Securities Law & Instruments


MRRS -- Issuer is a related and connected issuerof the sole agent -- issuer proposing distribution by prospectusof notes providing a return representing the return of a basketof securities managed by the agent -- complete relief from independentunderwriter requirement granted as agent has no input in thepricing of the notes and notes are clearly a house product ofthe issuer marketed exclusively to the existing clients of theissuer.

National Instruments Cited

National Instrument 33-105 -- Underwriting Conflictsss. 2.1 and 5.1.














WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker")in each of British Columbia, Alberta, Ontario, Québec,New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland(collectively, the "Jurisdictions") has receivedan application from National Bank Financial Inc. ("NBF")and National Bank of Canada (the "Issuer")(collectively, the "Filer") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation")that the requirement contained in the Legislation regardingacting as an underwriter in connection with a distribution ofsecurities of an issuer made by means of a prospectus wherethe issuer is a "related issuer" of the registrant(the "Independent Underwriter Requirements"),shall not apply to NBF in respect of the proposed distributions(the "Offerings") of an aggregate amount ofup to $500,000,000 of NBC Ex-Tra Total Return Notes (the "Notes")of the Issuer to be made under a short form shelf prospectus(the "Prospectus") and prospectus supplements(the "Prospectus Supplements") expected tobe filed with the Decision Maker in each of the Jurisdictions;

AND WHEREAS under the Mutual RelianceSystem for Exemptive Relief Applications (the "System"),the Commission des valeurs mobilières du Québecis the principal regulator for this application;

AND WHEREAS NBF has represented to theDecision Makers that:

1. The Issuer is a bank governed by the BankAct (Canada). The Issuer's head office and principal placeof business is located at 600 de la Gauchetière StreetWest, Montreal, Québec, H3B 4L2.

2. The Issuer is a "reporting issuer"or the equivalent not in default under the Legislation ofall of the provinces of Canada.

3. NBF is registered as an unrestricted dealerunder the Legislation of each of the Jurisdictions and hasits head office and principal place of business in Québec.

4. NBF is a wholly-owned subsidiary of theIssuer.

5. NBF intends to act as exclusive agent inrespect of the Offerings.

6. The proposed offering will consist of anaggregate principal amount of $500,000,000 of Notes, issuablein series, including Notes already issued. The Notes willnot bear interest. The return on the Notes will be based onthe increase or decrease in the Index Value between the issuedate and the maturity date or, as the case may be, betweenthe issue date and the redemption date.

7. On the specified maturity date, each holderof Notes of a series will be entitled to receive an amountequal to the Index Value (the "Index Value") inrespect of each Note held by such Noteholder. Until maturity,the Index Value will be calculated weekly by reference tothe return of the net asset value per unit of the Bank's External-TradersProgram (the "Program") converted from US dollarsto the specified currency.

8. The Program is a proprietary investmentstrategy managed by the Bank for its own funds and those ofoutside parties. The goal of the Program is to efficientlydeploy capital among an optimal number of external highly-specializedtrading advisors ("Trading Advisors") to maximizerisk-adjusted returns through diversification and trader selection.Capital of the Notes will not be guaranteed.

9. The proposed offering has been structuredby the Issuer and NBF in order to provide investors' accessto the Program. Holders of Notes would have no interest inthe assets of the Program, but an entitlement under the Notes,enforceable against the Issuer, the value of which will bedetermined by the performance of the Program.

10. The Notes issued on the closing date underany Prospectus Supplement will be sold at a price per Noteequal to the Index Value of the Note at that date.

11. The net asset value ("NAV")of the Program is the market value (both realized and unrealized)based on the closing prices as determined by the Program Manager,or any other price the Program Manager believes to be reliableand representative of the market value of all cash and moneymarket instruments, of all open positions and commoditiesinterest and all other assets held in the Program, minus allapplicable liabilities of the Program computed daily in USdollars. The NAV per Unit is the NAV of the Program dividedby the number of units then outstanding at the correspondingdate.

12. Expenses borne by the Program and paidfrom assets will include: management and incentive fees ofthe Trading Advisors, brokerage fees, clearing fees, exchangefees, audit fees and borrowing costs. In general, the Programwill pay to a Trading Advisor, out of the assets of the Program,a base fee of 1% of the allocated capital to such TradingAdvisor and incentive fees of around 20% on the net profitrealized and unrealized. Incentive fees are calculated foreach Trading Advisor on a cumulative basis and, in case oflosses, are not payable to such Trading Advisor until allprior net losses are recouped. In some instances, the returnmust exceed a certain benchmark before becoming payable. Thesefees and expenses will reduce the NAV per Unit and will thereforebe reflected in the Index Value.

13. The Index Value will be reduced by a percentageper annum representing the Management Fee and the ServiceFee at the end of each Calculation Period (the applicablerate will be prorated by the number of days in the CalculationPeriod). This reduction will reflect the Management Fee payablemonthly that the Bank is entitled to receive to manage theProgram and the Service Fee payable monthly by the Bank toinvestment advisors on record for their ongoing services totheir clients. This Service Fee will be payable to each investmentadvisor on record on the last Business Day of the month forongoing services to their clients equal to a percentage perannum of the average value of the Notes held by its clients(excluding Notes issued during that month) payable monthlyon the 15th day of the following month. The Service Fee willnot be payable on Notes redeemed during the month. The specificManagement Fee and Service Fee payable will be set forth inthe relevant Prospectus Supplement.

14. The issue price of each Offering, alongwith other information regarding each issue of Notes, includingthe aggregate principal amount of Notes being offered, thespecified currency, the closing date, the issue price, thematurity date, the management fee, the service fee, the proceedsto the Bank and the Agent's remuneration will be set forthin the Prospectus Supplement that will accompany the Prospectus.

15. Since NBF is a wholly-owned subsidiaryof the Issuer, the Issuer is a related issuer to NBF underthe definition of "related issuer" under the Legislation.

16. In Québec, under decision 2003-C-0047and in all other jurisdictions under National Instrument No.33-105 ("NI 33-105"), subject to certainexceptions, a registrant may not act as an underwriter oragent in a distribution of securities of a related issuerunless, among other things, an independent underwriter receivesa certain portion of the total agents' fees.

17. Because of the nature of the Notes, NBFwill have no input in the pricing of the Notes. As indicatedabove, the Notes will be initially priced at the Index Valueof the Notes on the first closing date. Thereafter, the priceof issue of the Notes will be equal to the Index Value whichwill be calculated under a formula, as disclosed in the Prospectus.

18. An independent auditor has been retainedon behalf of Note holders to audit, on a semi-annual basis,the financial statements of the Program, the NAV per Unitand the Index Value.

19. NBF as agent will not receive any benefitin connection with the Offerings other than the fee payableby the Issuer to NBF as agent.

20. The Prospectus contains the informationspecified in Appendix "C" of NI 33-105 on the basisthat the Issuer is a "related issuer" of NBF, includingdisclosure concerning the nature of the relationship withthe Issuer (the "Disclosure Requirements").

21. The Issuer is not and it is not expectedthat the Issuer could be in financial difficulty.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that the Issuer and NBF are exempt from theIndependent Underwriter Requirements in connection with theOfferings, subject to compliance with the Disclosure Requirements.

June 17, 2003.

"Guy Lemoine"
"Mark M. Rosenstein"