Annual Management Report of Fund Performance

Statutory Document 2007 Annual Management Report of Fund Performance NexGen Financial Limited Partnership Mutual Funds www.nexgenfinancial.ca

The Annual Management Report of Fund Performance (MRFP) contains financial highlights which should be read in conjunction with the Annual Financial Statements of the Fund. If the MRFP is not accompanied by the Annual Financial Statements, you may obtain a copy at your request, and at no cost, by calling us toll free at 1-866-378-7119, by writing to us at NexGen Financial Limited Partnership, 36 Toronto Street, Toronto, ON., M5C 2C5, or by visiting our website at www.nexgenfinancial.ca or SEDAR at www.sedar.com. Securityholders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. A NOTE ON FORWARD-LOOKING STATEMENTS This report may contain forward-looking statements about the Fund, including its strategy, expected performance and conditions. Forward-looking statements are statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, plans, believes, estimates or negative versions thereof and similar expressions. In addition, any statement that may be concerning future performance, strategies or prospects, and possible future Fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risk, uncertainties and assumptions about the Fund and economic factors. Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could contribute to these digressions, including, but not limited to, general economic, political and market factors, interest and foreign exchange rates, capital markets, business competition, technological changes, changes in government regulations, unexpected judicial or regulatory proceedings and catastrophic events. We stress that the above-mentioned list is not exhaustive. We encourage you to consider these and other factors carefully before making any investment decisions and we urge you to avoid placing undue reliance on forward-looking statements. Further, you should be aware of the fact that the Fund has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise.

Management Discussion of Fund Performance Investment Objective and Strategies The fundamental investment objective of the Fund is long-term capital growth from a diversified portfolio of North American stocks. Individual stocks are chosen using disciplined fundamental analysis and screening of companies. Selective Asset Management Inc. acts as sub-advisor to the Fund. Risk Throughout 2007, substantial cash reserves were held in the Fund as long-term interest rates rose and the U.S. economy appeared to be slowing. As a result of the substantial cash reserves, the overall level of risk associated with a shareholder s investment in the Fund was less than if the Fund had been fully invested. The sub-advisor believes these changes are of a short-term nature and do not affect the suitability or risk tolerance as outlined in the prospectus. Results of Operations The Fund s net asset value increased in size from $316,000 to $3,745,700 during the year ending December 31, 2007. This increase was a combination of net sales and investment returns. The front-end load series of the Capital Gains Class of the Fund returned 8.66% after fees and expenses for the year ending December 31, 2007, compared to a -2.77% return on its benchmark, the 50%/50% blend of S&P/TSX Composite and S&P 500 (CAD), (the Benchmark ), from which fees and expenses are not deducted. Please refer to the section titled Annual Compound Returns for a summary of the other series and class performance compared to the Benchmark. The significant cash held in the first quarter (approximately 30%) was put to work in early April. Cash held at the end of June was approximately 21%. During the second half of the year cash averaged 34% of the portfolio, ending the year with an average of 35%. All of the strong performers in the second quarter included new additions to the portfolio. The number of stocks held rose from 16 at the end of March (with significant bias to financial services stocks) to 27 stocks at the end of June with the addition of materials and energy related companies. The materials stocks benefited from the 11% increase in the price of copper and continued mergers and acquisitions activity in the sector. The price of oil rose 7.3% ($65.87 to $70.68) reflecting strong world economic growth and demand. The price of natural gas declined 12.4% ($7.73 to $6.77) as natural gas inventories are significantly above the 5 year average. Strong contributors to the Fund s performance during the first half of the year included Sino Forest, Rio Narcea Gold, CGI Group, Dundee Corp, Inmet Mining Corp and Major Drilling Group. Laggards to the Fund s performance included Pinetree Capital. During the second half of the year Aecon Group, Major Drilling, North West Co Fund, Potash Corp and Westjet Airlines proved to be strong performers for the Fund. The laggard for the year was Silvercorp Metals. Inter-Fund Debt Under the fund on fund investment structure, the Fund issues debt in the form of limited recourse notes to the NexGen North American Value Registered Fund (the top fund ). These limited recourse notes are redeemable on demand by the top fund, and pay interest at a floating rate equal to the prime rate plus 1%. During the year, the maximum inter-fund debt issued was $294,500 and the minimum, $84,200. At the end of the year, the debt represented 7.5% of the Fund s net asset value. This debt is intended to increase the tax efficiency of the Fund and is not used as financial leverage. Recent Developments A year ago U.S. consumer confidence was near a six year high and the Dow Jones Industrial Index had not had a correction of more than 2% for more than 139 trading days, the longest stretch in 53 years. In contrast U.S. consumer confidence (Reuters/University of Michigan survey) in December 2007 fell to the lowest level in more than 2 years and the first 13 trading days of 2008 have been the weakest for the S&P 500 in over 80 years. Canada experienced a significant slowdown in exports to the U.S. in the second half of 2007 due to the slowdown of the U.S. economy as well as due to the impact of 16.8% rise in the Canadian dollar during the year. On Jan 2nd, 2008 the U.S. Institute for Supply Management (ISM) Composite Index for December was reported at 47.7, well below the 50.8 in November 2007 and well below the consensus estimate of 50.5. (Below 50 is a contraction.) The ISM New Orders Index also declined significantly from 52.6 to 45.7. The weak U.S. dollar was expected to increase U.S. exports, however, export orders in December declined by 6.0 points to 52.5, the 3rd biggest drop in the 20-year history of the ISM New Orders Index. The decline in U.S. exports is significant as half the earnings for the typical large U.S. company comes from exports. This implies potential disappointment for Q4/07 and 2008 U.S. earnings. On January 4th, 2008, the U.S. unemployment rate was reported at 5.0% (the highest level in 2 years), significantly worse than the 4.8% expected. Over the past 12 months U.S. unemployment has risen by 0.6%. Myles Zyblock, Chief Strategist of RBC Capital Markets, noted that in ALL 10 previous times when there was a 0.6% rise in U.S. unemployment over a 12-month period, the U.S. was in recession. Since the start of this equity bull market in Q4/2002, the S&P 500 has had numerous corrections. The index has dropped below its 200-day moving average, but bounced off the 80-week (400-day moving average) and subsequently resumed its advance. On January 8th, the S&P 500 closed below its 80-week moving average for the first time in 5 years. In the sub-advisor s view, if the S&P 500 index does not rebound quickly it will be a significant negative technical analysis indication. In addition, the relative strength ratio of the Dow Jones Utilities versus the Dow Jones Industrial Index is the highest it s been in more than a decade.

-3.33-3.09-3.04 High Net -3.33-3.09-3.04 NORTH AMERICAN EQUITY For the Year High Ended Net December 31, 2007 Related Party Transactions NexGen Financial Limited Partnership ( NexGen ) is the manager of the Fund. In this capacity it provides investment management, distribution and administrative services to the Fund. In consideration for the services provided, NexGen receives a monthly management fee based on the average net asset value of each series of each class of the Fund, other than the Wrap and series. For the year ending December 31, 2007, the Fund paid $32,400 to NexGen for these services. Past Performance The past performance shows historical performance of each class and series of shares of the Fund. This information is provided to show the past performance only and does not necessarily indicate how the Fund will perform in the future. The past performance information assumes that all distributions were reinvested in additional shares of the same class and series of the Fund. The past performance information does not take into account sales, redemption, distribution or other optional charges that would have reduced returns or performance. Returns The following charts shows the performance of each class and series of shares of the Fund. They show in percentage terms how much an investment held on inception date would have increased or decreased by December 31, 2006, and how much an investment held on January 1, 2007 would have increased or decreased by December 31, 2007. (Performance for the F covers the period from July 1 to December 31, 2007). Capital Gains Class Capital Gains Class Dec. 8.66 31, 2006 8.66 9.00 9.00 9.32 9.32 10.99 10.99 Dividend Tax Credit Class Dividend Tax Credit Class 8.69 Compound Growth 8.57 Class -3.33-3.09-3.03 High Net -3.33-3.09-3.03 High Net Compound Growth Class 8.69 8.57-3.36-3.13-3.08 0.31 High Net -3.36-3.13-3.08 High Net 9.00 9.00 8.82 8.82 0.31 9.31 9.31 9.16 9.16 11.01 11.01 10.83 10.83-5.22-5.22-3.33-3.09-3.04-3.33-3.09-3.04 High Net High Net -5.18-5.18 Return of Capital Class Dec. 8.71 31, 2006 8.71 Return of Capital Class 9.00 9.00 9.31 9.31 11.00 11.00-3.33-3.09-3.04-3.33-3.09-3.04 High Net High Net Dividend Tax Credit Class Dividend Tax Credit Class

Annual Compound Returns This table shows the historical returns of each class and series of the Fund for the year ending December 31, 2007 and the period ending December 31, 2006 compared to the Benchmark. 2007 2006 3 Capital Gains Class 1 8.66% -3.33% F % 9.00% -3.09% F % Ultra 9.32% -3.04% 10.99% -5.18% Return of Capital Class 1 8.71% -3.33% F % 9.00% -3.09% F % Ultra 9.31% -3.04% 11.00% % Dividend Tax Credit Class 1 8.69% -3.33% F % 9.00% -3.09% F % Ultra 9.31% -3.03% 11.01% % Compound Growth Class 1 8.57% -3.36% F % 8.82% -3.13% F 0.31% Ultra 9.16% -3.08% 10.83% -5.22% Return of Benchmark 2-2.77% 10.16% Management Fees and Class Description The Fund offers four tax classes: Capital Gains Class; Return of Capital Class; Dividend Tax Credit Class; the Compound Growth Class; and a single non-publicly traded Inter-Fund Class. Each of these classes, excluding the Inter-Fund class currently have eight publicly traded series of shares: Regular,,, F,, Wrap and Load and Deferred Load. Management fees differ among the Fund s series of shares. The Fund pays NexGen an aggregate management fee. Management fees for Wrap and shares are negotiated and paid directly by the investor, not by the Fund. Management fees are used by NexGen to pay costs for managing the investment portfolio, making investment decisions, making brokerage arrangements for the purchase and sale of the investment portfolio and to fund sales and trailing commissions. In addition to a management fee, the Compound Growth Class of each series is charged an annual contingent tax management fee of 0.15% which is repayable if certain conditions are not met. Management Fee 2.00% F 1.00% 1.75% F 0.75% Ultra 1.50% Applicable to all classes of shares. 1 Net of all fees and expenses paid by the Fund other than the series where performance is reported gross of fees negotiated and paid directly by the investor. 2 This blended benchmark is comprised of 50% of the S&P/TSX Composite Index and 50% of the S&P 500 Index (C$). The S&P/TSX Composite Index is a capitalization-weighted index that represents some of the largest float-adjusted stocks trading on the Toronto Stock Exchange. Company size and liquidity are the chief attributes determining index membership. The S&P 500 Index consists of 500 of the largest U.S. companies (by market capitalization), and is representative of all major U.S. industries. 3 Performance for, and Ultra is from September 5 to December 31, 2006. Performance for is from May 10 to December 31, 2006.

Summary of Investment Portfolio at December 31, 2007 The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund. You may obtain quarterly updates to the Fund s holdings free of charge by calling us toll free at 1-866-378-7119, by writing us at NexGen Financial Limited Partnership, 36 Toronto Street, Suite 1070, Toronto, ON, M5C 2C5, by visiting our website at www.nexgenfinancial.ca or SEDAR at www.sedar.com. Top 25 Holdings Issuer % of Net Asset Value Export Development Canada 5.00% Feb 09/09 15.64% NexGen Canadian Cash Tax Managed Fund 8.62% Cash and Cash Equivalents 6.16% Aecon Group Inc. 3.29% Canadian Oil Sands Trust 3.10% Davis & Henderson Income Fund 3.03% Superior Plus Income Fund 2.87% Fairfax Financial Holdings Limited Sub. Voting 2.76% First Quantum Minerals Ltd. 2.66% Potash Corporation of Saskatchewan Inc. 2.57% Agrium Inc. 2.50% WestJet Airlines Ltd. 2.37% GMP Capital Trust 2.29% Rothmans Inc. 2.28% Saskatchewan Wheat Pool 2.26% Imperial Oil Limited 2.23% CML Healthcare Income Fund 2.20% CGI Group Inc. Cl. A Sub. Voting 2.19% Addax Petroleum Corporation 2.15% CI Financial Income Fund 2.15% EnCana Corporation 2.14% Major Drilling Group International Inc. 2.12% Home Capital Group Inc. Cl. B Sub. Voting 2.11% Great-West Lifeco Inc. 2.05% Petro-Canada 2.03% Portfolio Sector Allocation 6.19% 8.66% 10.37% 17.79% 11.71% 15.71% 16.76% Financials...17.79% Materials... 16.76% Federal Government Bonds...15.71% Energy...11.71% Industrials... 10.37% 5% Mutual Fund... 3% 8.66% 7% Cash and Cash Equivalents...6.19% Consumer Staples... 4.56% Consumer Discretionary... 15% 40% 3.84% Health Care... 2.21% Information Technology... 2.20% 30% Excludes non-cash working capital. 10

Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the years ended December 31, 2007 and 2006. This information is derived from the Fund s audited and interim financial statements. Net Assets per share ($) 1 F F Ultra capital gains class 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Net assets, beginning of year Increase (decrease) from operations: Total revenue Total expenses Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations 2 Distributions: From income (excluding dividends) From dividends From capital gains Return of capital Total annual distributions 3 Net assets, end of year 4 0.21 (0.28) 0.42 0.54 0.89 10.35 () 1.03 0.85 (0.13) (0.13) 9.87 9.69 0.75 0.36 1.03 10.40 1.03 0.86 9.69 0.11 0.02 (0.13) (0.13) 9.88 (0.22) 0.75 0.36 1.06 10.44 1.03 0.87 () 0.64 0.27 1.04 10.37 (0.01) (1.25) (0.84) F F Ultra return of capital class 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Net assets, beginning of year Increase (decrease) from operations: Total revenue Total expenses Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations 2 Distributions: From income (excluding dividends) From dividends From capital gains Return of capital Total annual distributions 3 Net assets, end of year 4 9.41 (0.26) 0.12 0.39 9.45 () () 1.00 0.83 9.41 (0.38) (0.38) 9.63 9.44 0.16 (0.23) 0.71 0.98 9.50 () 1.00 0.84 9.44 () 0.02 (0.38) (0.38) 9.64 9.44 (0.21) 0.71 1.01 9.53 () 1.00 0.85 9.44 9.23 () 0.60 0.26 0.97 9.45 (0.01) (1.25) (0.83) 9.23 1 This information is derived from the Fund s audited annual financial statements as at December 31 for the years shown. Starting with the reporting period of 2007, the net assets per unit presented in the financial statements differs from the net asset value calculated for fund pricing purposes. An explanation of these differences can be found in Note 2 of the notes to the financial statements. 2 Net assets and distributions are based on the actual amount of shares at the relevant time. The Increase/decrease from operations is based on the weighted average number of shares outstanding over the financial period. 3 Distributions were reinvested in additional shares of the Fund, unless the investor requested payment in cash. 4 This is not a reconciliation of the beginning and ending net assets per share as the increase (decrease) from operations data is based on the weighted average number of shares during the period rather than actual share amounts at the relevant time.

Net Assets per share ($) 1 (cont d) F F Ultra dividend tax credit class 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Net assets, beginning of year Increase (decrease) from operations: Total revenue Total expenses Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations 2 Distributions: From income (excluding dividends) From dividends From capital gains Return of capital Total annual distributions 3 Net assets, end of year 4 9.46 (0.26) 0.30 0.22 0.45 9.65 () () 1.01 0.84 9.46 (0.30) (0.30) (0.24) 0.72 0.99 9.71 0.85 () 0.02 (0.30) (0.30) 9.72 (0.21) 0.72 9.74 0.86 9.28 (0.05) 0.61 0.26 0.99 9.66 (0.01) (1.25) (0.84) 9.28 F F Ultra compound growth class 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Net assets, beginning of year Increase (decrease) from operations: Total revenue Total expenses Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations 2 Distributions: From income (excluding dividends) From dividends From capital gains Return of capital Total annual distributions 3 Net assets, end of year 4 0.22 (0.30) 0.38 (0.32) (0.02) 10.47 () 0.84 () 0.66 (0.64) 9.68 0.18 (0.27) 0.21 0.31 10.52 0.85 9.68 () 0.01 10.01 (0.23) 0.75 0.36 1.05 10.56 0.86 0.18 0.64 0.27 10.49 (0.01) (1.25) (0.84) 1 This information is derived from the Fund s audited annual financial statements as at December 31 for the years shown. Starting with the reporting period of 2007, the net assets per unit presented in the financial statements differs from the net asset value calculated for fund pricing purposes. An explanation of these differences can be found in Note 2 of the notes to the financial statements. 2 Net assets and distributions are based on the actual amount of shares at the relevant time. The Increase/decrease from operations is based on the weighted average number of shares outstanding over the financial period. 3 Distributions were reinvested in additional shares of the Fund, unless the investor requested payment in cash. 4 This is not a reconciliation of the beginning and ending net assets per share as the increase (decrease) from operations data is based on the weighted average number of shares during the period rather than actual share amounts at the relevant time.

Ratios and Supplemental Data F F Ultra CAPITAL GAINS CLASS 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Total net asset value ($) 1 Number of shares outstanding 1 Management expense ratio (%) 2 Management expense ratio before waivers or absorptions (%) 2 Trading expense ratio (%) 3 Portfolio turnover rate (%) 4 Net asset value per share ($) 73,012 7,044 2.69 3.07 10.36 14,388 1,488 2.81 9.25 2,505 253 1.63 1.86 9.89 5,345 513 2.42 2.75 10.42 7,196 743 2.51 8.28 9.69 2,508 253 1.33 1.52 9.90 5,366 513 2.13 2.43 10.46 7,198 742 2.25 7.42 7,894 760 0.55 0.63 10.39 7,112 750 0.15 0.51 RETURN OF CAPITAL CLASS 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Total net asset value ($) 1 Number of shares outstanding 1 Management expense ratio (%) 2 Management expense ratio before waivers or absorptions (%) 2 Trading expense ratio (%) 3 Portfolio turnover rate (%) 4 Net asset value per share ($) 310,540 32,814 2.69 3.07 9.46 14,193 1,508 2.81 9.25 9.41 2,505 260 1.63 1.86 9.64 5,239 551 2.41 2.75 9.52 7,098 752 2.52 8.31 9.43 2,509 260 1.33 1.52 9.66 5,259 551 2.13 2.43 9.55 7,100 752 2.25 7.43 9.44 8,328 880 0.54 0.62 9.47 7,502 813 0.15 0.51 9.23 DIVIDEND TAX CREDIT CLASS 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Total net asset value ($) 1 Number of shares outstanding 1 Management expense ratio (%) 2 Management expense ratio before waivers or absorptions (%) 2 Trading expense ratio (%) 3 Portfolio turnover rate (%) 4 Net asset value per share ($) 229,344 23,713 2.70 3.08 14,232 1,504 2.80 9.24 9.46 2,505 258 1.63 1.86 9.72 5,260 541 2.41 2.74 9.73 7,118 750 2.52 8.30 2,509 258 1.33 1.52 9.73 5,280 541 2.13 2.43 9.76 7,120 750 2.26 7.44 8,242 851 0.54 0.62 9.68 7,425 800 0.15 0.51 9.28 COMPOUND GROWTH CLASS 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Total net asset value ($) 1 Number of shares outstanding 1 Management expense ratio (%) 2 Management expense ratio before waivers or absorptions (%) 2 Trading expense ratio (%) 3 Portfolio turnover rate (%) 4 Net asset value per share ($) 2,019,064 192,448 2.86 3.26 10.49 14,382 1,488 2.96 9.77 27,596 2,754 1.78 2.04 10.02 423,824 40,206 2.56 2.92 10.54 7,193 743 2.68 8.82 9.68 2,508 250 1.30 1.52 10.03 5,354 506 2.27 2.59 10.58 7,195 742 2.41 7.95 7,890 751 0.70 10.50 7,108 750 0.68 1 The information is provided as at December 31 of the years shown. 2 The management expense ratio is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period as an annualized percentage of daily average net asset value during the period. The of the Fund was charged operating expenses beginning October 12, 2006. NexGen Financial Limited Partnership, the Manager, expects to continue to absorb expenses relating to the operation of the Fund until such time as this Fund is of sufficient size to reasonably absorb all expenses. 3 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily net assets during the period. 4 The Fund s portfolio turnover rate indicates how the Fund s portfolio advisor manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of a fund.

Don t leave your mutual fund taxes to chance...manage them with NexGen Financial Back Office / Customer Service 30 Adelaide Street East, Suite 1 Toronto, ON M5C 3G9 Ph 1 800 363 2749 Ph 416 506 8403 Fax 1 800 593 5630 nexgenfinancial@ifdsgroup.com Sales, Marketing and General Enquiries 36 Toronto Street, Suite 1070 Toronto, ON M5C 2C5 Ph 1 866 378 7119 Ph 416 775 3727 Fax 1 866 378 7121 Fax 416 775 3737 info@nexgenfinancial.ca www.nexgenfinancial.ca