **Notes
        to the Financial Statements**
 **years
        ended December 31, 2007 and 2006**
 **(in
        U.S. dollars)**
 
  **4.**
              **Mortgage
                  loans (continued)**
  Cross
        currency swaps with the parent company convert the Canadian dollars exposure
        of
        the mortgage loans to U.S. dollars. These swaps are not eligible for hedge
        accounting.
  2007
              
              2006$
              
              $Mortgage
                  loans, beginning of year
              
              
              512,225,046
              
              
              586,807,311Acquisitions
              
              
              579,249,606
              
              
              218,254,979Principal
                  repayments
              
              
              (542,456,244
              )
              
              (294,327,945
              )Foreign
                  exchange difference
              
              
              97,502,537
              
              
              1,490,701Mortgage
                  loans, end of year
              
              
              646,520,945
              
              
              512,225,046
 
 The
        scheduled principal repayments are as follows:
 
 $
              
              
              
              $2008
              
              
              403,752,473
              
              
              2012
              
              
              33,845,7032009
              
              
              84,657,910
              
              
              2013
              
              
              8,980,0462010
              
              
              37,364,511
              
              
              2014
              
              
              4,375,4042011
              
              
              60,214,190
              
              
              2015
              
              
              13,330,708
 
 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.
  **5.**
              **Premium
                  paid or discount received on mortgage
                  loans**
  The
        premium paid or discount received is amortized using the effective yield
        method
        on the residual term of mortgages acquired. The amortization amounts to a
        revenue of $1,646,391 in 2007 (revenue of $55,375 in 2006 and expense of
        $510,494 in 2005).
  **6.**
              **Promissory
                  notes**
  The
        promissory notes are issued to NB Capital Corporation, a wholly-owned subsidiary
        of the parent company.
 
 2007
              
              2006$
              
              $Promissory
                  notes, interest rate ranging between 5.37% and 10.15%, repayable
                  by
                  monthly variable installments until January 2015
              
              
              450,080,450
              
              
              380,522,681
  F-7
  **NB
        FINANCE, LTD.**
 **Notes
        to the Financial Statements**
 **years
        ended December 31, 2007 and 2006**
 **(in
        U.S. dollars)**
 
  **6.**
              **Promissory
                  notes (continued)**
  The
        scheduled principal repayments for the next eight years are as
        follows:
 $
                
                
                
                $2008
                
                
                297,724,722
                
                
                2012
                
                
                19,264,5042009
                
                
                58,366,139
                
                
                2013
                
                
                5,753,3812010
                
                
                21,904,363
                
                
                2014
                
                
                2,803,2562011
                
                
                35,723,299
                
                
                2015
                
                
                8,540,786
  **7.**
              **Transactions
                  with affiliated
                  compan****ies**
  During
        the year, the Company incurred interest expenses to NB Capital Corporation
        in an
        amount of $28,611,321 ($30,546,845 in 2006 and $33,995,506 in
        2005).
 
 The
        amount due to an affiliated company as at December 31, 2007 and 2006
        represents interest and principal reimbursements due on the promissory notes
        to
        NB Capital Corporation.
 
 The
        Company received $3,704,248 ($3,190,346 in 2006 and $1,810,982 in 2005) in
        interest on bank accounts held with National Bank of Canada (International)
        Limited.
 
 The
        Company has an expense of $53,387 ($50,000 in 2006, $83,333 in 2005) in advisory
        fees to National Bank of Canada.
  **8.**
              **Capital
                  stock**
  Authorized12,000
                  common shares, $1 par value2007
              
              
              2006$
              
              
              $Issued
                  and fully paid12,000
                  common shares
              
              
              12,000
              
              
              12,000
  **9.**
              **Fair
                  value of financial instruments and risk
                  management**
  In
        the
        context of its day-to-day operations, the Company exposes itself to certain
        categories of risk, as credit, interest rate and currency risks.
 
 *Credit
        risk*
 
 Credit
        risk is the risk of financial loss as a result of default by a counterpart
        with
        respect to its obligations towards the Company. All transactions related
        to
        mortgage loans are done with the parent company.
  F-8
  **NB
        FINANCE, LTD.**
 **Notes
        to the Financial Statements**
 **years
        ended December 31, 2007 and 2006**
 **(in
        U.S. dollars)**
 
  **9.**
              **Fair value of financial instruments
                  and risk
                  management (continued)**
  *Interest
        rate risk*
 
 Interest
        rate risk corresponds to the potential impact of a change in interest rate
        on
        the Company’s earnings and return on share capital.
 
 *Currency
        risk*
 
 The
        company use cross currency swaps to manage the currency risk.
 
 The
        cross
        currency swaps have maturity dates ranging from February 2008 to January
        2015
        and exchange
        rates ranging from ($C/$US) 1.0053 to 1.6118.
 
 The
        following table presents the notional amount of the cross currency swap
        contracts according to their maturity date:
 
 Notional Amount$2008
              
              
              253,748,8832009
              
              
              155,868,1652011
              
              
              40,035,7862012
              
              
              69,511,7692015
              
              
              43,435,959
 
 *Fair
        value*
 
 The
        following table presents the fair value of balance sheet financial instruments,
        except for instruments whose fair value is estimated to be equal to their
        carrying value. This fair value is determined using the valuation methods
        and
        assumptions described below.
 
 Fair
        value represents the amount at which a financial instrument could be exchanged
        in an arm’s length transaction between willing parties. The fair values
        presented are estimates derived using present value or other valuation
        techniques and may not be indicative of the net realizable value.
 
 **2007**
              
              **2006**Carrying Value
              
              Fair Value
              
              Carrying Value
              
              Fair Value$
              
              $
              
              $
              
              $**Assets**Mortgages
                  loans
              
              
              646,520,945
              
              
              647,408,156
              
              
              512,225,046
              
              
              522,734,732**Liabilities**Promissory
                  notes
              
              
              (450,080,450
              )
              
              (456,383,813
              )
              
              (380,522,681
              )
              
              (388,258,533
              )
  F-9
 **NB
          FINANCE, LTD.**
 **Notes
          to the Financial Statements**
 **years
          ended December 31, 2007 and 2006**
 **(in
          U.S. dollars)**
 **10.**
              **Reconciliation
                  of Canadian and United States
                  GAAP**
 
 The
        financial statements of the Company are prepared in accordance with Canadian
        GAAP. The principal differences resulting from the application of U.S. GAAP
        on
        net income are presented below.
 
 Starting
        January 1, 2004, under Canadian GAAP, derivative financial instruments that
        do
        not qualify for hedge accounting are carried at fair value on the balance
        sheet
        with changes in fair value recorded in income. Any resulting transitional
        gain
        (loss) is deferred and recognized in income at the same time as revenues
        related
        to the hedged item until January 1, 2007 at the application of Section 3855
        of
        CICA Handbook as described in note 2. According to U.S. GAAP, derivative
        financial instruments that do not qualify for hedge accounting are carried
        at
        fair value on the balance sheet with changes in fair value recorded in earnings.
        The following table reconciles net income (loss) according to Canadian GAAP
        with
        net income (loss) according to U.S. GAAP.
 
 **2007**
              
              **2006**
              
              **2005****$**
              
              **$**
              
              **$****Net
                  income (loss) per Canadian GAAP**
              
              
              **15,148,984**
              
              
              **11,884,249**
              
              
              **4,010,926**Amortization
                  of transitional gain
              
              
              **-**
              
              
              (1,216,914
              )
              
              (634,185
              )**Net
                  income (loss) per U.S. GAAP**
              
              
              **15,148,984**
              
              
              **10,667,335**
              
              
              **3,376,741****Other
                  comprehensive income**
              
              
              **-**
              
              
              **-**
              
              
              **-****Comprehensive
                  income**
              
              
              **15,148,984**
              
              
              **10,667,335**
              
              
              **3,376,741**
 
 The
        following table reconciles shareholder’s equity according to Canadian GAAP with
        shareholder’s equity according to U.S. GAAP.
 
 **2007**
              
              **2006**
              
              **2005****$**
              
              **$**
              
              **$****Shareholder’s
                  equity per Canadian GAAP**
              
              
              **182,581,136**
              
              
              **166,108,296**
              
              
              **154,224,047**Transition
                  gain on derivative financial instruments
              
              
              -
              
              
              1,323,856
              
              
              2,540,770**Shareholder’s
                  equity per U.S. GAAP**
              
              
              **182,581,136**
              
              
              **167,432,152**
              
              
              **156,764,817**
  F-10
  **NB
        FINANCE, LTD.**
 **Notes
        to the Financial Statements**
 **years
        ended December 31, 2007 and 2006**
 **(in
        U.S. dollars)**
 
  **11.**
                **Recent****Accounting Policies Pending
                    Adoption**
 
 In
        December 2006, the CICA published three new accounting standards: Section
        1535
        Capital Disclosures; Section 3862 Financial Instruments – Disclosures; and
        Section 3863 Financial Instruments – Presentation. These new standards will
        apply to the Company effective January 1, 2008.
  Section
        1535 establishes disclosure requirements concerning:
  ·
              an
                  entity’s objectives, policies and processes for managing
                  capital;
  ·
              quantitative
                  data about what the entity regards as
                  capital;
  ·
              whether
                  the entity has complied with any capital requirements;
                  and
  ·
              the
                  consequences of non-compliance with such capital
                  requirements.
  Sections
        3862 and 3863 consist of a comprehensive series of disclosure requirements
        and
        presentation rules applicable to financial instruments. They revise and enhance
        the disclosure requirements set out in Section 3861 Financial Instruments –
Disclosure and Presentation and carry forward unchanged the presentation
        requirements of Section 3861.
  Section
        3862 establishes disclosure requirements that enable users of financial
        statements to evaluate:
  ·
              the
                  significance of financial instruments for an entity’s financial position
                  and performance; and
  ·
              the
                  nature and extent of risks arising from financial instruments to
                  which the
                  entity is exposed and how the entity manages those
                  risks.
 F-11


**Dividend
      policy**





The
      Company does not currently pay dividends and does not foresee paying dividends
      in the near future. However, should dividends be paid, they would be paid to
      the
      Bank, its sole shareholder.





**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**





No
      trading market exists with respect to the securities of the Company. All Common
      Stock of the Company is held by the Bank.





ITEM
      10:
      ADDITIONAL INFORMATION





**Capital
      stock**





Authorized12,000
                common shares, $1 par value2007
            
            2006$
            
            $Issued
                and fully paid12,000
                common shares
            
            
            12,000
            
            
            12,000




**Memorandum
      of Association**





NB
      Finance's Memorandum of Association and Bye-laws both became operational on
      September 3, 1997 and are previously filed on the S-4/F-9 Registration
      Statement.





**Material
      Contracts**





See
      Item
      4: INFORMATION ON THE COMPANY





**Exchange
      Controls and other Limitations Affecting Security Holders**





There
      are
      no governmental laws, decrees or regulations in Bermuda or Canada that restrict
      the export or import of capital or that 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 limits the right of nonresident or foreign owners to
      hold or vote securities.





**Taxation**





United
      States security holders are not subject to any taxes under existing laws and
      regulations of Bermuda with respect to the Depository Shares of NB Capital
      Corporation. No tax treaty exists between the United States and
      Bermuda.




14




ITEM
      10:
      ADDITIONAL INFORMATION (continued)




**Documents
      on Display**





You
      may
      read or copy documents referred to in this annual report on Form 20-F that
      have
      been filed with the SEC at the SEC’s public reference room at 100 F. Street,
      N.E., Washington, D.C. 20549. The SEC also maintains a web site at http://www.sec.gov
      that contains reports and other information regarding registrants that file
      electronically with the SEC. NB Finance’s annual reports and some of the other
      information submitted to the SEC may be accessed through this web site.




ITEM
      11:
      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





In
      the
      context of its day-to-day operations, the Company exposes itself to certain
      categories of risk: (a) credit risk is the risk of financial loss as a result
      of
      default by a counterpart with respect to its obligations towards the Company.
      All transactions related to Mortgage Loans are done with the parent company,
      (b)
      interest rate risk corresponds to the potential impact of a change in interest
      rate on the Company’s earnings and return on share capital and (c) currency risk
      is the risk of fluctuations in currency exchange rates. The Company manages
      the
      currency risk using cross currency swaps.





Swaps
      are
      specific transactions in which two parties agree to exchange cash flows. The
      Company uses cross currency swaps for transactions in which counterparties
      exchange fixed rate interest payments and principal payments in U.S. dollar
      vis-à-vis Canadian dollar. Those swaps enable full payments because they act as
      a hedge against fluctuations in currency exchange rates.




ITEM
      12:
      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES




Not
      Applicable.




15




**PART
      II**





ITEM
      13:
      DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES





None





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





None





ITEM
      15:
      CONTROLS AND PROCEDURES





Based
      on
      their evaluation as of the end of the period covered by 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-15(e) under
      the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of
      such date, are effective to ensure that information required to be disclosed
      by
      the Company in reports that it files or furnishes under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in the Securities and Exchange Commission’s rules and forms.





The
      management of the Company is responsible for establishing and maintaining
      adequate internal control over financial reporting, as defined in Rule 13a-15(f)
      under the Exchange Act. Internal control over financial reporting is a process
      designed by, or under the supervision of, the Company’s principal executive and
      principal financial officers to provide reasonable assurance regarding the
      reliability of the Company’s financial reporting for external purposes in
      accordance with generally accepted accounting principles. Internal control
      over
      financial reporting includes maintaining records that in reasonable detail
      accurately and fairly reflect the Company’s transactions and dispositions of the
      assets of the Company; provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of the Company’s financial
      statements in accordance with generally accepted accounting principles; provide
      reasonable assurance that receipts and expenditures are made in accordance
      with  authorizations
      of management and the directors of the Company; and provide  reasonable
      assurance that unauthorized acquisition, use or disposition of the Company’s
      assets that could have a material effect on the Company’s financial statements
      would be prevented or detected on a timely basis. Because of its inherent
      limitations, internal control over financial reporting may not provide absolute
      assurance that a misstatement of the Company’s financial statements would be
      prevented or detected.




The
      management of the Company, including the President and Chief Financial Officer,
      conducted an evaluation of the effectiveness of the Company’s internal control
      over financial reporting based on criteria established in Internal Control
—
Integrated Framework, issued by the Committee of Sponsoring Organizations of
      the
      Treadway Commission. This evaluation included review of the documentation of
      controls, evaluation of the design effectiveness of controls, testing of the
      operating effectiveness of controls and a conclusion on this evaluation. Based
      on this evaluation, management concluded that the Company’s internal control
      over financial reporting was effective as of December 31, 2007.





There
      were no changes in our internal control over financial reporting (as defined
      in
      Rule 13a-15(f) under the Securities Exchange Act of 1934) during the period
      covered by this annual report that materially affected, or are reasonably likely
      to materially affect, our internal control over financial reporting.




16




ITEM
      15:
      CONTROLS AND PROCEDURES (continued)





This
      annual report on Form 20-F does not include an attestation report of the
      Company’s registered public accounting firm regarding internal control over
      financial reporting due to SEC rules that permit the Company to provide only
      management’s report in this annual report on Form 20-F.





ITEM
      16A:
      AUDIT COMMITTEE FINANCIAL EXPERT





The
      Company does not have an audit committee. The entire Board of Directors performs
      all functions ordinarily performed by an audit committee. The Board of Directors
      has reviewed the definition of “audit committee financial expert” under Item 16A
      of Form 20-F and determined that each of Donna Goral and Martin Ouellet
      satisfies the criteria for an audit committee financial expert. The SEC has
      indicated that the designation of Ms. Goral and Mr. Ouellet as audit committee
      financial experts does not make such persons an “expert” for any purpose, impose
      any duties, obligations or liability on such persons that are greater than
      those
      imposed on members of the Board of Directors who do not carry this designation
      or affect the duties, obligations or liability of any other member of the Board
      of Directors.




ITEM
      16B:
      CODE OF BUSINESS CONDUCT AND ETHICS





On
      December 23, 2003, the Company adopted a Code of Business Conduct and Ethics
      (the “Code”) that applies to all of the Company’s directors and officers (as
      defined in the Code). A revised version of the Code was put in place effective
      June 18, 2008 (included as Exhibit 11.1 to this annual report on Form 20-F),
      in
      order to update one of the persons to whom any questions regarding the Code
      can
      be forwarded, as well as other minor changes to the wording of the
      Code .





ITEM
      16C:
      PRINCIPAL ACCOUNTANT FEES AND SERVICES





**Audit
      Fees**





Deloitte
      & Touche LLP is the Company’s independent registered public accountant.
      Deloitte & Touche LLP’s aggregate fees billed to the Company for audit
      services during the 2007 fiscal year were $26,000 as compared to $25,000 for
      2006. The engagement of Deloitte & Touche LLP for the 2007 fiscal year and
      the scope of audit were pre-approved by our Board of Directors.





**Audit-Related
      Fees**





There
      were no fees billed for audit-related services for the fiscal years 2007 or
      2006.





**Tax
      Fees**





There
      were no tax fees for the fiscal years 2007 or 2006.





The
      Company’s Board of Directors pre-approves all services provided to the Company
      by the external auditor before the external auditor is engaged by the Company
      to
      render such services. The Board of Directors evidences its pre-approval by
      resolution of the Board of Directors.




ITEM
      16D:
      EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES





Not
      applicable.





ITEM
      16E:
      PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS





Not
      applicable.




17




**PART
      III**





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. The Financial Statements are contained on pages F-1 through
      F-11
      of this annual report on Form 20-F.





ITEM
      18:
      FINANCIAL STATEMENTS





See
      Item
      17.





ITEM
      19:
      EXHIBITS





The
      following exhibits are filed as part of this annual report on Form
      20-F:





**Exhibit Number**
            
            **Description**1.1
            
            Memorandum
                of Association of NB Finance, Ltd.*1.2
            
            By-laws
                of NB Finance, Ltd.*10.3
            
            Loan
                Agreement dated as of September 3, 1997 between NB Finance, Ltd.
                and NB
                Capital Corporation*10.5
            
            Deed
                of Sale of Mortgage Loans dated September 3, 1997 between National
                Bank of
                Canada and NB Finance, Ltd.*10.6
            
            Mortgage
                Loan Assignment Agreement dated September 3, 1997 among National
                Bank of
                Canada, NB Capital Corporation and NB Finance, Ltd.*10.7
            
            Promissory
                Notes representing the sixteen hypothecation loans executed by NB
                Finance,
                Ltd. in favor of NB Capital Corporation*10.10
            
            Loan
                Agreement dated as of December 4, 1998 between NB Finance, Ltd. and
                NB
                Capital Corporation*10.12
            
            Deed
                of Sale of Mortgage Loans dated December 4, 1998 between National
                Bank of
                Canada and NB Finance, Ltd.*10.13(i)
            
            Mortgage
                Loan Assignment Agreement dated as of December 4, 1998 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.13(ii)
            
            Mortgage
                Loan Assignment Agreement dated as of December 4, 1998 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.14(i)
            
            Promissory
                Note representing $25,836,597.23 executed by NB Finance, Ltd. in
                favor of
                NB Capital Corporation*10.14(ii)
            
            Promissory
                Note representing $29,880,126.51 executed by NB Finance, Ltd. in
                favor of
                NB Capital Corporation*




18




10.15
            
            Mortgage
                Loan Assignment Agreement dated as of September 7, 1999 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.16
            
            Promissory
                Notes representing $85,989,203.22 executed by NB Finance, Ltd. in
                favor of
                NB Capital Corporation*10.17
            
            Mortgage
                Loan Assignment Agreement dated as of April 14, 2000 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.18
            
            Promissory
                Notes representing $98,836,341.23 executed by NB Finance, Ltd. in
                favor of
                NB Capital Corporation*10.19
            
            Mortgage
                Loan Assignment Agreement dated as of September 28, 2000 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.20
            
            Promissory
                Notes representing $67,323,437.74 executed by NB Finance, Ltd. in
                favor of
                NB Capital Corporation*10.21
            
            Mortgage
                Loan Assignment Agreement dated as of January 30, 2001 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.22
            
            Promissory
                Notes representing $107,179,964.89 executed by NB Finance, Ltd. in
                favor
                of NB Capital Corporation*10.23
            
            Mortgage
                Loan Assignment Agreement dated as of June 12, 2001 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.24
            
            Promissory
                Notes representing $121,357,226.22 executed by NB Finance, Ltd. in
                favor
                of NB Capital Corporation*10.25
            
            Mortgage
                Loan Assignment Agreement dated as of September 24, 2001 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.26
            
            Promissory
                Notes representing a total of $55,963,732.07 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation*10.27
            
            Mortgage
                Loan Assignment Agreements dated as of January 29, 2002 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.28
            
            Promissory
                Notes representing a total of $71,866,079.87 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation*10.29
            
            Mortgage
                Loan Assignment Agreements dated as of June 20, 2002 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.30
            
            Promissory
                Notes representing a total of $64,221,362.98 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation*10.31
            
            Mortgage
                Loan Assignment Agreements dated as of December 16, 2002 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*




19




10.32
            
            Promissory
                Notes representing a total of $52,054,168.88 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation*10.33
            
            Promissory
                Notes representing a total of $70,420,135.45 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation*10.34
            
            Mortgage
                Loan Assignment Agreements dated as of May 27, 2003 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.35
            
            Promissory
                Notes representing a total of $106,552,720.44 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation*10.36
            
            Mortgage
                Loan Assignment Agreements dated as of October 21, 2003 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.37
            
            Promissory
                Notes representing a total of $76,053,456.93 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation*10.38
            
            Mortgage
                Loan Assignment Agreements dated as of April 28, 2004 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.39
            
            Promissory
                Notes representing a total of $94,559,444.49 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation*10.40
            
            Mortgage
                Loan Assignment Agreements dated as of August 26, 2004 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of
                Canada*10.41
            
            Promissory
                Notes representing a total of $73,037,930.00 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation *10.42
            
            Mortgage
                Loan Assignment Agreements dated as of February 24, 2005 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of Canada
                *10.43
            
            Promissory
                Note representing $97,736,747.47 executed by NB Finance, Ltd. in
                favor of
                NB Capital Corporation *10.44
            
            Mortgage
                Loan Assignment Agreement dated as of August 29, 2005 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of Canada
                *10.45
            
            Promissory
                Notes representing a total of $82,898,199.20 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation *10.46
            
            Mortgage
                Loan Assignment Agreements dated as of February 22, 2006 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of Canada
                *10.47
            
            Promissory
                Notes representing a total of $91,705,784.05 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation *10.48
            
            Mortgage
                Loan Assignment Agreements dated as of August 17, 2006 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of Canada
                *10.49
            
            Promissory
                Notes representing a total of $118,362,791.25 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation(1)




20




10.50
            
            Mortgage
                Loan Assignment Agreements dated as of February 22, 2007 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of Canada(2)10.51
            
            Promissory
                Note representing a total of $72,935,607.29 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation(3)10.52
            
            Mortgage
                Loan Assignment Agreements dated as of April 25, 2007 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of Canada(4)10.53
            
            Promissory
                Notes representing a total of $156,493,641.44 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation(5)10.54
            
            Mortgage
                Loan Assignment Agreements dated as of August 27, 2007 among NB Finance,
                Ltd., NB Capital Corporation and National Bank of Canada(6)10.55
            
            Promissory
                Notes representing a total of $33,517,318.32 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation(7)10.56
            
            Mortgage
                Loan Assignment Agreements dated as of September 26, 2007 among NB
                Finance, Ltd., NB Capital Corporation and National Bank of Canada(8)10.57
            
            Promissory
                Notes representing a total of $82,090,326.44 executed by NB Finance,
                Ltd.
                in favor of NB Capital Corporation(9)10.58
            
            Mortgage
                Loan Assignment Agreements dated as of December 18, 2007 among NB
                Finance,
                Ltd., NB Capital Corporation and National Bank of Canada(10)11.1
            
            NB
                Finance, Ltd. Code of Business Conduct and Ethics **12.1
            
            President’s
                certification pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002**12.2
            
            Chief
                Financial Officer’s certification pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002**13.1
            
            Written
                Statement of Chairman and President Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)**13.2
            
            Written
                Statement of Chief Financial Officer Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
                1350)**




*
            
            As
                previously filed.**
            
            As
                filed herewith.(1)
            
            Incorporated
                herein by reference to Exhibit 10.51 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31, 2008.(2)
            
            Incorporated
                herein by reference to Exhibit 10.50 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31, 2008.(3)
            
            Incorporated
                herein by reference to Exhibit 10.53 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31, 2008.(4)
            
            Incorporated
                herein by reference to Exhibit 10.52 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31,
                2008.


(5)
            
            Incorporated
                herein by reference to Exhibit 10.55 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31, 2008.(6)
            
            Incorporated
                herein by reference to Exhibit 10.54 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31, 2008.(7)
            
            Incorporated
                herein by reference to Exhibit 10.57 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31, 2008.(8)
            
            Incorporated
                herein by reference to Exhibit 10.56 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31, 2008.(9)
            
            Incorporated
                herein by reference to Exhibit 10.59 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31, 2008.(10)
            
            Incorporated
                herein by reference to Exhibit 10.58 to Form 10-K filed with the
                SEC by NB
                Capital Corporation on March 31,
                2008.




21




**SIGNATURE**


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




NB
                FINANCE, LTD.By:Name:
                Martin OuelletTitle:
                President





Dated:
      June 18, 2008




22