Management’s Discussion and Analysis First Quarter 2016

March 31, 2016

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Management’s Discussion and Analysis

Basis of Presentation This Management’s Discussion and Analysis (“MD&A”) has been prepared and includes material financial information as of May 9, 2016. This MD&A should be read in conjunction with the audited financial statements of Trez Capital Senior Mortgage Investment Corporation (“MIC”) for the year ended December 31, 2015 and the unaudited condensed interim financial statements for the three months ended March 31, 2016, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. All dollar amounts in this MD&A are in Canadian dollars. Additional information related to the MIC, including the MIC’s financial statements for the three months ended March 31, 2016, is available on SEDAR at www.sedar.com or www.trezcapital.com.

Forward-Looking Statements This MD&A may contain forward-looking statements relating to anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent our beliefs regarding future events. These statements are typically identified by expressions like “believe”, “expects”, “anticipates”, “would”, “will”, “intends”, “projected”, “in our opinion” and other similar expressions. By their nature, forward-looking statements require us to make assumptions which include, among other things, that: (i) the MIC will have sufficient capital under management to effect its investment strategies and pay its targeted dividends to shareholders, (ii) the investment strategies will produce the results as intended, (iii) the markets will react and perform in a manner consistent with the investment strategies and (iv) the MIC is able to invest in mortgages or loans of a quality that will generate returns that meet and or exceed the MIC’s targeted investment returns. Forward-looking statements are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will prove not to be accurate. We caution readers of this MD&A not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed or implied in the forward-looking statements. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including but not limited to, general market conditions, interest rates, regulatory and statutory developments, the effects of competition in areas that the MIC may invest in and the risks detailed from time to time in the MIC’s public disclosures. We caution that the foregoing list of factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to investing in the MIC, investors and others should carefully consider these factors, as well as other uncertainties and potential events and the inherent uncertainty of forward-looking statements. Due to the potential impact of these factors, the MIC and Trez Capital Fund Management LP (the “Manager”) do not undertake, and specifically disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

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Non-IFRS Financial Measures The MIC prepares and releases its audited annual financial statements and unaudited condensed interim financial statements in accordance with IFRS. In this MD&A, as a complement to results provided in accordance with IFRS, the MIC discloses certain financial measures not recognized under IFRS and which do not have standard meanings prescribed by IFRS. These measures include the following:

Mortgage portfolio – represents investments in mortgages net of accrued interest and fees receivable, mortgage syndications and fair value adjustments on investments in mortgages;

Average mortgage investment – represents the mortgage portfolio divided by the number of mortgage investments at the reporting date;

Weighted average interest rate – represents the weighted average effective interest rate on the mortgage portfolio at the reporting date;

Loan-to-value (“LTV”) – a measure of advanced and un-advanced mortgage commitments on a mortgage investment, including priority or pari-passu debt on the underlying real estate, as a percentage of the fair value of the underlying real estate collateral. For construction/redevelopment mortgage investments, fair value is based on an ‘as completed’ basis. Weighted average LTV is the dollar weighted average of mortgage LTVs in a portfolio;

Dividend yield – represents the annualized yield on the MIC’s equity capitalization computed as the annual dividend divided by the closing price of the MIC’s share price as at the period end date;

Average mortgage portfolio – represents the total of the monthly mortgage portfolio divided by the number of months in the reporting period; and

Yield on average mortgage portfolio - represents an annualized percentage of interest revenue divided by the average mortgage portfolio during a period.

Non-IFRS measures should not be construed as alternatives to net income (loss) or comprehensive income (loss) or cash flows from operating activities determined in accordance with IFRS as indicators of the MIC’s performance.

Review and Approval by the Board of Directors The Board of Directors (the “Board”) approved the content of this MD&A on May 9, 2016.

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Financial Highlights and Key Performance Indicators

($000s unless otherwise noted)

Three months ended March 31

Year ended December 31

2016 2015 2015

FINANCIAL

Revenue 1,245 1,732 6,834

Income from operations 801 1,376 4,769

Cash flow from operations 1,249 1,047 4,361

Dividends paid 1,103 1,023 4,331

EPS (basic and diluted) 0.10 0.15 0.51

PORTFOLIO

Mortgage portfolio 68,486 96,656 78,417

Total number of mortgage investments 21 29 24

Average mortgage investment 3,261 3,333 3,267

Weighted average interest rate 6.16% 6.14% 6.33%

Weighted average loan to value 38.47% 46.89% 44.41%

Average mortgage portfolio 72,638 101,065 99,739

Yield on average mortgage portfolio 6.68% 6.27% 6.24%

Revenue declined by $0.5 million for the three months ended March 31, 2016 compared to the same period in 2015. The decrease was attributable to lower commitment fees and interest revenue, which resulted from a reduction in average mortgage portfolio of $28.4 million in 2016 as compared to 2015. The decline was partially offset by 0.41% increase in yield on average mortgage portfolio in 2016. Income from operations decreased by $0.6 million for the three months ended March 31, 2016 compared to the same period in 2015, primarily due to the previously mentioned decrease in revenue as well as a $0.1 million increase in expenses, primarily related to Board of Directors’ fees. Cash flow from operations increased by $0.2 million for the three months ended March 31, 2016 compared to the same period in 2015. The increase was primarily the result of a collection of interest on a previously defaulted mortgage, partially offset by a decrease in interest revenue and commitment fees in 2016. On March 16, 2015 the MIC’s Board of Directors increased the annual dividend to $0.58 from $0.54 per Class A share, an increase of 7.41%. The annual dividend rate remained unchanged at $0.58 during the period ending March 31, 2016. During the first quarter of 2016, $19.3 million of mortgages with a weighted average interest rate of 7.09% were fully repaid and $2.6 million of mortgages with a weighted average interest rate of 5.68% were partially repaid. Of the $19.3 million of mortgages fully repaid, $13.5 million were repaid prior to their maturity dates.

During the same quarter, the MIC funded $3.0 million of new mortgages at a weighted average interest rate of 5.50%. In addition, the MIC increased its share in existing mortgages, including capitalized interest, by $9.0 million with a weighted average interest rate of 5.61%.

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The net effect was a decrease of $9.9 million in the mortgage portfolio during the first quarter of 2016. Overall, the mortgage portfolio decreased by $28.2 million during the period from March 31, 2015 to March 31, 2016 primarily due to principal repayments in the final quarter of the 2015 and the first quarter of 2016.

At March 31, 2016, excess cash was $6.7 million, down from $11.1 million at December 31, 2015 and during the period, bank indebtedness decreased by $15.0 million due to additional repayment of mortgage investments in the first quarter of the year.

Business Overview

Business Objective The investment objective of the MIC is to acquire and maintain a diversified portfolio of mortgage investments that preserves capital and generates attractive returns in order to permit the MIC to pay monthly dividends to its shareholders. The MIC seeks to achieve this objective through prudent investments to qualified real estate investors and developers, focusing primarily on short-term bridge financing needs not currently serviced by traditional real estate lenders. The MIC may hold senior positions in mortgages solely or jointly with external parties or other investment funds managed by the Manager. Under this ‘‘senior tranching’’, the MIC or other external party is entitled to priority for the payment of interest on and the repayment of the principal of its senior position, thereby reducing the risk to the MIC, in return for a reduced interest rate.

Current Business Environment The MIC’s mortgage investment portfolio of exclusively first mortgage loans performed well in the first quarter of 2016. 100% of the equity remained invested throughout the quarter and on average 17.4% of the credit facility was used to both modestly enhance returns as well as to manage cash flow. Deal flow remains stable as Canadian real estate continued to perform well. For the three months ended March 31, 2016, the MIC made a total of $11.3 million in new mortgage investments in the province of British Columbia. With the Manager’s head office in Vancouver and experienced origination team based there, the Manager is able to leverage strong relationships and market knowledge to benefit from the trend of continued strength in the province. The MIC continues to focus on high quality mortgage investments primarily secured by income producing real estate. As of March 31, 2016, 91.0% of the MIC’s mortgage investments were secured by income producing properties. 97.6% of the MIC’s residential exposure, which totaled approximately 70.1% of the total portfolio, represents multi-residential real estate (apartment buildings and student residences), which given their fairly predictable cash flow, substantially mitigates lending risk. Overall, Management is pleased with the MIC’s operating and financial performance for the three months ended March 31, 2016.

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Update on Special Committee Review Process On September 28, 2015 the Board of the MIC established a Special Committee of independent directors (the “Special Committee”) to consider alternatives to enhance value for its shareholders. The Special Committee was authorized to oversee a review process to be undertaken in response to concerns raised by shareholders regarding the discount of the Company’s share trading price relative to its book value (the “Strategic Review Process”). As part of the Strategic Review Process, on February 18, 2016 the Special Committee announced that it was pursuing a monetization process (a “Monetization Process”). The Special Committee concluded the Monetization Process in April 2016. No bids were received that the Special Committee was prepared to recommend to shareholders. On May 9, 2016, the Special Committee announced the completion of the Strategic Review Process and a plan for the orderly wind-up of the Company’s assets and the return of capital to shareholders (the “Orderly Wind-Up Plan”). The Orderly Wind-Up Plan in its entirety will be subject to shareholder approval at the Company’s annual and special meeting of shareholders scheduled to be held on June 16, 2016 (the “Meeting”). Further details on the Orderly Wind-Up Plan will be described in the management information circular to be sent to shareholders in connection with the Meeting. Under the Orderly Wind-Up Plan, the Company will cease originating new loans and all mortgage renewal activity, subject to contractual rights, and its assets will be monetized over time. The Orderly Wind-Up Plan will be implemented and capital will be returned to shareholders by the Board with the assistance of the Manager. The Orderly Wind-Up Plan will occur over time with the goal of shareholders realizing maximum value for the Company’s assets. The nature of the Company’s assets are such that the Company has contractual liquidity rights in the form of scheduled maturities. The expected weighted average term to maturity of the loan portfolio as of April 30, 2016 is 13 months and approximately $45.6 million in mortgages (representing approximately 66.9% of the total portfolio) are scheduled to mature on or before May 30, 2017. The final scheduled loan maturity in the Company’s portfolio is currently September of 2024. The Company may pursue, where appropriate, opportunities to accelerate the monetization of the Company’s loan portfolio through the sale of loans to third parties. Under the Orderly Wind-Up Plan, cash proceeds from the monetization of loans will be distributed to shareholders in a manner that is in the best interests of shareholders as approved by the Board. The Company intends to maintain its current dividend until such time as the Board deems it no longer appropriate under the Orderly Wind-Up Plan and will apply to the Toronto Stock Exchange to re-institute its normal course issuer bid in order to permit the Company to purchase shares in the market pursuant to an active normal course issuer bid program.

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The Manager has agreed, subject to shareholder approval, to assist in the Orderly Wind-Up Plan and to certain amendments to the Company’s management agreement (the “Amending Agreement”) to facilitate the Orderly Wind-Up Plan. Under the Amending Agreement, the Manager has agreed to provide the full asset management services necessary to support the Orderly Wind-Up Plan. The Manager will also waive its rights, if any, to early termination fees, in exchange for an incentive fee (the “Incentive Fee”) equal to 20% of the amount by which the net cash proceeds from the monetization of mortgages exceed $65,549,596, subject to a minimum Incentive Fee of $300,000. The Incentive Fee would be paid to the Manager in increments up to the minimum of $300,000 as distributions are made to shareholders with the balance, if any, paid at the completion of the Orderly Wind-Up Plan. If shareholders do not vote in favour of the Orderly Wind-Up Plan on or before June 30, 2016, the amendments to the management agreement described above will terminate.

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Mortgage Portfolio As at March 31, 2016, the MIC’s mortgage portfolio was comprised of 21 mortgage investments (December 31, 2015 - 24), with a weighted average interest rate of 6.16% (December 31, 2015 – 6.33%) and an average mortgage investment of $3.3 million (December 31, 2015 - $3.3 million). ($000s unless otherwise noted) Mar 31, 2016 Dec 31, 2015

Mortgage portfolio Accrued interest and fees receivable

68,486 515

78,417 1,254

Mortgage syndications 1,987 5,266 Fair value adjustments on investments in mortgages (800) (800)

Investments in mortgages $70,188 $84,137

Asset Type A summary of MIC’s mortgage portfolio by asset type is presented below: ($000s unless otherwise noted)

March 31, 2016 December 31, 2015

Number $ Amount % of

Portfolio Number $ Amount

% of Portfolio

Residential (multi-residential) 13 $46,864 68.4% 16 $53,747 68.5% Residential (single-family) 1 1,176 1.7% 1 1,160 1.5% Office 1 1,296 1.9% 1 1,316 1.7% Industrial 4 15,586 22.8% 3 13,100 16.7% Retail 2 3,564 5.2% 3 9,094 11.6%

Total 21 $68,486 100.0% 24 $78,417 100.0%

As of March 31, 2016 and December 31, 2015, 70.1% and 70.0% of the MIC’s mortgage portfolio was secured by residential projects, with multi-family residential forming the bulk of this exposure. Given speculation of overheating in residential markets in Canada, the Manager feels that having exposure to multi-family residential investments in mortgages provides a more attractive risk-adjusted return as compared to single-family residential mortgages.

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Mortgage Investment Size A summary of MIC’s mortgage portfolio by size is presented below: ($000s unless otherwise noted)

March 31, 2016 December 31, 2015

Number $ Amount % of

Portfolio Number $ Amount

% of Portfolio

$0-$2,500,000 11 $17,175 25.1% 13 $20,406 26.0% $2,500,001 - $5,000,000 6 22,242 32.5% 6 23,638 30.1% $5,000,001 - $7,500,000 2 12,576 18.3% 3 18,102 23.1% $7,500,000 - $10,000,000 2 16,493 24.1% 2 16,271 20.8%

Total 21 $68,486 100.0% 24 $78,417 100.0%

Mortgage allocation by investment size has remained relatively consistent between March 31, 2016 and December 31, 2015. The greatest changes occurred in mortgages from $0 million to $2.5 million and from $5.0 million to $7.5 million due to repayments of mortgages within these categories. The Manager is cognizant of concentration risk and the MIC’s largest investment was below $10 million at both March 31, 2016 and December 31, 2015. The Manager continues to work at further diversifying its mortgage portfolio and thereby reducing the MIC’s concentration risk.

Security A summary of MIC’s mortgage portfolio by priority of security is presented below: ($000s unless otherwise noted)

March 31, 2016 December 31, 2015

Number $ Amount % of

Portfolio Number $ Amount

% of Portfolio

First 21 $68,486 100.0% 24 $78,417 100.0%

As the MIC is structured to be a lower risk entity, majority of its mortgage investments are structured for the MIC to be the first priority in terms of security.

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Loan-to-Value The MIC’s LTV Investment Guidelines state that the LTV of an individual mortgage will not exceed 75% and the weighted average LTV of the mortgage portfolio will not exceed 70% at the time of funding. During the life of a mortgage, appraised values of the underlying security may be updated for changes in circumstances such as new loan participants and refinancing. A summary of MIC’s mortgage portfolio by LTV presented below: ($000s unless otherwise noted)

March 31, 2016 December 31, 2015

Number $ Amount % of

Portfolio Number $ Amount

% of Portfolio

34% or less 9 $32,177 47.0% 8 $22,760 29.0% 35-44% 4 12,400 18.1% 5 13,704 17.5% 45-54% 4 7,740 11.3% 4 10,769 13.7% 55-64% 2 12,037 17.6% 3 14,492 18.5% 65-70% - - -% 2 12,734 16.2% 71-75% 2 4,132 6.0% 2 3,958 5.1%

Total 21 $68,486 100.0% 24 $78,417 100.0%

At March 31, 2016, the weighted average LTV for the mortgage portfolio was 38.47% (December 31, 2015 – 44.41%). The decrease of 5.94% was due to repayments of mortgages with weighted average LTV greater than the weighted average LTV of the remaining portfolio. This remains below the investment guidelines that stipulate a maximum portfolio LTV of 70% at the time of funding. The MIC’s LTV is one of the lowest of publicly traded MICs in Canada, demonstrating the conservative nature of the portfolio.

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Maturity A summary of MIC’s mortgage portfolio by maturity date is presented below: ($000s unless otherwise noted)

March 31, 2016 December 31, 2015

Number $ Amount % of

Portfolio Number $ Amount

% of Portfolio

Past due - - -% 1 4,733 6.0% 2016 9 35,668 52.1% 11 38,795 49.5% 2017 7 21,619 31.6% 7 21,164 27.0% 2018 4 8,357 12.2% 3 5,345 6.8% Beyond 2018 1 2,842 4.1% 2 8,380 10.7%

Total 21 68,486 100.0% 21 78,417 100.0%

None of the investments in the mortgage portfolio were past due at March 31, 2016 (December 31, 2015 – one mortgage totaling $4.7 million). One mortgage investment past due at December 31, 2015 was repaid in full during March 2016. Subsequent to December 31, 2015, a borrower defaulted on a first mortgage in respect of a mortgage

with a carrying amount of $8,270,000 and interest receivable of $43,836. The mortgage was

subsequently renewed and is no longer considered in default after the borrower provided additional

security on the mortgage, made partial interest and full principal payments and capitalized unpaid

interest.

Interest Rate A summary of MIC’s mortgage portfolio by interest rate is presented below: ($000s unless otherwise noted)

March 31, 2016 December 31, 2015

Number $ Amount % of

Portfolio Number $ Amount

% of Portfolio

5.25% of less 1 2,842 4.1% 3 9,380 12.0% 5.26% - 5.50% 4 13,893 20.3% 2 2,876 3.7% 5.51% – 5.75% 2 4,857 7.1% 2 4,682 6.0% 5.76% – 6.00% 4 12,324 18.0% 5 14,058 17.9% 6.01% – 6.25% 6 20,056 29.3% 6 20,656 26.3% 6.26% - 6.50% - - -% 1 8,270 10.5% 6.51% - 6.75% 1 1,868 2.7% 2 6,495 8.3% 6.75%+ 3 12,646 18.5% 3 12,000 15.3%

Total 21 68,486 100.0% 24 78,417 100.0%

The weighted average interest rate at March 31, 2016 was 6.16% (December 31, 2015 – 6.33%). The decrease in rate at was due to a combination of the repayment of mortgages with a higher weighted average interest rate, and the funding of mortgages with a weighted average interest rate lower than the rate of the remaining mortgage portfolio.

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Geographic Diversification A summary of MIC’s mortgage portfolio by province is presented below: ($000s unless otherwise noted)

March 31, 2016 December 31, 2015

Number $ Amount % of

Portfolio Number $ Amount

% of Portfolio

British Columbia 3 $12,176 17.8% 3 $3,888 5.0% Alberta 7 30,149 44.0% 7 30,526 39.0% Ontario 10 24,847 36.3% 13 42,689 54.4% Nova Scotia 1 1,314 1.9% 1 1,314 1.6%

Total 21 $68,486 100.0% 24 $78,417 100.0%

The MIC continues to maintain a diversified portfolio of mortgage investments across Canada with the largest exposure in Alberta (December 31, 2015 – Ontario). The largest change in concentration between the two periods occurred in British Columbia and Ontario due to repayment of several mortgages located in Ontario and additional funding of mortgages in British Columbia during the three month ended March 31, 2016. Of the MIC’s Alberta investments, 58.3% are residential properties and 41.7% are industrial properties. The weighted average interest rate for the Alberta investments is 6.61%. While one of the loans defaulted temporarily in March, 2016, it was renewed in the same month and all repayments are now current. There have been no other defaults on the MIC’s Alberta mortgages. The Manager has been operating in Alberta for over 18 years and many of the MIC’s Alberta-based borrowers have very long-standing relationships with the Manager.

Results from Operations

($000s unless otherwise noted)

Three months ended March 31

Year ended December 31

2016 2015 2015

Revenue 1,245 1,732 6,834

Expenses (444) (356) (2,065)

Income from operations 801 1,376 4,769

Financing costs (66) (244) (924)

Net and comprehensive income 735 1,132 3,845

Earnings per share (basic and diluted) 0.10 0.15 0.51

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Revenue Revenue consists of interest income and commitment fees net of mortgage syndication interest expense. For the three months ended March 31, 2016, the decrease of $0.5 million, compared to the same period in 2015, was attributable to lower commitment fees and interest revenue resulting from a $28.4 million reduction in the average mortgage portfolio in 2016, as compared to the same period in 2015. The decrease was partially offset by an increase of 0.41% in the yield on average mortgage portfolio between the two periods.

Expenses Expenses are comprised of three major items: (i) management fees, (ii) general and administrative costs, and (iii) fair value adjustment on investment in mortgages. For the three months ended March 31, 2016, total expenses increased by $88,000 compared to the same period in the prior year.

($000s unless otherwise noted)

Three months ended March 31

Year ended December 31

2016 2015 2015

Management fees 180 227 932 General and administration 264 129 333 Fair value adjustment on investments in mortgages

- - 800

Total 444 356 2,065

Management Fees Management fees are calculated at 85 bps of gross assets, excluding mortgage syndications, and are paid monthly in arrears. For the three months ended March 31, 2016, management fees decreased by $47,000 (20.7%) compared to the same period in 2015. The decrease reflects a reduction in total assets primarily the result of a decrease in mortgage portfolio in the three months ended March 31, 2016. General and Administrative Costs General administration costs comprise of public MIC costs, board of directors fees, and professional fees relating to legal and audit. For the three months ended March 31, 2016, general and administrative expenses increased by $135,000 (104.65%) compared to the same period in 2015. The increase is primarily the result of higher board of directors fees following formation of the Special Committee, as well as higher legal costs associated with shareholders action.

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Financing Costs Financing costs relate to the credit facility. For the three months ended March 31, 2016, financing costs

decreased by $178,000 (72.96%) compared to the same period in 2015. This decrease was the result of

lower utilization of the credit facility with average facility utilization decreasing from $33.1 million in the

three month ended March 31, 2015 to $7.0 million in same period in 2016 .

Financial Condition

Liquidity and Capital Resources The liquidity needs of the MIC arise from working capital requirements, debt servicing with respect to the revolving credit facility, dividends to shareholders and future mortgage investment funding requirements. Cash flows from the MIC’s mortgage investments, available funding under the MIC’s revolving credit facility, and cash-on-hand represent the primary sources of liquidity. Cash flow from operations is dependent upon interest payments and principal repayments from borrowers.

Credit Facility On April 5, 2013, the Company entered into a credit facility (the “Facility”) with the Royal Bank of Canada for an amount of up to $40,000,000. The outstanding indebtedness of the Company in aggregate cannot exceed 40% of the aggregate value of the assets of the Company at any time. The Facility expires on April 5, 2017 and is subject to an interest rate equal to the bank's prime rate of interest plus 1% or bankers' acceptances (“BA”) with a stamping fee of 1% of the face amount of the BA. The Facility is secured by a general security agreement over the Company's assets. At March 31, 2016, $3,700,000 (December 31, 2015 - $18,700,000) was outstanding on the Facility. As at March 31, 2016, there is $663 (December 31, 2015 - $27,842) in deferred financing costs related to the Facility, which are amortized over the life of the BA as interest expense.

Shareholders’ Equity Common Shares As at March 31, 2016, the MIC had 7,577,988 common shares outstanding. Dividends The MIC maintains a dividend policy of $0.0485 per share payable monthly, or $0.58 per share annually, reflecting an annualized rate of 7.05% based on the closing share price of $8.25 on March 31, 2016.

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Dividend Reinvestment Plan

As at March 31, 2016, there were 626,146 common shares or 9.01% of the total float subscribed to the dividend reinvestment plan (“DRIP”).

Statement of Cash Flows The statement of cash flows for the three months ended March 31, 2016 and March 31, 2015 are as follows:

($000s unless otherwise noted)

Three months ended

Mar 31, 2016

Three months ended

Mar 31, 2015

Year ended December 31,

2015

Net change in cash related to Operating 1,249 1,047 4,361 Financing (16,141) 3,996 (11,982) Investing 10,472 (1,109) 17,314

Increase (decrease) in cash (4,420) 3,934 9,693

The increase (decrease) in net cash flow for the three months ended March 31, 2016 compared to the same period in 2015 was the result of the following factors:

Operating – cash flow generated from operations increased by $0.2 million for the three months ended March 31, 2016 compared to the same period in 2015. The increase was primarily the result of a collection of interest totaling $0.4 million on the payout of a previously non- performing mortgage. This was negated by a decrease in interest revenue and commitment fees resulting from a decrease in mortgage portfolio of $0.2 million in the three months ended March 31, 2016, compared to the same period in 2015.

Financing – cash flow used in financing activities decreased by $20.1 million for the three months ended March 31, 2016 compared to the same period in 2015. The decrease was the result of partial repayment of the credit facility of $20.2 million.

Investing – cash flow from investing activities increased by $11.6 million for the three months ended March 31, 2016 compared to the same period in 2015. The increase was the result of lower mortgage funding of $2.5 million and higher principal repayments of $9.1 million, compared to 2015.

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Quarterly Financial Information The following is a quarterly summary of the MIC’s results for the eight most recently completed quarters:

($000s unless otherwise noted) Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014

Average mortgage portfolio (in $millions)

$72.6 $93.5 $103.8 $100.6 $101.1 $100.3 $103.3 $104.9

Revenue 1,245 1,596 1,785 $1,721 $1,732 $1,630 $1,671 $1,923 Expenses (444) (1,093) (295) (347) (356) (282) (317) (322)

Income from operations 801 503 1,490 1,374 1,376 1,348 1,354 1,601 Financing costs (66) (204) (252) (224) (244) (274) (280) (296)

Net income and comprehensive income

735 299 1,238 1,150 1,132 1,074 1,074 1,304

Earnings per share (basic and diluted)

$0.10 $0.04 $0.16 $0.16 $0.15 $0.14 $0.14 $0.17

Related Party Transactions Manager

The MIC is managed by Trez Capital Fund Management LP (the “Manager”), a related party by virtue of

common management. Pursuant to the Management Agreement dated May 25, 2012, (amended

November 30, 2013) the Manager is entitled to a fee of 85 bps per annum of the gross assets of the MIC

(the “Management Fee”), plus applicable taxes, calculated monthly and paid monthly in arrears. For the

period ended March 31, 2016, the Manager earned management fees of $179,682 (2015 - $226,710). At

March 31, 2016, $254,431 (December 31, 2015 - $74,750) of these fees were outstanding. Other Related Party Transactions

(a) As at March 31, 2015, the MIC has co-invested in mortgage investments with other managed

funds, related parties by virtue of common management. The total amount of the co-invested

mortgages is $213,175,936 (December 31, 2015 - $245,347,008), of which the MIC’s share is

$57,528,885 (December 31, 2015 - $65,949,293). During the three months ended March 31,

2016, the MIC purchased investments in mortgages from entities under common management

of $nil (2015 - $48,286,734) and sold investments in mortgages of $2,000,000 (2015 -

$4,120,000) to entities under common management.

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(b) Included in investments in mortgages as at March 31, 2016 are three mortgages in an aggregate

amount of $8,268,262 (December 31, 2015 - $7,812,714) and accrued interest on $44,379

(December 31, 2015 - $369,934) which were previously in default and subsequently the

mortgages were assigned to an affiliate of the Manager of the MIC on October 1, 2015. The

affiliate of the Manager assumed the obligation to pay the MIC interest at the original interest

rates. The affiliate of the Manager obtained a court appointed received to list and market the

properties. As at March 31, 2016 and December 31, 2015, the mortgages were performing. For

the three months ended March 31, 2016, the MIC recognized $129,993 (2015 - $nil) in interest

income from the affiliate of the Manager and has accrued interest receivable of $44,379

(December 31, 2015 - $124,871).

(c) During the year ended December 31, 2015, the security on a previously defaulted mortgage was

sold to a third party and the sale was financed by cash and a four year vendor take back (“VTB”)

provided by the MIC. An affiliate of the Manager has also agreed to supplement the interest

rate on the senior portion of the VTB to be 5.0% for the entire term of the VTB. In March 2016,

the full amount of the VTB was paid out in full less a discount of $750,000 which was

supplemented by the affiliate of the Manager to the MIC. The MIC recognized interest income

of $11,324 relating to the affiliate of the Manager’s supplemental interest on the VTB during the

three months ended March 31, 2016.

(d) All related party transactions are measured at the exchange amount, which is the amount of

consideration established and agreed to by the related parties. The MIC invests in mortgages on

a participation basis with parties related to the Manager. Title to mortgages are held by

Computershare Trust Company of Canada, (“the Custodian”), on behalf of the beneficial owners

of the mortgages. In addition, certain mortgage broker duties are performed by Trez Capital

Limited Partnership, (“the Mortgage Broker”). The Manager and the Mortgage Broker are

related to the MIC through common control.

Critical Accounting Estimates The preparation of financial statements requires the Manager to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The most significant estimates that the Manager is required to make relate to the fair value of the investments in mortgages. These estimates may include assumptions regarding local real estate market conditions, interest rates and the availability of credit, the adjusted credit risk premium based on the change in the borrower’s credit risk, cost and terms of financing, the impact of present or future legislation or regulation, prior encumbrances and other factors affecting the investments in mortgages and underlying security of the mortgages. These assumptions are limited by the availability of reliable comparable data, economic uncertainty, ongoing geopolitical concerns and the uncertainty of predictions concerning future events. Liquid credit markets and volatile equity markets have combined to increase the uncertainty inherent in such estimates and assumptions. Accordingly, by their nature, estimates of impairment are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the estimated fair value could vary by a material amount.

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Risks and Uncertainties The risks associated with investing in the MIC are as disclosed in the MIC’s Annual Information Form dated March 28, 2016 and filed on SEDAR at www.sedar.com. Any changes to the MIC over the period from December 31, 2015, have not affected the overall risk of the MIC.

Disclosure Controls and Procedures and Internal Controls over Financial Reporting The MIC’s management, under the supervision of its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), is responsible for establishing and maintaining disclosure controls and procedures (“DC&P”) and internal controls over financial reporting (“ICFR”), as such terms are defined in National Instrument 52‐109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52‐109”). DC&P are those controls and other procedures that are designed to provide reasonable assurance that all material information required to be disclosed by the MIC in annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation. Furthermore, DC&P are those controls and other procedures that are designed to ensure that material information required to be disclosed by the MIC in annual filings, interim filings or other reports filed or submitted under securities legislation is accumulated and communicated to the MIC’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The MIC has adopted the Internal Control – Integrated Framework (published 1992, amended 2013) published by the Committee of Sponsoring Organizations of the Treadway Commission for the design of its ICFR for the three months ended March 31, 2016. As required by NI 52‐109, the MIC’s CEO and CFO have evaluated the effectiveness of the MIC’s DC&P and ICFR. Based on such evaluations, they have concluded that the design and operation of the MIC DC&P and ICFR, as applicable, are adequately designed and effective, as at March 31, 2016. No changes were made in the MIC’s design of ICFR during the three months ended March 31, 2016, that materially affected, or are reasonably likely to materially affect, the MIC’s ICFR. In designing such controls, it should be recognized that due to inherent limitations, any controls or control systems, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the control system are met. As a result of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, including instances of fraud, if any, have been detected or prevented. These inherent limitations include, without limitation, (i) the possibility that management’s assumptions and judgments may ultimately prove to be incorrect under varying conditions and circumstances; or (ii) the impact of isolated errors.

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Additionally, controls may be circumvented by unauthorized acts of individuals, by collusion of two or more people, or by management override. The design of any control system is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential conditions. Projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.