Teekay (TK) 20-F 2015 FY Annual report (foreign)

EXHIBIT 23.3

Consolidated Financial Statements

EXMAR LPG BVBA

December 31, 2015

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Exmar LPG BVBA

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Exmar LPG BVBA, which comprise the consolidated statements of financial position as at December 31, 2014 and 2013, the consolidated statements of income and comprehensive income, equity and cash flows for the year ended December 31, 2014 and for the period from February 12, 2013 to December 31, 2013, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements 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 entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the consolidated financial position of Exmar LPG BVBA as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the year ended December 31, 2014 and the period from February 12, 2013 to December 31, 2013 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ KPMG LLP

Chartered Accountants

April 21, 2015

Vancouver, Canada

2

EXMAR LPG BVBA

Consolidated Statements of Financial Position

(in thousands of U.S. Dollars)

	(Unaudited) As of December 31, 2015			As of December 31, 2014
Assets
Current:
Cash and cash equivalents		74,014			55,392
Accounts receivable, including non-trade of $11,083 (2014 - $10,304) (note 10(c))		12,954			15,155
Other current assets (notes 5 and 10(d))		3,021			66,663
Total current assets		89,989			137,210
Non-current assets:
Vessels, net of accumulated depreciation (note 4)		488,125			425,834
Total assets		578,114			563,044
Liabilities and Equity
Current:
Current portion of long-term debt (note 6(a))		35,867			36,109
Current portion of finance lease obligations (note 6(b))		2,333			21,547
Shareholders’ loans (note 7)		116,385			165,350
Accounts payable (note 10(b))		6,570			6,889
Other current liabilities (note 8)		2,031			2,140
Total current liabilities		163,186			232,035
Long-term liabilities:
Long-term debt (note 6(a))		286,721			168,813
Finance lease obligations (note 6(b))		11,278			—
Derivative financial instruments (note 14)		2,764			—
Total liabilities		463,949			400,848
Equity:
Common stock (note 9)		132,832			132,832
Reserve for equity adjustment on acquisition		(106,349	)		(106,349	)
Retained earnings		88,873			135,713
Accumulated other comprehensive loss (note 14)		(1,191	)		—
Total equity		114,165			162,196
Total liabilities and equity		578,114			563,044

Commitments (Note 12 and Note 13)

The accompanying notes are an integral part of the consolidated financial statements.

3

EXMAR LPG BVBA

Consolidated Statements of Income and Comprehensive Income

(in thousands of U.S. Dollars)

	(Unaudited) Year Ended December 31, 2015			Year Ended December 31, 2014			Period from February 12, 2013 to December 31, 2013
STATEMENT OF PROFIT OR LOSS
Operations
Revenues		203,765			198,843			170,525
Gain on sales of vessels (note 4)		406			65,563			1,824
Other operating income		—			650			31
Vessel operating expenses (note 10(a))		(94,014	)		(115,121	)		(106,426	)
Administrative expenses		(1,964	)		(1,442	)		(1,682	)
Depreciation (note 4)		(30,716	)		(28,244	)		(29,425	)
Other operating expenses		(856	)		(268	)		(305	)
Income from vessel operations		76,621			119,981			34,542
Finance costs		(11,983	)		(9,777	)		(8,805	)
Finance income		—			—			29
Other financial items, net		(1,347	)		(905	)		(501	)
Net income before taxes		63,291			109,299			25,265
Income taxes (note 3)		(131	)		(81	)		(97	)
Net income for the period		63,160			109,218			25,168
STATEMENT OF COMPREHENSIVE INCOME
Net income for the period		63,160			109,218			25,168
Other comprehensive loss: Items that are or may be reclassified to profit or loss
Net change in fair value of qualifying cash flow hedging instruments		(1,191	)		—			—
Other comprehensive loss for the period		(1,191	)		—			—
Total comprehensive income for the period		61,969			109,218			25,168

The accompanying notes are an integral part of the consolidated financial statements.

4

EXMAR LPG BVBA

Consolidated Statements of Cash Flows

(in thousands of U.S. Dollars)

	(Unaudited) Year Ended December 31, 2015			Year Ended December 31, 2014			Period from February 12, 2013 to December 31, 2013
Cash provided by (used for)
Operating Activities
Net income		63,160			109,218			25,168
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		30,716			28,244			29,425
Gain on sale of vessels		(406	)		(65,563	)		(1,824	)
Finance costs		11,983			9,777			8,805
Finance income		—			—			(29	)
Other financial expenses		1,001			—			—
Income taxes		131			81			97
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		2,201			1,339			(8,928	)
Decrease in other current assets		3,642			2,892			3,732
(Decrease) increase in accounts payable		(319	)		122			129
Decrease in other current liabilities		(109	)		(1,270	)		(2,218	)
Taxes paid		—			(85	)		(105	)
Finance costs paid		(9,524	)		(9,926	)		(9,654	)
Finance income received		—			—			29
Dry dock expenditures		(12,626	)		(11,397	)		(6,199	)
Other		18			78			490
Cash provided by operating activities		89,868			63,510			38,918
Investing Activities
Capital expenditures		(79,694	)		(129,113	)		(61,091	)
Proceeds from sales of vessels		13,720			149,986			5,490
Net cash (used in) provided by investing activities		(65,974	)		20,873			(55,601	)
Financing Activities
Proceeds from long-term debt		378,216			105,000			215,000
Repayments of long-term debt		(261,552	)		(80,884	)		(190,560	)
Repayments of finance lease obligations		(21,936	)		(25,555	)		(5,115	)
Proceeds from shareholders’ loans		—			—			27,570
Repayment of shareholders’ loans		(50,000	)		—			—
Dividends paid		(110,000	)		—			—
Advance to affiliated company (note 10(c))		60,000			(60,000	)		—
Net cash (used in) provided by financing activities		(5,272	)		(61,439	)		46,895
Net increase in cash and cash equivalents		18,622			22,944			30,212
Cash and cash equivalents at beginning of period		55,392			32,448			2,236
Cash and cash equivalents at end of period		74,014			55,392			32,448

5

EXMAR LPG BVBA

Consolidated Statements of Changes in Equity

(in thousands of U.S. Dollars)

	Common Stock		Reserve for Equity Adjustment on Acquisition			Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity
Balance, February 12, 2013		132,832		(106,349	)		1,327			—			27,810
Net income and comprehensive income		—		—			25,168			—			25,168
Balance, December 31, 2013		132,832		(106,349	)		26,495			—			52,978
Net income and comprehensive income		—		—			109,218			—			109,218
Balance, December 31, 2014		132,832		(106,349	)		135,713			—			162,196
(unaudited)
Net income		—		—			63,160			—			63,160
Other comprehensive loss		—		—			—			(1,191	)		(1,191	)
Dividends paid		—		—			(110,000	)		—			(110,000	)
Balance, December 31, 2015		132,832		(106,349	)		88,873			(1,191	)		114,165

6

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(1) Summary of Significant Accounting Policies

(a) Basis of preparation

These consolidated financial statements have been prepared in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (orIFRS). These consolidated financial statements include the accounts of Exmar LPG BVBA, which is incorporated under the laws of Belgium and its wholly owned subsidiaries, as described below (collectively, theCompany). The Company is owned jointly by Exmar NV and Teekay Luxembourg S.a.r.l. The comparative figures on the consolidated statement of income and comprehensive income are for the year ended December 31, 2014 and from February 12, 2013 to December 31, 2013. February 12, 2013 is the day Teekay Luxembourg S.a.r.l. acquired Exmar’s 50% interest in the Company. The address of the Company’s registered office is at De Gerlachekaai 20, B-2000 Antwerp, Belgium. The following is a list of Exmar LPG BVBA’s subsidiaries:

Name of Significant Subsidiaries	Jurisdiction of Incorporation	Proportion of Ownership Interest
Exmar Shipping BVBA	Belgium	100%
Exmar Gas Shipping Ltd	Hong Kong	100%
Good Investment Ltd	Hong Kong	100%

All intercompany balances and transactions between Exmar LPG BVBA and its subsidiaries have been eliminated within these consolidated financial statements. The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Exmar LPG BVBA was incorporated on July 10, 2012.

The Company evaluated events and transactions occurring after the consolidated statements of financial position date and based on information available to April 26, 2016.

(b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(c) Reporting Currency

The consolidated financial statements are stated in U.S. Dollars. The functional currency of the Company is the U.S. Dollar because the Company operates in the international shipping market, which typically utilizes the U.S. Dollar as the functional currency. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the U.S. Dollar are translated to reflect the year-end exchange rates.

(d) Use of Judgments and Estimates

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Significant items subject to such estimates and assumptions include the useful lives of vessels; the residual value of the vessels; the classification of new lease commitments and the review of the carrying amount of the fleet for potential impairment.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in the following: the classification of a lease as part of a time charter arrangement and the arm’s length nature of related party transactions.

(e) Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents unless there is a restriction imposed by a third party on the availability of the funds.

(f) Accounts Receivable

Accounts receivable are recorded at the invoiced amount, do not bear interest and are based on the provisions of the respective time charter. Management reviews the need for an allowance for doubtful accounts on a monthly basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the Company believes that the receivable will not be recovered.

As of December 31, 2015 and December 31, 2014, the collection of no accounts receivable was considered doubtful and, accordingly, there was no provision for doubtful accounts recorded.

(g) Operating Revenues and Expenses

The principal activities of the Company are the owning and chartering of vessels.

The lease element of time-charters and bareboat charters accounted for as operating leases are recognized by the Company daily over the term of the charter as the applicable vessel operates under the charter. The Company recognizes revenues from the non-lease element of time-charter contracts daily as services are performed. The Company does not recognize revenues during days that the vessel is off-hire.

All revenues from voyage charters are recognized on a percentage of completion method.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. Vessel operating expenses are paid by the Company for vessels on time-charters, and during off hire and are recognized when incurred.

As further discussed in Note 10 — Related Party Transactions, related parties have provided the management services for the vessels and employ the crews that work on the vessels.

(h) Vessels and vessels under finance lease

All pre-delivery costs incurred during the construction of new-buildings, including interest, supervision and technical costs, are capitalized. Depreciation is calculated on a straight-line basis over each vessel’s estimated useful life, less an estimated residual value. The vessel’s estimated useful lives are estimated at being 30 years.

Vessel capital modifications include the addition of new equipment or can encompass various modifications to the vessel that are aimed at improving or increasing the operational efficiency and functionality of the asset. This type of expenditure is amortized over the estimated useful life of the modification. Expenditures covering recurring routine repairs and maintenance are expensed as incurred.

The Company dry docks its vessels and vessels under finance lease on a regular basis (on average every three to five years). The Company capitalizes certain costs incurred during dry docking and amortizes those costs on a straight-line basis from the completion of a dry docking over the estimated useful life of the dry dock. The Company includes in capitalized dry docking those costs incurred as part of the dry docking to meet regulatory requirements, or expenditures that either add economic life to the vessel, increase the vessel’s earning capacity or improve the vessel’s operating efficiency. The Company expenses costs related to routine repair and maintenance incurred during dry dock that does not improve or extend the useful life of the vessels.

Vessels and equipment that are “held and used” are assessed for impairment when events or circumstances indicate the carrying amount of the asset may not be recoverable. The recoverable amount is the highest of the fair value less cost to sell and the value in use. The fair value less cost to sell is determined based upon independent broker reports. The value in use is based upon future cash flows discounted to their present value. In developing estimates of future cash flows, we must make assumptions about future charter rates, ship operating expenses, the estimated remaining useful lives of the fleet and the WACC. These assumptions are based on historical trends as well as future expectations. Although management believes that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. If the asset‘s net carrying value exceeds the net discounted cash flows expected to be generated over its remaining useful life, the carrying amount of the asset is reduced to its estimated fair value.

(i) Financial instruments

Non-derivative financial assets mainly relate to loans and receivables. The Company initially recognizes loans and receivables on the date when they are originated. All other financial assets and financial liabilities are initially recognized on the trade date.

The Company de-recognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such de-recognized financial assets that is created or retained by the Company is recognized as a separate asset or liability. The Company de-recognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

A financial asset is classified as at fair value through profit or loss if it is classified as held for trading or is designated as such on initial recognition. Directly attributable transaction costs are recognized in profit or loss as incurred.

Loans and receivables are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method.

Derivative financial instruments

All derivative financial instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated statements of financial position and subsequently re-measured to fair value, regardless of the purpose or intent for holding the derivative. The method of recognizing the resulting gain or loss is dependent on whether the derivative contract is designed to hedge a specific risk and also qualifies for hedge accounting. The Company applies hedge accounting to its derivative financial instruments (note 11).

When a derivative is designated as a cash flow hedge, the Company formally documents the relationship between the derivative and the hedged item. This documentation includes the strategy and risk management objective for undertaking the hedge and the method that will be used to assess the effectiveness of the hedge. Any hedge ineffectiveness is recognized immediately in earnings.

The Company does not apply hedge accounting if it is determined that the hedge was not effective or will no longer be effective, the derivative was sold or exercised, or the hedged item was sold, repaid or no longer possible of occurring.

For derivative financial instruments designated and qualifying as cash flow hedges, changes in the fair value of the effective portion of the derivative financial instruments are initially recorded as a component of accumulated other comprehensive loss in equity. In the periods when the hedged items affect earnings, the associated fair value changes on the hedging derivatives are transferred from equity to the corresponding earnings line item in the consolidated statements of profit or loss and other comprehensive loss. The ineffective portion of the change in fair value of the derivative financial instruments is immediately recognized in the consolidated statements of profit or loss and other comprehensive loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the amount accumulated in equity is reclassified to profit or loss.

Non-derivative financial instruments

Non-derivative financial instruments not classified as at fair value through profit or loss are assessed at each reporting date to determine whether there is objective evidence of impairment.

Objective evidence that non-derivative financial instruments are impaired includes:

• default or delinquency by a debtor;

• restructuring of an amount due to the Company on terms that the Company would not consider otherwise;

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

• indications that a debtor or issuer will enter bankruptcy;

• adverse changes in the payment status of borrowers or issuers;

• the disappearance of an active market for a security; and

• observable data indicating that there is measurable decrease in expected cash flows from a group of financial assets.

(j) Other Current Assets

Other current assets consist of prepaid expenses, accrued revenue and advances to an affiliated company.

(k) Debt issuance costs

Debt issuance costs, including fees, commissions and legal expenses, relating to bank loan facilities are deferred and amortized using the effective interest rate method over the term of the relevant loan. Amortization of deferred debt issuance is included in finance costs. Debt issuance costs are presented net of long-term debt.

(l) Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Each time charter includes a requirement for the Company to guarantee certain performance criteria of the vessel primarily speed, upload/discharge speed and fuel consumption over the term of the charter. Costs associated with these performance claims are recognized when it is probable that the Company has incurred a liability. Management’s best estimate with regards to the probable payment in respect of performance claims issued by the charter party is recognized as a liability. Receivables under insurance policies are recorded when it is probable that the insurer will pay the amount.

(m) Income taxes

The income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case is the related income taxes are recognised in equity.

Any deferred tax will be recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxes are measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Any deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. No deferred tax asset has been recognized for the current year.

(n) Leases

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. One of the Company’s leases has a provision whereby the amount of the lease payment fluctuates based on a percentage of the amount earned by a group of the Company’s vessels, including the leased vessel.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

These lease payments are considered contingent rent and are recorded in profit or loss in the period in which the revenue is earned.

Minimum lease payments under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(o) New standards and interpretations not yet adopted

IFRS 9 Financial Instruments published in July 2014 replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements, which align hedge accounting more closely with risk management. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. The Company does not plan to adopt this standard early and the extent of the impact has not yet been determined.

IFRS 15 Revenue from Contracts with Customers establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. IFRS 15 is effective for the annual reports beginning on or after 1 January 2017, with early adoption permitted. The Company is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 15.

IFRS 16 Leases sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and replaces the previous leases standard, IAS 17 - Leases. IFRS 16, which is not applicable to service contracts, but only applicable to leases or lease components of a contract, defines a lease as a contract that conveys to the customer (lessee) the right to use an asset for a period of time in exchange for consideration. IFRS 16 eliminates the classification of leases for the lessee as either operating leases or finance leases as required by IAS 17 and instead, introduces a single lessee accounting model whereby a lessee is required to recognize assets and liabilities for all leases with a term that is greater than 12 months, unless the underlying asset is of low value, and to recognize depreciation of leases assets separately from interest on lease liabilities in the income statement. As IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, a lessor will continue to classify its leases as operating leases or finance leases and to account for those two types of leases differently. IFRS 16 is effective from January 1, 2019, with early adoption allowed only if IFRS 15 - Revenue from Contracts with Customers is also adopted. The Company is evaluating the effect of adopting this new accounting guidance.

(2) Segment Information

The Company has not presented segment information as it considers it operates in one reportable segment, the floating liquefied petroleum gas carrier market. Furthermore, the Company’s vessels operate under time-charters or voyage charters. The charterer controls the choice of which routes the vessel will serve. Accordingly, the Company’s management does not evaluate the Company’s performance according to geographic region.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(3) Taxation

Exmar LPG BVBA

Exmar LPG BVBA is subject to Belgian corporate income taxes. Exmar LPG BVBA has estimated tax assets of $5.9 million available for carry forward against future taxable profits. These tax assets consist of $4.3 million accumulated losses and $1.6 million other tax credits. Given management’s assessment that it is not more likely than not that Exmar LPG BVBA will be able to generate sufficient taxable income in the future, the deferred tax assets has not been recognized.

Exmar Shipping BVBA

Exmar Shipping BVBA is subject to the Belgian Tonnage Tax Regime. Under this regime, the applicable tax is based on the weight (measured as net tonnage) of the vessels. The tonnage tax related to the vessels amounted to $0.1 million for the year ended December 31, 2015, for the year ended December 31, 2014, and for the period from February 12, 2013 to December 31, 2013.

Exmar Gas Shipping Ltd

No provision for Hong Kong Profits Tax has been made in the financial statements as Exmar Gas Shipping Ltd did not earn any income subject to Hong Kong Profit Tax for the year.

Good Investment Ltd

No provision for Hong Kong Profits Tax has been made in the financial statements as Good Investment Ltd did not earn any income subject to Hong Kong Profit Tax for the year.

(4) Vessels

	Vessels			Vessels under finance lease			Dry dock components			Vessels under Construction			Total
Cost at December 31, 2013		386,339			94,400			28,948			72,242			581,929
Capital expenditures		—			—			11,397			130,480			141,877
Vessel acquisitions		49,600			(49,600	)		—			—			—
Vessel sales		(140,340	)		—			(8,742	)		—			(149,082	)
Vessel deliveries		146,174			—			—			(146,174	)		—
Component disposal		—			—			(5,346	)		—			(5,346	)
Cost at December 31, 2014		441,773			44,800			26,257			56,548			569,378
Capital expenditures		—			—			12,626			79,694			92,320
Vessel acquisitions		44,800			(30,800	)		—			—			14,000
Vessel sales		(39,460	)		—			—			—			(39,460	)
Vessel deliveries		94,148			—			—			(94,148	)		—
Component disposal		—			—			(12,716	)		—			(12,716	)
Cost at December 31, 2015		541,261			14,000			26,167			42,094			623,522
Accumulated Depreciation at December 31, 2013		131,398			38,162			15,664			—			185,224
Depreciation		17,639			3,007			7,598			—			28,244
Vessel acquisitions		21,891			(21,891	)		—			—			—
Vessel sales		(59,219	)		—			(5,359	)		—			(64,578	)
Component disposal		—			—			(5,346	)		—			(5,346	)
Accumulated Depreciation at December 31, 2014		111,709			19,278			12,557			—			143,544
Depreciation		21,431			219			9,066			—			30,716
Vessel acquisitions		19,278			(19,278	)		—			—			—
Vessel sales		(26,147	)		—			—			—			(26,147	)
Component disposal		—			—			(12,716	)		—			(12,716	)
Accumulated Depreciation at December 31, 2015		126,271			219			8,907			—			135,397
Net Book Value at December 31, 2014		330,064			25,522			13,700			56,548			425,834
Net Book Value at December 31, 2015		414,990			13,781			17,260			42,094			488,125

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

During the year ended December 31, 2015, the Company entered into a sale and lease back transaction for the vesselKemira Gas that was renamed toTemse. This transaction resulted in a gain of $0.4 million. During the year ended December 31, 2014, the company sold four vessels, theEeklo,Flanders Harmony,Temse andFlanders Tenacity (which was a vessel under finance lease and purchased by the Company in 2014 immediately prior to the sale), resulting in a gain of $65.6 million. During the period from February 12, 2013 to December 31, 2013, the Company sold one vessel, theDonau, resulting in a gain of $1.8 million.

Interest costs capitalized to vessels for the year ended December 31, 2015 and for the year ended December 31, 2014 aggregated $0.8 million and $1.5 million, respectively.

(5) Other Current Assets

	December 31, 2015		December 31, 2014
Accrued revenues		80		2,834
Prepaid expenses		2,941		3,829
Advances to affiliated company (note 10(d))		—		60,000
		3,021		66,663

(6) Long-term Debt and Finance Lease Obligations

(a) Long-term debt

	December 31, 2015			December 31, 2014
U.S. Dollar denominated debt due through 2021		329,549			208,600
Less debt issuance costs		(6,961	)		(3,678	)
Total debt		322,588			204,922
Less current portion		(35,867	)		(36,109	)
		286,721			168,813

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

The annual maturities of the long-term debt as of December 31, 2015 during the next five years and thereafter are as follows:

	Long-term debt
2016		37,006
2017		37,006
2018		37,006
2019		37,006
2020		37,006
Thereafter		144,519
Total		329,549

The long-term debt of the Company relates to the 6-year senior secured loan facility (the “LPG Facility” amending and restating agreement of June 16, 2015) of up to $460.0 million, consisting of: a revolving credit facility (the “Revolving Credit Facility”) of $310.0 million and a newbuilding facility (the “Newbuilding Facility”) of up to $150.0 million. As per December 31, 2015 the available balance on the Newbuilding Facility amounts to $112.5 million which will be drawn upon delivery of the newbuild vessels Knokke, Kontich and Kortrijk.

The LPG Facility bears interest at LIBOR plus a margin of 1.90%, the maturity date of the LPG Facility is June 16, 2021. The weighted-average effective interest rate for the Company’s long-term debt outstanding at December 31, 2015 and December 31, 2014 was 2.38% and 3.45%, respectively.

The commitments under the Revolving Credit Facility are reduced by 24 consecutive quarterly reductions commencing on September 2015, the first 23 in an amount of $8.7 million and the last reduction in an amount of $109.9 million. The Newbuilding Facility is repayable in consecutive quarterly installments, each in an amount equal to one sixty-eighth of the amount of that newbuilding advance. The first installment of each Newbuilding Advance shall be repaid on the date falling 3 months after the Drawdown Date of that Newbuilding Advance and the last installment shall be repaid on the Maturity Date together with a balloon payment equal to the amount outstanding under that Newbuilding Advance.

All amounts due under the LPG Facility are secured by shareholder guarantees, a first priority mortgage, a first priority share pledge, the assignment of all earnings, insurances and existing or future time-charter contracts, and a first priority pledge of the earnings account.

The LPG Facility contains covenants that require, among other things, compliance with the following:

• minimum aggregate cash and cash equivalents of the higher of (i) $20.0 million and (ii) 5% of financial indebtedness;

• minimum consolidated working capital of $0;

• ratio of net financial indebtedness to consolidated total capitalization of less than 0.70;

• minimum ratio of EBITDA to interest expense 2.0 to 1.00;

• minimum security coverage ratio of 125%.

Consolidated working capital excludes shareholders’ loans. Dividends may be declared and paid providing that Exmar LPG BVBA and its subsidiaries are in compliance with the financial and other covenants; there is no event of default; and the minimum liquidity is respected.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(b) Finance lease obligations

The outstanding finance lease obligations as at December 31, 2015 relate to the lease arrangement for the LPG carrierTemse and as at December 31, 2014, the LPG carrier Brussels. During 2015, the lease relating to theBrusselsended and in addition, the Company entered into a sale and lease back arrangement for the LPG carrierTemse (formerly known asKemira Gas). The lease period commenced November 2015 for a period of six years. Lease rentals are payable on a monthly basis.

At December 31, 2015, the weighted-average interest rate implicit in the lease relating to theTemsewas 5.84%. At December 31, 2014, the weighted-average interest rate implicit in the lease relating to theBrussels was 5.75%.

	December 31, 2015			December 31, 2014
Brussels		—			21,547
Temse		13,611			—
Less current portion		(2,333	)		(21,547	)
Long-term finance lease obligations		11,278			—

As at December 31, 2015, the commitments under finance lease obligations approximated $15.3 million, including imputed interest of $1.7 million, repayable from 2016 through 2021, as indicated below:

	Commitment
2016		2,830
2017		2,745
2018		2,652
2019		2,565
2020		2,476
Thereafter		2,003
Total		15,271

(7) Shareholders’ Loans

As of December 31, 2015, the Company has loans outstanding to its shareholders of $116.4 million (December 31, 2014 - $165.4 million). These loans bear interest at LIBOR plus margin of 0.50% (2014 - LIBOR plus margin of 0.50%) and have no fixed repayment terms. As at December 31, 2015, the interest accrued on these advances was $3.4 million (December 31, 2014 - $2.3 million). Both the principal and the accrued interest on these loans are included as shareholders’ loans in the Company’s consolidated statements of financial position. The weighted-average effective interest rate for the Company’s shareholders’ loans outstanding at December 31, 2015 and December 31, 2014 was 0.77% and 0.73%, respectively.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(8) Other Current Liabilities

	December 31, 2015		December 31, 2014
Deferred revenues		1,455		1,898
Accrued interest expense		576		242
		2,031		2,140

(9) Common Stock

Exmar LPG BVBA has authorized share capital of $132,832,000 divided into 1,328,320 registered shares of no par value, all of which shares have been fully paid, and the legal title and beneficial ownership of 50% of those shares is held by each of Exmar NV and Teekay Luxembourg S.a.r.l..

In 2012, prior to the investment by Teekay Luxembourg S.a.r.l., Exmar NV transferred certain wholly owned subsidiaries to the newly-formed entity, Exmar LPG BVBA in exchange for the registered shares. As this transaction occurred between entities under common control at the time of the transfer, the assets of the underlying entities were recorded at the book value of Exmar NV at the date of the transfer. The difference between the value of the share capital issued and the book value of the assets is recorded as a reserve and adjusted through equity.

(10) Related Party Transactions

(a) Exmar NV provides general and corporate management services for the Company. Exmar Shipmanagement NV, a subsidiary of Exmar NV provides all services in relation to crew and technical management of the vessels. Exmar Marine NV, a subsidiary of Exmar NV, provides commercial management services. All amounts charged by Exmar NV, Exmar Shipmanagement NV and Exmar Marine NV to the Company are reflected in vessel operating expenses except for the management fee charged if and when a vessel is sold, these are netted in the gain on sale. Detail as follows:

	Year ended December 31, 2015		Year ended December 31, 2014		Period from February 12, 2013 to December 31, 2013
Exmar NV		632		588		520
Exmar Hong Kong		109		115		97
Exmar Shipmanagement NV		2,758		2,903		2,521
Exmar Marine NV		3,046		4,447		2,199

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(b) Included in accounts payable is due to affiliated companies of $0.1 million and $0.8 million as of December 31, 2015 and 2014, respectively.

(c) Included in accounts receivable is due from affiliated companies of $8.4 million and nil as of December 31, 2015 and 2014, respectively.

(d) During the year ended December 31, 2014, the Company loaned $60.0 million to Solaia Shipping LLC, a company under common control. This amount is included as part of other current assets in the Company’s consolidated statements of financial position. In February 2015, the amount advanced to Solaia Shipping LLC was repaid.

(11) Fair Value Measurements

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents– The fair value of the Company’s cash and cash equivalents approximates its carrying amounts reported in the consolidated statements of financial position.

Accounts receivable / Accounts payable – The fair value of the Company’s accounts receivable and accounts payable approximates the carrying amount given the short term nature of these instruments.

Advances to affiliated company included in other current assets – The fair value of the Company’s advances to an affiliated company as described in Note 10(d) – Related Party Transactions, approximates its carrying amount reported in the consolidated statements of financial position due to the short term nature.

Shareholders’ loans – The fair values of the Company’s shareholders’ loans are estimated using discounted cash flow analyses based on rates currently available for debt with similar terms and remaining maturities.

Long-term debt – The fair values of the Company’s fixed-rate and variable-rate long-term debt is estimated using discounted cash flow analyses based on rates currently available for debt with similar terms and remaining maturities. The Company does not include credit enhancement in its fair valuation of long-term debt.

Derivative financial instruments – The fair value of the Company’s derivative financial instruments is the estimated amount that the Company would receive or pay to terminate each agreement at the reporting date, taking into account the interest rates reflected in the swap curve at the reporting date and the current credit worthiness of both the Company and the derivative counterparty. The estimated amount is the present value of future cash flows. The Company transacts its derivative financial instrument through investment-grade rated financial institutions at the time of the transaction and requires no collateral from these institutions. There are no margin calls or cash collateral required from the counterparty. Given the current volatility in the credit markets, it is reasonably possible that the derivative fair value recorded could vary by a material amount in the near term.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

The Company categorizes the fair value estimates by a fair value hierarchy based on the inputs used to measure fair value. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value as follows:

Level 1.	Observable inputs such as quoted prices in active markets;
Level 2.	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3.	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following table includes the estimated fair value and carrying value of those assets and liabilities that are measured at fair value on a recurring and non-recurring basis, as well as the estimated fair value of the Company’s financial instruments that are not accounted for at a fair value on a recurring basis.

		December 31, 2015						December 31, 2014
	Fair Value Hierarchy Level	Carrying Amount Asset (Liability)			Fair Value Asset (Liability)			Carrying Amount Asset (Liability)			Fair Value Asset (Liability)
Cash and cash equivalents	Level 1		74,014			74,014			55,392			55,392
Advances to affiliated company included in other current assets	Level 3		—			—			60,000			60,000
Shareholders’ loans	Level 2		(116,385	)		(111,203	)		(165,350	)		(159,852	)
Long-term debt	Level 2		(322,588	)		(328,313	)		(208,600	)		(211,061	)
Derivative financial instruments	Level 2		(2,956	)		(2,956	)		—			—

(12) Operating leases

(a) Company as a lessor

The Company’s future minimum receipts under short- to long-term time charters at December 31, 2015 are as follows:

Less than one year	137,655
Between one and five years	252,476
More than five years	156,732
	546,863

Minimum scheduled future revenues assume 100% utilization and do not include revenue generated from new contracts entered into after December 31, 2015, revenue from undelivered vessels, revenue from unexercised option periods of its time-charter contract that existed on December 31, 2015, or variable or contingent revenues. Therefore, the minimum scheduled future revenues should not be construed to reflect total charter hire revenues for any of the years.

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(b) Company as a lessee

The Company leases a number of its vessels under operating lease agreements. The expense for 2015 relating to the operating leases amounts to $25.5 million ($23.5 million for 2014 and $20.4 million for 2013 for the period from February 12, 2013 to December 31, 2013) and no payments for non-cancellable subleases were received. The future minimum payments under non-cancellable operating leases at December 31, 2015 are as follows:

Less than one year	17,718
Between one and five years	56,497
More than five years	36,060
	110,275

(13) Commitments

As of December 31, 2015, the Company has newbuilding contracts with HHIC – Phil Inc for the construction of seven LPG carriers at a total cost of $266.0 million. As at December 31, 2015, the estimated remaining costs to be incurred are $117.7 million (2016), $113.4 million (2017) and $34.9 million (2018). The majority of the cost to be incurred in 2016 will be financed by the existing newbuilding facility, see also note 6. The Company intends to finance the newbuilding payments through its existing liquidity and expects to secure long-term debt financing for the units prior to their scheduled deliveries.

(14) Financial Risk Management

The Company has exposure to the following risks from its use of financial instruments:

Credit risk

The Company trades only with recognized, creditworthy third parties. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed on the statements of financial position.

Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient funds to meet its liabilities. The Company maintains liquidity and makes adjustments to it in light of changes to economic conditions, underlying risks inherent in its operations and capital requirements to maintain its operations. At December 31, 2015, the Company had $74.0 million of cash and cash equivalents ($55.4 million at December 31, 2014).

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

The following are the contractual maturities of financial liabilities, including estimated interest payments, as at December 31, 2015:

	Contractual cash flows
	Carrying amount		Total			1 year or less			1-3 years			3-5 years			More than 5 years
Accounts payable		6,570		6,570			6,570			—			—			—
Accrued interest expense		576		576			576			—			—			—
Shareholders’ loans(1)		116,385		116,385			116,385			—			—			—
Long-term debt (2)(3)		329,549		366,465			45,616			89,309			84,971			146,569
Finance lease obligations		13,611		15,271			2,600			5,413			5,055			2,203
Derivative financial instruments(4)
Inflow		—		(22,201	)		(2,874	)		(9,149	)		(8,474	)		(1,704	)
Outflow		2,764		25,157			6,326			10,443			7,084			1,304
		469,455		508,223			175,199			96,016			88,636			148,372

(1) The shareholders’ loans are due on demand; however, the Company does not expect the shareholders to demand repayment in the next year.

(2) Amount does not include debt issuance costs being netted against long-term debt of $7.0 million.

(3) Contractual cash flows for long-term debt include estimated future variable interest payments of $36.9 million based on current interest rates.

(4) Contractual cash flows for derivative liability include accrued interest payments included in accrued liabilities of $0.2 million.

Market risk

Interest Rate Risk

The company has borrowings that require the Company to make interest payments based on LIBOR. In order to cover this exposure the Company entered into interest rates swap agreements in which the variable LIBOR rate is changed into a fixed rate for the duration of the loan.

During 2015, the Company entered into several interest rate swap agreements, which exchanges a receipt of floating interest for a payment of fixed interest to reduce the Company’s exposure to interest rate variability on its outstanding floating-rate debt. The Company has designated, for accounting purposes, its interest rate swaps as cash flow hedges.

As at December 31, 2015, the Company was committed to the following interest rate swap agreements (orIRS):

	Interest Rate Index	Notional Amount	Fair Value / Carrying Amount of Liability	Remaining Term (years)	Fixed Interest Rate(1) %
U.S. Dollar-denominated interest rate swap(2)	LIBOR	292,600	(2,779)	5.5	1.84
U.S. Dollar-denominated interest rate swap(2)	LIBOR	36,949	(25)	5.5	1.69
U.S. Dollar-denominated interest rate swap(2)	LIBOR	37,500	(152)	5.3	1.81

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(1) Excludes the margin the Company pays on its variable-rate debt, which as at 31 December 2015 was 1.90%.

(2) Notional amount reduces quarterly.

The Company is exposed to credit loss in the event of non-performance by the counterparty to the interest rate swap agreement. In order to minimize counterparty risk, the Company only enters into derivative transactions with counterparties that are rated A- or better by Standard & Poor’s or A3 or better by Moody’s at the time of the transactions.

The following table presents the location, type of contract and fair value amount of the derivative financial instrument on the Company’s consolidated statements of financial position.

	December 31, 2015			December 31, 2014
IRS – Other current liabilities		(192	)		—
IRS – Derivative Financial Instruments		(2,764	)		—
		(2,956	)		—

Accumulated comprehensive loss

The following table contains the changes in the balances of each component of accumulated other comprehensive loss for the periods presented:

	Qualifying Cash Flow Hedging Instruments
		$
Balance as at December 31, 2013		—
Other comprehensive loss		—
Balance as at December 31, 2014		—
Other comprehensive loss		(1,191	)
Balance as at December 31, 2015		(1,191	)

Foreign Currency Risk

The Company’s functional currency is U.S. Dollars. The results of operations are affected by fluctuations in currency exchange rates. The volatility in the financial results due to currency exchange rate fluctuations is attributed primarily to foreign currency expenses. A portion of the vessel operating expenses are denominated in Euro, which is primarily a function of the nationality of the crew. As a result, fluctuations in the Euro relative to the U.S. Dollar have caused, and are likely to continue to cause, fluctuations in our reported vessel operating expenses. A 10 basis point change in foreign currency exchange rates would impact the Company’s consolidated statements of income and comprehensive income by approximately $1.4 million (2014 - $1.0 mllion).

Exmar LPG BVBA

Notes to the Consolidated Financial Statements

(all tabular amounts stated in thousands of U.S. Dollars, unless otherwise indicated)

December 31, 2015 (unaudited with the exception of comparative figures)

(15) Employee expenses and director remuneration

Directors are appointed by the two joint venture partners. Director compensation is nil for the years ended December 31, 2015, 2014, and 2013.

There are no key management personnel employed by the Company. Management of the Company is performed through corporate and ship management service agreements with Exmar Marine NV and Exmar Shipmanagement NV as described in Note 10 — Related Party Transactions. As a result, compensation for key management personnel amounts to nil for the years ended December 31, 2015, 2014, and 2013.

The following employee expenses related to seafarers have been included in vessel and other operating expenses:

	Year ended December 31, 2015		Year ended December 31, 2014		For the period from February 12, 2013 to December 31, 2013
Salaries, bonuses and other personnel expenses		16,547		15,884		14,331

(16) Capital Management

The Board defines “capital” to include funds raised through the issuance of ordinary share capital, accumulated profits and proceeds raised from debt facilities, including shareholder loans. The Board’s policy is to obtain additional capital for the construction or acquisition of new vessels through shareholder loan injections by the Company’s Joint Venture Partners and external debt facilities and to dividend out any available excess cash the Company generates. The Board regularly reviews and manages its capital structure to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

(17) Subsequent events

(a) In February 2016, one of the Company’s seven LPG newbuilding carriers, theKnokke, was delivered.