TWC Enterprises Limited — Audit Report / Information 2020

Mar 5, 2021

Independent Auditor’s Report

INDEPENDENT AUDITOR’S REPORT

To the Shareholders and the Board of Directors of TWC Enterprises Limited

Opinion

We have audited the consolidated financial statements of TWC Enterprises Limited (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of earnings and comprehensive earnings, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matter

A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the financial statements for the year ended December 31, 2020. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Property, Plant and Equipment – Assessment of Indicators of Impairment

Refer to Notes 2 and 7 to the financial statements

Key Audit Matter Description

The Company reviews property, plant and equipment for indicators of impairment at each reporting date or whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. As at March 31, 2020, management assessed internal and external factors, which included considerations related to the potential impact of the COVID-19 pandemic, and concluded that there were no events or changes in circumstances that indicated a potential impairment.

Auditing the Company's assessment of whether an indicator of impairment existed as at March 31, 2020 required increased auditor attention due to the judgments made by management when determining whether events or changes in circumstances could indicate a potential impairment.

How the Key Audit Matter Was Addressed in the Audit

Our audit procedures related to the assessment of whether an indicator of impairment existed in property, plant and equipment included the following, among others:

• Evaluated the Company’s identification of triggering events and evaluated the Company’s projected operating performance by comparing the key assumptions to historical results and considerations to recent events including the impact of the COVID-19 pandemic using internal and external information.

• Evaluated the responses as to factors considered and evaluated whether the Company omitted any significant internal or external factors in their assessment.

Other Information

Management is responsible for the other information. The other information comprises:

• Management’s Discussion and Analysis of Financial Condition and Results of Operations; and

• The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

TWC Enterprises Limited ANNUAL REPORT 2020 34

Independent Auditor’s Report

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design 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.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Terng Chen.

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Chartered Professional Accountants Licensed Public Accountants Toronto, Ontario March 5, 2021

35 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Consolidated Balance Sheets

		December 31,	December 31,
(thousands of Canadian dollars)	Notes	2020	2019
ASSETS
Current
Cash and cash equivalents		$ 57,217	$ 66,042
Accounts receivable	21	14,242	8,451
Mortgages and loans receivable	3, 21	21,314	35,119
Inventories and prepaid expenses	4	4,591	5,219
Other assets	5	69,847	85,103
		167,211	199,934
Mortgages and loans receivable	3, 21	3,685	2,216
Other assets	5	25,114	24,085
Right-of-use assets	6	11,359	16,318
Property, plant and equipment	7	410,404	417,306
Intangible assets	8	14,609	15,747
Total assets		$ 632,382	$ 675,606
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities	9	$ 20,717	$ 22,088
Lease liabilities	10	5,339	5,034
Borrowings	11	22,427	20,921
Prepaid annual dues and deposits		16,156	13,314
		64,639	61,357
Lease liabilities	10	7,020	12,207
Borrowings	11	95,773	110,222
Deferred membership fees	12	5,229	7,362
Deferred income tax liabilities	14	45,352	47,928
Total liabilities		218,013	239,076
Share capital	15	102,453	109,490
Retained earnings		307,830	322,454
Accumulated other comprehensive income		4,086	4,586
Total shareholders’ equity		414,369	436,530
Total liabilities and shareholders’ equity		$ 632,382	$ 675,606

See Accompanying Notes

On behalf of the Board of Directors

K. (Rai) Sahi Chairman, President and Chief Executive Officer

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Donald Turple Director

TWC Enterprises Limited ANNUAL REPORT 2020 36

TWC Enterprises Limited Consolidated Statements of Earnings and Comprehensive Earnings

For the years ended December 31, 2020 and 2019

he years ended December 31, 2020 and 2019
(thousands of Canadian dollars, exceptper share amounts)	Notes		2020		2019
REVENUE
Operating revenue		$	127,216	$	163,641
Amortization of membershipfees	12		4,585		5,146
	13		131,801		168,787
EXPENSES
Cost of sales			11,236		22,414
Labour and employee benefts			39,358		70,475
Utilities			7,049		8,118
Selling, general and administrative			3,906		5,454
Property taxes			3,401		3,450
Repairs and maintenance			3,184		4,241
Insurance			2,970		2,724
Fertilizers and pest control products			1,911		2,378
Fuel and oil			908		1,357
Other operating expenses			9,382		14,044
Depreciation of right-of-use assets	6		5,154		5,174
Depreciation of property, plant and equipment	7		12,971		13,880
Amortization of intangible assets	8		1,124		1,065
Interest, net and investment income	16		3,609		4,923
Impairment	7		-		352
Other items	17		21,458		1,644
			127,621		161,693
Earnings before income taxes			4,180		7,094
Income tax expense (recovery)	14
Current			5,779		4,210
Deferred			(2,570)		(2,020)
			3,209		2,190
Net earnings			971		4,904
Unrealized foreign exchange loss in respect of
foreign operations			(500)		(943)
Total comprehensive earnings		$	471	$	3,961
Weighted average shares outstanding (000)	15		25,981		27,111
Earningsper share - basic and diluted	15	$	0.04	$	0.18

See Accompanying Notes

37 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Consolidated Statements of Changes in Shareholders’ Equity

For the years ended December 31, 2020 and 2019

					Accumulated	Accumulated
						Other	Total
(thousands of Canadian dollars,		Common	Share	Retained	Comprehensive		Shareholders’
except common shares)	Notes	Shares	Capital	Earnings		Income	Equity
Balance, January 1, 2019		27,286,052	$ 111,744	$ 321,308	$	5,529	$ 438,581
Activity during 2019
Adoption of IFRS 16		-	-	3,298		-	3,298
Comprehensive earnings (loss)		-	-	4,904		(943)	3,961
Cash dividend	15B	-	-	(2,172)		-	(2,172)
Shares cancelled subject to
normal course issuer bid	15C	(550,432)	(2,254)	(4,884)		-	(7,138)
Balance, December 31, 2019		26,735,620	109,490	322,454		4,586	436,530
Activity during 2020
Comprehensive earnings (loss)		-	-	971		(500)	471
Cash dividend	15B	-	-	(2,091)		-	(2,091)
Shares cancelled subject to
normal course issuer bid	15C	(1,718,178)	(7,037)	(13,504)		-	(20,541)
Balance, December 31, 2020		25,017,442	$ 102,453	$ 307,830	$	4,086	$ 414,369

See Accompanying Notes

TWC Enterprises Limited ANNUAL REPORT 2020 38

TWC Enterprises Limited Consolidated Statements of Cash Flows

For the years ended December 31, 2020 and 2019

he years ended December 31, 2020 and 2019
(thousands of Canadian dollars)	Notes		2020		2019
OPERATING ACTIVITIES
Net earnings		$	971	$	4,904
Items not afecting cash:
Amortization of membership fees	12		(4,585)		(5,146)
Depreciation of property, plant and equipment	7		12,971		13,880
Depreciation of right-of-use assets	6		5,154		5,174
Amortization of intangible assets	8		1,124		1,065
Interest, net	16		3,609		4,923
Unrealized foreign exchange loss (gain)	17		(1,256)		2,810
Unrealized loss (gain) on investment in marketable securities	17		7,311		(2,426)
Loss on sale of common shares in Carnival plc	17		16,240		-
Gain on sale of property, plant and equipment	7		(1,416)		(525)
Equity income from investments in joint ventures	5		(115)		(1,135)
Impairment	7		-		352
Income tax provision			3,209		2,190
Collection of membership fee instalments	12		2,501		2,844
Interest paid			(3,517)		(4,828)
Income taxes refunded (paid)			(6,216)		25,258
Accounts receivable			(5,857)		(2,186)
Inventories and prepaid expenses			628		(304)
Accounts payable and accrued liabilities			(620)		2,386
Prepaid annual dues and deposits			2,842		754
Cash and cash equivalentsprovided byoperatingactivities			32,978		49,990
INVESTING ACTIVITIES
Operating property, plant and equipment expenditures	7		(6,046)		(7,723)
Expansion property, plant and equipment expenditures	7		(3,820)		(1,803)
Proceeds on sale of common shares in Carnival plc	5		5,825		-
Proceeds on sale of property, plant and equipment	7		4,517		729
Right-of-use assets	6		(194)		-
Joint venture acquisition	5		-		(9,236)
Investment in marketable securities			(15,653)		(59,973)
Other long-term assets			597		505
Cash used in investingactivities			(14,774)		(77,501)
FINANCING ACTIVITIES
Deferred fnancing costs			(60)		(60)
Revolving borrowings			8,089		(20,689)
Non-revolving borrowings - amortization payments			(20,956)		(18,618)
Lease liabilities			(4,880)		(5,105)
Mortgages and loans receivable			12,357		9,675
Shares repurchased for cancellation	15		(20,541)		(7,138)
Dividendspaid	15		(2,091)		(2,172)
Cash used in fnancingactivities Net efect of currency translation adjustment on cash and cash equivalents			(28,082) 1,053		(44,107) 453
Net decrease in cash and cash equivalents during the year			(8,825)		(71,165)
Cash and cash equivalents, beginningofyear			66,042		137,207
Cash and cash equivalents, end ofyear		$	57,217	$	66,042

See Accompanying Notes

39 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

1. NATURE OF OPERATIONS

TWC Enterprises Limited (the “Company” or “TWC”) was formed under the laws of Canada. The Company’s executive office is located at 15675 Dufferin Street, King City, Ontario L7B 1K5. TWC is a publicly traded company on the Toronto Stock Exchange (“TSX”) under the symbol “TWC.”

TWC is engaged in golf club operations under the trademark “ClubLink One Membership More Golf.” TWC is Canada’s largest owner, operator and manager of golf clubs with 48½, 18-hole equivalent championship and 3½, 18-hole equivalent academy courses at 37 locations in Ontario, Quebec and Florida (including one managed property).

The golf club operations located in the United States have a functional currency in United States (“US”) dollars, which are translated into Canadian dollars for reporting purposes in these consolidated financial statements.

2. BASIS OF PRESENTATION

(A) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (IASB).

These financial statements were authorized for issuance by the Board of Directors on March 5, 2021.

(B) Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional currency.

(C) Significant accounting judgments and estimates

The preparation of financial statements that conform with IFRS requires management to make judgments and estimates and form assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The following section discusses the accounting estimates, judgments and assumptions that the Company has made and how they affect the amounts reported in the consolidated financial statements.

Judgment is commonly used in determining whether a balance or transaction should be recognized in the financial statements and estimates and assumptions are more commonly used in determining the measurement of recognized transactions and balances. However, judgments and estimates are often interrelated.

On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenue and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from management’s judgments and estimates.

Amortization of membership fees

One of the more critical accounting estimates used by TWC is the weighted average remaining life of memberships sold by join year, which is used to recognize membership fee revenue. The membership fee revenue is amortized over the weighted average remaining membership life by year joined. The amortization period is reviewed annually and any adjustments are made prospectively. Subsequent to this amortization period, membership fees are recorded as revenue upon receipt. These amortization periods should decline each year by one year as each group gets one year older, producing a relatively uniform revenue stream from membership fees over the average remaining life of memberships sold by join year. However, these average ages may not decline on a consistent basis if a disproportionate amount of older or younger members decide to resign at any particular time. This could result in a deferral or acceleration of membership fee revenue, the amount of which would be dependent on the variability of the change in average ages. To date, there have been no significant variances in the average ages.

Property, plant and equipment

Property, plant and equipment are depreciated over their useful lives on a straight-line basis. The Company assesses on an annual basis the useful life and residual value of these assets, which are used in the calculation of depreciation expense. The useful lives assigned are disclosed in the list of accounting policies. Due to the relatively large proportion of these assets to total assets, the selection of the method of depreciation and the length of depreciation period could have a material impact on depreciation expense and net book value of property, plant and equipment.

When determining whether an asset is property, plant and equipment or an investment property, the original intent of the acquisition is considered in order to conclude as to which category is used.

TWC Enterprises Limited ANNUAL REPORT 2020 40

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

2. BASIS OF PRESENTATION (continued)

(C) Significant accounting judgments and estimates (continued)

Intangible assets

Intangible assets includes amounts assigned to the membership base from past business combinations of member golf courses. These are amortized over a thirty year time frame. Inherent in this useful life is the estimate of the weighted average life of a member which is fifteen years, as well as the practice of our current members referring colleagues and family members as new ClubLink members. As part of the thirty year useful life amortization period, it is estimated that the average member (which typically has a fifteen year average life) will refer one other member for a combined thirty year useful life.

Impairment

Property, plant and equipment and intangible assets are reviewed for impairment at each reporting date or whenever events or changes in the circumstances indicate that the carrying amount of an asset may not be recoverable. Estimates are made in the assessment of any impairment calculation, which are described more fully in the accounting policy note.

The impairment process begins with the identification of the appropriate asset or cash-generating unit for purposes of impairment testing. Identification and measurement of any impairments are based on the asset’s recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Value in use is generally based on an estimate of discounted future cash flows. Judgment is required in determining the appropriate discount rate. Assumptions must also be made about future sales, margins and market conditions over the long-term life of the assets or cash-generating unit.

The Company cannot predict if an event that triggers impairment will occur, when it will occur or how it will affect reported asset amounts. Although estimates are reasonable and consistent with current conditions, internal planning and expected future operations, such estimates are subject to significant uncertainties and judgments. As a result, it is reasonably possible that the amounts reported for asset impairments could be different if different assumptions were used or if market and other conditions were to change. The changes could result in non-cash charges that could materially affect the Company’s consolidated financial statements.

Income taxes

TWC records income taxes using the balance sheet liability method of accounting. Under this method, deferred income tax assets and liabilities are determined according to differences between the carrying amounts and tax bases of the assets and liabilities. Management uses judgment and estimates in determining the appropriate rates and amounts to record for deferred income taxes, giving consideration to timing and probability. Previously recorded tax assets and liabilities are remeasured using tax rates in effect when these differences are expected to reverse in accordance with enacted laws or those substantively enacted as at the date of the consolidated financial statements.

The Company operates in several tax jurisdictions. As a result, its income is subject to various rates of taxation. The complexity of tax regulations require assessments of uncertainties and judgments in estimating the taxes the Company will ultimately pay. While the Company believes that its positions and filings are appropriate and supportable, certain matters are periodically challenged by tax authorities. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, provincial, state and local tax audits. The resolution of these uncertainties and the associated final taxes may result in adjustments to the Company’s tax assets and tax liabilities and have a corresponding impact to net earnings.

Contingencies

The Company is exposed to possible losses and gains related to environmental matters and other various claims and lawsuits pending for and against it in the ordinary course of business. Prediction of the outcome of such uncertain events (i.e., being virtually certain, probable, remote or undeterminable), determination of whether recognition or disclosure in the consolidated financial statements is required and estimation of potential financial effects are matters for judgment. Where no amounts are recognized, such amounts are contingent and disclosure may be appropriate. While the amount disclosed in the consolidated financial statements may not be material, the potential for large liabilities exists and therefore these estimates could have a material impact on the Company’s consolidated financial statements.

41 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

2. BASIS OF PRESENTATION (continued)

(D) Accounting policies

The following are the Company’s accounting policies under IFRS:

Scope of consolidation

The consolidated financial statements of TWC, as the parent company, include the accounts of all entities that are controlled directly or indirectly by the Company. This includes the following wholly-owned major operating subsidiaries: ClubLink Corporation ULC and ClubLink US LLC and their respective subsidiaries. Control is achieved when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Intercompany transactions between subsidiaries are eliminated on consolidation.

Accounts receivable

Amounts are recorded at fair value less an allowance for doubtful accounts. In assessing the allowance, consideration is given to the financial solvency of specific customers and performing an evaluation of the remaining receivables according to their default risk primarily based on the age of the receivable and historical loss experience. Account balances are written off against the allowance after all collection efforts have been exhausted and the likelihood of recovery is considered remote. Recoveries are credited back to the allowance account.

Inventories

Inventories are stated at the lower of cost and net realizable value and consist of food, beverages and merchandise. Cost of sales represents the amount of inventories expensed during the year. Cost of sales are determined on a weighted-average basis.

TWC Enterprises Limited ANNUAL REPORT 2020 42

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

2. BASIS OF PRESENTATION (continued)

(D) Accounting policies (continued)

Property, plant and equipment

Property, plant and equipment (“PP&E”) is recorded at cost less impairment and accumulated depreciation.

PP&E include land and improvements thereto, buildings and related equipment. Operating PP&E, including assets under finance lease, are depreciated on a straight-line basis over their estimated useful lives as follows:

Land ............................................................................. Not depreciated Buildings and land improvements ................................. 25 - 60 years Bunkers, cart paths and irrigation .................................. 20 years Equipment ................................................................... 5 - 30 years

PP&E include properties under construction or held for future development. TWC capitalizes all direct costs relating to the development and construction of these properties. TWC also capitalizes interest and direct project development and management costs during construction of qualifying assets.

Intangible assets

Purchased intangible assets with finite useful lives are recorded at acquisition cost and amortized on a straight-line basis over their estimated useful life. All of TWC’s intangible assets have estimable useful lives and are therefore subject to amortization.

Intangible assets are amortized on a straight-line basis as follows: Membership base ..........................................................30 years Brand ............................................................................30 years Below market rent terms ...............................................over the length of the lease

Business combinations

The Company accounts for all business combinations using the acquisition method. As at the date of acquisition, the purchase price is allocated to the fair values of the assets acquired and liabilities assumed. If applicable, goodwill represents the excess of the cost of acquired net assets over the fair values assigned to the tangible and intangible assets acquired and to the fair value of liabilities assumed.

Impairment of long-lived assets

The Company reviews long-lived assets such as property, plant and equipment and acquired intangible assets, for impairment at each reporting date or whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable.

The Company assesses recoverability of these assets by comparing their carrying amount to the recoverable amount, which is the higher of value in use and fair value less costs to sell. Where the carrying amount of an asset or a group of assets exceeds its recoverable amount, the asset is considered to be impaired, and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset’s or group of assets’ recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

Accounts payable, borrowings and other liabilities

Trade payables and other non-derivative financial liabilities are recognized initially at fair value and in the case of borrowings include attributable transaction costs.

43 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

2. BASIS OF PRESENTATION (continued)

(D) Accounting policies (continued)

Deferred income taxes

The Company uses the balance sheet liability method of accounting for deferred income taxes. Temporary differences arising from the difference between the tax base of an asset or liability and its carrying amount on the consolidated balance sheets and unutilized tax losses are used to calculate deferred income tax liabilities or assets. Deferred income tax liabilities and assets are calculated using the substantively enacted tax rates and laws that are expected to be in effect in the periods that the temporary differences are expected to reverse. The effect of changes in tax rates is included in earnings in the period, which includes the substantive enactment.

Foreign currency translation

(a) Functional currency and currency translation account

The functional currency of TWC and its subsidiaries is the local currency. The assets and liabilities of TWC’s foreign operations where the functional currency is not the Canadian dollar are translated using the rate of exchange at the balance sheet date, whereas revenue and expenses are translated using average exchange rates during the respective periods. The resulting foreign currency translation adjustments are included in accumulated other comprehensive earnings or loss. The accumulated balance of the foreign currency translation reserve reflects the differences since January 1, 2010, the transition date to IFRS. When a foreign operation is disposed of, the foreign currency translation adjustment applicable to that entity is recognized in the consolidated statement of earnings.

(b) Local currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the entity at the applicable exchange rate on the date of each transaction. Monetary assets and liabilities that are denominated in foreign currencies other than the functional local currency are translated at the year-end closing rate with the resulting gains and losses reflected in the consolidated statement of earnings.

(c) Cash flow statement

Operating, investing and financing cash flows are translated using average exchange rates during the respective periods. The effects on cash due to fluctuations in exchange rates are shown in a separate line in the consolidated statement of cash flows.

Financial instruments

Financial assets must be classified and measured based on three categories: amortized cost, fair value through other comprehensive income (“FVTOCI”) and fair value through profit or loss (“FVTPL”). Financial liabilities are classified and measured based on two categories: amortized cost and FVTPL. Initially, all financial assets and financial liabilities are recorded in the consolidated balance sheets at fair value. After initial recognition, the effective interest related to financial assets and liabilities measured at amortized cost and the gain or loss arising from the change in the fair value of financial assets or liabilities classified as FVTPL are included in net income for the year in which they arise. At each consolidated balance sheet date, financial assets measured at amortized cost or at FVTOCI, except for investment in equity instruments, require an impairment analysis using the expected credit loss model (“ECL model”) to determine the expected credit losses using judgment determined on a probability weighting basis.

The following is a summary of the accounting model the Company applies to each of its significant categories of financial instruments:

instruments:
Balance Sheet Classifcation	Financial Instrument Designation
Cash and cash equivalents	Amortized cost
Accounts receivable	Amortized cost
Investments	FVTPL
Mortgages and loans receivable	Amortized cost
Accountspayable and accrued liabilities	Amortized cost
Borrowings	Amortized cost

TWC Enterprises Limited ANNUAL REPORT 2020 44

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

2. BASIS OF PRESENTATION (continued)

(D) Accounting policies (continued)

Financial instruments (continued)

Transaction costs related to the Company’s borrowings are netted against the related liability and are expensed using the effective interest method.

The fair value of financial instruments that are not quoted in an active market is determined by applying various valuation techniques with maximum use of observable market inputs. The valuation techniques used are discounted cash flows, option pricing models, valuations with reference to recent transactions in the same instrument and valuation with reference to other financial instruments that are substantially the same.

An item may only be designated in a hedging relationship if changes in fair value of the hedging item are expected to offset virtually all changes in fair value of the hedged item attributable to the hedged risk. This offsetting must be expected at inception of the hedge and throughout the hedging period.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Company also documents and assesses, both at hedge inception and on an ongoing basis, whether the derivative financial instruments that are used in hedging transactions are highly effective in offsetting expected changes in the hedged items.

Gains and losses on derivative financial instruments that are not designated in a hedging relationship and gains and losses related to the “ineffective” portion of effective hedges are recognized in other operating income and expenses.

Hedge accounting is discontinued prospectively if the hedging instrument or hedged item is terminated or sold, or if it is determined that the hedging instrument is no longer effective.

Share capital

Repurchased common shares are recorded at acquisition cost and are presented as a deduction from shareholders’ equity. On retirement of treasury shares, any excess over the calculated average issue price is charged to retained earnings.

Revenue recognition

Golf club operations revenue includes annual dues (recognized on a daily basis as earned) and sales to members and customers of green fees, cart rentals, food and beverage, merchandise and room rentals, which are all recognized when the service is provided. The Company recognizes its annual dues revenue on a straight-line basis throughout the year based on when its properties are open and services are provided. Membership fee revenue is amortized over the estimated weighted average remaining membership life by year joined. Subsequent to this amortization period, membership fees are recorded as revenue upon receipt.

Non-monetary transactions

The Company records non-monetary transactions at the fair value of the assets or services exchanged unless the exchange transaction lacks commercial substance or the fair value of neither the asset or service received nor the asset or service given up is reliably measurable.

The Company has recorded $462,000 (2019 – $875,000) of operating revenue relating to non-monetary transactions.

Lease payments

The Company is a lessee of property, plant and equipment, mainly leased golf clubs, under leases that do not transfer the substantive risks and rewards of ownership.

At the commencement date of a lease, a lessee will recognize a liability to make lease payments and an asset representing the right-of-use to use the underlying asset during the lease term. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

45 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

2. BASIS OF PRESENTATION (continued)

(D) Accounting policies (continued)

Earnings per share

Basic earnings per share is calculated by dividing net earnings by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated using the treasury stock method.

Joint ventures

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Investments in joint ventures are accounted for using the equity method. Under the equity method, the investment in a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Company’s share of net assets of the joint venture since the acquisition date. The consolidated statement of income reflects the Company’s share of the results of operations of the joint venture. Any change in other comprehensive income of the joint venture is presented as part of the Company’s consolidated statement of comprehensive earnings.

When the Company’s share of losses of a joint venture exceeds the Company’s interest in that joint venture, the Company discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the joint venture.

When the Company transacts with a joint venture, profits and losses resulting from the transactions are recognized in the Company’s consolidated financial statements only to the extent of interests in the joint venture that are not related to the Company.

Subsidies

As per IAS 20, Government Grants, the Company recognizes government assistance, in the form of grants or forgivable loans, when there is reasonable assurance that the Company will be able to comply with the conditions attached to the assistance and that the assistance will be received. Government assistance that compensates the Company for expenses incurred is recognized in the Consolidated Statements of Earnings and Comprehensive Earnings, as a reduction of the related expense, in the periods in which the expenses are recognized.

On April 11, 2020, the Government of Canada passed the Canada Emergency Wage Subsidy (“CEWS”) to support employers experiencing certain revenue declines as a result of the COVID-19 pandemic. The Company applied for CEWS for the period from March 15, 2020 to December 31, 2020. For the year ended December 31, 2020, the Company recognized a recovery of labour and employee benefits expense of $11,948,000. As at December 31, 2020, the Company has an amount receivable related to CEWS of $9,045,000 included in accounts receivable on the Consolidated Balance Sheets. This amount was received subsequent to year end.

3. MORTGAGES AND LOANS RECEIVABLE

Mortgages and loans receivable consist of the following:

Mortgages and loans receivable consist of the following:
(thousands of Canadian dollars)		2020		2019
Former ofcer loan	$	-	$	1,258
Vendor take-back mortgages		4,199		1,528
Relatedpartyreceivable(Note 18)		20,800		34,549
		24,999		37,335
Less: currentportion		21,314		35,119
	$	3,685	$	2,216

The vendor take-back mortgages have maturity dates to June 2023 and have an average fixed interest rate of 5.95% (2019 – 5.41%).

TWC Enterprises Limited ANNUAL REPORT 2020 46

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

4. INVENTORIES AND PREPAID EXPENSES

Inventories and prepaid expenses consist of the following:

Inventories and prepaid expenses consist of the following:
(thousands of Canadian dollars)		2020		2019
Merchandise and supplies	$	3,036	$	3,099
Food and beverage		610		902
Other		945		1,218
	$	4,591	$	5,219

5. OTHER ASSETS

Other assets consist of the following:

(thousands of Canadian dollars)	2020	2019
Investment in joint ventures	$ 22,996	$ 23,492
Common shares in Carnival plc	-	22,066
Investment in Automotive Properties REIT
(6,521,657 units; December 31, 2019 - 5,188,257 units)	69,847	63,037
Investment in other marketable securities	1,531	-
Other	587	593
	94,961	109,188
Less: currentportion	69,847	85,103
	$ 25,114	$ 24,085

On March 17, 2020, TWC sold its interest in Carnival plc for $5,825,000. This sale resulted in a loss of $16,240,000 reflected in other items.

The Company’s investment in joint ventures consist of the following:

(thousands of Canadian dollars)		2020		2019
Balance, beginning of year	$	23,492	$	7,834
Acquisition		-		14,501
Equity income		115		1,135
Recognized deferred proft		-		22
Return of capital on investments		(611)		-
Balance, end ofyear	$	22,996	$	23,492

On August 16, 2019, TWC purchased a 50% interest in a real estate management company and various real estate housing investments with ownership percentages ranging from 11.67% to 23.33% for $14,501,000. This purchase price was broken down into a cash outlay of $9,236,000 and promissory notes in the amount of $5,265,000. Included in this acquisition was an 11.67% interest in the Highland Gate project, bringing TWC’s total interest to be 61.67%. Notwithstanding this fact, TWC does not control this project due to the fact that the Company can only nominate one of the two directors for this asset, and decisions need to be unanimous. Therefore, Highland Gate is jointly controlled and is accounted for as a joint venture.

Control of the real estate management company and the various real estate housing investments is shared with TWC’s partners and are considered to be joint ventures which are to be accounted for using the equity accounting method. The real estate management company manages the real estate housing investments acquired.

47 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

5. OTHER ASSETS (continued)

Summarized financial information for the real estate management company and the real estate housing investments at 100% and TWC’s ownership interest is provided below:

								2020		2019
			Real	Estate	Real Estate
			Management			Housing
(thousands of Canadian dollars)	Highland Gate		Company		Investments			Total		Total
Current assets	$	2,686	$	2,747	$	2,033	$	7,466	$	4,429
Related party		-		189		11		200		(200)
Land and other long-term assets		72,729		634		39,407		112,770		112,251
Secured project debt		(31,677)		-		(9,756)		(41,433)		(46,648)
Loan from TWC		-		(800)		-		(800)		(870)
Liabilities		(11,086)		(1,000)		(7,330)		(19,416)		(10,909)
Net assets at 100%		32,652		1,770		24,365		58,787		58,053
Net assets at Company’s share		20,135		885		3,262		24,282		24,167
Return of capital on investments		(631)		-		20		(611)		-
Deferredproft		(675)		-		-		(675)		(675)
Net assets attributable to TWC	$	18,829	$	885	$	3,282	$	22,996	$	23,492
Net assets attributable topartners	$	13,823	$	885	$	21,083	$	35,791	$	34,561
Equityincome(loss)	$	(2)	$	115	$	2	$	115	$	1,135

6. RIGHT-OF-USE ASSETS

Right-of-use assets consists of the following:

(thousands of Canadian dollars)	Land and Buildings	Land and Buildings	Equipment	Equipment		Total
At January 1, 2019	$	-	$	-	$	-
Adoption of IFRS 16		21,372		531		21,903
Depreciation		(5,010)		(164)		(5,174)
Impairment		(402)		-		(402)
Foreign exchange		-		(9)		(9)
At December 31, 2019		15,960		358		16,318
Additions		-		194		194
Depreciation		(4,944)		(210)		(5,154)
Foreign exchange		-		1		1
At December 31, 2020	$	11,016	$	343	$	11,359

TWC Enterprises Limited ANNUAL REPORT 2020 48

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

			Buildings	Bunkers,
			and Land	Cart Paths
(thousands of Canadian dollars)		Land	Improvements	and Irrigation	Equipment	Total
Cost
At January 1, 2019	$	292,199	$ 159,177	$ 104,397	$ 89,547	$ 645,320
Additions		1,104	1,469	2,032	4,921	9,526
Impairment		-	(2,815)	(1,071)	(1,382)	(5,268)
Disposals		(323)	-	-	(3,223)	(3,546)
Foreign exchange diference		(547)	(488)	(414)	(434)	(1,883)
At December 31, 2019		292,433	157,343	104,944	89,429	644,149
Additions		617	4,048	1,659	3,542	9,866
Disposals		(2,395)	(1,561)	(691)	(3,560)	(8,207)
Foreign exchange diference		(212)	(192)	(168)	(135)	(707)
At December 31, 2020	$	290,443	$ 159,638	$ 105,744	$ 89,276	$ 645,101
Accumulated Depreciation
At January 1, 2019	$	-	$ 75,763	$ 75,397	$ 70,397	$ 221,557
Depreciation		-	4,657	4,711	4,512	13,880
Impairment		-	(2,642)	(1,022)	(1,264)	(4,928)
Disposals		-	-	-	(3,025)	(3,025)
Foreign exchange diference		-	(147)	(192)	(302)	(641)
At December 31, 2019		-	77,631	78,894	70,318	226,843
Depreciation		-	5,101	4,234	3,636	12,971
Disposals		-	(487)	(642)	(3,678)	(4,807)
Foreign exchange diference		-	(79)	(109)	(122)	(310)
At December 31, 2020	$	-	$ 82,166	$ 82,377	$ 70,154	$ 234,697
Net book value
at December 31, 2019	$	292,433	$ 79,712	$ 26,050	$ 19,111	$ 417,306
Net book value
at December 31, 2020	$	290,443	$ 77,472	$ 23,367	$ 19,122	$ 410,404

Certain property, plant and equipment have been assigned as collateral for borrowings (Note 11).

As at December 31, 2020, ClubLink had equipment under lease with a net book value of $20,000 (2019 – $1,168,000).

On October 13, 2017, the clubhouse at Le Maître de Mont-Tremblant sustained a significant fire event. In 2020, $3,462,000 was spent on the reconstruction of the clubhouse which was operational in October 2020.

On February 4, 2020, ClubLink sold Greenhills Golf Club and recorded an impairment charge in the amount of $352,000 in the 2019 financial statements in relation to this transaction, of which $340,000 was recorded to property, plant and equipment.

On May 21, 2020, ClubLink sold Harwood, a property held for future development, for proceeds of $2,650,000 including a $2,400,000 vendor take-back mortgage. Net proceeds totalled $2,517,000 and ClubLink recorded a gain of $503,000 on the sale.

On July 13, 2020, ClubLink sold Club de Golf Val des Lacs for proceeds of $1,750,000 including a $300,000 vendor take-back mortgage. Net proceeds totalled $1,680,000 and ClubLink recorded a gain of $835,000 on the sale.

Proceeds collected on the sale of various pieces of miscellaneous equipment amounted to $320,000 (2019 - $729,000).

Net gain on property, plant and equipment consists of the following:

Net gain on property, plant and equipment consists of the following:
(thousands of Canadian dollars)		2020		2019
Gain on sale of Harwood	$	(503)	$	-
Gain on sale of Val des Lacs		(835)		-
Gain on disposal of miscellaneous equipment		(78)		(525)
	$	(1,416)	$	(525)

49 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

8. INTANGIBLE ASSETS

Intangible assets consist of the following:

Iibl i f h flli
ntange assets consst o te oowng:
							Total
	Membership						Intangible
(thousands of Canadian dollars)		base		Brand		Other	Assets
Cost
At January 1, 2019	$	12,272	$	13,477	$	2,447	$ 28,196
Foreign exchange diference		(101)		-		(10)	(111)
At December 31, 2019		12,171		13,477		2,437	28,085
Foreign exchange diference		(40)		-		(4)	(44)
At December 31, 2020	$	12,131	$	13,477	$	2,433	$ 28,041
Accumulated amortization
At January 1, 2019	$	4,689	$	4,590	$	2,052	$ 11,331
Amortization		453		458		154	1,065
Foreign exchange diference		(47)		-		(11)	(58)
At December 31, 2019		5,095		5,048		2,195	12,338
Amortization		518		485		121	1,124
Foreign exchange diference		(26)		-		(4)	(30)
At December 31, 2020	$	5,587	$	5,533	$	2,312	$ 13,432
Net book value at December 31, 2019	$	7,076	$	8,429	$	242	$ 15,747
Net book value at December 31, 2020	$	6,544	$	7,944	$	121	$ 14,609

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following:

(thousands of Canadian dollars)		2020		2019
Trade payables	$	2,680	$	3,481
Accrued payroll costs		2,619		3,213
Accrued interest		625		747
Income taxes payable		4,885		4,072
Accrued liabilities and other		9,908		10,575
	$	20,717	$	22,088

TWC Enterprises Limited ANNUAL REPORT 2020 50

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

10. LEASE LIABILITIES

The following table represents the change in the balance of the Company’s lease liabilities:

(thousands of Canadian dollars)	Land and	Buildings	Equipment	Equipment		Total
At January 1, 2019	$	-	$	866	$	866
Adoption of IFRS 16		21,372		531		21,903
Interest expense		1,042		63		1,105
Lease payments		(5,471)		(739)		(6,210)
Impairment		(412)		-		(412)
Foreign exchange		-		(11)		(11)
At December 31, 2019		16,531		710		17,241
Additions		-		194		194
Interest expense		847		48		895
Lease payments		(5,503)		(472)		(5,975)
Foreign exchange		-		4		4
At December 31, 2020		11,875		484		12,359
Less: currentportion		5,059		280		5,339
	$	6,816	$	204	$	7,020

Future minimum payments of lease liabilities are as follows:

Future minimum payments of lease liabilities are as follows:
						Total
					Minimum
		Lease				Lease
(thousands of Canadian dollars)	Liabilities			Interest	Payments
2021	$	5,339	$	582	$	5,921
2022		4,504		279		4,783
2023		1,180		114		1,294
2024		1,247		41		1,288
2025		10		5		15
2026 and thereafter		79		16		95
	$	12,359	$	1,037	$	13,396

The above lease liabilities have a weighted average interest rate of 6.1% (2019 - 6.2%).

Land Lease Rent

TWC has certain golf clubs that it operates, which are under lease arrangements. The following are the golf clubs under lease with expiration dates:

• The Club at Bond Head: December 31, 2021

• The Country Club: December 31, 2022

• National Pines Golf Club: November 15, 2024

In December 2017, the landlord of the Country Club provided the Company with a five year notice - as provided in the lease document. The lease now expires on December 31, 2022, rather than the original expiration of December 31, 2026.

In December 2018, the Company provided the landlord of The Club at Bond Head with a three year notice - as provided in the lease document. The lease now expires on December 31, 2021, rather than the original expiration date of December 31, 2029.

During 2020, the Company paid $4,000 (2019 - $5,000) in percentage rent in addition to the land lease commitments described above.

51 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

11. BORROWINGS

Borrowings consist of the following:

Borrowings consist of the following:
(thousands of Canadian dollars)		2020		2019
Secured revolving operating line of credit to a maximum of $50,000,000
due September 11, 2022 (a)	$	8,089	$	-
Mortgages with blended monthly payments of principal and interest
8.345% Mortgages due July 1, 2022		4,110		6,440
7.550% Mortgage due July 1, 2022		488		768
7.416% Mortgages due September 1, 2023		9,056		11,918
7.268% Mortgage due July 1, 2024		4,482		5,539
8.060% Mortgage due July 1, 2024		24,155		29,826
6.194% Mortgage due March 1, 2026		25,383		29,352
6.315% Mortgage due December 1, 2027		25,387		28,184
8.000% Mortgage due October 1, 2029
(US $10,324,000; 2019 - US $11,098,000)		13,144		14,414
Other - maturingfrom August 16, 2022 to August 16, 2024(Note 5)		4,315		5,265
		118,609		131,706
Gross borrowings		118,609		131,706
Less: deferred fnancingcosts		409		563
Borrowings		118,200		131,143
Less: currentportion		22,427		20,921
	$	95,773	$	110,222

Note a: As at December 31, 2020, there are $1,018,000 (2019 – $1,018,000) in letters of credit issued, representing unavailable funds reserved for government withdrawals, and there is availability of $40,893,000 (2019 – $48,982,000) under this facility. This is a revolving operating line of credit with a two-year term and provisions for annual one-year extensions. This facility bears interest at bankers’ acceptance rates plus 1.60% or 2.16% (2019 – 3.74%).

Borrowings are collateralized by certain property, plant and equipment assets (Note 7).

Minimum principal debt repayments for the next five years and thereafter are as follows:

Minimum principal debt repayments for the next fve years and thereafter are as follows:
	Total
(thousands of Canadian dollars)	Borrowings
2021	$ 22,427
2022	30,842
2023	21,565
2024	16,390
2025	10,706
2026 and thereafter	16,679
	$ 118,609

12. DEFERRED MEMBERSHIP FEES

Deferred membership fees consist of the following:

Deferred membership fees consist of the following:
(thousands of Canadian dollars)		2020		2019
Unamortized membership fees (Note 12A)	$	30,479	$	28,726
Future membershipfee instalments(Note 12B)		(25,250)		(21,364)
Deferred membershipfees	$	5,229	$	7,362

TWC Enterprises Limited ANNUAL REPORT 2020 52

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

12. DEFERRED MEMBERSHIP FEES (continued)

Unamortized membership fees represents the portion of collected or committed membership fees that have not been booked as revenue.

Future membership fee instalments represents the amount of uncollected committed membership fee instalments. The Company forgives future instalments upon resignation of a member.

The net deferred membership fees represents the excess of membership fees collected over membership fee revenue recognized.

• (A) Changes in unamortized membership fees are as follows:

(thousands of Canadian dollars)	2020	2019
Balance, beginning of year	$ 28,726	$ 32,597
Sales to new members	8,751	4,147
Transfer and reinstatement fees	1,333	551
Resignations and terminations	(3,626)	(3,360)
Amortization of membership fees to revenue	(4,585)	(5,146)
Sale of Greenhills Golf Club	(104)	-
Exchange diference	(16)	(63)
Balance, end ofyear	$ 30,479	$ 28,726

• (B) Changes in future membership fee instalments are as follows:

(thousands of Canadian dollars)	2020	2019
Balance, beginning of year	$ 21,364	$ 22,915
Sales to new members	8,751	4,147
Transfer and reinstatement fees	1,333	551
Resignations and terminations	(3,626)	(3,360)
Instalments received in cash	(2,501)	(2,844)
Sale of Greenhills Golf Club	(52)	-
Exchange diference	(19)	(45)
Balance, end ofyear	$ 25,250	$ 21,364

13. REVENUE

Revenue consists of the following:

Year ended December 31, 2020 Year ended December 31, 2019	Year ended December 31, 2020 Year ended December 31, 2019
Canadian US Golf Club Golf Club (thousands of Canadian dollars) Operations Operations Total	Canadian US Golf Club Golf Club Operations Operations Total
Annual dues $ 48,081 $ 6,215 $54,296 Golf 33,241 9,432 42,673 Corporate events 2,167 160 2,327 Membership fees 4,239 346 4,585 Food and beverage 14,642 1,428 16,070 Merchandise 7,941 603 8,544 Rooms and other 3,360 (54) 3,306	$ 49,783 $ 6,629 $ 56,412 24,312 11,694 36,006 11,036 493 11,529 4,793 353 5,146 40,052 2,938 42,990 12,172 1,019 13,191 3,487 26 3,513
$ 113,671 $ 18,130 $ 131,801	$ 145,635 $ 23,152 $ 168,787

53 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

14. INCOME TAXES

(A) Income tax provision

The provision for income taxes differs from the expected amount calculated by applying the Canadian combined federal and provincial corporate income tax rates to earnings before income taxes. The major components of these differences are explained as follows:

as follows:
(thousands of Canadian dollars)		2020	2019
Earnings before income taxes	$	4,180	$ 7,094
Expected corporate tax rate		26.50%	26.50%
Calculated income tax provision		1,108	1,880
Diference in statutory tax rates		26	19
Capital items		2,473	(321)
Foreign exchange		(61)	344
Permanent diferences		59	60
Unbeneftted operating losses		339	245
Other		(735)	(37)
Total tax expense	$	3,209	$ 2,190

The tax rate used for the 2020 and 2019 reconciliations above is the corporate rate of 26.50% payable by corporate entities in Ontario, Canada.

(B) Deferred income tax liabilities

The tax effects of temporary differences that give rise to the deferred income tax assets and liabilities are summarized as below:

	Capital/
Intangible Assets			Other		Foreign
(thousands of Canadian dollars)	and Other	Capital	Items		Exchange		Total
Balance, January 1, 2019	$ 44,578	$	2,250	$	1,949	$	48,777
Recognized in earnings	215		-		(2,235)		(2,020)
Adoption of IFRS 16	1,189		-		-		1,189
Recognized in equitythrough comprehensive earnings	(18)		-		-		(18)
As at December 31, 2019	45,964		2,250		(286)		47,928
Recognized in earnings	(2,431)		-		(139)		(2,570)
Recognized in equitythrough comprehensive earnings	(6)		-		-		(6)
As at December 31, 2020	$ 43,527	$	2,250	$	(425)	$	45,352

There are no unused tax losses on which the deferred tax assets have been recognized as at December 31, 2020 (2019 - nil).

TWC Enterprises Limited ANNUAL REPORT 2020 54

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

15. SHARE CAPITAL

(A) Authorized and issued share capital

The authorized share capital is an unlimited number of common shares and preferred shares. As at December 31, 2020, there are 25,017,442 common shares outstanding (December 31, 2019 - 26,735,620). As at December 31, 2020, no preferred shares have been issued. Please refer to the consolidated statements of changes in shareholders’ equity for details.

(B) Dividends

During 2019, TWC declared and paid four quarterly cash dividends of 2 cents per common share for a total of 8 cents per common share or $2,172,000 for the year.

During 2020, TWC declared and paid four quarterly cash dividends of 2 cents per common share for a total of 8 cents per common share or $2,091,000 for the year.

(C) Shares repurchased and cancelled

The Company was approved by the Toronto Stock Exchange for a normal course issuer bid to purchase up to 1,366,000 of its common shares which expired on September 19, 2019. From September 20, 2018 to December 31, 2018, the Company repurchased for cancellation 31,087 common shares for a total purchase price of $392,380 or $12.62 per common share, including commissions. From January 1, 2019 to September 19, 2019, the Company repurchased for cancellation 530,332 common shares for a total purchase price of $6,867,799 or $12.95 per common share, including commissions.

The Company was approved by the Toronto Stock Exchange for a normal course issuer bid to purchase up to 1,338,000 of its common shares which expired on September 19, 2020. From September 20, 2019 to December 31, 2019, the Company repurchased for cancellation 20,100 common shares for a total purchase price of $270,126 or $13.44 per share, including commissions. From January 1, 2020 to September 19, 2020 the Company repurchased for cancellation 1,307,778 common shares for a total purchase price of $15,150,616 or $11.59 per share, including commissions.

The Company was approved by the Toronto Stock Exchange for a normal course issuer bid to purchase up to 1,271,000 of its common shares which will expire on September 19, 2021. From September 20, 2020 to December 31, 2020 the Company repurchased for cancellation 410,400 common shares for a total purchase price of $5,389,859 or $13.13 per share, including commissions.

In recording the repurchase and cancellation of shares, share capital is reduced by the weighted average issue price of the outstanding common shares with the differential to the purchase price being credited or charged to retained earnings.

(D) Earnings per share

Diluted earnings per share is the same as basic earnings per share.

55 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

16. INTEREST, NET AND INVESTMENT INCOME

Interest, net and investment income consists of the following:

Interest, net and investment income consists of the following:
(thousands of Canadian dollars)		2020		2019
Revolving lines of credit	$	80	$	127
Non-revolving mortgages		8,465		9,836
Lease liabilities (Note 10)		895		1,105
Line of credit to related party		(452)		(1,489)
Amortization of deferred fnancing costs		214		237
Other		262		102
Interest revenue and investment income		(5,855)		(4,995)
	$	3,609	$	4,923

17. OTHER ITEMS

Other items consist of the following loss (income) items:

(thousands of Canadian dollars)	2020		2019
Gain on sale of property, plant and equipment	$ (1,416)	$	(525)
Insurance proceeds	-		(2,141)
Foreign exchange loss (gain)	(1,256)		6,944
Unrealized loss (gain) on investment in marketable securities	7,311		(2,426)
Loss on sale of common shares in Carnival plc	16,240		-
Equity income from investments in joint ventures (Note 5)	(115)		(1,135)
Other	694		927
	$ 21,458	$	1,644

The exchange rate used for translating US denominated assets has changed from 1.2988 at December 31, 2019 to 1.2732 at December 31, 2020. This has resulted in a foreign exchange gain of $1,256,000 for the year ended December 31, 2020 on the translation of the Company’s US denominated financial instruments.

On March 17, 2020, TWC sold its interest in Carnival plc for $5,825,000. This sale resulted in a loss of $16,240,000 reflected above.

TWC Enterprises Limited ANNUAL REPORT 2020 56

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

18. RELATED PARTY TRANSACTION S

The immediate parent and controlling party of the Company is Paros Enterprises Limited (“Paros”) and its parents – S.N.A. Management Limited. These companies are privately-owned companies whose shareholder is the Chairman, President and Chief Executive Officer of the Company – K. (Rai) Sahi.

K. (Rai) Sahi, the Chairman, President and Chief Executive Officer of the Company is also the controlling shareholder of Morguard Corporation (“Morguard”).

The Company has provided an unsecured revolving demand credit facility to Morguard in the amount of $50,000,000 with no fixed maturity date. Morguard has provided an unsecured revolving demand credit facility to TWC in the amount of $50,000,000 with no fixed maturity date. These facilities bear interest on a basis which is consistent with the entity’s borrowing costs.

Summarized information regarding these facilities is as follows:

Summarized information regarding these facilities is as follows:
	For the year ended
	December 31,	December 31,
(thousands of Canadian dollars)	2020	2019
Loan receivable from Morguard	20,000	33,679
Net interest receivable	45	304
Net interest earned	452	1,489

The Company has provided an unsecured revolving demand credit facility to Paros in the amount of $5,000,000, with no fixed maturity date. Paros has provided an unsecured revolving demand credit facility to TWC in the amount of $5,000,000 with no fixed maturity date. These facilities bear interest at prime plus 1%. During 2020 and 2019, there were no advances or repayments under this facility.

The purpose of these credit facilities is to allow each of the above entities to manage its financing activities in the most effective manner.

The Company has provided an unsecured revolving demand credit facility to an investment in joint venture in the amount of $3,000,000, with no fixed maturity date. This facility bears interest at prime plus 1.25%. As at December 31, 2020, the amount receivable on this facility was $800,000 (December 31, 2019 - $870,000). Interest receivable at December 31, 2020 was $4,000 (December 31, 2019 - $4,000), and interest earned amounted to $66,000 for the year ended December 31, 2020 (December 31, 2019 - $25,000).

The Company receives managerial and consulting services from Morguard. The Company paid a management fee of $695,000 for the year ended December 31, 2020 (December 31, 2019 - $695,000), under a contractual agreement, which is included in operating expenses. Morguard also provides back-office services to ClubLink US Corporation. The Company paid a management fee of US$460,000 (CDN$617,000) for the year ended December 31, 2020 (December 31, 2019 - US$460,000; CDN$610,000) under a contractual agreement, which is included in direct operating expenses.

During 2020, the Company earned $264,000 (2019 - $630,000) in operating revenue (primarily food and beverage and corporate events) from related parties controlled by the Chairman, President and Chief Executive Officer of the Company.

A total of US$53,000 of rental revenue was earned by TWC for the year ended December 31, 2020 (December 31, 2019 - US$53,000) from Morguard relating to a shared office facility in Florida.

All related party transactions were made in the ordinary course of business and on substantially the same terms including interest rates and security as for comparable transactions with parties of a similar standing.

57 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

19. SEGMENTED INFORMATION

TWC’s reportable segments are strategic business units that offer different services and/or products. The Company’s operating segments have been determined based on reports reviewed that are used to make strategic decisions by the President and CEO, the Company’s chief operating decision maker.

TWC is engaged in golf club operations under the trademark “ClubLink One Membership More Golf”. TWC is Canada’s largest owner, operator and manager of golf clubs with 48½, 18-hole equivalent championship and 3½, 18-hole equivalent academy courses (including one managed property), at 37 locations in two separate geographic Regions: (a) Canada and (b) United States.

TWC’s golf clubs are strategically organized in clusters that are located in densely populated metropolitan areas and resort destinations frequented by those who live and work in these areas. By operating in regions, TWC is able to offer golfers a wide variety of unique membership, corporate event and resort opportunities. TWC is also able to obtain the benefit of operating synergies to maximize revenue and achieve economies of scale to reduce costs.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Any inter-segment transfers are recorded at cost.

Geographical information is not separately presented as the industry segments operate in separate and distinct geographical segments on their own.

segments on their own.
		For the Year Ended			December 31,		2020
	Canadian			US
	Golf Club		Golf Club		Corporate
(thousands of Canadian dollars)	Operations		Operations		Operations			Total
Operating revenue	$	109,432	$	17,784	$	-	$	127,216
Direct operatingexpenses		(63,219)		(17,217)		(2,869)		(83,305)
Net operating income (loss)		46,213		567		(2,869)		43,911
Amortization of membership fees		4,239		346		-		4,585
Depreciation and amortization		(17,545)		(1,704)		-		(19,249)
Other items		1,382		(165)		(22,675)		(21,458)
Segment earnings (loss) before
interest and income taxes	$	34,289	$	(956)	$	(25,544)		7,789
Interest, net (unallocated)								(3,609)
Provision for income taxes(unallocated)								(3,209)
Net earnings							$	971
Capital expenditures	$	9,784	$	82	$	-	$	9,866

TWC Enterprises Limited ANNUAL REPORT 2020 58

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

19. SEGMENTED INFORMATION (continued)

		For the	Year	Ended December 31, 2019	Ended December 31, 2019	Ended December 31, 2019	Ended December 31, 2019	Ended December 31, 2019
	Canadian			US
	Golf Club		Golf Club		Corporate
(thousands of Canadian dollars)	Operations		Operations		Operations			Total
Operating revenue	$	140,842	$	22,799	$	-	$	163,641
Direct operatingexpenses		(109,575)		(21,868)		(3,212)		(134,655)
Net operating income (loss)		31,267		931		(3,212)		28,986
Amortization of membership fees		4,793		353		-		5,146
Depreciation and amortization		(18,288)		(1,831)		-		(20,119)
Impairment		(352)		-		-		(352)
Other items		1,682		(19)		(3,307)		(1,644)
Segment earnings (loss) before
interest and income taxes	$	19,102	$	(566)	$	(6,519)		12,017
Interest, net (unallocated)								(4,923)
Provision for income taxes(unallocated)								(2,190)
Net earnings							$	4,904
Capital expenditures	$	8,278	$	1,248	$	-	$	9,526

				December 31, 2020	December 31, 2020
	Canadian		US
	Golf Club	Golf Club		Corporate
(thousands of Canadian dollars)	Operations	Operations		Operations	Total
Segment assets	$ 459,558	$	29,188	$ 143,636	$ 632,382
Segment liabilities	$ 169,764	$	7,950	$ 40,299	$ 218,013
				December 31, 2019
	Canadian		US
	Golf Club	Golf Club		Corporate
(thousands of Canadian dollars)	Operations	Operations		Operations	Total
Segment assets	$ 461,947	$	27,612	$ 186,047	$ 675,606
Segment liabilities	$ 192,135	$	9,005	$ 37,936	$ 239,076

59 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

20. CAPITAL MANAGEMENT

TWC’s objective is to ensure that capital resources are readily available to meet obligations as they become due, to complete its approved capital expenditure program and to take advantage of attractive acquisitions as these opportunities arise.

Certain secured debt obligations of the Company have restrictive covenants that require maintenance of certain financial ratios. These covenants include debt service ratios, borrowings to adjusted equity/asset ratios and a minimum total equity requirement. For all of 2020 and 2019, the Company was in compliance with these borrowings covenants.

TWC monitors capital on the basis of the net borrowings-to-adjusted equity ratio. This ratio is calculated as net borrowings divided by adjusted equity. Net borrowings is calculated as gross borrowings less cash. Adjusted equity is comprised of all components of shareholders’ equity (i.e., share capital, retained earnings and accumulated other comprehensive gain or loss) and deferred membership fees less a related statutory tax provision.

The Company sets its capital structure in proportion to risk. It manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, purchase and cancel shares pursuant to issuer bids, issue new shares, or sell assets to reduce borrowings.

TWC’s objective is to maintain a net borrowings-to-adjusted equity ratio of less than 2.50, in order to maintain access to financing at a reasonable cost. The net borrowings-to-adjusted equity ratios at December 31, 2020 and December 31, 2019, are as follows:

(thousands of Canadian dollars)	2020	2019
Gross borrowings	$ 118,609	$ 131,706
Cash and cash equivalents	(57,217)	(66,042)
Net borrowings(A)	$ 61,392	$ 65,664
Share capital	$ 102,453	$ 109,490
Retained earnings	307,830	322,454
Accumulated other comprehensive gain	4,086	4,586
Deferred membership fees	5,229	7,362
Less: taxprovision at statutoryincome tax rates	(1,386)	(1,951)
Adjusted equity (B)	$ 418,212	$ 441,941
Net borrowings-to-adjusted equityratio(A/B)	0.15	0.15

TWC has a revolving credit arrangement, which is used to fund operations. This allows the flexibility to manage its highly seasonal cash inflows and regular year round disbursements while providing appropriate returns to the shareholders. Cash flows considered surplus to the long-term needs of the business segment are generally utilized in corporate operations.

TWC may access financing from related party companies such as Morguard and Paros, as needed.

TWC Enterprises Limited ANNUAL REPORT 2020 60

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Categories of financial assets and liabilities

Pursuant to IFRS, financial instruments are classified into one of the following three categories: amortized cost, FVTOCI, FVTPL. The carrying values of the Company’s financial instruments on the consolidated balance sheets are classified into the following categories:

following categories:
(thousands of Canadian dollars)	2020	2019
Assets - Amortized cost(1)	$ 96,458	$ 111,828
Assets - FVTPL - Carnival plc shares and Automotive Properties REIT units	69,847	85,103
Liabilities - Amortized cost (2)	151,276	170,472

(1) Includes cash and cash equivalents, accounts receivable and mortgages and loans receivable.

(2) Includes accounts payable and accrued liabilities and borrowings.

A portion of the accounts receivable balance has been pledged in conjunction with the assignment of certain property, plant and equipment as collateral for borrowings.

Fair values

The Company has determined, using considerable judgment, the estimated fair values of its financial instruments based on the valuation methodologies which are described below. The fair values of TWC’s financial instruments approximate their carrying values for financial statement purposes.

The methods and assumptions used to estimate the fair value of each type of financial instrument are as follows:

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and revolving lines of credit approximate their carrying values given their short-term maturities.

The carrying value of mortgages and loans receivable is assumed to approximate fair value as they bear interest at current market rates.

The fair value of non-revolving borrowings was estimated based on the discounted cash flows of the borrowings at the Company’s estimated incremental interest rates for borrowings of the same remaining maturities.

Financial instruments recorded at fair value on the consolidated balance sheet are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 – valuation based on quoted prices (unadjusted) observed in active markets for identical assets or liabilities.

Level 2 – valuation techniques based on inputs that are quoted prices of similar instruments in active markets; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – valuation techniques with inputs not based on observable market inputs.

61 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Risks arising from financial instruments and risk management

The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange and interest rate risks), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

Risk management is the responsibility of the corporate finance department whose function is to identify, evaluate and, where appropriate, hedge financial risks. The Company’s overall risk management program focuses on establishing policies to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company aims to develop a disciplined control environment in which all employees understand their roles and obligations. Risks are monitored and are regularly discussed with the board of directors.

Foreign exchange risk

As discussed in Note 1, the United States golf club operations have a reporting currency in US dollars. Therefore, fluctuations in the US dollar exchange rate will impact the earnings of TWC.

For the year ended December 31, 2020, if the Canadian dollar had weakened (strengthened) 10% against the US dollar, all other variables held constant, the after tax earnings would have increased (declined) by $106,000 (2019 - $68,000).

Interest rate risk

The following debt instruments have variable interest rates:

(thousands of Canadian dollars)		2020		2019
Revolving line of credit - corporate
(December 31, 2020 - BA’s plus 160 basis points or 2.16%;
prime plus 47.5 basis points or 2.93%)
December 31, 2019 - BA’s plus 160 basis points or 3.74%;
prime plus 47.5 basis points or 4.43%)	$	8,089	$	-
Operatingline of credit from relatedparty (cost of fundsplus 10 basispoints)		-		-
	$	8,089	$	-

For the year ended December 31, 2020, an increase (decrease) of 100 basis points of each the Canadian and US variable interest rate borrowings would have increased (decreased) interest expense by $16,000 (2019 - $41,000).

The objective of the Company’s interest rate management activities is to minimize the volatility of the Company’s earnings.

TWC Enterprises Limited ANNUAL REPORT 2020 62

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Credit risk

Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to trade accounts receivable and mortgages and loans receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets.

The objective of managing credit risk is to prevent losses in financial assets. It is TWC’s experience that the credit worthiness of its member accounts receivable balances is very good because it has the ability to suspend the playing and charging privileges of members who have overdue accounts in order to manage credit risk exposure to its members.

Further, the Company collects deposits on group functions such as corporate events, banquets and resort stays to help reduce this risk.

The credit risk associated with mortgages and loans receivable is considered minimal as they are adequately secured. Collateral for mortgages and loans receivable include a charge on the underlying asset for vendor take-back mortgages and loans and the underlying security for share purchase loans.

The carrying amount of accounts receivable is reduced through the use of an allowance account and the amount of the loss is recognized in the statement of earnings within operating expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for doubtful accounts receivable. Subsequent recoveries of amounts previously written off are credited to the allowance account.

The following table describes the changes in the allowance for doubtful accounts receivable:

(thousands of Canadian dollars)		2020		2019
Balance, beginning of year	$	125	$	275
Increase (decrease) in allowance through bad debt expense		42		(61)
Bad debt write-ofs		(65)		(89)
Balance, end ofyear	$	102	$	125

The following table sets forth details of the age of receivables that are not overdue, as well as an analysis of overdue amounts and related allowance for doubtful accounts:

(thousands of Canadian dollars)	2020	2019
Accounts receivable
Current - including accruals	$ 13,210	$ 7,025
Past due for more than one day but not more than 60 days	244	222
Past due for more than 60 days	890	1,329
Less: allowance for doubtful accounts	(102)	(125)
Subtotal	14,242	8,451
Mortgages and loans receivable
Current	24,999	37,335
Past due	-	-
Less: allowance for doubtful accounts	-	-
Subtotal	24,999	37,335
Total loans and receivables	$ 39,241	$ 45,786

63 TWC Enterprises Limited ANNUAL REPORT 2020

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Liquidity risk

Liquidity risk arises through excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available cash reserves in order to meet its liquidity requirements at any point in time. The Company achieves this by maintaining sufficient cash and through the availability of funding from committed credit facilities.

The Company and its subsidiaries are subject to risks associated with borrowings, including the possibility that existing mortgages may not be refinanced or may not be refinanced on as favorable terms or with interest rates as favourable as those of the existing facilities. The Company and its subsidiaries reduce these risks by its continued efforts to stagger and to extend the maturity profile of its borrowings, enhance the value of its real estate properties and foster excellent relations with its lenders.

The Company believes that cash on hand, future free cash flows generated by operations and availability under its revolving operating facility will be adequate to meet its financial obligations.

The Company has financial liabilities with varying contractual maturity dates. Total financial liabilities at December 31, 2020, based on contractual undiscounted payments are as follows:

						2026 and	2026 and
(thousands of Canadian dollars)	2021	2022	2023	2024	2025		beyond	Total
Accounts payable and accrued liabilities	$ 20,717 $	- $	- $	- $	-	$	-	$ 20,717
Revolving lines of credit	-	8,089	-	-	-		-	8,089
Non-revolving mortgages - principal	21,428	21,702	20,461	15,229	10,706		16,679	106,205
Non revolving mortgages - interest	6,815	5,214	3,695	2,353	1,547		1,706	21,330
Lease liabilities - principal	5,339	4,504	1,180	1,247	10		79	12,359
Lease liabilities - interest	582	279	114	41	5		16	1,037
Other	999	1,051	1,104	1,161	-		-	4,315
	$ 55,880 $	40,839 $	26,554 $	20,031 $	12,268	$	18,480	$ 174,052

Total financial liabilities at December 31, 2019, based on contractual undiscounted payments are as follows:

						2025 and	2025 and
(thousands of Canadian dollars)	2020	2021	2022	2023	2024		beyond	Total
Accounts payable and accrued liabilities	$ 22,088 $	- $	- $	- $	-	$	-	$ 22,088
Revolving lines of credit	-	-	-	-	-		-	-
Non-revolving mortgages - principal	19,971	21,449	21,725	20,487	15,256		27,553	126,441
Non revolving mortgages - interest	8,342	6,835	5,233	3,712	2,368		3,288	29,778
Lease liabilities - principal	5,034	5,297	4,458	1,129	1,234		89	17,241
Lease liabilities - interest	888	574	273	112	41		21	1,909
Other	950	999	1,051	1,104	1,161		-	5,265
	$ 57,273 $	35,154 $	32,740 $	26,544 $	20,060	$	30,951	$ 202,722

COVID-19 Pandemic

As a result of the COVID-19 pandemic, the Company closed golf clubs in mid-March in order to adhere to government restrictions. All of the Company's properties were open again in stages, the latest being May 20, 2020. The impact of the pandemic has been to change the revenue mix of the operations. Golf revenue and member demand for golf has increased substantially, whereas any group type revenue has declined accordingly.

It is possible that future government restrictions may disrupt the Company's operations, although in general, there was no evidence of any substantive spread of the virus through golf activities in 2020.

It is also possible that a prolonged global economic recession could have a negative impact on the ability for members to pay for a premium golf experience.

TWC Enterprises Limited ANNUAL REPORT 2020 64

TWC Enterprises Limited Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

22. CONTINGENCIES

As at December 31, 2019 and December 31, 2020, TWC has $1,018,000 outstanding in letters of credit against its corporate credit facility.

As at December 31, 2020, TWC has $2,000,000 outstanding in letters of credit issued in its name with a Morguard credit facility.

From time to time, TWC and certain of its subsidiaries, employees, officers and/or directors are defendants in a number of legal actions arising in the ordinary course of operations. In the opinion of management, it is expected that the ultimate resolution of such pending legal proceedings will not have a material effect on TWC’s consolidated financial position.

In the normal course of operations, the Company executes agreements that provide for indemnification and guarantees to third parties in transactions such as business dispositions, business acquisitions, sales of assets and sales of services.

23. SUBSEQUENT EVENT

On March 3, 2021, the Company declared a 2 cents per common share cash dividend, payable March 31, 2021 to shareholders of record on March 15, 2021.

65 TWC Enterprises Limited ANNUAL REPORT 2020