Press Releases

Highlights from the National Bank Management Proxy Circular in View of the Annual Meeting of Shareholders

Montreal, 25 January 2008 -

National Bank today published the notice for its Annual Meeting of Common Shareholders to be held on February 29 and its Management Proxy Circular.

As is the case every year, the Management Proxy Circular presents the breakdown of management compensation and the proposals submitted by shareholders. This year’s Management Proxy Circular also provides information concerning the August purchase of asset-backed commercial paper (ABCP).

Executive compensation

The Management Proxy Circular contains the Human Resources Committee’s detailed report on executive compensation.  The table accompanying the report shows that no short-term bonus was granted to the President and Chief Executive Officer and the Chief Operating Officer – Personal and Commercial Banking and Wealth Management for the year ended October 31, 2007, as financial results fell short of the objectives set at the beginning of the year.

The cash compensation of the President and Chief Executive Officer, whose appointment took effect on June 1, 2007, comprised a base salary of $675,074 during the year.

The President and Chief Executive Officer was also eligible for the mid-term and long-term compensation program based on growth in the market price of the Bank’s shares. Consistent with practices in the reference market, his mid-term compensation comprised 22,284 stock units with a value of $1,200,000 on the award date, the vesting of which is subject to restrictions. They will only vest after three years if the incumbent is still in his position and their value will be based on the market price of the Bank’s shares at that time. His long-term compensation consisted of 196,464 stock options based on an exercise price of $53.85 per share.

The estimated value of the President and Chief Executive Officer’s cash and stock-based compensation totalled $3,875,074 for fiscal 2007, as compared with $6,542,342 earned in his former position during fiscal 2006.

The former President and Chief Executive Officer received a short-term bonus when he left the Bank on May 31, 2007. Similarly, the two Co-Presidents and Co-Chief Executive Officers of National Bank Financial were entitled to a bonus after the first six months of the fiscal year because, at the time, their variable compensation was established semi-annually; they were not entitled to any bonus for the second half of the year.

Information on the transaction to purchase ABCP

The Management Proxy Circular discusses a “Material Transaction” as defined in the Canadian Securities Administrators’ rules, referring to the Bank’s decision to acquire, at 100% of the acquisition cost plus accrued interest, all ABCP held in the public mutual funds and pooled funds of subsidiaries of the Bank as well as all ABCP directly or indirectly held by its individual retail clients and by corporate clients with total holdings of $2 million or less in ABCP that were not considered accredited investors under regulations. As a result of this decision, the Bank purchased $2.1 billion in ABCP.

To handle this matter, the Board set up a committee made up exclusively of independent directors who had no interest in the ABCP and the Transaction. The Management Proxy Circular states: “In most cases, the informed persons had ABCP holdings in mutual funds. These persons benefited from the Transaction to the same extent and on the same conditions as other clients of the Bank affected by this Transaction. Each of such persons who is also a Board member declared his or her interest at the first meeting of the Board or of one of its committees which he or she attended and during which the draft Transaction was examined. None of these persons took part in the deliberations of the Board or its committees concerning the Transaction. On the recommendation of the Independent Committee, the Transaction was unanimously approved by the Board members, excluding the directors who had declared an interest in the Transaction.”

André Caillé, Chair of the Independent Committee, gave the following explanation for the Committee’s approach: “Directors and officers of the Bank holding ABCP had to be included in the transaction to purchase the ABCP held by individual retail clients. They, too, are clients who entrust the Bank with their savings. They could not be treated differently from other retail clients and penalized for doing business with their Bank.”

The Management Proxy Circular states that 48 “informed” persons held $7,829,720 of the ABCP that was purchased, or 0.4% of the total amount. Of that number, five members of the Board of Directors, three members of the Office of the President and eight Senior Vice-Presidents directly or indirectly held $7,125,689. The other 32 officers held ABCP totalling $704,031. 

Another member of the Board who directly or indirectly held ABCP was not covered by the Transaction because his ABCP holdings did not fall within the established parameters for the purchase.

Mr. Caillé also added that after the purchase “the Board, on the recommendation of the Independent Committee, arranged with each of the members of the Office of the President with an interest in the ABCP to have their personal investments in the purchased ABCP placed in trust. By proceeding in this manner, the Independent Committee and the Board were able to work with senior management on the ABCP issue, without any appearance of conflict of interest, until the matter was resolved.”

The members of the Office of the President who held ABCP were Louis Vachon, President and Chief Executive Officer, Ricardo Pascoe, Co-President and Co-Chief Executive Officer of National Bank Financial, and Michel Tremblay, Chief Operating Officer – Personal and Commercial Banking and Wealth Management, who has since left the Bank.

“The Independent Committee lauds the actions of the President and Chief Executive Officer and his colleagues, which were taken in the interest of the Bank,” Mr. Caillé concluded.

These decisions were approved by the Board on the recommendation of the Independent Committee.

As noted in the Management Proxy Circular, “the decisive action taken by the Bank to relieve individual clients from uncertainties related to this market by purchasing the ABCP they were holding, and its assessment of the impairment in value of its ABCP portfolio were well received by the market. This event confirmed that the Bank is a diversified, profitable and financially solid company.”

Shareholder proposals

The Management Proxy Circular presents 20 shareholder proposals: 10 from one shareholder and nine from the Mouvement d’éducation et de défense des actionnaires.

The Management Proxy Circular is available on the Bank’s website at www.nbc.ca/investorrelations/.

About National Bank of Canada
National Bank of Canada is an integrated group which provides comprehensive financial services to consumers, small and medium-sized enterprises and large corporations in its core market, while offering specialized services to its clients elsewhere in the world. The National Bank offers a full array of banking services, including retail, corporate and investment banking. It is an active player on international capital markets and, through its subsidiaries, is involved in securities brokerage, insurance and wealth management as well as mutual fund and retirement plan management. National Bank has more than $113 billion in assets and, together with its subsidiaries, employs 16,863 people. The Bank’s securities are listed on the Toronto Stock Exchange (NA:TSX). For more information, visit the Bank’s website at www.nbc.ca.

Information (The telephone number provided below is for the exclusive use of journalists and other media representatives):

Denis Dubé
Senior Manager - Public Relations
National Bank of Canada
Tel.: 514-394-8644