# UNITED STATES SECURITIES AND EXCHANGE COMMISSION

# WASHINGTON, D.C. 20549

# FORM 20-F

(Mark One)

     [   ]     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934

TEEKAY SHIPPING CORPORATION
(Exact name of Registrant as specified in its charter)

Republic of The Marshall Islands
                                            (Jurisdiction of incorporation or organization)


                    TK House, Bayside Executive Park, West Bay Street & Blake Road, P.O. Box AP-59213, Nassau,
                                                      Commonwealth of the Bahamas
                                               (Address of principal executive offices)

Securities registered or to
be registered pursuant to Section 12(b) of the Act.

|Title of each class
Common Stock, par value of $0.001 per share
8.32% First Preferred Ship Mortgage Notes due 2008
7.25% PEPS Unit | Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
|---------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------

Securities registered or to be
registered pursuant to Section 12(g) of the Act.

None

Securities for which there
is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of
outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report.

39,692,060 shares of Common Stock, par value of $0.001 per share.

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

Indicate by check mark
which financial statement item the registrant has elected to follow:

# TEEKAY SHIPPING CORPORATION

# INDEX TO REPORT ON FORM 20-F

| |  | Page
| |  | ----

`PART I.

  Item 1.           Identity of Directors, Senior Management and Advisors................................  Not applicable
  Item 2.           Offer Statistics and Expected Timetable..............................................  Not applicable
  Item 3.           Key Information......................................................................         3
  Item 4.           Information on the Company...........................................................        12
  Item 5.           Operating and Financial Review and Prospects.........................................        31
  Item 6.           Directors, Senior Management and Employees...........................................        39
  Item 7.           Major Shareholders and Related Party Transactions....................................        44
  Item 8.           Financial Information................................................................        44
  Item 9.           The Offer and Listing................................................................        46
  Item 10.          Additional Information...............................................................        46
  Item 11.          Quantitative and Qualitative Disclosures About Market Risk...........................        49
  Item 12.          Description of Securities Other than Equity Securities...............................  Not applicable

PART II.

  Item 13.          Defaults, Dividend Arrearages and Delinquencies......................................        51
  Item 14.          Material Modifications to the Rights of Security Holders and Use of Proceeds.........        51
  Item 15.          Controls and Procedures..............................................................        51
  Item 16A.         Audit Committee Financial Expert.....................................................  Not applicable
  Item 16B.         Code of Ethics.......................................................................  Not applicable
  Item 16C.         Principal Accountant Fees and Services...............................................  Not applicable

PART III.

  Item 17.          Financial Statements.................................................................  Not applicable
  Item 18.          Financial Statements.................................................................        52
  Item 19.          Exhibits.............................................................................        52
  Signature         .....................................................................................        56
 Certifications     .....................................................................................        57`

# PART I

This report should be read in conjunction with the  consolidated  financial  statements and accompanying  notes
included in this report.

In addition to historical information,  this report contains forward-looking  statements that involve risks and
uncertainties.  Such  forward-looking  statements  relate  to  future  events  and  the  Companys  operations,
objectives,  expectations,  performance,  financial  condition and  intentions.  When used in this report,  the
words "expects,"  "intends," "plans," "believes,"  "anticipates,"  "estimates" and variations of such words and
similar expressions are intended to identify  forward-looking  statements.  Forward-looking  statements in this
report include, in particular,  statements regarding:  Aframax time charter equivalent (or "TCE") rates; tanker
supply and demand;  supply and demand for oil;  potential  growth of the shuttle tanker market;  future capital
expenditures;   the  Companys  growth  strategy  and  measures  to  implement  such  strategy;  the  Companys
competitive  strengths;  the  Companys  pending  acquisition  of Navion  ASA and its  impact on the  Companys
operations;  the Companys potential  inability to integrate  effectively the operations of Navion or any other
future  acquisitions  with the Company;  and the future  success and  performance  of the Company.  Readers are
cautioned  not to place undue  reliance on these or other  forward-looking  statements,  which speak only as of
the date of this report.

Forward-looking  statements  in this  report  are  necessarily  estimates  reflecting  the  judgment  of senior
management and involve known and unknown risks and uncertainties.  These  forward-looking  statements are based
upon a number of  assumptions  and estimates  that are  inherently  subject to  significant  uncertainties  and
contingencies,  many of which are beyond the control of the Company.  Actual results may differ materially from
those  expressed  or implied by such  forward-looking  statements.  These  forward-looking  statements  should,
therefore,  be  considered  in light of various  important  factors,  including  those set forth in this report
under the heading "Factors That May Affect Future Results."

The Company  undertakes no obligation to revise any  forward-looking  statements in order to reflect any change
in the Companys  expectations or events or  circumstances  that may subsequently  arise.  Readers are urged to
carefully  review and  consider  the  various  disclosures  made in this  report and in other of the  Companys
filings  made with the SEC that attempt to advise  interested  parties of the risks and factors that may affect
our business, prospects and results of operations.

Item 1.   Identity of Directors, Senior Management and Advisors
               Not applicable.

Item 2.   Offer Statistics and Expected Timetable
               Not applicable.

Item 3.   Key Information

Selected Financial Data

Set forth below are selected  consolidated  financial and other data of Teekay  Shipping  Corporation  together
with its subsidiaries  (sometimes  referred to as "Teekay" or the "Company"),  for the years ended December 31,
2002,  2001 and 2000,  the nine-month  period ended December 31, 1999 and the year ended March 31, 1999,  which
have been  derived  from the  Companys  consolidated  financial  statements.  The data below should be read in
conjunction  with  the  consolidated  financial  statements  and  the  notes  thereto  and  the  report  of the
independent  Chartered  Accountants  therein,  with respect to the  consolidated  financial  statements for the
years ended  December 31, 2002,  2001 and 2000,  and "Item 5.  Operating and Financial  Review and  Prospects,"
included herein.

The Company  changed its fiscal year end from March 31 to December 31,  commencing  December 31, 1999, in order
to  facilitate  comparison  of its  operating  results  to  those  of  other  companies  in the  transportation
industry.  The  Companys  consolidated  financial  statements  are  prepared  in  accordance  with  accounting
principles generally accepted in the United States.

`Year Ended      Year Ended     Year Ended       Nine Months       Year Ended
                                            December 31,    December 31,   December 31,     Ended December     March 31,
                                                 2002           2001            2000             31,              1999
                                                                                                 1999
                                            (U.S. dollars in thousands, except share and per share data, ratios and fleet data.)
Income Statement Data:
Voyage revenues........................     $ 783,327      $1,039,056     $  893,226       $    377,882       $  411,922
Voyage expenses........................       239,455         249,562        248,957            129,532           93,511
Net voyage revenues....................       543,872         789,494        644,269            248,350          318,411
Income from vessel operations..........       119,346         383,463        327,675             23,572           85,634
Interest expense.......................       (57,974)        (66,249)       (74,540)           (44,996)         (44,797)
Interest income........................         3,494           9,196         13,021              5,842            6,369
Other (loss) income....................       (11,475)         10,108          3,864             (4,013)          (1,800)
Net income (loss) (1)..................        53,391         336,518        270,020            (19,595)          45,406
Per Share Data:
Net income (loss)  basic..............     $    1.35      $     8.48     $     7.02       $      (0.54)      $     1.46
Net income (loss)  diluted............          1.33            8.31           6.86              (0.54)            1.46

Cash dividends declared................          0.86            0.86           0.86               0.65             0.86
Balance Sheet Data (at end of period):
Cash and marketable securities.........     $ 298,255       $ 196,004     $  223,123       $    226,381       $  132,256
Capital stock..........................       470,988         467,341        452,808            427,937          330,493
Total assets...........................     2,723,506       2,467,781      1,974,099          1,982,684        1,452,220
Total debt.............................     1,130,822         935,702        797,484          1,085,167          641,719
Total stockholders equity.............     1,421,898       1,398,200      1,098,512            832,067          777,390
Number of outstanding shares of common
stock..................................    39,692,060      39,550,326     39,145,219         38,064,264       31,648,318
Other Financial Data:
EBITDA(2)..............................     $ 278,061      $  539,324     $  451,066       $     95,875       $  186,069
EBITDA to interest expense(2)(3).......           4.5x            8.0x           6.1x               2.1x             4.0x
Total debt to LTM EBITDA(2)(4).........           4.1x            1.7x           1.8x               8.3x             3.5x
Total debt to total capitalization(5)..          43.9%           39.8%          42.1%              56.6%            45.2%
Net debt to capitalization(6)..........          36.4%           34.3%          34.3%              50.8%            39.6%

Capital expenditures:
  Vessel and equipment purchases,
  gross (7)............................       135,650         184,983         43,512             23,313           85,445
  Drydocking...........................        34,913          20,064         11,941              6,598           11,749
Total Fleet Data(8):
Average number of ships                            85              82             71                 65               47
Average age of Companys fleet
(in years at end of period)                      10.8            10.2            9.0                8.4              8.7
Operating cash flow per ship per day (9)   $   8,168      $   17,682     $   16,687       $      5,177       $    11,171
Spot Aframax Fleet Data (10):
Average number of ships ...............            60              60             59                 55               43
Average age of  Companys  fleet
(in years at end of period)                      10.5             9.4            8.3                7.4              8.0
TCE per ship per day(11)...............     $  18,205      $   30,542     $   27,138       $     13,462       $   19,576
Vessel  operating  expenses
per  ship per day(12)..................         5,496           5,374          4,980              5,621            4,969
Operating cash flow per ship per day(9)         7,774          19,747         18,145              4,731           10,903`

(Footnotes on following page)

(Footnotes for previous page)

|(1) | Net income (loss) for our fiscal year ended March 31, 1999 has been  restated to reflect early  adoption
       of  Statement of Financial  Accounting  Standards  No. 145,  "Extinguishment  of Debt and Capital  Lease
       Modification,"  which  requires any gain or loss on debt  extinguishments  to be classified as income or
       loss from  continuing  operations,  rather than as an  extraordinary  item as previously  required under
       Statement of Financial Accounting Standards No. 4.                                                                                                                                                                                                                                                                                        
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | EBITDA represents net income (loss) before interest expense, income tax expense, depreciation and amortization expense,
              minority interest, foreign exchange gains (losses) and gains (losses) on disposition of assets.  EBITDA is included
              because such data is used by certain investors to measure a companys financial performance.  EBITDA is not required by
              accounting principles generally accepted in the United States and should not be considered as an alternative to net
              income or any other indicator of the Companys performance required by accounting principles generally accepted in the United
              States.  The following table reconciles the Companys net income (loss) with EBITDA for the periods presented:

`-------------- --------------- ------------ --------------- ---------------
                                         Year Ended     Year Ended        Year       Nine Months     Year Ended
                                         December 31,   December 31,      Ended          Ended         March 31,
                                            2002            2001       December 31,  December 31,         1999
                                                                          2000          1999
                                        -------------- --------------- ------------ --------------- ---------------
                                                               (U.S. dollars in thousands)

      Net income (loss)..............     $  53,391     $   336,518     $  270,020    $   (19,595)     $ 45,406
      Interest expense ..............        57,974          66,249         74,540         44,996        44,797
      Income tax expense.............        11,413           6,963          1,500          1,500         1,900
      Depreciation and amortization..       149,296         136,283        100,153         68,299        93,712
      Other items (a)................         5,987          (6,689)         4,853            675           254
                                        -------------- --------------- ------------ --------------- ---------------
      EBITDA.........................       278,061         539,324        451,066         95,875       186,069
                                        -------------- --------------- ------------ --------------- ---------------`

|     | (a) Other items consist of minority  interest,  foreign  exchange gains (losses),  and gains (losses) on
       disposition of assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3)  | For purposes of computing EBITDA to interest  expense,  interest expense includes  capitalized  interest
       but excludes amortization of loan costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(4)  | Total debt to LTM EBITDA  represents  total debt as of the end of the period  compared to EBITDA for the
       12-month period then ended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(5)  | Total capitalization represents total debt, minority interest and total stockholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(6)  | Net  debt  represents  total  debt  less  cash,  cash  equivalents  and  marketable  securities.   Total
       capitalization represents net debt, minority interest and total stockholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(7)  | Excludes vessels purchased in connection with the Companys  corporate  acquisitions of Bona Shipholding
       Ltd.  ("Bona")  in 1999 and  Ugland  Nordic  Shipping  AS ("UNS") in 2001.  See Item 5   Operating  and
       Financial Review and Prospects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(8)  | Excludes  vessels of the Companys joint ventures and  newbuildings and one Aframax tanker that has been
       subject to a bareboat charter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(9)  | Operating  cash flow  represents  income from  vessel  operations  plus  depreciation  and  amortization
       expense (other than drydock  amortization  expense).  Ship days are calculated on the basis of a 365-day
       fiscal year  multiplied by the average number of vessels in the Companys  fleet for the respective year
       (excluding  vessels of the Companys joint ventures).  Operating cash flow is not required by accounting
       principles  generally  accepted in the United States and should not be considered as an  alternative  to
       net income or any other  indicator  of the  Companys  performance  required  by  accounting  principles
       generally accepted in the United States.                                          
|(10) | Includes  the  Companys  core Aframax  fleet that  operates  primarily  in the spot charter  market and
       excludes vessels that operate primarily under long-term  fixed-rate  contracts,  including the Companys
       ten  Aframax-size  shuttle  tankers  and three  Aframax-size  Australian-crewed  vessels.  Time  charter
       equivalent  (TCE) and vessel  operating  expense data is separately  presented  only for this portion of
       the fleet because the remainder of the fleet generally has varying  revenue and expense  characteristics
       that make  period-to-period  comparisons not meaningful.  Also excludes one Aframax tanker that has been
       subject to a bareboat charter and Aframax tankers of the Companys joint ventures.
|(11) | TCE is a measure of the revenue  performance of a vessel.  The Companys  average TCE for a given period
       has been calculated by deducting total voyage expenses (except  commissions)  from total voyage revenues
       and  dividing the  remaining  sum by the  Companys  total  voyage days in the period.  Voyage  expenses
       comprise all expenses relating to particular voyages,  including bunker fuel expenses,  port fees, canal
       tolls, and brokerage commissions.                                                                                                                                                                                                                                                                                 
|(12) | Vessel  operating  expenses  consist of all expenses  relating to the  operation of vessels  (other than
       voyage  expenses),  including  crewing,  repairs  and  maintenance,  insurance,  stores and  lubes,  and
       communications  expenses.  Ship days are  calculated  on the basis of a 365-day year  multiplied  by the
       average  number of vessels in the Companys  fleet for the respective  year.  Vessel  operating  expense
       amounts exclude vessels time-chartered-in.                                                                                                                                                                                                                                                                        

Factors That May Affect Future Results

The Cyclical Nature of the Tanker Industry Causes Volatility in the Companys Profitability

Historically,  the tanker industry has been cyclical,  experiencing  volatility in profitability due to changes
in the supply of, and demand for, tanker  capacity.  Increases in tanker capacity supply or decreases in tanker
capacity  demand could have a material  adverse  effect on the Companys  business,  financial  condition,  and
results of  operations.  The supply of tanker  capacity  is  influenced  by the number and size of new  vessels
built,  older  vessels  scrapped,  converted  and lost and the number of vessels  that are out of service.  The
demand for tanker  capacity is influenced by, among other  factors:  global and regional  economic  conditions;
increases  and  decreases in  production  of and demand for crude oil and  petroleum  products;  increases  and
decreases in OPEC production  quotas;  the distance crude oil and petroleum  products need to be transported by
sea; and developments in international trade and changes in seaborne and other transportation patterns.

Because many of the factors  influencing  the supply of and demand for tanker capacity are  unpredictable,  the
nature, timing and degree of changes in tanker industry conditions are also unpredictable.

The Company  Depends  Upon Oil Markets,  Changes in Which Could Result in Decreased  Demand for Its Vessels and
Services

Demand for the Companys  vessels and services in transporting  crude oil and petroleum  products  depends upon
world and regional oil markets.  Any decrease in shipments of crude oil in those  markets could have a material
adverse effect on the Companys business,  financial condition and results of operations.  Historically,  those
markets  have been  volatile as a result of the many  conditions  and events that affect the price,  production
and  transport of oil, as well as  competition  from  alternative  energy  sources.  A slowdown of the economic
recovery  in the  United  States  and world  economies  may  result  in  reduced  consumption  of crude oil and
petroleum  products and a decreased demand for the Companys vessels and services.  In addition,  the continued
political  unrest in  Venezuela  or  similar  unrest  in other  major  oil-producing  countries  could  further
adversely affect the demand for the Companys vessels.

Continued  Terrorist  Attacks or War Could Lead to Further  Economic  Instability  and Decrease Demand for Oil,
Which Could Harm The Companys Business

The  Companys  Substantial  Operations  Outside the United States  Expose it to  Political,  Governmental  and
Economic Instability, Which Could Harm the Companys Operations.

The  Companys  operations  are  primarily  conducted  outside the United  States and,  therefore,  they may be
affected by changing  economic,  political and  governmental  conditions in the countries  where the Company is
engaged in business or where its vessels are  registered.  Any disruption  caused by these factors could have a
material adverse effect on the Companys business, financial condition and results of operations.

The Company  derives a  significant  portion of its total  revenues  from its  operations  in the  Indo-Pacific
Basin.  Past political  conflicts in this region,  particularly in the Arabian Gulf,  have included  attacks on
tankers,  mining of  waterways  and other  efforts to disrupt  shipping  in the area.  Vessels  trading in this
region have also been subject to, in limited instances,  acts of piracy. In addition to tankers,  oil pipelines
and offshore  oil fields could also be targets of terrorist  attacks.  Future  hostilities  or other  political
instability  in this region or other  regions  where the Companys  operates  could affect its trade  patterns,
increase insurance costs,  increase tanker operational costs or otherwise harm its business.  For example, the
war between the United States and Iraq could  significantly  alter the supply and  transportation of oil in the
Indo-Pacific Basin, which could harm the Companys business. In addition,  tariffs, trade embargoes,  and other
economic  sanctions by the United States or other  countries  against  countries in the  Indo-Pacific  Basin or
elsewhere  as a result of  terrorist  attacks or other  hostilities  may limit  trading  activities  with those
countries, which could harm the Companys business.

The Companys  Dependence on Spot Voyages May Result in  Significant  Fluctuations  in the  Utilization  of Its
Vessels and Its Profitability

During  the  years  ended  December  31,  2002  and  2001,  the  Company  derived  approximately  65% and  78%,
respectively,  of its net voyage  revenues from spot voyages or time  charters and  contracts of  affreightment
priced on a spot market basis. Due to the Companys  dependence on the spot charter market,  declining  charter
rates in a given period generally will result in corresponding  declines in operating  results for that period.
The spot charter market is highly  competitive  and spot charter rates are subject to significant  fluctuations
based on tanker and oil supply and  demand.  Charter  rates have  varied  significantly  in the last few years.
Future spot charters may not be available at rates that will be  sufficient to enable the Companys  vessels to
be operated  profitably  or to provide  sufficient  cash flow to service its debt  obligations.  The  Companys
dependence on spot voyages will also be affected by the pending  acquisition of Navion ASA.  Although  Navions
shuttle tanker fleet operates on long-term  fixed-rate  contracts of  affreightment,  its  conventional  tanker
fleet  generates  revenues  from spot voyages and  contracts of  affreightment  priced on a spot market  basis.
Accordingly,  these  revenues  historically  have been,  and after the  Companys  acquisition  of Navion  will
continue to be, subject to spot market price fluctuations.

Reduction in Oil Produced From Offshore Oil Fields Could Harm the Companys Shuttle Tanker Business

Demand for the Companys  shuttle tankers in  transporting  crude oil and petroleum  products  depends upon the
amount of oil produced from  offshore oil fields,  especially  in the North Sea,  where the  Companys  shuttle
tankers  primarily  operate.  As oil prices increase,  the prospect of offshore oil exploration and development
of offshore  oil  fields,  which cost more to develop  than land oil fields,  becomes  more  attractive  to oil
companies.  However,  when oil prices decline,  it becomes less attractive for oil companies to explore for oil
offshore and develop  offshore oil fields.  If the amount of oil produced  from  offshore oil fields  declines,
especially  in the North Sea, the  Companys  shuttle  tanker  business  could be harmed.  In addition,  if for
environmental  or other reasons,  there is a change in policy towards using  pipelines  rather than  oceangoing
vessels in  transporting  crude oil and  petroleum  products from  offshore oil fields,  the Companys  shuttle
tanker  business  could be adversely  affected,  which could have a material  adverse  effect on the  Companys
business,  financial  condition  and  results of  operations.  As at March 1, 2003,  the Company had 20 vessels
(including 2  newbuildings)  in its shuttle  tanker fleet.  If the Company  closes its pending  acquisition  of
Navion ASA, it will acquire an additional 8 owned and 13  chartered-in  shuttle  tankers,  which would increase
the  Companys  exposure  to the  foregoing  shuttle-tanker-related-risks.  Most  of  Navions  shuttle  tanker
revenues  are  derived  from  long-term  contracts  of  affreightment.  Revenue  under most of these  contracts
depends  upon the  amount of oil the  Company  transports,  the  production  of which is beyond  the  Companys
control and which can vary depending upon the nature of a given oil field and the field  operators  production
decisions.

The Companys  Inability to Renew or Replace  Long-Term  Charter Contracts Could Adversely Affect Its Operating
Results and Make Them More Volatile

As at March 1, 2003, 34 of the Companys  tankers,  including  all 20 of its shuttle  tankers,  were subject to
long-term  charter  contracts.  Fourteen of these  contracts  terminate by their terms  between  March 2003 and
September 2004. The 20 remaining  contracts  terminate by their terms between September 2005 and April 2018. If
the  Company  completes  its  pending  acquisition  of  Navion,  it will  have  an  additional  8 owned  and 13
chartered-in  shuttle  tankers  subject to fixed-rate  contracts of  affreightment  with terms ranging from six
months to the life of the oil field being  serviced,  and 1 owned gas carrier  subject to a 13-year time charter.
If the  Company  is not able to renew or  replace  these  contracts  on  favorable  terms,  or at all,  or if a
significant  number of these  contracts are terminated  early,  it could have a material  adverse effect on the
Companys business, financial condition and results of operations and make such results more volatile.

The Intense Competition In the Companys Markets May Lead to Reduced Profitability

The Companys vessels operate in highly  competitive  markets.  Competition arises primarily from other Aframax
and shuttle tanker owners,  including major oil companies and independent companies.  The Company also competes
with  owners of other size  tankers.  The  Companys  market  share is  insufficient  to enforce  any degree of
pricing  discipline  in the markets in which the Company  operates and the Companys  competitive  position may
erode in the future.  Any new markets that the Company  enters  could  include  participants  that have greater
financial  strength and capital  resources than the Company.  The Company may not be successful in entering new
markets.

The Tanker Industry Is Subject to Substantial  Environmental  and Other  Regulations,  Which May  Significantly
Increase the Companys Expenses

The operations of the Company are affected by extensive and changing  environmental  protection  laws and other
regulations.  The Company has  incurred,  and expects to continue to incur,  substantial  expenses in complying
with  these  laws and  regulations,  including  expenses  for  ship  modifications  and  changes  in  operating
procedures.  Additional  laws and  regulations  may be adopted  that could  limit the  Companys  ability to do
business or further  increase  the cost of doing  business.  This could have a material  adverse  effect on the
Companys business, financial condition and results of operations.

The United  States Oil Pollution  Act of 1990 ("OPA 90") in  particular  has increased the Companys  expenses.
OPA 90 provides for the phase-in of the exclusive use of  double-hull  tankers at United States ports,  as well
as potentially  unlimited  liability for owners,  operators and demise or bareboat charterers for oil pollution
in U.S.  waters.  To  comply  with the OPA 90,  tanker  owners  generally  incur  increased  costs  in  meeting
additional  maintenance  and inspection  requirements,  in developing  contingency  arrangements  for potential
spills and in obtaining required insurance  coverage.  OPA 90 contains  financial  responsibility  requirements
for vessels  operating in U.S.  waters and requires  owners and  operators of vessels to establish and maintain
with the United  States Coast Guard  evidence of  insurance  or of  qualification  as a  self-insurer  or other
evidence of financial responsibility sufficient to meet their potential liabilities under the OPA 90.

Following the example of the OPA 90, the International  Maritime  Organization,  the United Nations agency for
maritime  safety,  adopted  regulations  for  tanker  design and  inspection  that are  designed  to reduce oil
pollution  in  international  waters and that will be phased in on a schedule  depending  upon  vessel  age. In
addition,  as a result of the November 2002 sinking of the tanker Prestige and related oil spill,  the European
Union,  the United States and certain other  countries are considering or have adopted  stricter  technical and
operational  requirements  for tankers,  including  the  accelerated  phase-out  of  single-hull  vessels,  and
legislation that will affect the liability of tanker owners and operators for oil pollution.

The Companys  shuttle tankers  primarily  operate in the North Sea. In addition to the regulations  imposed by
the International Maritime  Organization,  countries having jurisdiction over North Sea areas impose regulatory
requirements  in  connection  with  operations in those areas.  These  regulatory  requirements,  together with
additional  requirements  imposed by  operators  of North Sea oil fields,  require the Company to make  further
expenditures for sophisticated  equipment,  reporting and redundancy systems on its shuttle tankers and for the
training of seagoing  staff.  Additional  regulations  and  requirements  may be adopted or imposed  that could
limit the Companys ability to do business or further increase the cost of doing business in the North Sea.

The Company May Not Be Able to Successfully Integrate Any Future Acquisitions

A principal  component of the  Companys  strategy is to continue to grow by expanding its business both in the
geographic areas and markets where it has  historically  focused as well as into new geographic  areas,  market
segments and services.  The Company may not be successful  in expanding  its  operations  and any expansion may
not be profitable.  The Companys strategy of growth through  acquisitions,  including its pending  acquisition
of Navion  ASA,  involves  business  risks  commonly  encountered  in  acquisitions  of  companies,  including:
disruption of the Companys  ongoing  business;  difficulties  in  integrating  the  operations,  personnel and
business  culture of acquired  companies;  difficulties of coordinating  and managing  geographically  separate
organizations;  adverse  effects on  relationships  with the Companys  existing  suppliers and customers,  and
those of the companies acquired;  difficulties  entering geographic markets or new market segments in which the
Company has no or limited experience; and loss of key officers and employees of acquired companies.

The Companys  failure to  effectively  integrate  Navion or any other  businesses it may acquire in the future
will harm the Companys business and results of operations.

The  process of  integrating  operations  could  also cause an  interruption  of, or loss of  momentum  in, the
activities of one or more of an acquired  Companys  businesses  and the Companys  businesses.  Members of the
Companys  senior  management  may be  required  to devote  considerable  amounts  of time to this  integration
process,  which  will  decrease  the time they will have to manage the  Companys  business,  service  existing
customers and attract new customers.  If the Companys senior management is not able to effectively  manage the
integration  process, or if any significant  business activities are interrupted as a result of the integration
process, the Companys business could suffer.

The Company May Not Realize  Expected  Benefits  from  Acquisitions,  and  Implementing  Its Strategy of Growth
Through Acquisitions May Harm Its Financial Condition and Performance

Present and future  acquisitions,  including  the  Companys  pending  acquisition  of Navion  ASA,  may not be
profitable to the Company at the time of their completion and may not generate  revenues  sufficient to justify
the Companys  investment.  In addition,  the Companys  acquisition  growth strategy  exposes it to risks that
may harm its results of  operations  and  financial  condition,  including  risks that the Company may: fail to
realize anticipated benefits,  such as cost-savings and revenue enhancements;  decrease the Companys liquidity
by using a  significant  portion of its available  cash or borrowing  capacity to finance  acquisitions;  incur
additional  indebtedness,  which may result in significantly  increased interest expense or financial leverage,
or issue additional  equity  securities to finance  acquisitions,  which may result in significant  shareholder
dilution;  incur or assume  unanticipated  liabilities,  losses or costs associated with the business acquired;
or incur  other  significant  charges,  such as  impairment  of  goodwill  or other  intangible  assets,  asset
devaluation or restructuring charges.

The Company  expects to realize  financial and  operating  benefits as a result of the pending  acquisition  of
Navion ASA,  including  added  stability to the Companys  cash flow and earnings  throughout  the
tanker market cycle as a result of the  fixed-rate,  long-term  nature of Navions  contracts of  affreightment
related to its shuttle tanker business.  However,  revenue generated under most of these contracts depends upon
the amount of oil the  Company can  transport,  the  production  of which is beyond the  Companys  control and
which can vary depending on the nature of a given oil field and the field operators production  decisions.  In
addition,  Navion has a right of first refusal on Statoils oil  transportation  requirements at the prevailing
market rate until  December  31,  2007.  Although  the Company  believes  this  arrangement  may  increase  the
utilization of its conventional  fleet after the acquisition,  it may be unable to achieve such increased fleet
utilization.

The Strain That Growth  Places Upon The  Companys  Systems and  Management  Resources  May Harm The  Companys
Business

The Companys growth has placed and will continue to place significant  demands on its management,  operational
and financial  resources.  For example,  the closing of the Companys  pending  acquisition of Navion ASA, will
result in an additional 45 tankers,  including 34 vessels  time-chartered-in,  worldwide  that the Company will
have to deploy,  control and  monitor.  These would  represent  an increase of 45% over the  Companys  current
fleet of tankers.  As the Company expands its operations,  it must effectively  manage and monitor  operations,
control costs and maintain  effective quality and control in geographically  dispersed  markets.  The Companys
future  growth and  financial  performance  will also  depend on its  ability to:  recruit,  train,  manage and
motivate its  employees to support the  Companys  expanded  operations;  and continue to improve the Companys
customer support, financial controls and information systems.

These efforts may not be successful and may not occur in a timely or efficient  manner.  Failure to effectively
manage  the  Companys  growth  and  the  system  and  procedural   transitions  required  by  expansion  in  a
cost-effective manner could have a material adverse affect on the Companys business.

The  Companys  Insurance  May Not Be  Sufficient  to Cover the Losses  That May Occur to Its  Property or as a
Result of Its Operations

The  operation of oil tankers  carries the risk of  environmental  damage from an oil spill as well as the risk
of catastrophic  marine disasters and property losses inherent to any ocean-going  vessel.  The Company carries
protection  and  indemnity  coverage to protect  against  most of the  accident-related  risks  involved in the
conduct of its business and maintains  environmental damage and pollution coverage.  The Company does not carry
insurance  covering the loss of revenue  resulting from vessel off-hire time. In addition,  the Company may not
be  adequately  insured  against  all  risks,  may not be able to procure  adequate  coverage  at  commercially
reasonable  rates in the future and any  particular  claim may not be paid.  Any uninsured loss or unpaid claim
could  have a  material  adverse  effect  on the  Companys  business,  financial  condition,  and  results  of
operations.

More  stringent  environmental  regulations  at times in the past have resulted in increased  costs for, and in
the future may result in the lack of availability  of, insurance  against the risks of environmental  damage or
pollution.  The Company  currently  maintains $1 billion in coverage for liability for  pollution,  spillage or
leakage of oil for each of its vessels. A catastrophic spill could exceed the coverage  available,  which could
have a material adverse effect on the Companys business, financial condition, and results of operations.

On February 1, 2003,  one of the Companys  vessels,  the Alliance  Spirit,  was empty of cargo and waiting off
Skikda,  Algeria to load crude oil when a severe  storm  arose and pushed  aground  the vessel and three  other
vessels,  not in the Companys fleet. As of March 27, 2003, the vessel had been cut in two and its fore part
had been removed in preparation for sale to a third party for scrapping.  The aft part of the vessel continues to
remain aground.  The vessel could roll over or break  apart,  resulting in a spillage or leakage of approximately
15 metric tones of residual  crude oil cargo  that remainsh in the cargo  tanks.  Any  damages  resulting  from this
incident  could  have a material  adverse  effect on the Companys financial condition to the extent not covered by insurance.

An Incident  Involving  Environmental  Damage or  Pollution  and Any of the  Companys  Vessels  Could Harm the
Companys Reputation and Business

Oil  spills  related  to the  sinkings  of the  tanker  Erika off the  coast of  France in 1999 and the  tanker
Prestige  off the  coast of Spain in 2002,  and  other  tanker-related  environmental  incidents  have  created
increased  demand for modern  vessels  operated by ship  management  companies with a reputation for safety and
environmental  compliance.  Any event  involving the Companys  tankers that results in material  environmental
damage or pollution could harm the Companys  reputation for safety and  environmental  compliance and decrease
demand for the Companys services, which could harm its business.

The Companys Operating Results Are Subject to Seasonal Fluctuations

The Company  operates its tankers in markets that have  historically  exhibited  seasonal  variations in demand
and,  therefore,  in charter  rates.  This  seasonality  may  result in  quarter-to-quarter  volatility  in the
Companys  results of  operations.  Tanker  markets are typically  stronger in the winter months as a result of
increased oil consumption in the northern  hemisphere.  In addition,  unpredictable  weather  patterns in these
months  tend to  disrupt  vessel  scheduling.  The oil  price  volatility  resulting  from  these  factors  has
historically  led to  increased  oil  trading  activities  in the winter  months.  As a result,  the  Companys
revenues  have  historically  been  weaker  during its fiscal  quarters  ended June 30 and  September  30, and,
conversely, revenues have been stronger in the Companys fiscal quarters ended December 31 and March 31.

The Company Expends  Substantial Sums During  Construction of Newbuildings  Without Earning Revenue and Without
Assurance That They Will Be Completed

The Company is typically  required to expend  substantial  sums as progress  payments during  construction of a
newbuilding,  but the Company  does not derive any revenue  from the vessel  until after its  delivery.  If the
Company were unable to obtain financing  required to complete  payments on any of its newbuilding  orders,  the
Company could  effectively  forfeit all or a portion of the progress  payments  previously made. As of March 1,
2003, the Company had twelve  newbuildings  on order with deliveries  scheduled  between March 2003 and October
2004. The Company may order additional newbuildings in the future.

The Loss of Any Key Customer Could Result in a Significant Loss of Revenue in a Given Period

The Company has derived,  and believes  that it will continue to derive,  a  significant  portion of its voyage
revenues  from a  limited  number of  customers.  No  customer  accounted  for more  than 10% of the  Companys
consolidated  voyage  revenues  during the year ended December 31, 2002.  One customer,  an  international  oil
company,  accounted for 13% ($130.8  million) of the Companys  consolidated  voyage  revenues  during the year
ended December 31, 2001. Two  customers,  both  international  oil  companies,  individually  accounted for 13%
($118.3 million) and 12% ($110.2 million) of the Companys  consolidated  voyage revenues during the year ended
December  31,  2000.  No other  customer  accounted  for more  than 10% of the  Companys  consolidated  voyage
revenues  during the fiscal periods  presented  above.  Giving effect to the Companys  pending  acquisition of
Navion ASA as if it had occurred on January 1, 2001, one customer would have  accounted for  approximately  25% ($389.4 million)
and 26% ($491.0 million) of the Companys  consolidated voyage revenues during the years
ended  December 31, 2002 and 2001,  respectively.  No other  customer would have accounted for more than 10% of
such  consolidated  voyage  revenues during either of such periods.  The loss of any significant  customer or a
substantial  decline  in the amount of  services  requested  by a  significant  customer  could have a material
adverse effect on the Companys business, financial condition and results of operations.

Exposure to  Currency  Exchange  Rate and  Interest  Rate  Fluctuations  Could  Result in  Fluctuations  in the
Companys Net Income.

While  virtually  all of the  Companys  revenues  are  earned  in U.S.  Dollars,  a portion  of the  Companys
operating  costs are  incurred in  currencies  other than U.S.  Dollars.  This  partial  mismatch in  operating
revenues and expenses could lead to  fluctuations  in net income due to changes in the value of the U.S. dollar
relative to other currencies,  in particular the Norwegian Kroner,  the Australian Dollar, the Canadian Dollar,
the Singapore Dollar, the Japanese Yen, and the British Pound.

At March 1, 2003,  approximately  $402  million,  or 38%,  of the  Companys  debt bore  interest  at  floating
interest rates.  The Company also had a commitment of  approximately  $724 million for the pending acquisition
of Navion ASA. This commitment  bears interest at floating  interest  rates.  Increases in interest rates would
increase  interest  payments  on this debt and  commitment,  and could  have a material  adverse  effect on the
Companys  business,  financial  condition and results of operations.  To partially mitigate this interest rate
exposure,  as of March 1, 2003, the Company had entered into six interest rate swaps,  with maturities  between
March 2003 and January 2006, that  effectively  change the Companys  interest rate exposure on $720 million of
debt and this commitment from a floating LIBOR rate to an average fixed rate of 2.63%.

The Company May Not Be Exempt From United  States Tax on Its United States  Source  Income,  Which Would Reduce
Its Net Income and Cash Flow by the Amount of the Applicable Tax.

If it is not exempt  from tax under  Section 883 of the United  States  Internal  Revenue  Code,  the  shipping
income derived from the United States sources  attributable to the Companys  subsidiaries  transportation  of
cargoes  to or  from  the  United  States  will be  subject  to  U.S.  federal  income  tax.  If the  Companys
subsidiaries  were subject to such tax, the  Companys  net income and cash flow would be reduced by the amount
of such tax. Currently,  the Company has claimed an exemption under Section 883. Proposed regulations,  if they
become final as proposed,  may not permit the Company to continue to claim this  exemption.  The Company cannot
give any  assurance  that future  changes and shifts in ownership of the  Companys  stock will not preclude it
from being able to satisfy the existing  exemption  requirements  or, if the Company were to initially  qualify
for an exception thereunder, the proposed regulations as adopted and finalized.

In the years ended December 31, 2002 and 2001,  approximately 17.9% and 18.0%,  respectively,  of the Companys
net voyage revenues were derived from U.S.  sources  attributable to the  transportation  of cargoes to or from
the  United  States.  The  average  U.S.  federal  income tax on such U.S.  source  income,  in the  absence of
exemption  under  Section 883,  would have been 4% thereof,  or  approximately  $5.6 million and $7.5  million,
respectively, for the years ended December 31, 2002 and 2001.

Item 4.  Information on the Company

The Company

The Company is a leading  provider of international  crude oil and petroleum  product  transportation  services
through the worlds  largest  fleet of  medium-size  oil  tankers  and will have the worlds  largest  fleet of
shuttle  tankers,  after the  completion  of the pending  acquisition  of Navion ASA.  The  Companys  fleet of
tankers  provides  transportation  services  to major  oil  companies,  oil  traders  and  government  agencies
worldwide.

As of March 1, 2003,  the Companys  fleet  consisted of 101 vessels:  67 Aframax oil tankers  (including  five
vessels  time-chartered-in,  two Aframax-size oil/bulk/ore carriers ("O/B/Os") trading exclusively as crude oil
carriers,  two  Aframax  tankers  converted  to floating  storage  and  off-take  vessels  ("FSOs"),  and seven
newbuildings);  18 shuttle  tankers  (including  two  newbuildings,  one vessel  converted to an FSO, and three
vessels  owned by joint  ventures);  eight  O/B/Os  that are  operated  through  an O/B/O  pool  managed by the
Company;  two smaller oil tankers;  one Very Large Crude  Carrier;  two Suezmax  tankers  (including  one vessel
owned by a joint  venture)  and three  Suezmax-size  newbuildings.  The  Companys  vessels are of  Australian,
Bahamian,  Canadian,  Cayman Islands,  Liberian,  Marshall Islands,  Norwegian,  Norwegian  International  Ship
("NIS"),  and  Panamanian  registry.  The  Companys  fleet has a total cargo  capacity of  approximately  10.4
million tonnes.  The Companys  Aframax tankers  represent  approximately 13% of the total tonnage of the world
Aframax and O/B/O fleet,  and the Companys  shuttle  tankers  (excluding the shuttle tankers to be acquired as
part of the  pending  acquisition  of Navion)  represent  approximately  26% of the total  tonnage of the world
shuttle tanker fleet.

The  Companys  Aframax  tanker  fleet  (excluding   Aframax-size  shuttle  tankers)  has  an  average  age  of
approximately  10.5  years,  compared  to an average  age for the world oil  tanker  fleet,  including  Aframax
tankers, of approximately 11.6 years and for the world Aframax tanker fleet of approximately 12.0 years.

The Company has been  recognized  by customers  and tanker  rating  services  for safety,  quality and service.
Given the increasing emphasis by customers on quality as a result of stringent environmental  regulations,  and
heightened  concerns about liability for oil pollution,  the Company  believes that its emphasis on quality and
safety provides it with a favorable competitive profile.

The critical ship  management  functions of vessel  maintenance,  crewing,  purchasing,  shipyard  supervision,
insurance and financial  management  services are carried out  "in-house" in the Companys  various  facilities
around the world.  Since 1995,  IUM  Shipmanagement  AS ("IUM"),  a company in which Teekay  indirectly  owns a 40 percent
interest  through its wholly  owned  subsidiary  UNS, has provided  UNS ship  management  services,
including  crewing and  maintenance.  IUM is under contract to provide these services to UNS until December 31,
2005.

The Company has  chartering  staff located in Vancouver,  Tokyo,  London,  Oslo,  Houston and  Singapore.  Each
office serves the Companys clients  headquartered in that offices region. Fleet operations,  vessel positions
and charter market rates are monitored around the clock.  Management  believes that monitoring such information
is critical to making  informed  bids on  competitive  brokered  business.  During the year ended  December 31,
2002,  approximately  65% of the Companys  consolidated  net voyage revenues were derived from spot voyages or
time charters and contracts of affreightment priced on a spot market basis.

The Company pursues an intensively  customer- and  operations-oriented  business  strategy  designed to achieve
superior operating results. The Company believes that it has four key competitive strengths:

| | market  concentration  in the  Indo-Pacific  Aframax market,  the Atlantic Basin Aframax market,
               and  the  shuttle  tanker  market,  which  facilitates   comprehensive   coverage  of  charterer
               requirements  and  provides  a base  for  efficient  operation  and a high  degree  of  capacity
               utilization,                                                                                                                                                    
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | full-service  marine  operations  capabilities  and  experienced  management  in  all  functions
               critical to its operations,  which affords a focused  marketing  effort,  high quality and tight
               cost controls, improved capacity utilization and effective operations and safety monitoring,                                                                                                                                                                                    
| | a large,  uniform-size fleet of Aframax-size (75,000 to 119,999 dwt) tankers,  many of which are
               in  sister  vessel  series  (substantially  identical  vessels),  which  facilitates  scheduling
               flexibility due to vessel  substitution  opportunities,  permitting  greater  responsiveness  to
               customer demands and enhanced capacity  utilization,  and which results in lower operating costs
               than those experienced by smaller operators, and
| | a strong  network of customer  relationships  and a  reputation  for  transportation  excellence
               among quality-sensitive customers.                                                                                                                                                                                                                                                                                                                                                              

The  Company's  growth  strategy is to leverage  its existing  competitive  strengths to continue to expand its
business.  The Company  anticipates  that the  continued  upgrade and  expansion  of its tanker  business  will
continue to be a key  component  of its  strategy.  In addition,  the Company  believes  that its  full-service
marine operations  capabilities,  reputation for safety and quality and strong customer  orientation provide it
with the opportunity to expand its business by providing  additional  value-added and innovative  services,  in
many cases to existing  customers.  Finally,  the Company intends to identify  expansion  opportunities  in new
tanker market  segments,  geographic areas and services to which the Company's  competitive  strengths are well
suited,  such as the Company's  entry into the shuttle tanker market through its acquisition of UNS in 2001 and
its  pending  acquisition  of  Navion  ASA,  as  described  below.  The  Company  may  choose  to  pursue  such
opportunities through internal growth, joint ventures or business acquisitions.

The Teekay  organization  was founded in 1973.  Teekay Shipping  Corporation is incorporated  under the laws of
the Republic of The Marshall Islands and maintains its principal  executive  headquarters at TK House,  Bayside
Executive Park, West Bay Street & Blake Road, P.O. Box AP-59213,  Nassau, The Bahamas.  Its telephone number at
such address is (242) 502-8820.  The Company's  principal operating office is located at Suite 2000, Bentall 5,
550 Burrard Street,  Vancouver,  British  Columbia,  Canada,  V6C 2K2. Its telephone  number at such address is
(604) 683-3529.

Acquisition of Ugland Nordic Shipping AS

In May 2001, the Company  completed its  acquisition  of UNS, the world's  largest  shuttle tanker owner.  UNS'
modern  fleet  of  20  vessels  (including  two  newbuildings  and  two  vessels  undergoing   conversion  from
conventional  tankers to shuttle  tankers) has an average age of 9.4 years  (excluding  the  newbuildings)  and
operates  primarily in the North Sea under  long-term  fixed-rate  contracts.  The total purchase price for the
outstanding shares of UNS was approximately $223 million  (including  transaction  expenses of approximately $7
million).  The operating results of UNS have been reflected in the Company's  financial  statements  commencing
March 6, 2001, the date the Company acquired a majority interest in UNS.

UNS' large-scale and high-quality  shuttle tanker  operations has provided the Company a strategic  opportunity
to enter this  attractive  market as a market leader.  The  acquisition  has also allowed the Company to expand
the  portfolio of  value-added  services it offers to its  customers.  The Company  believes that to the extent
offshore oil fields become more important to the global oil supply,  the need for shuttle tanker  services will
increase.  By combining the Company's  global  franchise and UNS' expertise in the shuttle  tanker market,  the
Company  believes the shuttle tanker business is an area of significant  growth for Teekay.  The acquisition of
UNS has also provided added  stability to the Company's cash flow  throughout  its business  cycle,  due to the
long-term, fixed-price nature of its shuttle tanker contracts.

Pending Acquisition of Navion ASA

On December  16, 2002,  the Company and Statoil ASA  announced  that they had entered  into an agreement  under
which the  Company  will  acquire  Statoil's  wholly-owned  shipping  company,  Navion ASA  (excluding  its oil
drilling ship and related operations and one floating  production,  storage and offload vessel), on a debt-free
basis, for  approximately  $800 million in cash. The Company  anticipates  funding its acquisition of Navion by
borrowing  under a new credit  facility,  together with available  cash or cash  generated from  operations and
borrowings  under other existing  credit  facilities.  The Company has a commitment of approximately $724
million relating to the acquisition.  The closing of the transaction is expected to take place in the second quarter of 2003.

Navion,  based in Norway,  operates  primarily in the shuttle tanker and the conventional crude oil and product
tanker  markets.  Its modern  shuttle  tanker fleet,  which as of December 31, 2002 consisted of nine owned and
17 chartered-in  vessels  (including four vessels  chartered-in  from the Company's  subsidiary UNS),  provides
logistical  services to Statoil and other oil companies in the North Sea under fixed-rate,  long-term contracts
of  affreightment.  Navion's modern,  chartered-in,  conventional  tanker fleet,  which as of December 31, 2002
consisted  of 12 crude oil tankers  and nine  product  tankers,  operates  primarily  in the  Atlantic  region,
providing  services to Statoil and other oil companies.  In addition,  Navion owns two FSOs  currently  trading
as conventional crude tankers in the Atlantic region, and one gas carrier on long-term charter to Statoil.

Through a joint venture with Statoil,  Navion is responsible  for meeting  Statoil's  transportation  needs for
crude oil,  condensate  and refined  petroleum  products.  As part of this  arrangement,  Navion has a right of
first refusal on Statoil's oil  transportation  requirements  at the prevailing  market rate until December 31,
2007.  After the  acquisition,  the Company  believes  this  arrangement  may increase the  utilization  of its
conventional  fleet.  The Company also believes that the  acquisition of Navion will provide added stability to
the Company's  cash flow and earnings  throughout  the tanker market cycle,  due to the  fixed-rate,  long-term
nature of Navion's shuttle tanker contracts.

Competition

The  Company  competes  primarily  in  the  Aframax  and  shuttle  tanker  markets.   In  the  Aframax  market,
international  seaborne  oil and other  petroleum  products  transportation  services  are provided by two main
types of operators:  captive fleets of major oil companies (both private and  state-owned) and independent ship
owner fleets.  Many major oil companies and other oil trading companies,  the primary charterers of the vessels
owned or controlled by the Company,  also operate their own vessels and transport  their own oil as well as oil
for third party  charterers in direct  competition  with  independent  owners and  operators.  Competition  for
charters in the Aframax  spot  charter  market is intense and is based upon  price,  location,  the size,  age,
condition and acceptability of the vessel, and the reputation of the vessel's manager.

The Company  competes  principally  with other  Aframax  owners in the spot charter  market  through the global
tanker charter market.  This market is comprised of tanker broker  companies that represent both charterers and
ship  owners in  chartering  transactions.  Within  this  market,  some  transactions,  referred  to as "market
cargoes,"  are  offered  by  charterers  through  two or more  brokers  simultaneously  and shown to the widest
possible range of owners;  other transactions,  referred to as "private cargoes," are given by the charterer to
only one broker  and shown  selectively  to a limited  number of owners  whose  tankers  are most  likely to be
acceptable to the charterer and are in position to undertake the voyage.

Other large operators of Aframax tonnage include General Maritime  Corporation,  with  approximately 28 Aframax
vessels,  American  Eagle  Tankers  Ltd.  (partially  owned  by  the  Singapore  government),   which  controls
approximately  25  Aframax  vessels,   Tanker  Pacific   Management   (Singapore)  Pte.  Ltd.,  which  controls
approximately 13 Aframax vessels, and Overseas Shipholding Group, with approximately 12 Aframax vessels.

The Company's  competition in the Aframax  (75,000 to 119,999 dwt) market is also affected by the  availability
of other size vessels  that compete in the  Company's  markets.  Suezmax  (120,000 to 199,999 dwt) size vessels
and Panamax  (50,000 to 74,999  dwt) size  vessels  can  compete  for many of the same  charters  for which the
Company  competes.  Because of their large size,  Ultra Large Crude Carriers  (320,000+ dwt) ("ULCCs") and Very
Large Crude  Carriers  (200,000 to 319,999 dwt)  ("VLCCs")  rarely  compete  directly with Aframax  tankers for
specific  charters.  However,  because ULCCs and VLCCs comprise a substantial  portion of the total capacity of
the market,  movements by such vessels into  Suezmax  trades and of Suezmax  vessels into Aframax  trades would
heighten the already intense competition.

Management  believes that it has  significant  competitive  advantages in the Aframax tanker market as a result
of the  quality,  type and  dimensions  of its vessels and its market  share in the  Indo-Pacific  and Atlantic
Basins.  Some competitors of the Company,  however,  may have greater financial  strength and capital resources
than the Company.

There currently are 68 vessels in the world shuttle tanker fleet  (including five  newbuildings),  the majority
of which operate in the North Sea.  Shuttle tankers  typically  operate under long-term,  fixed-rate  contracts
for a specific  offshore oil field or under  contracts of  affreightment  for various  fields.  Competition for
charters is based primarily upon price,  availability,  the size, technical  sophistication,  age and condition
of the  vessel,  and the  reputation  of the  vessel's  manager.  Technical  sophistication  of the  vessel  is
especially  important in harsh  operating  environments  such as the North Sea.  Although the size of the world
shuttle tanker fleet has been  relatively  unchanged in recent years,  conventional  tankers could be converted
into less  sophisticated  shuttle tankers by adding  specialized  equipment to meet the requirements of the oil
companies.  Shuttle  tanker  demand is also affected by the possible  substitution  of sub-sea  pipelines  that
transport oil from offshore production platforms.

The  Company  currently  owns  20  shuttle  tankers,  including  two  newbuildings  and two  vessels  currently
undergoing  conversion from conventional  tankers to shuttle tankers.  After the Company's pending  acquisition
of Navion ASA, the Company will acquire an  additional 8 owned  shuttle  tankers and control an  additional  13
chartered-in  shuttle tankers  (excluding four vessels  chartered-in from the Company's  subsidiary UNS). Other
shuttle  tanker  owners in the  North Sea  include  Knutsen  OAS  Shipping  AS and JJ Ugland  Group,  which own
approximately  nine and six  shuttle  tankers,  respectively.  The  remaining  owners in the North Sea each own
three or fewer  vessels.

As part of its growth  strategy,  the Company  will  continue to consider  strategic  opportunities,  including
business  acquisitions,  such as the acquisitions of UNS in 2001, Bona  Shipbuilding Ltd. ("Bona") in 1999, and
the pending  acquisition  of Navion.  To the extent the Company  enters new  geographic  areas or tanker market
segments,  there can be no  assurance  that the  Company  will be able to  compete  successfully  therein.  New
markets  may  involve  competitive  factors  that  differ  from  those of the  Aframax  market  segment  in the
Indo-Pacific  and Atlantic  Basins and the North Sea shuttle  tanker market and may include  participants  that
have greater financial strength and capital resources than the Company.

Regulation

The business of the Company and the operation of its vessels are materially  affected by government  regulation
in the form of  international  conventions  and national,  state and local laws and regulations in force in the
jurisdictions  in which the vessels  operate,  as well as in the country or  countries  of their  registration.
Because such  conventions,  laws, and  regulations  are often revised,  the Company cannot predict the ultimate
cost of complying  with such  conventions,  laws and  regulations or their impact on the resale price or useful
life of its vessels.  Additional conventions,  laws and regulations may be adopted that could limit the ability
of the Company to do business or increase  the cost of its doing  business  and that may  materially  adversely
affect the  Company's  operations.  The  Company is  required by various  governmental  and  quasi-governmental
agencies  to obtain  permits,  licenses  and  certificates  with  respect  to its  operations.  Subject  to the
discussion  below  and to the fact  that the kinds of  permits,  licenses  and  certificates  required  for the
operations  of the vessels owned by the Company will depend on a number of factors,  the Company  believes that
it has been and will be able to continue  to obtain all  permits,  licenses  and  certificates  material to the
conduct of its operations.

The Company  believes  that the  heightened  environmental  and quality  concerns  of  insurance  underwriters,
regulators and charterers will generally lead to greater  inspection and safety  requirements on all vessels in
the tanker market and will accelerate the scrapping of older vessels throughout the industry.

Environmental  Regulation  International  Maritime  Organization  ("IMO").  On March 6,  1992,  the IMO  adopted
regulations  that set  forth  new and  upgraded  requirements  for  pollution  prevention  for  tankers.  These
regulations,  which went into effect on July 6, 1995 in many  jurisdictions in which the Company's tanker fleet
operates,  provide that (i) tankers  between 25 and 30 years old must be of  double-hull  construction  or of a
mid-deck design with double side  construction,  unless they have wing tanks or double-bottom  spaces, not used
for the carriage of oil,  which cover at least 30% of the length of the cargo tank section of the hull,  or are
capable of  hydrostatically  balanced  loading which ensures at least the same level of protection  against oil
spills in the event of  collision  or  stranding,  (ii)  tankers 30 years old or older  must be of  double-hull
construction  or  mid-deck  design with  double-side  construction,  and (iii) all  tankers  will be subject to
enhanced inspections.  Also, under IMO regulations,  a tanker must be of double-hull construction or a mid-deck
design with double side  construction  or be of another  approved  design ensuring the same level of protection
against oil  pollution  in the event that such tanker (i) is the subject of a contract  for a major  conversion
or original  construction on or after July 6, 1993,  (ii) commences a major  conversion or has its keel laid on
or after January 6, 1994,  or (iii)  completes a major  conversion  or is a  newbuilding  delivered on or after
July 6, 1996.

On April 27, 2001,  the IMO revised its  regulations  relating to the  prevention  of pollution  from  tankers.
These regulations,  which took effect on September 1, 2002,  generally provide that single-hull tankers must be
phased out between 2003 and 2015. These  regulations  identify three categories of single-hull  tankers,  which
include double-bottom and double-side tankers:

| | "Category 1 oil tanker" means any oil tanker of 20,000 dwt and above  carrying  crude oil, fuel
         oil,  heavy diesel oil or lubricating  oil as cargo,  and of 30,000 dwt and above carrying other oils,
         which does not have segregated ballast tanks;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | "Category 2 oil tanker" means any oil tanker of 20,000 dwt and above  carrying  crude oil, fuel
         oil,  heavy diesel oil or lubricating  oil as cargo,  and of 30,000 dwt and above carrying other oils,
         which has segregated ballast tanks; and      
| | "Category  3 oil  tanker"  means an oil tanker of 5,000 dwt and above but less than the tonnage
         specified for Category 1 and 2 oil tankers.                                                                                                                  

All of the  single-hull  tankers the  Company  operates  are  Category 2 oil  tankers.  As  illustrated  in the
following  table,  the most recent IMO  regulations  provide for the phase-out on a rolling basis of Category 1
oil tankers by 2007 and of Category 2 oil tankers by 2015.

`------------------------------------------------------------ ---------------------------------------------------------
Category of Oil Tanker                                       Year To Be Removed From Service
------------------------------------------------------------ ---------------------------------------------------------

Category 1..............................................     2003 for ships delivered in 1973 or earlier
                                                             2004 for ships delivered in 1974 and 1975
                                                             2005* for ships delivered in 1976 and 1977
                                                             2006* for ships delivered in 1978, 1979 and 1980
                                                             2007* for ships delivered in 1981 or later

------------------------------------------------------------ ---------------------------------------------------------

Category 2.............................................      2003 for ships delivered in 1973 or earlier
                                                             2004 for ships delivered in 1974 and 1975
                                                             2005 for ships delivered in 1976 and 1977
                                                             2006 for ships delivered in 1978 and 1979
                                                             2007 for ships delivered in 1980 and 1981
                                                             2008 for ships delivered in 1982
                                                             2009 for ships delivered in 1983
                                                             2010* for ships delivered in 1984
                                                             2011* for ships delivered in 1985
                                                             2012* for ships delivered in 1986
                                                             2013* for ships delivered in 1987
                                                             2014* for ships delivered in 1988
                                                             2015* for ships delivered in 1989 or later
------------------------------------------------------------ ---------------------------------------------------------

Category 3............................................       2003 for ships delivered in 1973 or earlier
                                                             2004 for ships delivered in 1974 and 1975
                                                             2005 for ships delivered in 1976 and 1977
                                                             2006 for ships delivered in 1978 and 1979
                                                             2007 for ships delivered in 1980 and 1981
                                                             2008 for ships delivered in 1982
                                                             2009 for ships delivered in 1983
                                                             2010 for ships delivered in 1984
                                                             2011 for ships delivered in 1985
                                                             2012 for ships delivered in 1986
                                                             2013 for ships delivered in 1987
                                                             2014 for ships delivered in 1988
                                                             2015 for ships delivered in 1989 or later
------------------------------------------------------------ ---------------------------------------------------------`

* Subject to compliance with Condition Assessment Scheme Survey.

However,  under certain conditions,  Category 2 and Category 3 oil tankers may continue in operation beyond the
date set forth in the table above.  Category 2 and Category 3 oil tankers  fitted with double bottoms or double
sides may continue in service until 25 years after their  delivery  date.  Category 2 or Category 3 oil tankers
that are single hull may continue in service  until 25 years after their  delivery  date or 2017,  whichever is
earlier,  if fitted  with wing tanks or double  bottoms or  operated  with  hydrostatically  balanced  loading.
Category 1 oil tankers  over 25 years old must have double  bottoms or operate  with  hydrostatically  balanced
loading.  However,  a port  state  may  declare  that it does not  accept  entry of such  vessels  after  their
phase-out  date.  The  European  Union,  Cyprus and Malta have already  declared  that they will not permit the
entry of such vessels.

Vessels must pass a Condition  Assessment  Scheme Survey after 2005 for Category 1 oil tankers,  and after 2010
for Category 2 oil tankers.  The Conditional  Assessment  Scheme Survey includes surveys of the hull structure,
including  cargo  tanks,  pump rooms,  cofferdams,  pipe  tunnels,  void  spaces  within the cargo area and all
ballast tanks.

Under the current IMO  regulations,  the  Company's  vessels will be able to operate for  substantially  all of
their  respective  economic  lives before being  required to have  double-hulls.  Although 21 of the  Company's
vessels are over 15 years old (including the eight OBOs it acquired in the Bona  acquisition),  IMO regulations
do not  require any of its  vessels to be  phased-out  until 2007.  However,  compliance  with the  regulations
regarding inspections of all vessels may adversely affect the Company's  operations.  The Company cannot at the
present  time  evaluate  the  likelihood  or magnitude  of any such  adverse  effect on its  operations  due to
uncertainty of interpretation of the IMO regulations.

The  operation  of the  Company's  vessels  is  also  affected  by the  requirements  set  forth  in the  IMO's
International  Management Code for the Safe Operation of Ships and Pollution  Prevention (the "ISM Code").  The
ISM Code requires  shipowners and bareboat  charterers to develop and maintain an extensive "Safety  Management
System" that includes the adoption of a safety and environmental  protection policy setting forth  instructions
and  procedures for safe operation and  describing  procedures for dealing with  emergencies.  The failure of a
shipowner or bareboat  charterer  to comply with the ISM Code may subject  that party to  increased  liability,
may decrease  available  insurance  coverage for the affected  vessels and may result in a denial of access to,
or detention in, certain ports.  Currently,  each of the Company's  applicable  vessels is ISM  Code-certified.
However, there can be no assurance that such certification will be maintained in the future.

Environmental  Regulations  The  United  States Oil  Pollution  Act of 1990 ("OPA 90").  OPA 90  established  an
extensive  regulatory and liability  regime for the protection and cleanup of the environment  from oil spills.
OPA 90 affects  all owners and  operators  whose  vessels  trade to the  United  States or its  territories  or
possessions  or whose vessels  operate in United States waters,  which include the United  States'  territorial
sea and its two hundred nautical mile exclusive economic zone.

Under OPA 90, vessel  owners,  operators and bareboat (or "demise")  charterers are  "responsible  parties" and
are jointly,  severally  and strictly  liable  (unless the spill  results  solely from the act or omission of a
third party,  an act of God or an act of war) for all  containment and clean-up costs and other damages arising
from  discharges or threatened  discharges of oil from their vessels.  These other damages are defined  broadly
to include (i) natural resources damages and the costs of assessment  thereof,  (ii) real and personal property
damages,  (iii) net loss of taxes,  royalties,  rents,  fees and other  lost  revenues,  (iv) lost  profits  or
impairment of earning  capacity due to property or natural  resources  damage,  (v) net cost of public services
necessitated by a spill  response,  such as protection  from fire,  safety or health hazards,  and (vi) loss of
subsistence  use of natural  resources.  OPA 90 limits the liability of  responsible  parties to the greater of
$1,200 per gross ton or $10 million per tanker  that is over 3,000 gross tons  (subject to possible  adjustment
for inflation).  These limits of liability would not apply if the incident was proximately  caused by violation
of applicable United States federal safety,  construction or operating  regulations,  including IMO conventions
to which the U.S. is signature to, or by the responsible  party's gross  negligence or willful  misconduct,  or
if the  responsible  party fails or refuses to report the  incident or to  cooperate  and assist in  connection
with the oil removal  activities.  The Company  currently plans to continue to maintain for each of its vessels
pollution  liability  coverage in the amount of $1 billion per incident.  A catastrophic spill could exceed the
coverage  available,  which  could  have a  materially  adverse  effect on the  Company's  business,  financial
condition and results of operations.

Under OPA 90, with limited  exceptions,  all newly built or converted tankers operating in United States waters
must be built with  double-hulls,  and  existing  vessels that do not comply with the  double-hull  requirement
must be phased out over a 20-year period  (1995-2015)  based on size, age and hull  construction.  Vessels with
double-sides and  double-bottoms  are granted an additional five years of service life before being phased out.
Of the  Company's  vessels,  21 are  over  15  years  old  (including  the  eight  OBOs  acquired  in the  Bona
acquisition).  Fifteen of those vessels have double-sides or  doublebottoms,  the oldest of which would not be
phased out until 2009. Three of those vessels have  double-hulls.  The Company's oldest  single-hull  tanker is
part of its  shuttle  tanker  fleet and does not trade in the  United  States.  Notwithstanding  the  phase-out
period,  OPA 90  currently  permits  existing  single-hull  tankers  to  operate  until  the year 2015 if their
operations within United States waters are limited to discharging at the Louisiana  Off-shore Oil Platform,  or
off-loading by means of lightering activities within authorized lightering zones more than 60 miles offshore.

OPA 90 requires  owners and  operators of vessels to establish  and maintain with the United States Coast Guard
(the "Coast Guard") evidence of financial  responsibility  sufficient to meet their potential liabilities under
OPA  90.  In  December  1994,  the  Coast  Guard  implemented   regulations  requiring  evidence  of  financial
responsibility  in the amount of $1,500 per gross ton for tankers,  coupling the OPA limitation on liability of
$1,200 per gross ton with the Comprehensive Environmental Response,  Compensation,  and Liability Act liability
limit of $300 per  gross  ton.  Under  the  regulations,  such  evidence  of  financial  responsibility  may be
demonstrated by insurance,  surety bond,  self-insurance,  or guaranty. Under OPA 90, an owner or operator of a
fleet of tankers is required only to demonstrate  evidence of financial  responsibility in an amount sufficient
to cover the tanker in the fleet having the greatest maximum liability under OPA 90.

The Coast  Guard's  regulations  concerning  certificates  of financial  responsibility  ("COFR")  provide,  in
accordance  with OPA 90, that claimants may bring suit directly  against an insurer or guarantor that furnishes
COFR;  and, in the event that such insurer or guarantor is sued directly,  it is prohibited  from asserting any
contractual  defense  that it may have had  against the  responsible  party and is limited to  asserting  those
defenses  available  to the  responsible  party and the  defense  that the  incident  was caused by the willful
misconduct of the responsible  party.  Certain  organizations,  which had typically provided COFR under pre-OPA
90 laws,  including the major  protection  and indemnity  organizations,  have declined to furnish  evidence of
insurance  for  vessel  owners  and  operators  if they are  subject to direct  actions  or  required  to waive
insurance policy defenses.

The Coast  Guard's  financial  responsibility  regulations  may also be  satisfied  by evidence of surety bond,
guaranty or by  self-insurance.  Under the  self-insurance  provisions,  the ship owner or operator must have a
net worth and working  capital,  measured in assets  located in the United States against  liabilities  located
anywhere  in the world,  that  exceeds  the  applicable  amount of  financial  responsibility.  The Company has
complied with the Coast Guard regulations by providing a financial  guaranty from a related company  evidencing
sufficient  self-insurance  for all the Company's  vessels trading into the United States.  If other vessels in
the  Company's  fleet trade into the United  States in the future,  the Company  expects to provide  guaranties
through self-insurance, or to obtain such guaranties from third-party insurers.

OPA 90  specifically  permits  individual  states to impose  their own  liability  regimes  with  regard to oil
pollution incidents occurring within their boundaries,  and some states have enacted legislation  providing for
unlimited  liability for oil spills.  In some cases,  states which have enacted such  legislation  have not yet
issued  implementing  regulations  defining  tanker  owners'  responsibilities  under these  laws.  The Company
intends to comply with all applicable state regulations in the ports where the Company's vessels call.

Owners or operators of tankers  operating in United  States waters are required to file vessel  response  plans
with the Coast Guard,  and their tankers are required to operate in compliance  with their Coast Guard approved
plans.  Such  response  plans must,  among other things,  (i) address a "worst case"  scenario and identify and
ensure,  through contract or other approved means, the availability of necessary private response  resources to
respond to a "worst case  discharge,"  (ii) describe crew training and drills,  and (iii)  identify a qualified
individual with full authority to implement  removal actions.  The Company has filed vessel response plans with
the Coast Guard for the tankers  owned by the Company and has  received  approval of such plans for all vessels
in its fleet to operate in United States waters.

OPA allows U.S. State legislatures to pre-empt  associated  regulation if the state's  regulations are equal or
more stringent.  Several  coastal states such as California,  Washington and Alaska require state specific COFR
and vessel response plans.Environmental  Regulation  Other  Environmental Initiatives.  The European Union is considering legislation that
will affect the  operation  of tankers and the  liability  of owners for oil  pollution.  It is  impossible  to
predict what legislation, if any, may be promulgated by the European Union or any other country or authority.

In response to the environmental  contamination  caused by the sinking in November 2002 of the tanker Prestige,
on March 27, 2003, the European  Transport  Commission  approved new regulations that would, among other things,
place a ban on the transportation of heavy oil grades in all single-hull tankers bound for or leaving European
ports and accelerate the phase-out of single hull vessels.  The European Union Parliament is scheduled to meet in
July 2003, to ratify these new regulations.  The Company has not determined the impact, if any, that these regulations
will have on the Company's business, results of operation or financial position.  Although  individual  European
Union members are not currently required to implement  these regulations,  Spain has issued a Royal decree  banning
the transport of heavy oils on single-hull tankers,  and there are indications that Portugal and Italy may unilaterally
implement similar measures.  Some other countries,  including the United States,  Japan and Australia,  are also
considering  revisions to their existing pollution  regulations  applicable to tankers. The proposed regulations
may be amended before they are adopted, if at all.

Although the United  States is not a party  thereto,  many  countries  have  ratified and follow the  liability
scheme  adopted by the IMO and set out in the  International  Convention  on Civil  Liability for Oil Pollution
Damage,  1969, as amended (the "CLC"),  and the Convention for the  Establishment of an International  Fund for
Oil Pollution of 1971, as amended.  Under these  conventions,  a vessel's  registered  owner is strictly liable
for pollution  damage caused on the territorial  waters of a contracting  state by discharge of persistent oil,
subject to certain  complete  defenses.  Many of the countries  that have  ratified the CLC have  increased the
liability  limits through a 1992 Protocol to the CLC. The liability  limits in the countries that have ratified
this Protocol are currently  approximately  $4.0 million plus  approximately  $572 per gross registered tonne
above 5,000 gross tonnes with an approximate  maximum of $75 million per vessel,  with the exact amount tied to
a unit of account which varies  according to a basket of currencies.  Effective  November 1, 2003,  such limits
will be increased to approximately  $5.8 million plus  approximately  $858 per gross registered ton above 5,000
gross tons, up to 140,000 gross tons. The right to limit  liability is forfeited  under the CLC where the spill
is caused by the owner's  actual fault or privity and,  under the 1992  Protocol,  where the spill is caused by
the owner's  intentional or reckless  conduct.  Vessels trading to contracting  states must provide evidence of
insurance  covering the limited  liability of the owner. In  jurisdictions  where the CLC has not been adopted,
various  legislative  schemes or common law govern, and liability is imposed either on the basis of fault or in
a manner similar to the CLC.

In addition,  the IMO,  various  countries and states,  such as  Australia,  the United States and the State of
California, and various regulators,  such as port authorities,  the U.S. Coast Guard and the U.S. Environmental
Protection Agency, have either adopted legislation or regulations,  or are separately  considering the adoption
of legislation or regulations, aimed at regulating the discharge of ballast water as a potential pollutant.

Shuttle Tanker Regulation

The Companys  shuttle tankers  primarily  operate in the North Sea. In addition to the regulations  imposed by
the IMO, countries having  jurisdiction over North Sea areas impose regulatory  requirements in connection with
operations in those areas.  These regulatory  requirements,  together with additional  requirements  imposed by
operators  in North Sea oil  fields,  require  the  Company  to make  further  expenditures  for  sophisticated
equipment,  reporting and  redundancy  systems on its shuttle  tankers and for the training of seagoing  staff.
Additional  regulations and  requirements  may be adopted or imposed that could limit the Companys  ability to
do business or further increase the cost of doing business in the North Sea.Risk of Loss and Insurance

The  operation  of any  ocean-going  vessel  carries an inherent  risk of  catastrophic  marine  disasters  and
property  losses caused by adverse  weather  conditions,  mechanical  failures,  human error,  war,  terrorism,
piracy and other  circumstances or events. In addition,  the transportation of crude oil is subject to the risk
of crude  oil  spills,  and  business  interruptions  due to  political  circumstances  in  foreign  countries,
hostilities,  labor  strikes,  and  boycotts.  The  occurrence  of any of these  events  may  result in loss of
revenues or increased costs.

The Company carries insurance  coverage to protect against most of the  accident-related  risks involved in the
conduct of its business and it maintains  environmental  damage and pollution insurance  coverage.  The Company
does not carry  insurance  covering  the loss of revenue  resulting  from  vessel  off-hire  time.  The Company
believes  that its current  insurance  coverage is adequate  to protect  against  most of the  accident-related
risks  involved  in the conduct of its  business  and that it  maintains  appropriate  levels of  environmental
damage and pollution  insurance  coverage.  The Company also carries protection and indemnity insurance against
certain  liabilities  that may be incurred while its vessels are  operating.  The Company's  current  insurance
coverage  for  pollution  is $1 billion per vessel per  incident.  There can be no  assurance  that all covered
risks are adequately  insured against,  that any particular claim will be paid or that the Company will be able
to procure  adequate  insurance  coverage  at  commercially  reasonable  rates in the  future.  More  stringent
environmental  regulations may result in increased  costs for, and may result in the lack of  availability  of,
insurance against the risks of environmental damage or pollution.Operations Outside the United States

Because the Company's  operations are primarily  conducted  outside of the United States,  they may be affected
by currency  fluctuations  and by changing  economic,  political and  governmental  conditions in the countries
where the Company is engaged in business or where its vessels are registered.

During  the year ended  December  31,  2002,  the  Company  derived  approximately  43% of its total net voyage
revenues from its operations in the Indo-Pacific Basin. Past political  conflicts in that region,  particularly
in the Arabian  Gulf,  have  included  attacks on tankers,  mining of  waterways  and other  efforts to disrupt
shipping in the area.  Vessels trading in the region have also been subject to, in limited  instances,  acts of
piracy.  In addition to tankers,  oil  pipelines  and  offshore  oil fields  could also be targets of terrorist
attacks.  Future  hostilities or other political  instability in this region or other regions where the Company
operates could affect the Company's trade  patterns,  increase  insurance  costs,  increase tanker  operational
costs and otherwise  adversely affect the Company's  operations and performance.  For example,  war between the
United  States and Iraq could  significantly  alter the supply and  transportation  of oil in the  Indo-Pacific
Basin,  which would adversely affect the Companys  operations and  performance.  In addition,  tariffs,  trade
embargoes,  and other  economic  sanctions by the United  States or other  countries  against  countries in the
Indo-Pacific  Basin or  elsewhere  as a result of  terrorist  attacks or other  hostilities  may limit  trading
activities with those countries, which could also adversely affect the Companys operations and performance.Customers

The Company has derived,  and believes  that it will continue to derive,  a  significant  portion of its voyage
revenues from a limited number of customers.  Customers of the Company  include major oil companies,  major oil
traders,  large oil consumers and petroleum product producers,  government agencies, and various other entities
dependent  upon the tanker  transportation  trade.  No customer  accounted  for more than 10% of the  Company's
consolidated  voyage revenues during the year ended December 31, 2002. A single customer,  an international oil
company,  accounted for 13% ($130.8  million) of the Company's  consolidated  voyage  revenues  during the year
ended December 31, 2001. Two  customers,  both  international  oil  companies,  individually  accounted for 13%
($118.3 million) and 12% ($110.2 million) of the Company's  consolidated  voyage revenues during the year ended
December  31,  2000.  No other  customer  accounted  for more  than 10% of the  Company's  consolidated  voyage
revenues  during the fiscal periods  presented  above.  The loss of any  significant  customer or a substantial
decline in the amount of services  requested by a significant  customer could have a material adverse effect on
the Company's business, financial condition and results of operations.Taxation of the Company

The following  discussion is a summary of the principal United States,  Bahamian,  Bermudian,  Marshall Islands
and Norwegian  tax laws  applicable to the Company.  The  following  discussion of tax matters,  as well as the
conclusions  regarding  certain issues of tax law that are reflected in such  discussion,  are based on current
law. No assurance  can be given that changes in or  interpretation  of existing laws will not occur or will not
be retroactive or that anticipated  future factual matters and circumstances  will in fact occur. The Companys
views  have no  binding  effect  or  official  status  of any  kind,  and no  assurance  can be given  that the
conclusions discussed below would be sustained if challenged by taxing authorities.United States Taxation

The following  discussion is based upon the  provisions of the U.S.  Internal  Revenue Code of 1986, as amended
(the  "Code"),   existing  and  proposed  U.S.  Treasury  Department   regulations,   administrative   rulings,
pronouncements and judicial decisions, all as of the date of this Annual Report.

Teekay  has made  special  U.S. tax  elections  in  respect of each of its  vessel-owning  or  vessel-operating
subsidiaries  that are  potentially  subject to  U.S. tax as a result of deriving  income  attributable  to the
transportation  of cargoes to or from the United  States.  No such U.S. tax  elections have been made by Teekay
in respect of (a) its vessel-owning or  vessel-operating  subsidiaries that operate  exclusively outside the United
States  because these  subsidiaries  are not subject to U.S. tax and (b) a Norwegian  subsidiary
that rarely transports  cargoes  to or from the  United  States  but when it does is
eligible to claim exemption from United States tax under the United States-Norway Income Tax Treaty.

The effect of the special U.S. tax  elections is to ignore or disregard the  subsidiaries,  for which elections
have been made, as separate  taxable  entities from that of their parent,  Teekay.  Therefore,  for purposes of
the ensuing U.S. tax  discussion,  Teekay, and not the subsidiaries  subject to this election,  will be treated
as the owner or operator of the vessels.

Taxation of the Company's Shipping Income: In General

The Company  anticipates that it will derive  substantially  all of its gross income from the use and operation
of vessels in  international  commerce  and that this income  will  principally  consist of  freights  from the
transportation  of  cargoes,  hire or lease  from time or  voyage  charters  and the  performance  of  services
directly related thereto, which the Company refers to as shipping income.

Shipping income that is attributable  to  transportation  that begins or ends, but that does not both begin and
end,  in the United  States  will be  considered  to be 50%  derived  from  sources  within the United  States.
Shipping  income  attributable  to  transportation  that both  begins  and ends in the  United  States  will be
considered to be 100% derived from sources within the United States.  Teekay does not engage in  transportation
that gives rise to 100% U.S. source income.

Shipping income  attributable to transportation  exclusively  between  non-U.S. ports  will be considered to be
100% derived from sources  outside the United States.  Shipping  Income derived from sources outside the United
States will not be subject to U.S. federal income tax.

Based upon Teekays  anticipated  shipping  operations,  Teekays  vessels will operate in various parts of the
world,  including to or from  U.S. ports.  Unless  exempt from  U.S. taxation  under  Section 883  of the Code,
Teekay will be subject to  U.S. federal  income  taxation,  in the manner  discussed  below,  to the extent its
shipping income is considered derived from sources within the United States.

In the years  ended  December  31,  2002 and 2001,  approximately  35.8% and 36.0%,  respectively,  of Teekays
shipping income was attributable to the  transportation of cargoes either to or from a U.S. port.  Accordingly,
17.9% and 18.0%,  respectively,  of Teekays  shipping income would be treated as derived from U.S. sources for
the  years  ended  December  31,  2002 and 2001,  respectively.  In the  absence  of  exemption  from tax under
Section 883,  Teekay  would have been  subject to a 4% tax on its gross U.S.  source  shipping  income equal to
approximately  $5.6 million  for the  year  ended  December  31,  2002  and  $7.5 million  for the  year  ended
December 31, 2001.Application of Code Section 883

Under  Section 883 of the Code,  Teekay will be exempt from  U.S. taxation  on its U.S. source  shipping income
if:

|(i)  | Teekay is organized in a qualified  foreign  country which is one that grants an equivalent  exemption
       from tax to  corporations  organized in the United  States in respect of the  shipping  income for which
       exemption  is being  claimed  under  Section 883  and which the  Company  refers to as the country  of
       organization requirement; and
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ii) | Teekay can satisfy any one of the following three (3) stock ownership requirements:                                                                                                                                                                                                                                                                                        

| | more than 50% of Teekays  stock,  in terms of value,  is  beneficially  owned by individuals who
              are residents of a qualified  foreign  country,  which the Company  refers to as the  beneficial
              ownership requirement;                                                                                                              
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Teekay is a controlled  foreign  corporation  within the meaning of Section 957 of the Code and
              more  than  50%  of  the  Companys  shipping  income  is  includible  in  the  gross  income  of
              U.S. persons  that own 10% or more of the  Companys  stock,  which the Company  refers to as the
              CFC requirement; or
| | Teekays stock is primarily and regularly  traded on an established  securities  market located
              in the United States, which the Company refers to as the publicly-traded requirement;                                                                                                                                                              

The  U.S. Treasury  Department has recognized the Marshall  Islands,  Teekays country of  incorporation,  as a
qualified foreign country. Accordingly, the Company satisfies the country of organization requirement.

Therefore,  Teekays  eligibility to qualify for exemption  under  Section 883 is wholly  dependent upon Teekay
being able to satisfy one of the three (3) stock ownership requirements.

Proposed  regulations  interpreting  Section 883  were  promulgated by the  U.S. Treasury  Department in August
2002, which the Company refers to as the proposed  regulations. These regulations  superseded and replaced in
their entirety the regulations  initially proposed  interpreting  Section 883  promulgated by the U.S. Treasury
Department in February 2000.

The  proposed  regulations  will  apply to  taxable  years  beginning  thirty  days or more  after the date the
regulations are published as final  regulations in the Federal  Register.  As a result,  such  regulations will
not be effective for calendar  year  taxpayers  like us until the calendar  year 2004 at the earliest.  At this
time,  it is unclear when the  proposed  regulations  will be  finalized  and whether they will be finalized in
their  present  form.  For  purposes  of the ensuing  discussion,  however,  the  Company has assumed  that the
proposed regulations will be finalized in their current form without change.

Based on the current  ownership of Teekays stock,  the Company  believes its ability to satisfy the beneficial
ownership  requirement  will prove to be  problematic  since the Company does not believe that it can document,
as required by the proposed  regulations,  more than 50% of its stock is owned by individuals who are residents
of qualified foreign countries, who the Company refers to as qualified shareholders.  Furthermore,  Teekay is
unable to satisfy the CFC requirement  since it is currently not a controlled  foreign  corporation,  which the
Company  refers  to as  CFC,  within  the  meaning  of  Section 957  of the Code,  and the  Company  does not
anticipate  that Teekay will become a CFC based on the current  ownership of its stock by  U.S. persons.  A CFC
is a  foreign  corporation  more  than  50% of the  stock  of  which,  by  vote or by  value,  is  actually  or
constructively  owned by one or more  U.S. persons,  each of whom owns 10% or more of the total voting power of
such stock.

In respect of the  publicly-traded  requirement,  the proposed  regulations  provide,  in pertinent  part, that
stock of a foreign  corporation  will be  considered  to be  primarily  traded on an  established  securities
market if the number of shares  that are traded  during any taxable  year on that market  exceeds the number of
shares  traded  during that year on any other  established  securities  market.  At present,  the sole class of
stock of Teekay that is issued and  outstanding  is its common stock,  and its common shares are listed only on
The New York  Stock  Exchange,  or NYSE.  Since the NYSE is an  established  securities  market  in the  United
States, Teekay is able to satisfy the primarily traded requirement.

The proposed  regulations  further provide that stock will generally be considered to be regularly  traded on
an established securities market if:

|(i)  | stock  representing  more than 50% of the  issuers  outstanding  classes  of stock,  by voting
       power and value, is listed on such market,  which the Company refers to as the 50% listing  threshold;
       and
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ii) | with respect to the class of stock relied on to satisfy the 50% listing threshold:                                                                                                                                        

| | such class of stock is traded on such market,  other than in de minimis  quantities,  on at least
              60 days  during the taxable year,  or 1/6 of the days in a short taxable year,  which the Company
              refers to as the trading frequency threshold; and                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the  aggregate  number of shares of such class of stock  traded on such market is at least 10% of
              the  average  number  of  shares of such  class of stock  outstanding  during  such  year,  or as
              appropriately  adjusted in the case of a short taxable year,  which the Company  refers to as the
              trading volume threshold.

Teekay  currently  satisfies  the 50%  listing  threshold  since  all its  common  stock is listed on the NYSE.
Furthermore,  Teekays  common  stock is  currently  traded on the NYSE at a level  sufficient  to satisfy  the
trading  frequency and trading  volume  thresholds.  Even if this were not the case,  the proposed  regulations
provide that the trading  frequency  threshold and the trading  volume  threshold  will be deemed  satisfied if
stock is traded on an established  securities  market in the United States and the stock is regularly quoted by
dealers making a market in the stock,  which the Company refers to as the  U.S. securities  market exception.
Teekays  common stock is currently  regularly  quoted on the NYSE by one or more dealers that make a market in
its common  stock and the  Company  anticipates  that this will  continue to be the case.  Therefore,  Teekays
common stock would also be considered to be regularly traded based on the U.S. securities market exception.

Notwithstanding the foregoing,  the proposed  regulations  provide, in pertinent part, that Teekays stock will
not be  considered to be regularly  traded on an  established  securities  market for any taxable year in which
50% or more of its stock is actually or  constructively  owned within the meaning of the proposed  regulations,
at any time during the year,  by persons who each own 5% or more of its stock,  which the Company  refers to as
the 5% override rule.

For purposes of being able to  determine  the persons who own 5% or more of Teekays  stock,  which the Company
refer to as 5%  shareholders,  the proposed  regulations  permit  Teekay to rely on those  persons  which are
identified on Form 13G  filings with the United States  Securities  and Exchange  Commission,  or the SEC, as
having a 5% or more beneficial  interest in Teekays  common stock.  The proposed  regulations  further provide
that an  investment  company  identified  on a SEC Form 13G  filing which is  registered  under the  Investment
Company  Act of  1940,  as  amended,  will  not  be  treated  as a 5%  shareholder  if no  person  actually  or
constructively  owns 5% or more of the  outstanding  interests of the investment  company and 5% or more of the
value of Teekays common stock, which the Company refers to as the investment company exception.

In the event the 5%  override  rule is  triggered  based on its at any time  during  the year  standard,  the
proposed  regulations  provide that the 5% override  rule will not apply for such year if Teekay can  establish
that  among  the  closely-held  group  of 5%  shareholders,  there  are  sufficient  5%  shareholders  that are
considered to be qualified  shareholders for purposes of Section 883 to preclude  non-qualified 5% shareholders
in the  closely-held  group  from  owning 50% or more of  Teekays  stock for more than half the number of days
during such year, which the Company refers to as the 5% override rule exemption.

Based on the 5%  shareholders  currently  identified on SEC Form 13G  filings or otherwise  known to it, Teekay
would  presently  be subject to the 5%  override  rule  unless one 5%  shareholder  is able to qualify  for the
investment  company  exception.  To date,  Teekay  has been  unable  to obtain  the  necessary  information  to
determine  whether  or not such 5%  shareholder  qualifies  for this  exception.  Furthermore,  if Teekay  were
subject to the 5%  override  rule,  it is not clear that  Teekay  would be able to qualify  for the 5% override
rule exemption based on the proposed regulations as currently drafted.

In  response  to an  invitation  for  public  comment  on  the  proposed  regulations  from  the  U.S. Treasury
Department,  the  Company  submitted  written  comments  requesting  certain  modifications  be  made to the 5%
override  rule,  the 5% override rule  exemption  which,  if accepted and  reflected in the final  regulations,
would  render  Teekay not subject to the 5% override  rule based on its  existing  shareholdings.  However,  no
assurance can be given that the Companys  proposed  modifications will ultimately be accepted and reflected in
the final  regulations  or that,  even if the  modifications  are  accepted,  future  changes  or shifts in the
ownership  of Teekays  stock would not subject it to the 5%  override  rule and thereby  preclude  Teekay from
qualifying for exemption under Section 883.

Until the proposed  regulations are promulgated in final form and come into force,  however,  Teekay intends to
take the  position on its U.S.  tax return  filings  that it  satisfies  the  publicly-traded  requirement  and
thereby qualifies for exemption from tax under Section 883 in respect of its U.S. source shipping income.
To the extent  Teekay is unable to qualify  for  exemption  from tax under  Section 883,  Teekays  U.S. source
shipping  income will become subject to the 4% gross basis tax regime or,  alternatively,  to the net basis and
branch tax regime described below.

Taxation in Absence of Internal Revenue Code Section 883 Exemption

4% Gross  Basis Tax Regime.  To the extent the  benefits of Section  883 are  unavailable  with  respect to any
item of U.S.  source  income,  Teekays  U.S.  source  shipping  income,  to the  extent not  considered  to be
"effectively  connected" with the conduct of a U.S. trade or business,  as discussed below, would be subject to
a 4% tax imposed by Section 887 of the Code on a gross basis,  without the benefit of  deductions.  Since under
the sourcing rules  described  above,  no more than 50% of Teekays  shipping  income would be treated as being
derived from U.S.  sources,  the maximum  effective rate of U.S. federal income tax on Teekays shipping income
would never exceed 2% under the 4% gross basis tax regime.

Based on its U.S.  source  Shipping  Income for 2002,  Teekay  would be subject to U.S.  federal  income tax of
approximately $5.6 million under Section 887 in the absence of an exemption under Section 883.

Net Basis and  Branch  Profits  Tax  Regime.  To the extent the  benefits  of the  Section  883  exemption  are
unavailable  and Teekays U.S.  source  shipping  income is considered to be  "effectively  connected" with the
conduct of a U.S.  trade or  business,  as  described  below,  any such  "effectively  connected"  U.S.  source
shipping  income,  net of applicable  deductions,  would be subject to the U.S.  federal  corporate  income tax
currently  imposed at rates of up to 35%. In addition,  Teekay may be subject to the 30% "branch profits" taxes
on earnings  effectively  connected with the conduct of such trade or business,  as determined  after allowance
for certain  adjustments,  and on certain interest paid or deemed paid  attributable to the conduct of its U.S.
trade or business.

Teekays U.S.  source shipping  income would be considered  "effectively  connected" with the conduct of a U.S.
trade or business only if:

| | Teekay has, or is considered  to have, a fixed place of business in the United States  involved
      in the earning of shipping income; and                                                                                                                                                                                                        
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | substantially  all of  Teekays  U.S.  source  shipping  income is  attributable  to  regularly
      scheduled  transportation,  such as the  operation  of a vessel that  follows a published  schedule  with
      repeated  sailings at regular  intervals  between  the same  points for voyages  that begin or end in the
      United States.

The Company does not intend to have,  or permit  circumstances  that would  result in having any Teekay  vessel
operating to the United  States on a regularly  scheduled  basis.  Based on the  foregoing  and on the expected
mode of Teekays  shipping  operations  and other  activities as described in this Annual  Report,  the Company
believes that none of Teekays U.S. source  shipping  income will be  "effectively  connected" with the conduct
of a U.S. trade or business.

Gain on Sale of Vessels.  To the extent any of Teekays  vessel  makes more than an  occasional  voyage to U.S.
ports, Teekay may be considered to be engaged in the conduct of a U.S. trade or business.  As a result,  except
to the extent the gain on the sale of a vessel may be partly or wholly  subject to U.S.  federal  income tax as
"effectively  connected"  income  (determined  under rules different from those discussed  above) under the net
basis and branch tax regime  described  above.  To the extent  circumstances  permit,  the  Company  intends to
structure  sales of Teekays  vessels in such a manner,  including  effecting  the sale and delivery of vessels
outside the United States, as to not give rise to U.S. source gain.Marshall Islands, Bahamian and Bermudian Taxation

Teekay  believes  that  neither  it nor its  subsidiaries  will be subject  to  taxation  under the laws of the
Marshall  Islands,  the Bahamas or Bermuda,  and distributions by its subsidiaries to the Company also will not
be subject to any taxes under the laws of such countries.Norwegian Taxation

In December  1996,  Norway  introduced  a new regime for the taxation of the  shipping  industry.  If a company
meets certain  requirements,  it may choose to be taxed according to this regime,  which results in deferral of
taxation for income related to shipping  activities  until the  accumulated  untaxed profits are distributed to
shareholders  outside the regime or upon the companys exit from the regime.  A company within the regime will,
however,  be liable to pay without the  benefit of  deferral a 28% tax on  investment  income and a tonnage tax
based on the  registered  tonnage of its fleet.  The rates for  tonnage tax are set  annually by the  Norwegian
parliament.  To the extent  the debt in  average  during an income  year is below 50% of the  assets,  a deemed
interest factor will be added to the companys taxable income.

To qualify for the shipping  taxation  regime,  the shipping  activities of UNS have been  separated from other
activities,  such as management functions.  While UNS as the parent company does not qualify under the shipping
tax regime,  Ugland  Nordic  Investment  AS, a wholly owned  subsidiary  of UNS,  owns the assets and companies
engaged in shipping  activities (the  "Qualifying  Company").  These companies  engaged in shipping  activities
constitute  "shipping  companies"  under the tax regime and has been assessed as such in recent years including
2001  by  the  revenue  authorities.  Under  the  regime,  the  shipping  companies  may  not  have  employees;
consequently,  all service and management  functions  must be obtained from a related or unrelated  entity that
is separate from the shipping  companies.  Intra-group  services are required to be priced in  accordance  with
market  terms and UNS is subject to a 28%  non-deferred  tax with  respect to the net income of any  management
services it provides.

If the Qualifying  Company were to cease to qualify for the shipping  company tax regime,  it would be taxed on
its accumulated  untaxed profits and gains,  taking into account both value appreciations and retained earnings
during the period it was under the regime and any  deferred tax  positions  that may have been  transferred  to
the  Qualifying  Company upon entry into the regime.  The  Qualifying  Company would cease to qualify under the
regime if any of the shipping  companies  disposed of all of its vessels  and/or  ownership  interests in other
shipowning  companies  qualifying under the tax regime and the proceeds from such sale were not reinvested in a
shipowning  company  qualifying  under the tax  regime or a  replacement  vessel,  or an  agreement  to build a
replacement vessel were not entered into within a year from the sale.

To the extent untaxed profits are distributed from the Qualifying  Company to shareholders  outside the regime,
which would include  dividends or other  distributions  paid by the  Qualifying  Company to UNS, the Qualifying
Company  will be taxed at a rate of 28% of the  distributed  amount  as  grossed-up  for such  taxes.  Further,
dividends paid from UNS to a non-Norwegian  shareholder will be subject to a Norwegian  withholding tax of 25%,
unless a lower tax has been agreed upon in an applicable tax treaty.

The Company  records  deferred  taxes under the  Norwegian  shipping tax regime on the  Companys  consolidated
financial  statements in accordance with accounting  principles  generally  accepted in the United States.  See
Note 1 to the Companys  December 31, 2002 audited  consolidated  financial  statements  included  elsewhere in
this annual report on Form 20-F.The Company's Fleet

The following list provides additional information with respect to the Company's vessels as at March 1, 2003.

`Hull     Percent                       Year

                                   Series/Yard      Type    Ownership        Dwt-MT    Built      Flag
Aframax Tankers (60)
HAMANE SPIRIT.................       Onomichi          DH       100%         105,200        1997  Bahamian
POUL SPIRIT...................       Onomichi          DH       100%          98,600        1995  Bahamian
TORBEN SPIRIT.................       Onomichi          DH       100%          98,600        1994  Bahamian
LEYTE SPIRIT..................       Onomichi          DH       100%          98,700        1992  Bahamian
LUZON SPIRIT..................       Onomichi          DH       100%          98,600        1992  Bahamian
MAYON SPIRIT..................       Onomichi          DH       100%          98,500        1992  Bahamian
SAMAR SPIRIT..................       Onomichi          DH       100%          98,600        1992  Bahamian
PALMSTAR LOTUS................       Onomichi          SH       100%         100,300        1991  Bahamian
PALMSTAR THISTLE..............       Onomichi          SH       100%         100,300        1991  Bahamian
TEEKAY SPIRIT.................       Onomichi          SH       100%         100,300        1991  Bahamian
ONOZO SPIRIT..................       Onomichi          SH       100%         100,000        1990  Bahamian
PALMSTAR CHERRY...............       Onomichi          SH       100%         100,000        1990  Bahamian
PALMSTAR POPPY................       Onomichi          SH       100%         100,000        1990  Bahamian
PALMSTAR ROSE.................       Onomichi          SH       100%         100,200        1990  Bahamian
PALMSTAR ORCHID...............       Onomichi          SH       100%         100,000        1989  Bahamian
FALSTER SPIRIT................       Hyundai           DH       100%          95,400        1995  Bahamian
GOTLAND SPIRIT................       Hyundai           DH       100%          95,400        1995  Bahamian
SOTRA SPIRIT..................       Hyundai           DH       100%          95,400        1995  Bahamian
VICTORIA SPIRIT (1)...........       Hyundai           DH       100%         103,200        1993  Bahamian
VANCOUVER SPIRIT (1) .........       Hyundai           DH       100%         103,200        1992  Bahamian
SHILLA SPIRIT.................       Hyundai           SH       100%         106,700        1990  Bahamian
ULSAN SPIRIT..................       Hyundai           SH       100%         106,700        1990  Bahamian
DAMPIER SPIRIT (2)............       Hyundai           SH       100%         106,700        1988  Bahamian
KARRATHA SPIRIT (2)...........       Hyundai           SH       100%         106,700        1988  Australian
NAMSAN SPIRIT.................       Hyundai           SH       100%         106,700        1988  Bahamian
PACIFIC SPIRIT................       Hyundai           SH       100%         106,700        1988  Bahamian
MERSEY SPIRIT.................       Hyundai           DS       100%          94,800        1986  Bahamian
CLYDE SPIRIT..................       Hyundai           DS       100%          94,700        1985  Bahamian
OPAL QUEEN (3)................       Imabari           DH         0%         107,200        2001  Panamanian
BAHAMAS SPIRIT................       Imabari           DH       100%         107,300        1998  Bahamian
AVALON SPIRIT.................       Imabari           DH       100%         107,200        1998  Canadian
SENANG SPIRIT.................       Imabari           DH       100%          95,700        1994  Bahamian
SEBAROK SPIRIT................       Imabari           DH       100%          95,700        1993  Bahamian
SERAYA SPIRIT.................       Imabari           DS       100%          97,100        1992  Bahamian
SEAFALCON (3).................       Imabari           DS         0%          97,100        1991  Marshall Islands
SENTOSA SPIRIT................       Imabari           DS       100%          97,200        1989  Bahamian
SELETAR SPIRIT................       Imabari           DS       100%          95,000        1988  Bahamian
SEMAKAU SPIRIT................       Imabari           DS       100%          97,200        1988  Bahamian
SINGAPORE SPIRIT..............       Imabari           DS       100%          97,000        1987  Bahamian
SUDONG SPIRIT.................       Imabari           DS       100%          98,200        1987  Bahamian
KANATA SPIRIT.................       Samsung           DH       100%         113,000        1999  Bahamian
KAREELA SPIRIT................       Samsung           DH       100%         113,100        1999  Bahamian
KIOWA SPIRIT..................       Samsung           DH       100%         113,300        1999  Bahamian
KOA SPIRIT....................       Samsung           DH       100%         113,300        1999  Bahamian
KYEEMA SPIRIT.................       Samsung           DH       100%         113,400        1999  Bahamian
SILVER PARADISE (3)...........       Samsung           DH         0%         105,200        1998  Panamanian
KYUSHU SPIRIT.................       Mitsubishi        DS       100%          95,600        1991  Bahamian
SABINE SPIRIT.................       Mitsubishi        DS       100%          84,800        1989  Bahamian
KOYAGI SPIRIT.................       Mitsubishi        SH       100%          96,000        1989  Bahamian
COLUMBIA SPIRIT...............       Mitsubishi        DS       100%          84,800        1988  Bahamian
HUDSON SPIRIT.................       Mitsubishi        DS       100%          84,800        1988  Bahamian
SEABRIDGE (3).................       Namura            DH         0%         105,200        1996  Liberian
TORRES SPIRIT.................       Namura            SH       100%          96,100        1990  Bahamian
SEAMASTER (3).................       Namura            SH         0%         101,100        1990  Liberian
SHETLAND SPIRIT...............       Mitsui            DH       100%         106,200        1994  Bahamian
ORKNEY SPIRIT.................       Mitsui            DH       100%         106,300        1993  Bahamian
SHANNON SPIRIT................       Gdynia            SH       100%          99,300        1987  Bahamian
CLARE SPIRIT..................       Gdynia            SH       100%          99,300        1986  Bahamian
MAGELLAN SPIRIT...............       Hitachi           DS       100%          95,000        1985  Bahamian
COOK SPIRIT...................       Hashima           DS       100%          91,500        1987  Bahamian
         Subtotal Aframax Tankers   .................................      6,029,400


Shuttle Tankers (18)
STENA NATALITA................       Tsuneishi         DH         50%        108,100        2001  Cayman Islands
STENA SIRITA..................       Tsuneishi         DH         50%        127,500        1999  Norwegian
STENA ALEXITA.................       Tsuneishi         DH         50%        127,500        1998  Norwegian
NORDIC SAVONITA...............       Tsuneishi         DH       100%         108,200        1992  NIS
NORDIC TORINITA...............       Tsuneishi         DH       100%         106,900        1992  Cayman Islands
STENA AKARITA.................       Tsuneishi         DH       65.5%        107,200        1991  Liberian
PETROTROLL....................       Tsuneishi         DS       100%          67,400        1981  NIS
NORDIC LAURITA................       Tsuneishi         SH       50.5%         68,100        1981  NIS
PETRONORDIC...................       Samsung           DH       100%          92,000        2002  NIS
NORDIC SPIRIT (4).............       Samsung           DH       100%         151,000        2001  Bahamian
STENA SPIRIT (4)..............       Samsung           DH        50%         151,000        2001  Bahamian
NORDIC MARITA.................       Samsung           DH       100%         103,900        1999  Cayman Islands
NORDIC YUKON..................       Dalian            DH       100%          97,100        1992  NIS
PETROTRYM.....................       Dalian            DH       100%          80,700        1987  NIS
NORDIC SVENITA................       Imabari           DH       100%         106,500        1997  Liberian
NORDIC SARITA.................       Daewoo            DH       100%         124,500        1986  Norwegian
PETROSKALD....................       Uddevalla         DB       100%          34,800        1982  Liberian
NORDIC APOLLO (2) ............       Avondale          DH        89%         127,000        1992  Liberian
         Subtotal Shuttle Tankers   .................................      1,889,400

Oil/Bulk/Ore Carriers (8)
TEEKAY FORUM .................       Hyundai           DB       100%          78,500        1983  Bahamian
TEEKAY FULMAR.................       Hyundai           DB       100%          78,500        1983  Bahamian
TEEKAY FOUNTAIN...............       Hyundai           DB       100%          78,500        1982  NIS
TEEKAY FORTUNA................       Hyundai           DB        67%          78,500        1982  NIS
TEEKAY FREIGHTER..............       Bremer            DB        52%          75,400        1982  NIS
TEEKAY FOAM...................       Hyundai           DB       100%          78,500        1981  Bahamian
TEEKAY FAVOUR.................       Howaldtswerke     DB       100%          82,500        1981  Bahamian
TEEKAY FAIR...................       Bremer            DH       100%          75,500        1981  NIS
         Subtotal Oil/Bulk/Ore Carriers   ...........................        625,900

Other Tankers (3)
MUSASHI SPIRIT (VLCC).........       Sasebo            SH       100%         280,700        1993  Bahamian
BARRINGTON....................       Samsung           DH       100%          33,200        1989  Australian
PALMERSTON....................       Halla             DB       100%          36,700        1990  Australian
         Subtotal Other Tankers   ..................................         350,600
         Subtotal DWT  Vessels Delivered   ........................       8,895,300

Newbuildings (12)
SHUTTLE TANKER (HULL 1377)....       Samsung           DH       100%          92,000        2003  N/A
SHUTTLE TANKER (HULL 1408)....       Samsung           DH       100%         147,500        2003  N/A
SUEZMAX TANKER (HULL 1431)....       Hyundai           DH       100%         152,000        2003  N/A
SUEZMAX TANKER (HULL 1432)....       Hyundai           DH       100%         152,000        2003  N/A
AFRAMAX TANKER (HULL 1433)....       Hyundai           DH       100%         112,000        2003  N/A
AFRAMAX TANKER (HULL 1434)....       Hyundai           DH       100%         112,000        2003  N/A
SUEZMAX TANKER (HULL 1435)....       Hyundai           DH       100%         152,000        2003  N/A
AFRAMAX TANKER (HULL 1253) (5).      Tsuneishi         DH        0%          105,000        2003  N/A
AFRAMAX TANKER (HULL 5248)....       Daewoo            DH       100%         115,000        2004  N/A
AFRAMAX TANKER (HULL 5249)....       Daewoo            DH       100%         115,000        2004  N/A
AFRAMAX TANKER (HULL 1465)....       Samsung           DH       100%         115,000        2004  N/A
AFRAMAX TANKER (HULL 1466)....       Samsung           DH       100%         115,000        2004  N/A

         Subtotal Newbuildings       ..............................        1,484,500
         Total DWT  All Tankers     ..............................       10,379,800
DH   Double-hull tanker             DB   Double-bottom tanker
DS   Double-sided tanker          SH   Single-hull tanker

(1)   Oil/bulk/ore carrier trading exclusively as a crude oil tanker.
(2)   Floating storage and off-take vessel.
(3)   Time chartered-in vessel
(4)   Vessel undergoing conversion to a shuttle tanker
(5)   Bareboated-in vessel`

Many of the Company's  vessels have been designed and  constructed  as  substantially  identical  sister ships.
These vessels can, in many situations,  be interchanged,  providing scheduling flexibility and greater capacity
utilization.  In  addition,  spare  parts and  technical  knowledge  can be applied  to all the  vessels in the
particular series, thereby generating operating efficiencies.

Prior to 1985, the Company chartered-in most of the tonnage it subsequently  provided to its customers.  As the
availability of acceptable  chartered-in  tonnage declined,  the Company began an expansion of its owned fleet.
Since 1985,  the Company has  significantly  expanded its owned fleet by taking  delivery of 43 new vessels and
acquiring 35 vessels in the  second-hand  market,  as well as  disposing of 30 older  tankers over the past ten
years. In addition,  the Company  acquired  control of an additional 26 vessels through its acquisition of Bona
in 1999, an additional 18 vessels  through its  acquisition  of UNS in 2001,  and will acquire an additional 11
vessels from its pending acquisition of Navion.

See Note 6 of the  consolidated  financial  statements  for  information  with  respect  to major  encumbrances
against vessels of the Company.

Classification, Audits and Inspections

All of the  Company's  vessels  have been  certified  as being "in  class" by their  respective  classification
societies:  Nippon Kaiji Kyokai, Det Norske Veritas or American Bureau of Shipping.  Every commercial  vessel's
hull and  machinery  is "classed"  by a  classification  society  authorized  by its country of  registry.  The
classification  society  certifies that the vessel has been built and  maintained in accordance  with the rules
of such  classification  society and complies with applicable  rules and regulations of the country of registry
of the vessel and the  international  conventions  of which that country is a member.  Each vessel is inspected
by a  surveyor  of  the  classification  society  every  year  ("Annual  Survey"),  every  two to  three  years
("Intermediate  Survey") and every four to five years  ("Special  Survey").  Vessels  also may be required,  as
part of the  Intermediate  Survey  process,  to be  drydocked  every  24 to 30  months  for  inspection  of the
underwater  parts of the vessel and for necessary  repairs  related to such  inspection.  Many of the Company's
vessels have  qualified  with their  respective  classification  societies for  drydocking  every five years in
connection with the Special Survey and are no longer subject to the  Intermediate  Survey  drydocking  process.
To so  qualify,  the  Company  was  required  to enhance  the  resiliency  of the  underwater  coatings of each
qualifying  vessel  as well  as to  install  apparatus  on  each  vessel  to  accommodate  thorough  underwater
inspection by divers.

In  addition  to the  classification  inspections,  many  of  the  Company's  customers,  including  major  oil
companies,  regularly  inspect the Company's  vessels as a precondition to chartering  voyages on such vessels.
The Company's  vessels are also subject to  inspections by the world's  leading port state control  authorities
such as the U.S.  Coast Guard and the  Australian  Maritime  Safety  Authority.  The Company  believes that its
well-maintained,  high-quality  tonnage  should  provide  it  with  a  competitive  advantage  in  the  current
environment of increasing regulation and customer emphasis on quality of service.

Company  employees  perform  much  of the  necessary  routine  maintenance  and  regularly  inspect  all of the
Company's  vessels,  both at sea and while the vessels are in port.  The Company  inspects its vessels at least
two times per year using  predetermined and rigorous  criteria.  Each vessel is examined and specific notations
are made,  and  recommendations  are given for  improvements  to the  overall  condition  of the vessel and its
maintenance, safety, and crew welfare.

The Company has obtained through Det Norske Veritas (DNV), the Norwegian  classification  society,  approval of
the Company's safety  management  system as in compliance with  International  Safety Management (ISM) Code. To
have the Company's  safety  management  system  certified as in compliance,  the system is audited  annually by
DNV. In November  2000,  the Company's  Document of Compliance  (DOC) was certified  through  November 2004. As
part of the  Company's  ISM Code  compliance,  all  vessels'  safety  management  certificates  (SMC) are being
maintained  through ongoing internal audits performed by the Company and intermediate  audits performed by DNV.
DNV has  also  certified  the UNS  shuttle  tankers  as ISM  Code  compliant.  In  accordance  with  Australian
regulations,  classifications  societies  are not  recognized  to perform  ISM Code  audits  for the  Company's
Australian-flagged  vessels.  Thus, the Australian  Maritime  Safety  Authority  approves the Company's  safety
management  system  by  auditing  the  Company's   Australian-flagged  vessels  and  the  Company's  Australian
operations.Organizational Structure

The following is a list of the Company's significant subsidiaries as at March 1, 2003.

`State or         Proportion of
                                                                              Jurisdiction of        Ownership
Name of Significant Subsidiary                                                 Incorporation          Interest

BONA SHIPHOLDING LTD. ................................................       BERMUDA                    100%
NORSK TEEKAY AS.......................................................       NORWAY                     100%
NORSK TEEKAY HOLDINGS LTD. ...........................................       MARSHALL ISLANDS           100%
SINGLE SHIP COMPANIES(3)..............................................       AUSTRALIA                  100%
SINGLE SHIP LIMITED LIABILITY COMPANIES(46)...........................       MARSHALL ISLANDS           100%
TEEKAY CHARTERING LIMITED.............................................       MARSHALL ISLANDS           100%
TEEKAY NORDIC HOLDINGS INC. ..........................................       MARSHALL ISLANDS           100%
TEEKAY NORGE LIMITED..................................................       LIBERIAN                   100%
TEEKAY SHIPPING LIMITED...............................................       BAHAMAS                    100%
UGLAND NORDIC SHIPPING AS.............................................       NORWAY                     100%`

Item 5.   Operating and Financial Review and Prospects

Managements Discussion and Analysis of Financial Condition and Results of Operations

General

Teekay is a leading  provider of  international  crude oil and  petroleum  product  transportation  services to
major oil  companies,  major oil traders and  government  agencies  worldwide.  At March 1, 2003, the Companys
fleet consisted of 101 vessels  (including  twelve  newbuildings on order, five vessels  time-chartered-in  and
four vessels  owned by joint  ventures),  for a total  cargo-carrying  capacity of  approximately  10.4 million
tonnes.

During the year ended  December 31,  2002,  approximately  45% (2001  57%;  2000  68%) of the  Companys  net
voyage revenues was derived from spot voyages.  The balance of the Companys  revenue is generated by two other
modes of  employment:  time-charters,  whereby  vessels are  chartered to  customers  for a fixed  period,  and
contracts of  affreightment  ("COAs"),  whereby the Company  carries an agreed quantity of cargo for a customer
over a  specified  trade  route  within  a  given  period  of  time.  In the  year  ended  December  31,  2002,
approximately  20% (2001  21%;  2000  14%) of net voyage  revenues was  generated by  time-charters  and COAs
priced on a spot market basis.  In the aggregate,  approximately  65% (2001  78%; 2000  82%) of the Companys
net voyage  revenues  during the year ended  December 31, 2002 was derived  from spot voyages or  time-charters
and COAs priced on a spot market  basis,  with the  remaining  35% (2001  22%;  2000  18%) being derived from
fixed-rate  time-charters  and COAs. The change in the Companys  composition of net voyage  revenues  reflects
the  acquisition  of Ugland  Nordic  Shipping AS ("UNS") in 2001 and the change in spot tanker  rates over this
period.  This dependence on the spot market,  which is within industry norms,  contributes to the volatility of
the Companys revenues, cash flow from operations, and net income.

Historically,  the tanker  industry has been  cyclical,  experiencing  volatility  in  profitability  and asset
values  resulting from changes in the supply of, and demand for, vessel capacity.  In addition,  tanker markets
have historically  exhibited  seasonal  variations in charter rates.  Tanker markets are typically  stronger in
the winter  months as a result of increased  oil  consumption  in the  northern  hemisphere  and  unpredictable
weather patterns that tend to disrupt vessel scheduling.

Acquisition of Ugland Nordic Shipping AS

As of May 28, 2001,  the Company had purchased  100% of the issued and  outstanding  shares of UNS (9% of which
was purchased in fiscal 2000 and the remaining 91% of which was purchased in fiscal 2001),  for $222.8  million
in cash.

UNS is the worlds largest owner of shuttle  tankers,  controlling a modern fleet of 20 vessels  (including two
newbuildings)  (the "UNS Fleet") that engages in the transportation of oil from offshore  production  platforms
to onshore  storage  and  refinery  facilities.  The UNS Fleet has an average  age of  approximately  9.4 years
(excluding  the two  newbuildings),  and  operates  primarily  in the  North  Sea  under  fixed-rate  long-term
contracts.  In addition,  as of December 31, 2002, UNS owned  approximately  10.3% of Nordic  American  Tankers
Shipping  Ltd.  (AMEX:  NAT)  ("NAT"),  the  owner of three  Suezmax  tankers  on a  long-term  contract  to BP
Shipping.

For the year ended  December 31, 2000,  UNS earned net voyage  revenues of $69.1  million,  resulting in income
from  vessel  operations  of $23.8  million and net income of $15.4  million,  applying  accounting  principles
generally  accepted  in the  United  States.  The  operating  results  of UNS  have  been  consolidated  in the
Companys  financial  statements  commencing  March 6,  2001,  the date that the  Company  acquired  a majority
interest in UNS.  Minority  interest  expense,  which is included in other income (loss),  has been recorded to
reflect  the  minority  shareholders  share of UNS net income  for the  period  from March 6, 2001 to May 28,
2001, when the Company acquired the remaining shares in UNS.

Pending Acquisition of Navion ASA

On December  16, 2002,  Teekay and Statoil ASA  announced  that they had entered into an agreement  under which
the Company will acquire Statoils  wholly-owned shipping company,  Navion ASA (excluding its oil drilling ship
and related  operations and one floating  production,  storage and offload  vessel),  on a debt-free basis, for
approximately  $800 million in cash.  The Company  anticipates  funding its  acquisition of Navion by borrowing
under a new credit  facility,  together with available  cash or cash  generated from  operations and borrowings
under  other  existing  credit  facilities.  The Company has a commitment of approximately $724 million
relating to the acquisition.  The  closing of the  transaction  is expected to take place in the second quarter of 2003.

Navion,  based in Norway,  operates  primarily in the shuttle tanker and the conventional crude oil and product
tanker  markets.  Its modern  shuttle  tanker fleet,  which as of December 31, 2002 consisted of nine owned and
17 chartered-in  vessels  (including four vessels  chartered-in  from the Companys  subsidiary UNS),  provides
logistical  services to Statoil and other oil companies in the North Sea under fixed-rate,  long-term contracts
of  affreightment.  Navions modern,  chartered-in,  conventional  tanker fleet,  which as of December 31, 2002
consisted  of 12 crude oil tankers  and nine  product  tankers,  operates  primarily  in the  Atlantic  region,
providing  services to Statoil and other oil  companies.  In  addition,  Navion owns two  floating  storage and
off-take vessels  currently trading as conventional  crude tankers in the Atlantic region,  and one gas carrier
on long-term charter to Statoil.

Through a joint venture with Statoil,  Navion is responsible  for meeting  Statoils  transportation  needs for
crude oil,  condensate  and refined  petroleum  products.  As part of this  arrangement,  Navion has a right of
first refusal on Statoils oil  transportation  requirements  at the prevailing  market rate until December 31,
2007.  After the  acquisition,  the Company  believes  this  arrangement  may increase the  utilization  of its
conventional  fleet.  The Company also believes that the  acquisition of Navion will provide added stability to
the Companys  cash flow and earnings  throughout  the tanker market cycle,  due to the  fixed-rate,  long-term
nature of Navions shuttle tanker contracts.

Critical Accounting Policies

The  Companys  consolidated  financial  statements  are  prepared in  accordance  with  accounting  principles
generally  accepted in the United  States,  which require the Company to make  estimates in the  application of
its accounting policies based on the best assumptions,  judgments,  and opinions of management.  Following is a
discussion  of the  accounting  policies  that  involve a higher  degree of  judgment  and the methods of their
application.  For a description of additional material  accounting  policies of the Company,  see Note 1 to the
Companys consolidated financial statements.

Revenue Recognition

The Company generates a majority of its revenues from voyage charters.  Within the shipping  industry,  the two
methods used to account for voyage  revenues and expenses are the  percentage of  completion  and the completed
voyage methods. For each method,  voyages may be calculated on either a load-to-load or  discharge-to-discharge
basis. Most shipping companies, including the Company, use the percentage of completion method.

In applying the percentage of completion method, management believes that the  discharge-to-discharge  basis of
calculating  voyages more accurately  reflects voyage results than the load-to-load basis. At the time of cargo
discharge,  the  Company  generally  has  information  about the next load port and  expected  discharge  port,
whereas at the time of loading the Company normally is less certain what the next load port will be.

Vessel Lives and Impairment

The carrying  value of each of the Companys  vessels  represents  its original cost at the time of delivery or
purchase less  depreciation  calculated using an estimated useful life of 25 years from the date the vessel was
originally  delivered  from the  shipyard.  In the  shipping  industry,  use of a 25-year  life has  become the
prevailing  standard.  However,  the actual life of a vessel may be  different  from the 25-year  life,  with a
shorter  life  potentially  resulting  in  an  impairment  loss.  Regulations  of  the  International  Maritime
Organization that became effective in April 2001 require the accelerated phase-out of single hull vessels.

In response to the sinking of the tanker  Prestige,  on March 27, 2003, the  European  Transport  Commission approved new
regulations that would, among other things, place a ban on the transportation of heavy oil grades in all single-hull tankers
bound for or leaving European ports and accelerate the phase-out of single-hull tankers.  The European Union Parliament
is scheduled to meet in July 2003, to ratify these new regulations.  Although  individual  European  Union
members are currently not required to implement these regulations,  several  countries,  including  some outside
the European Union, are considering revisions to their existing pollution regulations applicable to tankers.

If these regulations are adopted in their current form,  they could result in higher  depreciation  expense related
to a reduction of the estimated  useful life of  single-hull  vessels for  accounting  purposes.  However,  the
Company  believes  that these regulations could also  result in a  tightening  in the world  tanker  supply and a
reallocation  of affected  tonnage.  This could result in firm tanker market  conditions  and increased  tanker
freight  rates for modern  vessels.  The Company has not  determined  the impact,  if any, that the adoption of
these regulations will have on the Companys results of operation or financial position.

The carrying  values of the Companys  vessels may not  represent  their fair market value at any point in time
since the market prices of secondhand  vessels tend to fluctuate  with changes in charter rates and the cost of
newbuildings.  Both charter  rates and  newbuilding  costs tend to be cyclical in nature.  The Company  reviews
vessels and equipment for impairment  whenever events or changes in circumstances  indicate the carrying amount
of an asset  may not be  recoverable.  Recoverability  of these  assets  is  measured  by  comparison  of their
carrying  amount to future  undiscounted  cash  flows the assets  are  expected  to  generate.  If vessels  and
equipment  are  considered  to be impaired,  the  impairment  to be  recognized  equals the amount by which the
carrying value of the assets exceeds their fair market value.

Goodwill

The Company  adopted  Statement of Financial  Accounting  Standards No. 142 ("SFAS  142"),  "Goodwill and Other
Intangible  Assets" and as a result has discontinued  amortization of goodwill since January 1, 2002.  Pursuant
to SFAS 142,  goodwill and indefinite  lived intangible  assets are tested for impairment  annually or whenever
an  impairment  indicator  arises.  An impairment  test  requires the Company to make  estimates of future cash
flows.  If events or  circumstances  change,  including  reductions  in  anticipated  cash flows  generated  by
operations,  goodwill could become impaired and require a charge to earnings.  Based on the Companys  goodwill
balance at December 31,  2001,  the Company  estimates  that  application  of SFAS 142 will result in an annual
increase in net income of approximately $4.5 million, by no longer amortizing goodwill.

Results of Operations

Bulk  shipping  industry  freight  rates are  commonly  measured  at the net voyage  revenue  level in terms of
"time-charter   equivalent"  ("TCE")  rates,  defined  as  voyage  revenues  less  voyage  expenses  (excluding
commissions),  divided by voyage ship-days for the round-trip  voyage.  Voyage revenues and voyage expenses are
a function  of the type of  charter,  either  spot  charter  or  time-charter,  and port,  canal and fuel costs
depending  on the trade route upon which a vessel is  sailing,  in addition to being a function of the level of
shipping freight rates. For this reason,  shipowners base economic decisions  regarding the deployment of their
vessels upon  anticipated TCE rates,  and industry  analysts  typically  measure bulk shipping freight rates in
terms of TCE rates. Therefore, the discussion of revenue below focuses on net voyage revenues and TCE rates.

TCE rates are primarily  dependent on oil production and consumption  levels,  the number of vessels  scrapped,
the  number of  newbuildings  delivered  and  charterers  preference  for modern  tankers.  As a result of the
Companys  dependence  on the  tanker  spot  market,  any  fluctuations  in Aframax  TCE rates will  impact the
Companys revenues and earnings.

Year Ended December 31, 2002 versus Year Ended December 31, 2001

In response to a slowing global  economy,  OPEC made a series of oil production  cuts during 2001.  These cuts
resulted in reduced  tanker  demand,  contributing  to a  significant  decline in average TCE rates during the
last three  quarters  of 2001.  Average  TCE rates  continued  to  decline  in the first nine  months of 2002.
Primarily due to increased  global oil demand and oil  production in the fourth  quarter of 2002,  the general
strike in Venezuela,  and the sinking of the tanker  Prestige,  TCE rates  increased in the fourth  quarter of
2002,  and have remained  strong into the first two months of 2003.  Overall,  the Companys  average TCE rate
(excluding the Companys vessels on bareboat  charter)  decreased 34.0% to $18,995 for the year ended December
31, 2002, from $28,768 for the year ended December 31, 2001.

The Companys  average fleet size  increased  3.1% in the year ended  December 31, 2002,  compared to the year
ended December 31, 2001,  primarily due to the acquisition of UNS, whose operating  results were  consolidated
into the Companys financial statements beginning March 6, 2001.

Net voyage  revenues  decreased  31.1% to $543.9  million for the year ended  December  31,  2002,  from $789.5
million for the prior year.  The decrease was  primarily  due to a decline in the  Companys  average TCE rate,
partially offset by the increase in the Companys average fleet size.

Vessel operating  expenses,  which include  crewing,  repairs and maintenance,  insurance,  stores,  lubes, and
communication  expenses,  increased 8.5% to $168.0  million for the year ended  December 31, 2002,  from $154.8
million for the year ended December 31, 2001,  primarily as a result of the  acquisition of UNS,  higher repair
and maintenance  costs,  and the effect on Norwegian Kroner  denominated  expenses from the appreciation of the
Norwegian Kroner against the US dollar.

Time charter hire expense  decreased  24.3% to $49.9 million for the year ended  December 31, 2002,  from $66.0
million  for the prior year,  due  primarily  to a decrease  in the average TCE rates  earned in the O/B/O pool
managed by the Company,  the lower number of vessels owned by minority  participants  in the O/B/O pool,  and a
decrease in the average number of vessels  time-chartered-in by the Company.  The minority  participants share
of the O/B/O pools net voyage revenues,  which is reflected as a time-charter hire expense,  was $18.3 million
for the year ended  December  31, 2002,  compared to $27.6  million for the year ended  December 31, 2001.  The
average number of vessels  time-chartered-in by the Company,  excluding the O/B/O vessels, was five in the year
ended December 31, 2002, compared to six in the prior year.

Depreciation  and amortization  expense  increased 9.5% to $149.3 million for the year ended December 31, 2002,
from $136.3  million for the prior year,  mainly due to the  acquisition  of UNS, which resulted in an increase
in the average size and average cost base of the Companys  owned fleet,  the purchase of a 2001-built  Suezmax
tanker in June 2002, and increased drydock amortization  expense.  This was partially offset by the elimination
of goodwill  amortization.  Depreciation and amortization expense included  amortization of drydocking costs of
$21.8  million  for the year ended  December  31,  2002,  compared to $14.2  million  for the prior  year.  The
increase in drydock  amortization is primarily related to the Companys  acceleration of drydock maintenance on
certain  vessels  during 2002 and the increase in frequency of required  drydockings  for vessels older than 15
years of age.

General and  administrative  expenses  increased  17.1% to $57.2 million for the year ended  December 31, 2002,
from $48.9 million for the prior year,  primarily as a result of the  acquisition of UNS and an increase in the
number of shore staff.

Interest  expense  decreased  12.5% to $58.0 million for the year ended  December 31, 2002,  from $66.2 million
for the prior year.  This decrease  reflects  lower interest  rates,  partially  offset by the additional  debt
assumed as part of the UNS acquisition.

Interest  income  decreased  62.0% to $3.5  million  for the year ended  December  31,  2002,  compared to $9.2
million for the prior year, mainly as a result of lower interest rates.

Other loss of $11.5 million for the year ended December 31, 2002 was primarily  comprised of income taxes,  the
settlement  of a  contingent  payment,  relating  to the  Companys  purchase  in 1993 of all  the  issued  and
outstanding shares of Palm Shipping Inc. (now Teekay Chartering  Limited),  loss on sale of  available-for-sale
securities,  and minority  interest  expense,  partially offset by equity income from 50%-owned joint ventures,
dividend  income  from NAT,  and  foreign  exchange  gains.  Other  income of $10.1  million for the year ended
December 31, 2001 was primarily  comprised of equity income from  50%-owned  joint  ventures,  dividend  income
from NAT, gain on the disposition of  available-for-sale  securities,  and foreign  exchange  gains,  partially
offset by income tax expense and minority  interest  expense.  Equity income from 50%-owned  joint ventures for
the year ended December 31, 2001 included a $10.2 million gain on the sale of three 50%-owned vessels.

As a result of the foregoing  factors,  net income  declined to $53.4  million for the year ended  December 31,
2002, from $336.5 million for the prior year.

Year Ended December 31, 2001 versus Year Ended December 31, 2000

The Companys  average  fleet size  increased  15.3% for the year ended  December 31, 2001 compared to the year
ended December 31, 2000, primarily due to the acquisition of UNS in March 2001.

Average TCE rates were  higher in 2001,  compared  to 2000,  due to  increased  demand for  tankers,  primarily
arising from  increased oil  production in the first half of 2001.  The  Companys  average TCE rate  increased
12.1% to $28,768 for the year ended December 31, 2001  (excluding the Companys  vessels on bareboat  charter),
from $25,661 for the year ended December 31, 2000.

Net voyage  revenues  increased  22.5% to $789.5  million for the year ended  December  31,  2001,  from $644.3
million  for the year  ended  December  31,  2000.  This was the  result of the  increase  in fleet size and an
increase in the Companys average TCE rate.

Vessel operating  expenses  increased 23.5% to $154.8 million for the year ended December 31, 2001, from $125.4
million for the year ended  December 31, 2000,  primarily as a result of the increase in fleet size, and higher
repairs and maintenance costs.

Time charter hire expense  increased  23.3% to $66.0 million for the year ended  December 31, 2001,  from $53.5
million for the prior year,  due  primarily to an increase in the average  number of vessels  time-chartered-in
by the Company and an increase in the average TCE rates earned in the O/B/O pool  managed by the  Company.  The
minority  participants  share of the O/B/O pools net voyage  revenues,  which is reflected as a  time-charter
expense,  was $27.6 million for the year ended December 31, 2001,  compared to $26.3 million for the year ended
December 31, 2000. The average number of vessels  time-chartered-in  by the Company,  excluding the O/B/Os, was
six in the year ended December 31, 2001, compared to five in the prior year.

Depreciation and amortization  expense  increased 36.1% to $136.3 million for the year ended December 31, 2001,
from $100.2  million for the prior year,  mainly due to the  acquisition  of UNS, which resulted in an increase
in the  average  size  and  average  cost  base of the  Companys  owned  fleet,  and an  increase  in  drydock
amortization  expense.  Depreciation  and  amortization  expense  included  amortization of drydocking costs of
$14.2 million for the year ended December 31, 2001, compared to $9.2 million for the prior year.

General and  administrative  expenses  increased  30.5% to $48.9 million for the year ended  December 31, 2001,
from $37.5  million for the prior  year,  primarily  as a result of the  acquisition  of UNS and higher  senior
management bonuses, which are driven largely by the Companys financial performance.

Interest  expense  decreased  11.1% to $66.2 million for the year ended  December 31, 2001,  from $74.5 million
for the prior year.  This decrease  reflects  lower interest  rates,  partially  offset by the additional  debt
assumed as part of the UNS acquisition.

Interest  income  decreased  29.4% to $9.2  million for the year ended  December  31,  2001,  compared to $13.0
million for the prior year, mainly as a result of lower interest rates.

Other income of $10.1 million for the year ended  December 31, 2001  consisted  primarily of equity income from
50%-owned joint ventures,  dividend income from NAT, gain on the disposition of available-for-sale  securities,
and foreign  exchange  gains,  partially  offset by income tax expense and minority  interest  expense.  Equity
income  from joint  ventures  included  a $10.2  million  gain on the sale of three  50%-owned  vessels.  Other
income for the year ended  December 31, 2000 was $3.9  million,  which was  comprised  mainly of equity  income
from a 50%-owned  joint venture,  partially  offset by a loss on the  disposition of two vessels and income tax
expense.

As a result of the foregoing  factors,  net income rose to $336.5 million for the year ended December 31, 2001,
from $270.0 million for the prior year.

Liquidity and Capital Resources

As at December  31,  2002,  the  Company had total cash and cash  equivalents  of $284.6  million,  compared to
$174.9  million as at December  31, 2001,  and $181.3  million as at December 31,  2000.  The  Companys  total
liquidity,  including cash,  short-term  marketable  securities and undrawn  long-term  borrowings,  was $525.3
million as at December 31, 2002,  down from $688.2  million as at December 31, 2001, and up from $373.1 million
as at December 31, 2000.  The decrease in total  liquidity  during the year ended  December 31, 2002 was mainly
the result of cash used for capital  expenditures,  a deposit for the purchase of Navion ASA,  debt  repayments
and prepayments,  payment of dividends,  investment in a joint venture, and a $57.6 million scheduled reduction
in the  available  borrowing  limit  under  the  Companys  two  long-term  revolving  credit  facilities  (the
"Revolvers").  This decrease was partially  offset by net cash flow from operating  activities  during the year
ended December 31, 2002. In the Companys  opinion,  working  capital is sufficient  for the Companys  present
requirements.

Net cash flow from  operating  activities  decreased  to $214.4  million in the year ended  December  31, 2002,
compared to $520.2  million in the year ended  December 31, 2001, and $333.3 million in the year ended December
31,  2000.  This  primarily  reflects  the  significant  decrease in the  Companys  average TCE rate for 2002,
partially offset by the increase in the Companys fleet size as a result of the UNS acquisition.

Scheduled  debt  repayments  were $51.8  million  during the year ended  December 31,  2002,  compared to $72.0
million  during the year ended  December 31, 2001,  and $63.8 million  during the year ended December 31, 2000.
Debt prepayments  were $8.0 million during the year ended December 31, 2002,  compared to $751.7 million during
the year ended December 31, 2001, and $429.9 million during the year ended December 31, 2000.

As at December 31, 2002, the Companys total debt was $1,130.8  million,  up from $935.7 million as at December
31, 2001.  The Companys  Revolvers  provided for borrowings of up to $450.7  million,  of which $240.7 million
was undrawn at December 31, 2002. The amount available under the Revolvers  reduces  semi-annually,  with final
balloon  reductions  in 2006 and  2008.  The  Companys  8.32%  First  Preferred  Ship  Mortgage  Notes are due
February 1, 2008 and are subject to a sinking fund which will retire $45.0 million of the  principal  amount of
the 8.32% Notes on February 1 of each year,  commencing  2004. The Companys  unsecured 8.875% Senior Notes are
due July 15, 2011.  The  Companys  outstanding  term loans reduce in quarterly or  semi-annual  payments  with
varying maturities through 2009.

Among other matters,  the long-term debt agreements  generally provide for such items as maintenance of certain
vessel market  value-to-loan ratios and minimum consolidated  financial  covenants,  prepayment  privileges (in
some cases with  penalties),  and  restrictions  against the  incurrence of new  investments  by the individual
subsidiaries  without prior lender consent.  The amount of Restricted  Payments,  as defined,  that the Company
can make,  including  dividends and  purchases of its own capital  stock,  was limited to $440.6  million as of
December 31, 2002. Certain of the loan agreements  require that a minimum level of free cash be maintained.  As
at December 31, 2002, this amount was $84.8 million.

The Company  manages the impact of interest  rate changes on earnings and cash flows  through its interest rate
structure.  For the  Revolvers,  the interest rate  structure is based on LIBOR plus a margin  depending on the
financial  leverage  of the  Company.  Interest  payments  on the term  loans  are also  based on LIBOR  plus a
margin. As at December 31, 2002, the interest rate swap agreements  effectively  change the Companys  interest
rate  exposure  on $20.0  million of debt from a floating  LIBOR  rate to an average  fixed rate of 5.75%.  The
interest rate swap agreements expire between March 2003 and May 2004.

Funding and treasury  activities  are  conducted  within  corporate  policies to minimize  borrowing  costs and
maximize  investment  returns while maintaining the safety of the funds and appropriate levels of liquidity for
Company  purposes.  Cash and cash  equivalents are held primarily in U.S.  dollars,  with some balances held in
Japanese Yen, Singapore Dollars, Canadian Dollars, Australian Dollars, British Pounds and Norwegian Kroner.

The Company is exposed to market risk from  foreign  currency  fluctuations  and changes in interest  rates and
bunker fuel prices. The Company uses forward foreign currency  contracts,  interest rate swaps, and bunker fuel
swap  contracts  to manage  currency,  interest  rate,  and  bunker  fuel price  risks,  but does not use these
financial  instruments  for trading or  speculative  purposes.  As at December 31, 2002,  the Company had $65.8
million in forward  foreign  currency  contracts,  which expire  between  January 2003 and December  2004.  The
Company is also committed to bunker fuel swap contracts  totaling 20,400 metric tonnes with a  weighted-average
price of $116.00 per tonne, which expire between January 2003 and May 2004.

Dividends declared during the year ended December 31, 2002 were $34.1 million, or $0.86 per share.

On September 19, 2001,  Teekay  announced  that its Board of Directors had  authorized  the repurchase of up to
2,000,000  shares of its Common Stock in the open  market.  As at December  31,  2002,  Teekay had  repurchased
561,700 shares of Common Stock at an average price of $27.97 per share.

During the year ended December 31, 2002, the Company  incurred  capital  expenditures for vessels and equipment
of $135.7  million,  compared to $185.0  million in the year ended  December 31, 2001, and $43.5 million in the
year ended  December  31,  2000.  These  capital  expenditures  for 2002 were  primarily  for the purchase of a
2001-built  Suezmax tanker in June 2002 and for newbuilding  installment  payments.  During September 2002, the
Company,  through a 50%-owned joint venture,  purchased  another  2001-built  Suezmax tanker for $26.0 million.
Cash  expenditures  for drydocking  were $34.9 million in the year ended  December 31, 2002,  compared to $20.1
million in the year ended  December  31, 2001,  and $11.9  million in the year ended  December  31, 2000.  This
increase was primarily  due to the Companys  decision to accelerate  drydock  maintenance  on certain  vessels
during 2002 and the increase in the Companys fleet size as a result of the UNS acquisition.

As at December 31, 2002, the Company was committed to the  construction  of two shuttle,  three Suezmax and six
Aframax tankers  scheduled for delivery  between March 2003 and October 2004, at a total cost of  approximately
$496.6  million,  excluding  capitalized  interest.  As of December 31,  2002,  there have been  payments  made
towards these commitments of $127.3 million and long-term financing  arrangements  existed for $16.3 million of
the unpaid cost of these  vessels.  It is the  Companys  intention to finance the  remaining  unpaid amount of
$353.0 million through  incremental  debt or the utilization of surplus cash balances,  or a combination of the
two. As of December 31, 2002,  the remaining  payments  required to be made under these  newbuilding  contracts
were $245.9 million in 2003 and $123.4 million in 2004.  With the exception of four Aframax  tankers  scheduled
for delivery in 2004, all of the vessels upon delivery will be subject to long-term  charter  contracts,  which
expire between 2009 and 2015.

The Company is also  committed to a capital  lease on an Aframax  tanker that is currently  under  construction
and is expected to deliver in the fourth  quarter of 2003.  The lease will  require  minimum  payments of $66.9
million (including a purchase obligation payment) over the 15-year term of the lease.

The following  table  summarizes the Companys  long-term  contractual  obligations  (excluding  commitments of
Navion ASA) as at December 31, 2002 (in millions of U.S. dollars).

`--------------------------------------------------- -------- ------- -------- -------- -------- --------- ----------
                                                       2003    2004     2005     2006     2007  There-after   Total
--------------------------------------------------- -------- ------- -------- -------- -------- --------- ----------
Long-term debt                                         83.6   104.9    131.1    180.8     84.8     545.6    1,130.8
Chartered-in vessels (operating lease)                 25.7    10.8      2.0                                   38.5
Commitment   for   future    chartered-in   vessel
  (capital lease)                                       1.3     4.1      4.1      4.1      4.1      49.2       66.9
Newbuilding installments                              245.9   123.4                                           369.3
  Total                                               356.5   243.2    137.2    184.9     88.9     594.8    1,605.5
--------------------------------------------------- -------- ------- -------- -------- -------- --------- ----------`

The Company and certain  subsidiaries  of the Company have guaranteed  their share of the outstanding  mortgage
debt in three 50%-owned joint venture  companies.  As of December 31, 2002, the Company and these  subsidiaries
had guaranteed  $82.7 million of such debt, or 50% of the total $165.3 million in outstanding  mortgage debt of
the joint venture companies.  The outstanding  mortgage debt has maturity dates ranging from May 2008 to August
2009.  These joint venture companies own three shuttle tankers.

In February  2003,  the  Company  completed  an offering  for gross  proceeds of $143.75  million in  mandatory
convertible  equity units pursuant to its currently  effective  universal  shelf  registration  statement filed
with the SEC. Each equity unit  includes (a) a forward  contract that requires the holder to purchase for $25 a
specified  fraction of a share of the  Companys  Common Stock on February 16,  2006,  and a (b) $25  principal
amount,  subordinated note due May 18, 2006. The forward contracts provide for contract  adjustment payments of
1.25% annually and the notes bear interest at 6.0% annually.  Upon  settlement on February 16, 2006 of the 5.75
million  forward  contracts  included  in the equity  units,  the  Company  will issue  between  3,267,150  and
3,991,075  shares of its Common  Stock  (depending  on the average  closing  price of the Common  Stock for the
20-trading  day period ending on the third trading day prior to February 16, 2006).  Proceeds from the offering
may be  used  to  finance  potential  acquisitions  and  for  general  corporate  purposes,  including  capital
expenditures, working capital, and the repayment of debt.

As part of its growth strategy,  the Company will continue to consider strategic  opportunities,  including the
acquisition  of  additional  vessels  and  expansion  into new  markets.  The Company may choose to pursue such
opportunities  through  internal  growth,  joint  ventures,  or business  acquisitions.  The Company intends to
finance any future acquisitions  through various sources of capital,  including internally generated cash flow,
existing credit lines,  additional debt borrowings,  and the issuance of additional  shares of capital stock or
other equity securities.

Item 6.   Directors, Senior Management and Employees

Directors and Senior Management

The directors and executive officers of the Company are listed below:

`Name                                               Age    Position

C. Sean Day                                         53    Director and Chairman of the Board
Bjorn Moller                                        45    Director, President and Chief Executive Officer
Axel Karlshoej                                      62    Director and Chairman Emeritus
Bruce C. Bell                                       55    Director and Corporate Secretary
Dr. Ian D. Blackburne                               57    Director
Morris L. Feder                                     86    Director
Thomas Kuo-Yuen Hsu                                 56    Director
Leif O. Höegh                                       39    Director
Eileen A. Mercier                                   55    Director
Peter Antturi                                       44    SVP, Treasurer and Chief Financial Officer
Arthur Bensler                                      45    VP and General Counsel
David Glendinning                                   49    SVP, Customer Relations & Marine Project Development
Vincent Lok                                         35    VP, Finance
Mads Meldgaard                                      38    VP, Chartering
Graham Westgarth                                    48    SVP, Marine Operations
Paul Wogan                                          40    VP, Business Development`

Certain biographical information about each of these individuals is set forth below:

C. Sean Day has been a Director of the Company since September  1998, and has served as the Company's  Chairman
of the Board since September  1999.  From 1989 to 1999, he was President and Chief Executive  Officer of Navios
Corporation,  a large bulk  shipping  company  based in Stamford,  Connecticut.  Prior to this,  Mr. Day held a
number of senior  management  positions  in the  shipping and finance  industry.  He is currently  serving as a
Director of Genesee & Wyoming Inc., Kirby  Corporation,  CBS Personnel and California Pellett Mills. Mr. Day is
a director of the Company that constitutes the largest  shareholder of the Company.  See Item 7  Related Party
Transactions.

Bjorn Moller  became a Director and the  President  and Chief  Executive  Officer of the Company in April 1998.
Mr. Moller has over 20 years'  experience in shipping and has served in senior  management  positions  with the
Company for more than 15 years. He has headed the Company's  overall  operations since January 1997,  following
his  promotion to the position of Chief  Operating  Officer.  Prior to this,  Mr.  Moller  headed the Company's
global chartering operations and business development activities.

Axel  Karlshoej  has served as a Director of the Company  since 1989,  was Chairman of the Board from June 1994
to September 1999, and has been Chairman  Emeritus since stepping down as Chairman.  Mr. Karlshoej is President
and serves on the compensation  committee of Nordic  Industries,  a California  general  construction firm with
which he has  served  for the past 30 years.  He is the older  brother  of the late J.  Torben  Karlshoej,  the
founder of the Company.

Bruce C. Bell has served as a Director  and as the  Corporate  Secretary of the Company  since May 2000.  He is
the Managing Director of Oceanic Bank and Trust Limited,  a Bahamian bank and trust company,  a position he has
held since March 1994.  Prior to joining Oceanic Bank and Trust,  Mr. Bell was engaged in the private  practice
of law in Canada,  specializing in corporate/commercial,  banking and international business transactions.  Mr.
Bell is a director of the company that constitutes  the largest  shareholder  of Teekay.  See Item 7  Related
Party Transactions.

Dr. Ian D.  Blackburne was appointed as a Director of the Company in September  2000.  Dr.  Blackburne has over
25 years'  experience in petroleum  refining and marketing,  and in March 2000 he retired as Managing  Director
and CEO of  Caltex  Australia  Limited,  a  large  petroleum  refining  and  marketing  conglomerate  based  in
Australia.  He is currently  serving as a Director of CSR Limited and  Suncorp-Metway  Ltd.,  Australian public
companies in the  diversified  industrial  and financial  sectors.  Dr.  Blackburne is also the Chairman of the
Australian Nuclear Science and Technology Organization.

Morris L. Feder has served as a Director of the Company  since June 1993.  He is President  of Worldwide  Cargo
Inc., a New York-based  ship chartering  firm. Mr. Feder has been engaged in the shipping  industry for over 50
years,  of which 43 were spent with  Maritime  Overseas  Corporation,  from which he retired as Executive  Vice
President  and a Director in December  1991.  He has also  served as Senior  Vice  President  and a Director of
Overseas  Shipholding  Group Inc.  Mr. Feder is a member of the American  Bureau of Shipping,  the  Connecticut
Maritime  Association,  and the  Association of Shipbrokers and Agents USA Inc. Mr. Feder has indicated that he
intends to retire from the Company's Board at the end of this year.

Thomas  Kuo-Yuen Hsu has served as a Director of the Company since June 1993. He has served 29 years with,  and
is  presently  Executive  Director of,  Expedo & Company  (London)  Ltd.,  which is part of the Expedo Group of
Companies  that manages a fleet of eight vessels  ranging in size from 20,000 dwt to 280,000 dwt. He has been a
Committee Director of the Britannia Steam Ship Insurance Association Limited since 1988.Leif O. Höegh was appointed as a Director in June 1999 in connection  with the  Company's  acquisition  of Bona
Shipholding  Ltd.  He served as a Director of Bona from  November  1993 to June 1999 and as its  Chairman  from
June 1998 to June 1999. Mr. Höegh is the joint  controlling  shareholder  and  Vice-Chairman  of Leif Höegh and
Co. ASA, a shipping  company.  He also serves as a Director of NeoMed  Management  Ltd.  and as the Chairman of
Höegh Capital Partners, Inc.Eileen A. Mercier has served as a Director of the Company since  December  2000. Ms. Mercier has over 30 years'
experience in a wide variety of financial and strategic  planning  positions,  including  Senior Vice President
and  Chief  Financial  Officer  for  Abitibi-Price  Inc.  from  1990 to 1995.  She also  currently  serves as a
Director  for CGI Group Inc.,  Quebecor  World  Inc.,  Winpak  Ltd.,  Hydro One Inc.,  ING Bank of Canada,  The
Workplace Safety and Insurance Board of Ontario, York University, and the University Health Network.Peter Antturi joined the Company in September  1991 as Manager,  Accounting and was promoted to the position of
Controller in March 1992, and then to Senior Vice President,  Treasurer and Chief Financial  Officer in October
1997.  Prior to joining the Company,  Mr. Antturi  held various  accounting  and finance  roles in the shipping
industry since 1985. Mr. Antturi will become President of Navion ASA, a shipping  company,  upon the closing of
the Company's  acquisition  of Navion,  which is expected to occur in the second  quarter of 2003.  Mr. Antturi
will continue as the Company's Chief Financial Officer until the Company appoints his successor.Arthur Bensler joined the Company in September 1998 as General  Counsel,  and was promoted to Vice President in
2002.  Before joining the Company,  Mr. Bensler was a partner in a large Vancouver law firm, where he practiced
corporate,  commercial  and  maritime  law from  1986  until  joining  the  Company.  Mr.  Bensler  is also the
Assistant Corporate Secretary of the Company.Captain David  Glendinning  joined the Company in January 1987. Since then, he has worked in a number of senior
positions within the organization,  including service as Vice President,  Marine and Commercial Operations from
January 1995 to January 1999.  Since February 1999 he has served as Senior Vice President,  Customer  Relations
and Marine Project  Development.  Captain Glendinning has 18 years' sea service on oil tankers of various types
and sizes and is a Master Mariner.Vincent  Lok joined the  Company in 1993.  Since  that  time,  he has held a number of finance  and  accounting
positions in the Company,  including  Controller from 1997 until his appointment to Vice President,  Finance in
March  2002.  Prior to joining  the  Company,  Mr. Lok worked in the  Vancouver  audit  practice  of Deloitte &
Touche.Mads  Meldgaard  joined the Company in January  1986 and served in the  European and  Singapore  offices  until
December  1991,  when he was  appointed  Chartering  Manager in the Vancouver  office.  In January 1994, he was
promoted  to the  position  of General  Manager,  Chartering,  and then to  Managing  Director  (Singapore)  in
September 1995. In July 1998, Mr. Meldgaard was promoted to Vice President, Chartering based in Vancouver.Captain  Graham  Westgarth  joined the Company in February 1999 as Vice  President,  Marine  Operations and was
promoted to the position of Senior Vice President,  Marine  Operations in December 1999.  Captain Westgarth has
29 years' shipping industry  experience.  Eighteen of those years were spent at sea,  including five years in a
command  position.  He joined the Company from Maersk  Company  (UK),  where he joined as Master in 1987 before
being promoted to General Manager in 1994.Paul Wogan joined the Company in November 2000 as the Managing  Director of the London  office.  In 2002 he was
promoted to the position of Vice President,  Business Development and relocated to Vancouver.  Prior to joining
the Company,  Mr. Wogan spent 10 years with Seachem Tankers Ltd., a chemical  tanker  company,  serving as Vice
President of Marketing  before becoming CEO in 1997.  Prior to joining  Seachem,  he was involved in chartering
for a major crude oil and product carrier fleet controlled by the Ceres Hellenic Group  (Livanos),  the company
that subsequently founded Seachem. Mr. Wogan holds an MBA from the Cranfield School of Management.

Compensation of Directors and Senior Management

The  aggregate  compensation  paid to the  Company's  eight  executive  officers  listed above (the  Executive
Officers) was  $3,056,557  for the year  ended  December  31,  2002,  a portion  of which was  attributable  to
payments made pursuant to bonus plans of the Company,  which consider both Company and  individual  performance
for a given  period.  For the year ended  December  31,  2002,  the Company  also  contributed  an aggregate of
$242,228 to provide  pension and similar  benefits for the Executive  Officers.  During the year ended December
31,  2002,  the Company  granted  stock  options to purchase an aggregate  of 111,600  shares of the  Company's
common stock at an exercise  price of $39.12 per share,  to the Executive  Officers  under the  Company's  1995
Stock Option Plan. These options expire March 11, 2012, ten years after the date of the grant.

During the year ended  December 31, 2002,  the eight  non-employee  Directors of the Company  received,  in the
aggregate,  approximately  $180,000 for their services as Directors plus  reimbursement of their  out-of-pocket
expenses.  During that same  period,  the Company  granted  stock  options to purchase an  aggregate  of 80,000
shares of the Company's  common stock at an exercise price of $39.12 per share, to the  non-employee  Directors
under the Company's  1995 Stock Option Plan.  These options  expire March 11, 2012, ten years after the date of
the grant.Options to Purchase Securities From Registrant or Subsidiaries

Teekay's  1995  Stock  Option  Plan  (the  "Plan")  entitles  certain  eligible  officers,  employees
(including  senior sea staff) and  directors  of the  Company  to receive  options to acquire  Common  Stock of
Teekay.  As of March 15, 2003, a total of 5,740,450 shares of Common Stock are reserved for issuance  under
the Plan. As of such date,  options to purchase a total of 4,495,999 shares of Common Stock were outstanding,
with  options to purchase a total of 2,493,444 shares  then  exercisable,  including  options to purchase a
total  of  1,188,300  shares  held  by  Directors  and the  Executive  Officers,  of  which 867,279 were
exercisable.  The  outstanding  options under the Plan are exercisable at prices ranging from $16.875 to $41.19
per share,  with a weighted  average exercise price of $28.49 per share, and expire between July 19, 2005 and
March 10, 2013, ten years after the date of each grant.Board Practices

The Board of Directors  consists of nine members.  The Board of Directors is divided into three  classes,  with
members of each class  elected to hold office for a term of three years in accordance  with the  classification
indicated  below or until his or her successor is elected and qualifies.  Directors Bruce C. Bell, C. Sean Day,
and Dr. Ian D.  Blackburne  have terms  expiring in 2003 and have been  nominated by the Board of Directors for
re-election at the 2003 Annual Meeting of Shareholders.  Directors  Morris L. Feder,  Leif O. Höegh, and Eileen
A. Mercier have terms expiring in 2004.  Directors  Thomas Kuo-Yuen Hsu, Axel Karlshoej,  and Bjorn Moller have
terms expiring in 2005.

Other than an employment  agreement  between the Company and Mr.  Moller,  which provides that Mr. Moller shall
be paid cash severance upon termination of his employment,  there are no service  contracts between the Company
and any of its Directors providing for benefits upon termination of their employment or service.

The Board of Directors has standing Audit, Nominating and Governance,  and Compensation  Committees.  The Audit
Committee  is  appointed  by  the  Board  of  Directors  to  assist  the  Board  in  fulfilling  its  oversight
responsibilities  to monitor the integrity of the financial  statements of the Company;  the  compliance by the
Company with legal and regulatory  requirements;  the  independence  and performance of the Company's  internal
and external  auditors;  and the systems of internal  controls that management and the Board have  established.
Additionally,  the Audit  Committee  reviews  procedures to identify the principal risks facing the Company and
reports to the Board on the systems in place to monitor  these risks.  The Audit  Committee  consists of Eileen
A. Mercier,  Morris L. Feder,  and Leif O. Höegh.  The Nominating and Governance  Committee is appointed by the
Board of  Directors  and is  responsible  for  making  recommendations  to the Board on  Director  nominations;
reporting  annually to the Board an assessment of the Board's  performance  and making  recommendations  to the
Board  regarding  the status of the  compensation  of  Directors in relation to other  companies of  comparable
size;  and advising  the Board on  corporate  governance  matters.  The  Nominating  and  Governance  Committee
consists of Bruce C. Bell, C. Sean Day, and Eileen A. Mercier.  The Compensation  Committee is appointed by the
Board of Directors to establish the Company's executive compensation  programs,  review the compensation of the
Companys  Executive Officers and make  recommendations to the Board of Directors regarding  compensation.  The
Compensation Committee consists of Axel Karlshoej, Thomas Kuo-Yuen Hsu, and Dr. Ian D. Blackburne.

Crewing and Staff

As at December  31, 2002 and 2001,  the Company  employed  approximately  3,650  seagoing  and 450  shore-based
personnel.  This is an increase from approximately 2,650 seagoing and 350 shore-based  personnel as at December
31, 2000.

The Company  regards  attracting and retaining,  motivated  seagoing  personnel as a top priority.  Through its
global manning organization  comprising of offices in Glasgow,  Latvia,  Manila,  Melbourne,  Mumbai, Oslo, and
Sydney, the Company offers seafarers highly competitive  employment  packages and comprehensive  benefits.  The
Company  also  provides  excellent  opportunities  for  personal  and career  development,  which relate to the
Company's philosophy of promoting internally.

During fiscal 1996, the Company entered into a Collective  Bargaining Agreement with the Philippine  Seafarers'
Union (PSU), an affiliate of the  International  Transport  Workers'  Federation (ITF), and a Special Agreement
with ITF London that covers  substantially  all of the  Company's  junior  officers and seamen.  The Company is
also party to Enterprise  Bargaining  Agreements with various  Australian  maritime unions that covers officers
and seamen employed through the Australian operations.

The  Company  sees its  commitment  to training  as  fundamental  to the  development  of the  highest  caliber
seafarers for its marine  operations.  The Company's  cadet  training  program is designed to balance  academic
learning with hands-on  training at sea. The Company has  relationships  with training  institutions in Canada,
Croatia,  India,  Latvia,  Norway,  Philippines,  Turkey,  and  the  United  Kingdom.  After  receiving  formal
instruction  at one of these  institutions,  the  cadet's  training  continues  on board a Teekay  vessel.  The
Company also has a career  development  plan that is devised to ensure a continuous flow of qualified  officers
who are trained on the Company vessels and are familiar with the Company's operational  standards,  systems and
policies.  The Company  believes that  high-quality  manning and training  policies  will play an  increasingly
important  role in  distinguishing  larger  independent  tanker  companies  that have  in-house (or  affiliate)
capabilities from smaller companies that must rely on outside ship managers and crewing agents.Share Ownership

The  following  table sets forth certain  information  regarding  ownership,  as of March 15, 2003, of Teekay's
common stock,  par value of $0.001 per share (the "Common Stock") by the Directors and Executive  Officers as a
group. Information for certain holders is based on information delivered to the Company.

`Identity of Person or Group                                                        Shares Owned    Percent of Class
All Directors and Executive Officers (16 persons) (1) (2)..................           887,429             2.23%
___________________________`

(1) Includes 867,279 shares of Common Stock subject to stock options  exercisable  within 60 days after
March 15, 2003.  Excludes (a) 321,021 shares of Common Stock subject to stock  options first  exercisable
more than 60 days after March 15, 2003 and (b) shares  owned by Resolute  Investments,  Inc. See Item 7  Major
Shareholders and Related Party Transactions.
     (2)  Each of the  Directors  and  Executive  Officers  beneficially  owns  less  than  one  percent  of the
outstanding shares of Common Stock.

Item 7.   Major Shareholders and Related Party TransactionsMajor Shareholders

     (a) The following table sets forth information  regarding  beneficial  ownership,  as of March 15, 2003, of
Teekay's  Common  Stock by each  person  known by the  Company to  beneficially  own more than 5% of the Common
Stock.  Information  for certain  holders is based on their  latest  filings with the  Securities  and Exchange
Commission or information delivered to the Company.

`Identity of Person or Group                                                        Shares Owned    Percent of Class
Resolute Investments, Inc. (1).............................................         16,515,690          41.54%
Fidelity Management and Research...........................................          5,577,535          14.03%
___________________________`

(1)  Two of the  Company's  directors  are  officers  and  directors  of  Resolute  Investments,  Inc.  Two
additional   directors  of  the  Company  are  directors  of  the  entity  that  ultimately  controls  Resolute
Investments, Inc.  See "--Related Party Transactions."

    The Company's  major  shareholders  have the same voting rights as other  shareholders  of the Company.  No
corporation or foreign  government owns more than 50% of the Company's  outstanding  Common Stock.  The Company
is not aware of any  arrangements,  the  operation  of which  may at a  subsequent  date  result in a change in
control of the Company.Related Party Transactions

As at December 31, 2002,  Resolute  Investments,  Inc.  (Resolute) owned 41.54% of the Company's  outstanding
Common Stock.  Two of the Company's  Directors,  C. Sean Day and Bruce Bell, are Directors and the Chairman and
Vice President,  respectively,  of Resolute.  Two additional Directors of the Company,  Thomas Kuo-Yuen Hsu and
Axel  Karlshoej,  are Managing  Directors of The Kattegat  Trust  Company  Limited  ("Kattegat"),  which is the
trustee of the trust that owns all of Resolute's outstanding equity.

Payments made by the Company to Kattegat,  Oceanic Bank and Trust, and Transmarine  Navigation  Company,  which
are affiliates of Resolute,  in respect of port agent services,  legal and  administration  fees, shared office
costs,  and consulting  fees for the years ended December 31, 2002,  2001 and 2000 totalled $0.9 million,  $1.5
million,  and $1.6 million,  respectively.  Those  payments  included  reimbursement  to Kattegat or affiliates
thereof  of  $200,000  for each  such  year for  payments  they  made to C.  Sean Day for  consulting  services
performed for the Company.  Bruce Bell is the Managing Director of Oceanic Bank and Trust.  Mr. Day is a director of
Transmarine Navigation Company.

In 1993 the Company  purchased  all of the issued and  outstanding  shares of Palm  Shipping  Inc.  (now Teekay
Chartering  Limited)  from an  affiliate  of Resolute.  During the year ended  December  31, 2002,  the Company
accrued  $6.0 million as a settlement  of a  contingent  payment that was required  under the terms of the Palm
Shipping acquisition agreement.

Item 8.  Financial InformationConsolidated Financial Statements and Notes

See Item 18 below.Legal Proceedings

From time to time the  Company  has been,  and expects to  continue  to be,  subject to legal  proceedings  and
claims in the ordinary course of its business,  principally  personal injury and property casualty claims. Such
claims,  even if lacking  merit,  could result in the  expenditure  of  significant  financial  and  managerial
resources.  The  Company  is not  aware  of any  legal  proceedings  or  claims  that it  believes  will  have,
individually  or in the  aggregate,  a material  adverse  effect on the  Company,  its  financial  condition or
results of operations.Dividend Policy

Commencing  with the fiscal quarter ended  September 30, 1995, the Company has declared and paid quarterly cash
dividends in the amount of $0.215 per share on its Common Stock.  Subject to financial  results and declaration
by the Board of Directors,  the Company  currently  intends to continue to declare and pay a regular  quarterly
dividend  in such  amount  per share on its Common  Stock.  Pursuant  to the  Company's  dividend  reinvestment
program,  holders of Common Stock are permitted to choose,  in lieu of receiving  cash  dividends,  to reinvest
any dividends in additional  shares of Common Stock at then  prevailing  market prices,  but without  brokerage
commissions or service charges.

The timing and amount of dividends,  if any,  will depend,  among other  things,  on the  Company's  results of
operations,  financial  condition,  cash requirements,  restrictions in financing  agreements and other factors
deemed  relevant  by the  Company's  Board of  Directors.  Because  the  Company is a holding  company  with no
material assets other than the stock of its  subsidiaries,  its ability to pay dividends on the Common Stock is
dependent on the earnings and cash flow of its  subsidiaries.  The indentures  relating to the Company's  8.32%
First  Preferred  Ship  Mortgage  Notes due 2008 (the  "Mortgage  Note  Indenture")  and  certain of the credit
agreements  governing  the  Company's  (and its  subsidiaries)  credit  facilities  provide that the  Company's
ability to pay  dividends  is subject  to  limitations  based upon the  Company's  cumulative  net income  plus
certain  additional  amounts,  including the proceeds  received by the Company from any issuance of its capital
stock.  The Company does not believe that the  restrictions  contained  in the  Mortgage  Note  Indenture or in
other  financing  agreements to which the Company and its  subsidiaries  are party to will restrict  payment of
cash dividends on the Common Stock for the foreseeable future.Significant Changes

On February 1, 2003,  one of the Company's  vessels,  the Alliance  Spirit,  was empty of cargo and waiting off
Skikda,  Algeria to load crude oil when a severe storm arose and pushed the vessel  aground.  Subsequent to the
grounding,  the vessel has been  classified  as a  constructive  total loss and insurance proceeds have been
received for the vessel's full value.  As of March 27, 2003, the vessel had been cut in two and
its fore part had been removed in preparation for sale to a third party for scrapping.  The aft part of the vessel remains aground.
Although all bunker fuel,  diesel fuel, lube oils, paints and chemicals on board have been successfully  removed
from the vessel, an estimated 15 metric  tonnes of residual  oil cargo  remain in the cargo  tanks.
The Company maintains  insurance  coverage on the vessel
for environmental  damage or pollution  liability in an amount of $1 billion.  The Company believes any liability
resulting from the escape of any oil into the  environment  would be  substantially  below  this  amount.  Under
the  applicable  global convention,  any liability  above $1 billion for any oil spill in this region  relating
to this incident would be limited to approximately $32 million.

As of February 18, 2003, the Company  completed an offering for gross proceeds of $143.75  million in mandatory
convertible  equity units ("PEPS Units") pursuant to its currently  effective  universal  shelf  registration  statement filed
with the U.S.  Securities  and  Exchange  Commission.  Each equity unit  includes (a) a forward  contract  that
requires  the holder to purchase  for $25 a  specified  fraction of a share of the  Company's  Common  Stock on
February 16, 2006 and (b) a $25 principal  amount,  subordinated  note due May 18, 2006. The forward  contracts
provide for contract adjustment  payments of 1.25% annually and the notes bear interest at 6.0% annually.  Upon
settlement  on February  16, 2006 of the 5.75  million  forward  contracts  included in the equity  units,  the
Company  will issue  between  3,267,150  and  3,991,075  shares of its Common Stock  (depending  on the average
closing  price of the Common  Stock for the  20-trading  day period  ending on the third  trading  day prior to
February 16, 2006).  Proceeds from the offering may be used to finance  potential  acquisitions and for general
corporate purposes, including capital expenditures, working capital, and the repayment of debt.

Item 9.  The Offer and Listing

The  Companys  Common  Stock is traded on The New York Stock  Exchange  under the symbol  "TK". The  following
table sets forth the high and low  closing  sales  prices for the Common  Stock on The New York Stock  Exchange
for each of the periods indicated.

`High             Low
          Years Ended:
            March 31, 1999...............................................      $30.8750        $14.2500
            Nine months ended December 31, 1999..........................       18.9375         13.7500
            December 31, 2000............................................       50.8750         15.3125
            December 31, 2001............................................       52.6100         25.4900
            December 31, 2002............................................       41.7000         26.3500

          Quarters Ended:                                                        High             Low
            March 31, 2001...............................................      $45.6000        $33.2500
            June 30, 2001................................................       52.6100         38.6200
            September 30, 2001...........................................       41.0000         29.1600
            December 31, 2001............................................       35.0100         25.4900
            March 31, 2002...............................................       39.1200         32.0500
            June 30, 2002................................................       40.5800         35.0500
            September 30, 2002...........................................       36.5000         27.9000
            December 31, 2002............................................       41.7000         26.3500

          Months Ended:                                                          High             Low
            September 2002...............................................      $31.9400        $27.9000
            October 2002.................................................       32.7800         26.3500
            November 2002................................................       38.7100         32.8000
            December 2002................................................       41.7000         36.7000
            January 2003.................................................       43.1600         38.9800
            February 2003................................................       40.5000         35.7100`

Teekays  8.32% Notes and the 7.25% PEPS Units are listed for trading on The New York Stock  Exchange.  The 8.32%
Notes were first  offered on the market  January  19,  1996,  and the 7.25% PEPS Units were first  offered on the
market  February 11,  2003. As no active  trading  market exists for these Notes or  PEPS Units,  no historical
pricing information is included here.

Item 10.  Additional InformationMemorandum and Articles of Association

The Company's  Articles of  Incorporation  and Bylaws have  previously been filed as exhibits 2.1, 2.2, and 2.3
to the  Company's  Annual  Report on Form 20-F (File No.  1-12874),  filed  with the  Securities  and  Exchange
Commission on March 30, 2000, and are hereby incorporated by reference into this Annual Report.

The rights,  preferences and restrictions  attaching to each class of the Company's capital stock are described
in the section  entitled  "Description  of Capital  Stock" of the Company's  Rule 424(b)  prospectus  (File No.
1-12874),  filed with the  Securities  and Exchange  Commission on June 10, 1998,  and hereby  incorporated  by
reference into this Annual  Report,  provided that since the date of such  prospectus  (1) the par value of the
Company's capital stock has been changed to $0.001 per share,  (2) the  authorized capital stock of the Company
has been increased to  725,000,000  shares of Common Stock and 25,000,000  shares of Preferred  Stock,  (3) the
Company has been  domesticated  in the  Republic  of the  Marshall  Islands  and (4) the  Company has adopted a
staggered Board of Directors, with directors serving three-year terms.

The necessary  actions  required to change the rights of holders of the stock and the conditions  governing the
manner in which annual  general  meetings and special  meetings of  shareholders  are convoked are described in
the  Company's  Bylaws filed as exhibit 2.3 to the  Company's  Annual  Report on Form 20-F (File No.  1-12874),
filed with the  Securities  and Exchange  Commission on March 30, 2000,  and hereby  incorporated  by reference
into this Annual Report.

The Company has in place a rights  agreement that would have the effect of delaying,  deferring or preventing a
change in control of the Company.  The rights  agreement has been filed as part of the Company's Form 8-A (File
No.  1-12874),  filed  with  the  Securities  and  Exchange  Commission  on  September  11,  2000,  and  hereby
incorporated by reference into this Annual Report.

There are no  limitations  on the rights to own  securities,  including the rights of  non-resident  or foreign
shareholders  to hold or exercise  voting rights on the  securities  imposed by the laws of the Republic of the
Marshall Islands or by the Company's articles of incorporation or bylaws.Material Contracts

The  following  is a summary of each  material  contract,  other than  material  contracts  entered into in the
ordinary course of business,  to which the Company or any of its  subsidiaries is a party, for the two years
immediately preceding the date of this Annual Report:

(a) Indenture,  dated January 29, 1996,  for U.S.  $225,000,000  8.32% First  Preferred Ship Mortgage Notes
due 2008,  Teekay  Shipping  Corporation  as Issuer;  United States Trust Company of New York as Trustee;  VSSI
Oceans Inc., VSSI Atlantic Inc., VSSI Appian Inc.,  Senang Spirit Inc., Exuma Spirit Inc.,  Nassau Spirit Inc.,
and Andros Spirit Inc. as Guarantors.

     (b)  Agreement,  dated October 3, 1996, for a U.S.  $90,000,000  Term Loan Facility to be made available to
certain  subsidiaries of Teekay  Shipping  Corporation by Christiania  Bank og Kreditkasse,  acting through its
New York Branch, The Bank of Nova Scotia, and Banque Indosuez.

     (c) Agreement,  dated October 18, 1996, for a U.S.  $120,000,000 Term Loan Facility to be made available to
certain  subsidiaries of Teekay Shipping  Corporation by Den Norske Bank ASA,  Nederlandse  Scheepshypothesbank
N.V., The Bank of New York, and Midland Bank plc.

     (d) Agreement,  dated January 26, 1998, for a U.S.  $200,000,000  Reducing  Revolving Credit Facility to be
made available to certain  wholly-owned  subsidiaries  of Teekay  Shipping  Corporation by Den Norske Bank ASA,
Christiania Bank og Kreditkasse ASA, New York Branch, and the Bank of Nova Scotia.

     (e) Amended and Restated  Reimbursement  Agreement  dated April 16, 1998  (amended May 1999)  relating to a
U.S.  $74,000,000  Credit  facility made  available by RABO  Australia  Limited to Barrington  (Australia)  Pty
Limited,  Palmerston  (Australia)  Pty  Limited,  VSSI  Australia  Limited,  VSSI  Transport  Inc. and Alliance
Chartering Pty Limited and Nedship Bank (America) N.V. as Guarantor.

     (f) Amended and Restated Guarantee dated April 16, 1998 made by Teekay Shipping Corporation in favor of
Nedship Bank (America) N.V. relating to the U.S. $74,000,000 facility granted by RABO Australia Limited and
guaranteed by Nedship Bank (America) N.V.

     (g) Agreement, dated March 26, 1999, for the amalgamation of Northwest Maritime Inc., a 100% owned
subsidiary of Teekay Shipping Corporation, and Bona Shipholding Ltd.

     (h) Amendment and  Restatement  Agreement,  dated June 11, 1999,  relating to a US  $500,000,000  Revolving
Loan Agreement made available to Bona Shipholding Ltd. by Chase Manhattan plc,  Citibank  International plc and
various other banks.

     (i)  Reimbursement  Agreement,  dated February 16, 2001,  between  Karratha Spirit Pty Ltd and Nedship Bank
(America) N.V.

     (j) Agreement,  dated February 16, 2001, for a U.S.  $34,000,000 Term Loan Facility to be made available to
Karratha Spirit Pty Ltd by RABO Australia Limited.

     (k)  Indenture  dated  June 22,  2001  among  Teekay  Shipping  Corporation  and The Bank of New York Trust
Company of Florida (formerly U.S. Trust Company of Texas, N.A.).

     (l)  Amendment  and  Restatement  Agreement,  dated  September  14, 2001,  relating to a U.S.  $500,000,000
Revolving Loan Agreement  between Bona Shipholding Ltd.,  Teekay Shipping  Corporation,  J.P. Morgan Securities
Inc., Citibank International plc and various other banks.

     (m) First  Supplemental  Indenture dated as of December 6, 2001, among Teekay Shipping  Corporation and The
Bank of New York Trust Company of Florida, N.A.

     (n) Share Sale and  Purchase  Agreement  by and among  Statoil ASA and Statpet AS and Norsk Teekay AS dated
December 15, 2002.

     (o) Supplemental  Indenture No. 1 between Teekay Shipping  Corporation and The Bank of New York, as trustee
dated as of February 18, 2003.

     (p) Purchase Contract  Agreement between Teekay Shipping  Corporation and The Bank of New York, as purchase
contract agent dated as of February 18, 2003.

     (q) Pledge  Agreement  between Teekay Shipping  Corporation  and The Bank of New York, as collateral  agent
dated as of February 18, 2003.

     (r) Remarketing  Agreement between Teekay Shipping  Corporation and Morgan Stanley & Co. Incorporated dated
as of February 18, 2003.

     (s)  Underwriting  Agreement  between Teekay Shipping  Corporation,  Morgan Stanley & Co.  Incorporated and
Salmon Smith Barney dated as of February 11, 2003.Exchange Controls and Other Limitations Affecting Security Holders

The Company is not aware of any  governmental  laws,  decrees or  regulations  in the  Republic of The Marshall
Islands  that  restrict  the export or import of  capital,  including,  but not limited  to,  foreign  exchange
controls,  or that affect the remittance of dividends,  interest or other payments to  non-resident  holders of
the Company's securities.

The Company is not aware of any  limitations  on the right of  non-resident  or foreign  owners to hold or vote
securities  of the  Company  imposed by the laws of the  Republic  of the  Marshall  Islands  or the  Company's
articles of incorporation and bylaws.Taxation

Teekay  Shipping  Corporation  was  incorporated  in the  Republic  of  Liberia  on  February  9,  1979 and was
domesticated in the Republic of The Marshall Islands on December 20, 1999.Marshall  Islands Tax  Consequences.  Because Teekay and its  subsidiaries  do not, and do not expect that they
will,  conduct business or operations in the Republic of The Marshall  Islands,  and because all  documentation
related to the public  offering of Teekay's  common stock was executed  outside of the Republic of The Marshall
Islands,  under current Marshall  Islands law, no taxes or withholdings  will be imposed by the Republic of The
Marshall  Islands on  distributions  made to holders of shares of the Company's  common stock,  so long as such
persons  do not  reside in,  maintain  offices  in, nor engage in  business  in the  Republic  of The  Marshall
Islands.  Furthermore,  no stamp,  capital gains or other taxes will be imposed by the Republic of The Marshall
Islands on the purchase, ownership or disposition by such persons of shares of our common stock.Bahamian  Tax  Consequences.  Under  current  Bahamian  law,  no taxes or  withholdings  will be imposed by the
Commonwealth of the Bahamas on  distributions  made in respect of the shares of our common stock, and no stamp,
capital  gains  or other  taxes  will be  imposed  by the  Commonwealth  of the  Bahamas  on the  ownership  or
disposition  of the shares of the  Company's  common  stock,  as there are no  personal  income or  corporation
taxes, capital gains taxes or death duties in the Commonwealth of the Bahamas.Documents on Display

Documents  concerning  the Company  that are referred to herein may be  inspected  at its  principal  executive
headquarters at TK House,  Bayside  Executive  Park,  West Bay Street & Blake Road, P.O. Box AP-59213,  Nassau,
The Bahamas.  Those documents  electronically filed via the Electronic Data Gathering,  Analysis, and Retrieval
(EDGAR) system may also be obtained from the Securities and Exchange  Commission's  (SE) website at www.sec.gov
or from the SEC public  reference  room at Judiciary Plaza, 450 Fifth Street,  Washington,  D.C.  20549.
Further  information on the operation of the public  reference rooms may be
obtained  by calling  the SEC at  1-800-SEC-0330.  Copies of  documents  can be  requested  from the SEC public
reference rooms for a copying fee.

Item 11.  Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from  foreign  currency  fluctuations,  changes in  interest  rates,  and
bunker fuel prices. The Company uses forward foreign currency  contracts,  interest rate swaps, and bunker fuel
swap  contracts  to manage  currency,  interest  rate,  and  bunker  fuel price  risks,  but does not use these
financial instruments for trading or speculative purposes.

Foreign Exchange Rate Risk

The international  tanker  industrys  functional  currency is the U.S. dollar.  Virtually all of the Companys
revenues and most of its operating costs are in U.S. dollars.  The Company incurs certain  operating  expenses,
drydocking,  and  overhead  costs in  foreign  currencies,  the most  significant  of which are  Japanese  Yen,
Singapore  Dollars,  Canadian Dollars,  Australian  Dollars,  British Pounds and Norwegian  Kroner.  During the
year ended December 31, 2002,  approximately 21% of vessel and voyage costs,  overhead and drydock expenditures
were  denominated  in these  currencies.  However,  the Company has the ability to shift its  purchase of goods
and services from one country to another and, thus, from one currency to another, on relatively short notice.

The Company enters into forward  contracts as a hedge against  changes in certain  foreign  exchange  rates. As
at December  31, 2002,  the Company had $65.8  million in foreign  exchange  forward  contracts  that mature as
follows:  $39.3 million in 2003 and $26.5  million in 2004.  To the extent the hedge is  effective,  changes in
the fair value of the  forward  contract  are either  offset  against  the fair value of assets or  liabilities
through  income,  or  recognized in other  comprehensive  income until the hedged item is recognized in income.
The  ineffective  portion  of a forward  contracts  change in fair  value will be  immediately  recognized  in
income.

Interest Rate Risk

The Company invests its cash and marketable  securities in financial  instruments  with maturities of less than
six months within the parameters of its investment policy and guidelines.

The Company  uses  interest  rate swaps to manage the impact of  interest  rate  changes on  earnings  and cash
flows.  Changes  in the fair value of the  interest  rate swaps are  either  offset  against  the fair value of
assets or liabilities  through  income,  or recognized in other  comprehensive  income until the hedged item is
recognized  in  income.  The  ineffective  portion  of an  interest  rate  swaps  change in fair value will be
immediately  recognized in income.  Premiums and receipts,  if any, are  recognized as  adjustments to interest
expense over the lives of the individual contracts.

As at December 31, 2002, the Company was committed to a series of interest rate swap  agreements  whereby $20.0
million  of the  Companys  floating  rate debt was  swapped  with  fixed  rate  obligations  having an average
remaining term of 10 months,  expiring between March 2003 and May 2004. These  arrangements  effectively change
the Companys  interest  rate exposure on $20.0 million of debt from a floating  LIBOR rate to an average fixed
rate of 5.75%.

Commodity Price Risk

The  Company  uses  bunker  fuel  swap  contracts  as a hedge to  protect  against  the  change  in the cost of
forecasted  bunker fuel costs for certain vessels being  time-chartered-out  and for vessels  servicing certain
contracts  of  affreightment.  To the extent the hedge is  effective,  changes in the fair value of the forward
contract are either offset against the fair value of assets or  liabilities  through  income,  or recognized in
other  comprehensive  income  until the hedged  item is  recognized  in income.  The  ineffective  portion of a
forward  contracts  change in fair value will be  immediately  recognized in income.  As at December 31, 2002,
the Company was committed to bunker fuel swap contracts  totaling 20,400 metric tonnes with a  weighted-average
price of $116.00 per tonne, which expire between January 2003 and May 2004.

The following table sets forth the magnitude of these foreign  exchange forward  contracts,  interest rate swap
agreements, bunker fuel swap contracts, and written freight call option:

`Contract                Carrying Amount                  Fair
(in USD 000s)                                 Amount             Asset           Liability            Value
----------------------------------------- ------------------ ---------------- ------------------ ------------------
December 31, 2002
FX Forward Contracts                       $     65,821        $     545       $         -          $        545
Interest Rate Swap Agreements                    20,000                -               802                  (802)
Bunker Fuel Swap Contracts                        2,366              254                 -                   254
Debt                                          1,130,822                -         1,130,822            (1,143,753)

December 31, 2001
FX Forward Contracts                       $     65,500        $       -       $       343          $       (343)
Interest Rate Swap Agreements                    85,000                -             2,429                (2,429)
Bunker Fuel Swap Contracts                        4,769                -               328                  (328)
Written Freight Call Option                       5,998                -               857                  (857)
Debt                                            935,702                -           935,702              (952,055)
----------------------------------------- ------------------ ---------------- ------------------ ------------------`

Item 12.  Description of Securities Other than Equity Securities

Not applicable.

PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies

None.Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds

None.Item 15.  Controls and Procedures

An evaluation of the Company's  disclosure  controls and  procedures was  conducted in  March 2003 under the
supervision of the Company's Chief Executive  Officer and Chief Financial  Officer.  Based on this  evaluation,
it was determined  that effective  disclosure  controls and procedures are in place and that these controls are
operating as intended.

There  were no  significant  changes  in the  Company's  internal  controls  or in  other  factors  that  could
significantly affect these controls subsequent to the date of their evaluation.

The Company's Chief Executive Officer and Chief Financial  Officer do not expect that the Company's  disclosure
controls or  internal  controls  will  prevent all error and all fraud.  A control  system,  no matter how well
conceived  and  operated,  can provide only  reasonable,  not absolute,  assurance  that the  objectives of the
system  are met.  Further,  the  design of a control  system  must  reflect  the fact that  there are  resource
constraints,  and the  benefits  of  controls  must be  considered  relative  to their  costs.  Because  of the
inherent  limitations in all control  systems,  no evaluation of controls can provide  absolute  assurance that
all control  issues and  instances of fraud,  if any,  within the Company have been  detected.  These  inherent
limitations  include the realities that judgments in  decision-making  can be faulty,  and that  breakdowns can
occur because of simple error or mistake.  Additionally,  controls can be  circumvented  by the individual acts
of some persons,  by collusion of two or more people, or by management  override of the control.  The design of
any system of controls also is based partly on certain  assumptions about the likelihood of future events,  and
there can be no  assurance  that any design will  succeed in  achieving  its stated  goals under all  potential
future conditions.Item 16A.  Audit Committee Financial Expert

Not applicable.  Applies to fiscal years ending on or after July 15, 2003.Item 16B.  Code of Ethics

Not applicable.  Applies to fiscal years ending on or after July 15, 2003.Item 16C. Principal Accountant Fees and Services

Not applicable.  Applies to fiscal years ending on or after December 15, 2003.

PART III

Item 17.  Financial Statements

Not applicable.Item 18.  Financial Statements

The  following  financial  statements  and schedule,  together with the report of Ernst & Young LLP,  Chartered
Accountants thereon, are filed as part of this Annual Report:

`Page

Independent Auditor's Report..............................................................................  F-1
Consolidated Financial Statements
Consolidated Statements of Income.........................................................................  F-2
Consolidated Balance Sheets...............................................................................  F-3
Consolidated Statements of Cash Flows.....................................................................  F-4
Consolidated Statements of Changes in Stockholders' Equity................................................  F-5
Notes to the Consolidated Financial Statements............................................................  F-6
Schedule A to the Consolidated Financial Statements.......................................................  F-19`

All other  schedules for which  provision is made in the  applicable  accounting  regulations of the Securities
and  Exchange  Commission  are not  required,  are  inapplicable  or have  been  disclosed  in the Notes to the
Consolidated Financial Statements and therefore have been omitted.Item 19.  Exhibits

The following exhibits are filed as part of this Annual Report:

`1.1  Amended and Restated Articles of Incorporation of Teekay Shipping Corporation. (9)
      1.2  Articles of Amendment of Articles of Incorporation of Teekay Shipping Corporation. (9)
      1.3  Amended and Restated Bylaws of Teekay Shipping Corporation. (9)
      2.1  Registration Rights Agreement among Teekay Shipping Corporation, Tradewinds Trust Co. Ltd., as Trustee for
           the Cirrus Trust, and Worldwide Trust Services Ltd., as Trustee for the JTK Trust. (1)
      2.2  Specimen of Teekay Shipping Corporation Common Stock Certificate. (1)
      2.3  Indenture dated January 29, 1996 among Teekay Shipping Corporation, VSSI Oceans Inc., VSSI Atlantic Inc.,
           VSSI Appian Inc., Senang Spirit Inc., Exuma Spirit Inc., Nassau Spirit Inc., Andros Spirit Inc. and United
           States Trust Company of New York, as Trustee. (5)
      2.4  Specimen of Teekay Shipping Corporation's 8.32% First Preferred Ship Mortgage Notes Due 2008. (5)
      2.5  Bahamian Statutory Ship Mortgage dated January 29, 1996 by Nassau Spirit Inc. to United States Trust
           Company of New York. (3) (5)
      2.6  Deed of Covenants dated January 29, 1996 by Nassau Spirit Inc. to United States Trust Company of New York.
           (3) (5)
      2.7  First Preferred Ship Mortgage dated January 29, 1996 by VSSI Oceans Inc. to United States Trust Company of
           New York, as Trustee. (4)
      2.8  Assignment of Time Charter dated January 29, 1996 by Nassau Spirit Inc. to United States Trust Company of
           New York, as Trustee. (3) (5)
      2.9  Assignment of Insurance dated January 29, 1996 by Nassau Spirit Inc. to United States Trust Company of New
           York, as Trustee. (3) (5)
     2.10  Pledge Agreement and Irrevocable Proxy dated January 29, 1996 by Teekay in favor of United States Trust
           Company of New York, as Trustee. (5)
     2.11  Guarantee dated January 29, 1996 by Nassau Spirit Inc. in favor of United States Trust Company of New
           York, as Trustee. (3) (5)
     2.12  Assignment of Freights and Hires dated January 29, 1996 by Nassau Spirit Inc. to United States Trust
           Company of New York, as Trustee. (3) (5)
     2.13  Cash Collateral Account Agreement dated January 29, 1996 between Nassau Spirit Inc. and United States
           Trust Company of New York, as Trustee. (3) (5)
     2.14  Investment Account Agreement dated January 29, 1996 between Teekay Shipping Corporation and United States
           Trust Company of New York, as Trustee. (5)
     2.15  Indenture dated June 22, 2001 among Teekay Shipping Corporation and The Bank of New York Trust Company of
           Florida (formerly U.S. Trust Company of Texas, N.A.). (14)
     2.16  First Supplemental Indenture dated as of December 6, 2001, among Teekay Shipping Corporation and The Bank
           of New York Trust Company of Florida, N.A. (15)
     2.17  Exchange and Registration Rights Agreement dated June 22, 2001 among Teekay Shipping Corporation and
           Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc., Deutsche Banc Alex.
           Brown Inc. and Scotia Capital (USA) Inc. (14)
     2.18  Exchange and Registration Rights Agreement dated December 6, 2001 between Teekay Shipping Corporation and
           Goldman, Sachs & Co. (15)
     2.19  Specimen of Teekay Shipping Corporation's 8.875% Senior Notes due 2011. (14)
     2.20  Form of Supplemental Indenture No. 1 between Teekay Shipping Corporation and The Bank of New York, as
           trustee. (18)
     2.21  Form of Purchase Contract Agreement between Teekay Shipping Corporation and The Bank of New York, as
           purchase contract agent. (18)
     2.22  Form of Pledge Agreement between Teekay Shipping Corporation and The Bank of New York, as collateral
           agent. (18)
     2.23  Form of Remarketing Agreement between Teekay Shipping Corporation and Morgan Stanley & Co. Incorporated.
           (18)
     2.24  Form of Underwriting Agreement Between Teekay Shipping Corporation, Morgan Stanley & Co. Incorporated and
           Salomon Smith Barney. (18)
      4.1  1995 Stock Option Plan. (1)
      4.2  Amendment to 1995 Stock Option Plan. (10)
      4.3  Amended 1995 Stock Option Plan. (12)
      4.4  Form of Indemnification Agreement between Teekay and each of its officers and directors. (1)
      4.5  Charter Party, as amended, dated September 21, 1989 between Palm Shipping Inc. and BP Shipping Limited. (2)
      4.6  Time Charter, as amended, dated July 3, 1995 between VSSI Oceans Inc. and Palm Shipping Inc. (4)
      4.7  Time Charter, as amended, dated January 4, 1994 between VSSI Atlantic Inc. and Palm Shipping Inc. (4)
      4.8  Time Charter, as amended, dated February 1, 1992 between VSSI Appian Inc. and Palm Shipping Inc. (4)
      4.9  Time Charter, as amended, dated December 1, 1993 between Senang Spirit Inc. and Palm Shipping Inc. (4)
     4.10  Time Charter, as amended, dated August 1, 1992 between Exuma Spirit Inc. and Palm Shipping Inc. (4)
     4.11  Time Charter, as amended, dated May 1, 1992 between Nassau Spirit Inc. and Palm Shipping Inc. (4)
     4.12  Time Charter, as amended, dated November 1, 1992 between Andros Spirit Inc. and Palm Shipping Inc. (4)
     4.13  Management Agreement, as amended, dated June 1, 1992 between Teekay Shipping Limited and Nassau Spirit
           Inc. (3) (4)
     4.14  Agreement, dated October 3, 1996, for a U.S. $90,000,000 Term Loan Facility to be made available to
           certain subsidiaries of Teekay Shipping Corporation by Christiania Bank og Kreditkasse, acting through its
           New York Branch, The Bank of Nova Scotia, and Banque Indosuez. (6)
     4.15  Agreement, dated October 18, 1996, for a U.S. $120,000,000 Term Loan Facility to be made available to
           certain subsidiaries of Teekay Shipping Corporation by Den Norske Bank ASA, Nederlandse
           Scheepshypothesbank N.V., The Bank of New York, and Midland Bank plc. (6)
     4.16  Agreement, dated January 26, 1998, for a U.S. $200,000,000 Reducing Revolving Credit Facility to be made
           available to certain wholly-owned subsidiaries of Teekay Shipping Corporation by Den Norske Bank ASA,
           Christiania Bank og Kreditkasse ASA, New York Branch, and the Bank of Nova Scotia. (7)
     4.17  Agreement, dated March 26, 1999, for the amalgamation of Northwest Maritime Inc., a 100% owned subsidiary
           of Teekay Shipping Corporation, and Bona Shipholding Ltd. (8)
     4.18  Agreement, dated April 16, 1998, for a U.S. $30,000,000 Term Loan Facility to be made available to VSSI
           Australia Limited by RABO Australia Limited. (9)
     4.19  Agreement, dated December 18, 1997, for a U.S. $44,000,000 Term Loan Facility to be made available to
           Barrington (Australia) Pty Limited and Palmerston (Australia) Pty Limited by RABO Australia Limited. (9)
     4.20  Amended and Restated Reimbursement Agreement, dated April 16, 1998, Among Barrington (Australia) Pty
           Limited, Palmerston (Australia) Pty Limited, VSSI Australia Limited, VSSI Transport Inc. and Alliance
           Chartering Pty Limited and Nedship Bank (America) N.V., The Bank of New York and Landesbank
           Schleswig-Holstein. (9)
     4.21  Amendment No. 1, dated May 1999, to Amended and Restated Reimbursement Agreement dated April 16, 1998
           among Barrington (Australia) Pty Limited, Palmerston (Australia) Pty Limited, VSSI Australia Limited, VSSI
           Transport Inc. and Alliance Chartering Pty Limited and Nedship Bank (America) N.V.,
           The Bank of New York and Landesbank Schleswig-Holstein. (9)
     4.22  Amended and Restated Agreement, date June 11, 1999, for a U.S. $500,000,000 Revolving Loan between Bona
           Shipholding Ltd., Chase Manhattan plc, Citibank International plc and various other banks. (9)
     4.23  Amendment and Restatement Agreement, dated June 11, 1999, relating to a U.S. $500,000,000 Revolving Loan
           Agreement between Bona Shipholding Ltd., Chase Manhattan plc, Citibank International plc and various other
           banks. (9)
     4.24  Rights agreement, dated as of September 8, 2000, between Teekay Shipping Corporation and The Bank of New
           York, as Rights Agent. (11)
     4.25  Reimbursement Agreement, dated January 1, 2000, between Fleet Management Inc. and Teekay Shipping
           Corporation. (12)
     4.26  Reimbursement Agreement, dated February 16, 2001, between Karratha Spirit Pty Ltd and Nedship Bank
           (America) N.V. (13)
     4.27  Agreement, dated February 16, 2001, for a U.S. $34,000,000 Term Loan Facility to be made available to
           Karratha Spirit Pty Ltd by RABO Australia Limited. (13)
     4.28  Amendment and Restatement Agreement, dated September 14, 2001, relating to a U.S. $500,000,000 Revolving
           Loan Agreement between Bona Shipholding Ltd., Teekay Shipping Corporation, J.P. Morgan Securities Inc.,
           Citibank International plc and various other banks. (17)
     4.29  Share Sale and Purchase Agreement by and among Statoil ASA and Statpet AS and Norsk Teekay AS dated
           December 15, 2002.
      8.1  List of Significant Subsidiaries
     12.1  Teekay Shipping Corporation Certification of Bjorn Moller, Chief Executive Officer, pursuant to 18 U.S.C.
           Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     12.2  Teekay Shipping Corporation Certification of Peter Antturi, Chief Financial Officer, pursuant to 18 U.S.C.
           Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     15.1  Letter from Ernst & Young LLP, as independent chartered accountants, dated March 24, 2003, regarding
           audited financial information.

______________________________________________________________________________________________________

(1)   Previously  filed as an exhibit to the Company's  Registration  Statement on Form F-1  (Registration  No.
      33-7573-4),  filed  with  the  SEC on July  14,  1995,  and  hereby  incorporated  by  reference  to such
      Registration Statement.

(2)   Previously  filed as an exhibit to the Company's  Registration  Statement on Form F-1  (Registration  No.
      33-68680),  as declared  effective by the SEC on November 29, 1993, and hereby  incorporated by reference
      to such Registration Statement.

(3)   A schedule  attached to this exhibit  identifies all other documents not required to be filed as exhibits
      because such other documents are  substantially  identical to this exhibit.  The schedule also sets forth
      material details by which the omitted documents differ from this exhibit.

(4)   Previously  filed as an exhibit to the Company's  Registration  Statement on Form F-3  (Registration  No.
      33-65139),  filed  with the SEC on January  19,  1996,  and  hereby  incorporated  by  reference  to such
      Registration Statement.

(5)   Previously  filed as an exhibit to the  Company's  Annual Report on Form 20-F (File No.  1-12874),  filed
      with the SEC on June 4, 1996, and hereby incorporated by reference to such Annual Report.

(6)   Previously  filed as an exhibit to the  Company's  Annual Report on Form 20-F (File No.  1-12874),  filed
      with the SEC on June 11, 1997, and hereby incorporated by reference to such Annual Report.

(7)   Previously  filed as an exhibit to the  Company's  Annual Report on Form 20-F (File No.  1-12874),  filed
      with the SEC on May 20, 1998, and hereby incorporated by reference to such Annual Report.

(8)   Previously  filed as an exhibit to the  Company's  Annual  Report on Form 20-F (File  No.1-12874),  filed
      with the SEC on June 11, 1999, and hereby incorporated by reference to such Annual Report.

(9)   Previously  filed as an exhibit to the  Company's  Annual  Report on Form 20-F (File  No.1-12874),  filed
      with the SEC on March 30, 2000, and hereby incorporated by reference to such Annual Report.

(10)  Previously  filed as an exhibit to the Company's  Form 6-K (File  No.1-12874),  filed with the SEC on May
      2, 2000, and hereby incorporated by reference to such Annual Report.

(11)  Previously  filed as an  exhibit  to the  Company's  Form 8-A (File  No.1-12874),  filed  with the SEC on
      September 11, 2000, and hereby incorporated by reference to such Annual Report.

(12)  Previously  filed as an exhibit to the  Company's  Annual  Report on Form 20-F (File  No.1-12874),  filed
      with the SEC on April 2, 2001, and hereby incorporated by reference to such Annual Report.

(13)  Previously  filed as an exhibit to the Company's  Form 6-K (File  No.1-12874),  filed with the SEC on May
      24, 2001, and hereby incorporated by reference to such Report.

(14)  Previously  filed as an exhibit to the Company's  Registration  Statement on Form F-4  (Registration  No.
      333-64928),  filed  with  the  SEC on July  11,  2001,  and  hereby  incorporated  by  reference  to such
      Registration Statement.

(15)  Previously  filed as an exhibit to the Company's  Registration  Statement on Form F-4  (Registration  No.
      333-76922),  filed  with the SEC on January  17,  2002,  and hereby  incorporated  by  reference  to such
      Registration Statement.

(16)  Previously  filed  as an  exhibit  to the  Company's  Registration  Statement  on Form  F-4,  as  Amended
      (Registration  No.  333-76922),  filed with the SEC on  February  5, 2002,  and  hereby  incorporated  by
      reference to such Registration Statement.

(17)  Previously  filed as an exhibit to the  Company's  Annual  Report on Form 20-F (File  No.1-12874),  filed
      with the SEC on March 29, 2002, and hereby incorporated by reference to such Annual Report.

(18)  Previously  filed as an exhibit to the Company's  Report on Form 6-K  (File  No.1-12874),  filed with the
      SEC on February 12, 2003, and hereby incorporated by reference to such Report on Form 6-K.`

# SIGNATURES

The registrant  hereby  certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this Annual Report on its behalf.

|Dated:     March 31, 2003 | TEEKAY SHIPPING CORPORATION

By:     /s/ Peter Antturi
          Peter Antturi
          Senior Vice President and Chief Financial Officer
          (Principal Financial and Accounting Officer)
|------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# CERTIFICATION

I, Bjorn Moller, Chief Executive Officer of the registrant, certify that:

|1. | I have reviewed this annual report on Form 20-F of Teekay Shipping Corporation;
|-- | -------------------------------------------------------------------------------

|2. | Based on my  knowledge,  this annual  report does not contain any untrue  statement of a material fact
         or  omit  to  state  a  material  fact  necessary  to  make  the  statements  made,  in  light  of the
         circumstances  under  which such  statements  were made,  not  misleading  with  respect to the period
         covered by this Annual Report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge,  the financial  statements,  and other financial  information  included in this
         annual  report,  fairly  present  in  all  material  respects  the  financial  condition,  results  of
         operations  and cash flows of the  registrant  as of, and for,  the periods  presented  in this annual
         report;
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The  registrants  other  certifying  officers and I are responsible for  establishing and maintaining
         disclosure  controls  and  procedures  (as  defined in Exchange  Act Rules  13a-14 and 15d-14) for the
         registrant and have:
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) | designed such  disclosure  controls and procedures to ensure that material  information  relating
              to the  registrant,  including  its  consolidated  subsidiaries,  is made  known to us by  others
              within  those  entities,  particularly  during the period in which  this  annual  report is being
              prepared;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | evaluated the effectiveness of the registrants  disclosure  controls and procedures as of a date
              within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) | presented  in this  annual  report our  conclusions  about the  effectiveness  of the  disclosure
              controls and procedures based on our evaluation as of the Evaluation Date;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The  registrants  other  certifying  officers  and  I  have  disclosed,  based  on  our  most  recent
         evaluation,  to the registrants  auditors and the audit committee of registrants  board of directors
         (or persons performing the equivalent function):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) | all  significant  deficiencies  in the design or  operation  of  internal  controls  which  could
              adversely  affect the  registrants  ability to record,  process,  summarize and report financial
              data and have  identified  for the  registrants  auditors  any material  weaknesses  in internal
              controls; and
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | any fraud,  whether or not  material,  that  involves  management  or other  employees who have a
              significant role in the registrants internal controls; and
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants  other certifying  officers and I have indicated in this annual report whether or not
         there were  significant  changes in internal  controls or in other  factors  that could  significantly
         affect  internal  controls  subsequent  to the  date of our  most  recent  evaluation,  including  any
         corrective actions with regard to significant deficiencies and material weaknesses.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Dated:     March 31, 2003 | By:     /s/ Bjorn Moller
          Bjorn Moller
          President and Chief Executive Officer
|------------------------- | -----------------------------------------------------------------------------------------------

# CERTIFICATION

I, Peter Antturi, Vice President and Chief Financial Officer of the registrant, certify that:

|1. | I have reviewed this annual report on Form 20-F of Teekay Shipping Corporation;
|-- | -------------------------------------------------------------------------------

|2. | Based on my  knowledge,  this annual  report does not contain any untrue  statement of a material fact
         or  omit  to  state  a  material  fact  necessary  to  make  the  statements  made,  in  light  of the
         circumstances  under  which such  statements  were made,  not  misleading  with  respect to the period
         covered by this Annual Report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge,  the financial  statements,  and other financial  information  included in this
         annual  report,  fairly  present  in  all  material  respects  the  financial  condition,  results  of
         operations  and cash flows of the  registrant  as of, and for,  the periods  presented  in this annual
         report;
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The  registrants  other  certifying  officers and I are responsible for  establishing and maintaining
         disclosure  controls  and  procedures  (as  defined in Exchange  Act Rules  13a-14 and 15d-14) for the
         registrant and have:
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) | designed such  disclosure  controls and procedures to ensure that material  information  relating
              to the  registrant,  including  its  consolidated  subsidiaries,  is made  known to us by  others
              within  those  entities,  particularly  during the period in which  this  annual  report is being
              prepared;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | evaluated the effectiveness of the registrants  disclosure  controls and procedures as of a date
              within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) | presented  in this  annual  report our  conclusions  about the  effectiveness  of the  disclosure
              controls and procedures based on our evaluation as of the Evaluation Date;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The  registrants  other  certifying  officers  and  I  have  disclosed,  based  on  our  most  recent
         evaluation,  to the registrants  auditors and the audit committee of registrants  board of directors
         (or persons performing the equivalent function):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) | all  significant  deficiencies  in the design or  operation  of  internal  controls  which  could
              adversely  affect the  registrants  ability to record,  process,  summarize and report financial
              data and have  identified  for the  registrants  auditors  any material  weaknesses  in internal
              controls; and
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | any fraud,  whether or not  material,  that  involves  management  or other  employees who have a
              significant role in the registrants internal controls; and
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants  other certifying  officers and I have indicated in this annual report whether or not
         there were  significant  changes in internal  controls or in other  factors  that could  significantly
         affect  internal  controls  subsequent  to the  date of our  most  recent  evaluation,  including  any
         corrective actions with regard to significant deficiencies and material weaknesses.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Dated:     March 31, 2003 | By:     /s/ Peter Antturi
          Peter Antturi
          Senior Vice President and Chief Financial Officer
|------------------------- | -------------------------------------------------------------------------------------------------------------

# AUDITORS REPORT

To the Shareholders ofTEEKAY SHIPPING CORPORATION

We have audited the accompanying  consolidated  balance sheets of Teekay Shipping  Corporation and subsidiaries
as of December 31, 2002 and 2001, and the related consolidated  statements of income,  changes in stockholders
equity and cash flows for the years ended  December  31, 2002,  2001,  and 2000.  Our audits also  included the
financial  schedule  listed  in  the  Index:  Item  18.  These  financial   statements  and  schedule  are  the
responsibility  of the Companys  management.  Our  responsibility  is to express an opinion on these financial
statements  and  schedule  based on our audits.  We did not audit the  financial  statements  of Ugland  Nordic
Shipping AS, a wholly-owned  subsidiary,  for the period from  acquisition on March 6, 2001 to the December 31,
2001,  whose total assets and net voyage revenues for the period from  acquisition on March 6, 2001 to December
31, 2001,  constituted  21 percent and 10 percent,  respectively,  of the related  consolidated  totals.  Those
statements  were  audited by other  auditors  whose report had been  furnished  to us for that period,  and our
opinion,  insofar as it relates to the amounts  included  for Ugland  Nordic  Shipping AS for that  period,  is
based solely on the report of the other auditors.

We conducted our audits in accordance with auditing standards  generally  accepted in the United States.  Those
standards  require  that we plan and  perform  the audit to  obtain  reasonable  assurance  about  whether  the
financial  statements  are  free of  material  misstatement.  An audit  includes  examining,  on a test  basis,
evidence supporting the amounts and disclosures in the financial  statements.  An audit also includes assessing
the  accounting  principles  used and  significant  estimates  made by  management,  as well as evaluating  the
overall  financial  statement  presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  based on our audit and the report of the other auditors,  the financial statements referred to
above  present  fairly,  in all material  respects,  the  consolidated  financial  position of Teekay  Shipping
Corporation  and  subsidiaries  as at  December  31,  2002 and  2001,  and the  consolidated  results  of their
operations  and their cash flows for the years ended  December  31, 2002,  2001,  and 2000 in  conformity  with
accounting  principles  generally  accepted in the United States.  Also, in our opinion,  the related schedule,
when  considered  in  relation  to the basic  financial  statements  taken as a whole,  presents  fairly in all
material aspects the information set forth herein.

|Vancouver, Canada,
February 13, 2003
(except for Note 15(b) which is as of February 19, 2003.) | /s/ ERNST & YOUNG LLP
Chartered Accountants
|---------------------------------------------------------------------------------------------- | -------------------------------------------

# TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of U.S. dollars, except share and per share amounts)

`Year Ended        Year Ended         Year Ended
                                                                          December 31,       December 31,       December 31,
                                                                              2002              2001               2000
                                                                                $                 $                  $
                                                                        -------------------------------------------------------

NET VOYAGE REVENUES
Voyage revenues                                                               783,327        1,039,056            893,226
Voyage expenses                                                               239,455          249,562            248,957
-------------------------------------------------------------------------------------------------------------------------------

Net voyage revenues                                                           543,872          789,494            644,269
-------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Vessel operating expenses                                                     168,035          154,831            125,415
Time-charter hire expense                                                      49,949           66,019             53,547
Depreciation and amortization                                                 149,296          136,283            100,153
General and administrative                                                     57,246           48,898             37,479
-------------------------------------------------------------------------------------------------------------------------------
                                                                              424,526          406,031            316,594
-------------------------------------------------------------------------------------------------------------------------------

Income from vessel operations                                                 119,346          383,463            327,675
-------------------------------------------------------------------------------------------------------------------------------
OTHER ITEMS
Interest expense                                                              (57,974)         (66,249)           (74,540)
Interest income                                                                 3,494            9,196             13,021
Other (loss) income (note 11)                                                 (11,475)          10,108              3,864
-------------------------------------------------------------------------------------------------------------------------------
                                                                              (65,955)         (46,945)           (57,655)
-------------------------------------------------------------------------------------------------------------------------------

Net income                                                                     53,391          336,518            270,020
-------------------------------------------------------------------------------------------------------------------------------

Earnings per common share
 Basic                                                                          1.35             8.48               7.02
 Diluted                                                                        1.33             8.31               6.86
Weighted average number of common shares
 Basic                                                                     39,630,997      39,706,799         38,468,158
 Diluted                                                                   40,252,396      40,488,222         39,368,253
===============================================================================================================================`

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

# TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)

`As at             As at
                                                                                            December 31,     December 31,
                                                                                                2002             2001
                                                                                                 $                 $
                                                                                         ----------------------------------

ASSETS
Current
Cash and cash equivalents (note 6)                                                              284,625           174,950
Marketable securities (note 4)                                                                        -             5,028
Restricted cash                                                                                   4,180             7,833
Accounts receivable                                                                              70,906            57,519
Prepaid expenses and other assets                                                                27,847            22,139
---------------------------------------------------------------------------------------------------------------------------

Total current assets                                                                            387,558           267,469
---------------------------------------------------------------------------------------------------------------------------
                                                                                                 13,630            16,026
Marketable securities (note 4)

Vessels and equipment (note 6)
At cost, less accumulated depreciation of $940,082
    (December 31, 2001 -  $801,985)                                                           1,928,488         1,925,844
Advances on newbuilding contracts (note 13)                                                     138,169           117,254
---------------------------------------------------------------------------------------------------------------------------

Total vessels and equipment                                                                   2,066,657         2,043,098
---------------------------------------------------------------------------------------------------------------------------
Restricted cash (note 6)                                                                          4,605                 -
Deposit for purchase of Navion ASA (note 13)                                                     76,000                 -
Investment in joint ventures                                                                     56,354            27,352
Other assets                                                                                     29,513            26,757
Goodwill (note 1)                                                                                89,189            87,079
---------------------------------------------------------------------------------------------------------------------------
                                                                                              2,723,506         2,467,781
===========================================================================================================================


LIABILITIES AND STOCKHOLDERS EQUITY
Current
Accounts payable                                                                                 22,307            24,484
Accrued liabilities (note 5)                                                                     83,643            51,011
Current portion of long-term debt (note 6)                                                       83,605            51,830
---------------------------------------------------------------------------------------------------------------------------

Total current liabilities                                                                       189,555           127,325
---------------------------------------------------------------------------------------------------------------------------
Long-term debt (note 6)                                                                       1,047,217           883,872
Other long-term liabilities (note 1)                                                             44,512            39,407
---------------------------------------------------------------------------------------------------------------------------

Total liabilities                                                                             1,281,284         1,050,604
---------------------------------------------------------------------------------------------------------------------------

Minority interest                                                                                20,324            18,977

Stockholders equity
Capital stock (note 9)                                                                          470,988           467,341
Retained earnings                                                                               954,005           935,660
Accumulated other comprehensive loss                                                             (3,095)           (4,801)
---------------------------------------------------------------------------------------------------------------------------

Total stockholders equity                                                                    1,421,898         1,398,200
---------------------------------------------------------------------------------------------------------------------------

                                                                                              2,723,506         2,467,781
===========================================================================================================================`

Commitments and contingencies (notes 7, 12, 13 and 15)

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

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)


Year Ended       Year Ended       Year Ended
                                                                          December 31,     December 31,     December 31,
                                                                              2002             2001             2000
                                                                               $                $                 $
                                                                         --------------------------------------------------

Cash and cash equivalents provided by (used for)

OPERATING ACTIVITIES
Net income                                                                      53,391         336,518           270,020
Non-cash items:
    Depreciation and amortization                                              149,296         136,283           100,153
    Loss on disposition of vessels and equipment                                     -               -             1,004
    Loss (gain) on disposition of available-for-sale securities                  1,130            (758)                -
    Equity income (net of dividends received: December 31, 2002 - $1,748;
      December 31, 2001 - $33,514; December 31, 2000 - $8,474)                  (2,775)         16,190            (1,072)
    Deferred income taxes (note 11)                                             11,413           6,963               999
    Other  net                                                                 (5,049)         (3,243)           (1,173)
Change in non-cash working capital items related to
  operating activities (note 14)                                                 7,038          28,197           (36,676)
---------------------------------------------------------------------------------------------------------------------------

Net cash flow from operating activities                                        214,444         520,150           333,255
---------------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Net proceeds from long-term debt                                               255,185         688,381           206,000
Scheduled repayments of long-term debt                                         (51,830)        (72,026)          (63,757)
Prepayments of long-term debt                                                   (8,000)       (751,738)         (429,926)
Increase in restricted cash                                                       (952)         (7,833)                -
Proceeds from issuance of Common Stock                                           4,221          20,584            24,843
Repurchase of Common Stock                                                      (1,547)        (14,162)                -
Cash dividends paid                                                            (34,073)        (34,094)          (32,973)
Other                                                                                -               -             2,970
---------------------------------------------------------------------------------------------------------------------------

Net cash flow from financing activities                                        163,004        (170,888)         (292,843)
---------------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Expenditures for vessels and equipment                                        (135,650)       (184,983)          (43,512)
Expenditures for drydocking                                                    (34,913)        (20,064)          (11,941)
Proceeds from disposition of assets                                                  -               -             9,713
Deposit for purchase of Navion ASA                                             (76,000)              -                 -
Purchase of Ugland Nordic Shipping AS
  (net of cash acquired of $26,605) (note 3)                                         -        (176,453)          (13,114)
Acquisition costs related to purchase of Ugland Nordic Shipping AS (note 3)          -          (5,067)                -
Acquisition costs related to purchase of Bona Shipholding Ltd.                       -             (20)           (2,685)
Investment in joint venture                                                    (26,000)              -                 -
Proceeds from disposition of available-for-sale securities                       6,675          35,975                 -
Purchases of available-for-sale securities                                           -          (5,000)          (17,900)
Other                                                                           (1,885)              -                 -
---------------------------------------------------------------------------------------------------------------------------

Net cash flow from investing activities                                       (267,773)       (355,612)          (79,439)
---------------------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents                               109,675          (6,350)          (39,027)
Cash and cash equivalents, beginning of the period                             174,950         181,300           220,327
---------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of the period                                   284,625         174,950           181,300
===========================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements.

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(in thousands of U.S. dollars)

Accumulated
                                                                                          Other       Compre-
                                                   Thousands                            Compre-       hensive       Total
                                                   of Common    Common    Retained      hensive       Income    Stockholders
                                                    Shares       Stock    Earnings   Income (Loss)    (Loss)       Equity
                                                       #           $          $            $            $             $
------------------------------------------------------------------------------------------------------------------------------

Balance as at December 31, 1999                      38,064     427,937    404,130          -                       832,067
------------------------------------------------------------------------------------------------------------------------------

Net income                                                                      270,020                 270,020     270,020
Other comprehensive income:
   Unrealized gain on available-for-sale
    securities                                                                            4,555           4,555       4,555
                                                                                                     -----------
Comprehensive income                                                                                    274,575
                                                                                                     -----------
Dividends declared                                                              (33,001)                            (33,001)
Reinvested dividends                                    1            28                                                  28
Exercise of stock options                              1,080     24,843                                              24,843
------------------------------------------------------------------------------------------------------------------------------

Balance as at December 31, 2000                       39,145    452,808         641,149   4,555                   1,098,512
------------------------------------------------------------------------------------------------------------------------------

Net income                                                                      336,518                 336,518     336,518
Other comprehensive income:
  Unrealized loss on available-for-sale securities                                       (6,636)         (6,636)     (6,636)
  Reclassification adjustment for gain on available-
     for-sale securities included in net income                                          (3,627)         (3,627)     (3,627)
  Cumulative effect of accounting change (note 12)                                        4,155           4,155       4,155
  Unrealized loss on derivative instruments (note 12)                                    (2,274)         (2,274)     (2,274)
  Reclassification adjustment for gain on
    derivative instruments (note 12)                                                       (974)           (974)       (974)
                                                                                                     -----------
Comprehensive income                                                                                    327,162
                                                                                                     -----------
Adjustment for equity income on step acquisition
  (note 3)                                                                         198                                  198
Dividends declared                                                             (34,102)                             (34,102)
Reinvested dividends                                       1          8                                                   8
Exercise of stock options                                917     20,584                                              20,584
Repurchase of Common Stock                              (513)    (6,059)        (8,103)                             (14,162)
------------------------------------------------------------------------------------------------------------------------------

Balance as at December 31, 2001                       39,550    467,341        935,660   (4,801)                   1,398,200
------------------------------------------------------------------------------------------------------------------------------

Net income                                                                      53,391                   53,391       53,391
Other comprehensive income:
  Unrealized loss on available-for-sale securities                                         (239)           (239)       (239)
  Reclassification adjustment for loss on available-
     for-sale securities included in net income                                             737             737         737
  Unrealized gain on derivative instruments (note 12)                                     3,023           3,023       3,023
  Reclassification adjustment for gain on
    derivative instruments (note 12)                                                     (1,815)         (1,815)     (1,815)
                                                                                                     -----------
Comprehensive income                                                                                     55,097
                                                                                                     -----------
Dividends declared                                                            (34,079)                              (34,079)
Reinvested dividends                                       1           6                                                  6
Exercise of stock options                                190       4,221                                              4,221
Repurchase of Common Stock                               (49)       (580)        (967)                               (1,547)
------------------------------------------------------------------------------------------------------------------------------

Balance as at December 31, 2002                       39,692     470,988      954,005    (3,095)                  1,421,898
------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
         (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
1.
Summary of Significant Accounting PoliciesBasis of presentation
     The  consolidated  financial  statements  have been  prepared in  accordance  with  accounting  principles
     generally  accepted in the United  States.  They  include  the  accounts  of Teekay  Shipping  Corporation
     ("Teekay"),  which is incorporated under the laws of the Republic of the Marshall Islands,  and its wholly
     owned or controlled  subsidiaries  (the  "Company").  Significant  intercompany  balances and transactions
     have been eliminated upon consolidation.
     The preparation of financial  statements in conformity with accounting  principles  generally  accepted in
     the United States 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.Reporting currency
     The  consolidated  financial  statements  are stated in U.S.  dollars  because  the  Company  operates  in
     international shipping markets which utilize the U.S. dollar as the functional currency.Operating revenues and expenses
     Voyage  revenues and  expenses  are  recognized  on the  percentage  of  completion  method of  accounting
     determined using the  discharge-to-discharge  basis.  Estimated losses on voyages are provided for in full
     at the time such losses become evident.  The  consolidated  balance sheets reflect the deferred portion of
     revenues and expenses, which will be earned in subsequent periods.
     Voyage expenses  comprise all expenses  relating to particular  voyages,  including  bunker fuel expenses,
     port fees,  canal tolls,  and  brokerage  commissions.  Vessel  operating  expenses  comprise all expenses
     relating to the  operation of vessels  including  crewing,  repairs and  maintenance,  insurance,  stores,
     lubes, and communications.Cash and cash equivalents
     The Company  classifies  all highly liquid  investments  with a maturity date of three months or less when
     purchased as cash and cash equivalents.
     Cash interest paid during the years ended December 31, 2002, 2001 and 2000, totalled $65.3 million,
     $54.8 million, and $77.1 million, respectively.Marketable securities
     The Companys  investments in marketable  securities are classified as  available-for-sale  securities and
     are carried at fair value. Net unrealized gains or losses on available-for-sale  securities,  if material,
     are reported as a component of other comprehensive income.TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
Vessels and equipment
     All  pre-delivery  costs incurred during the construction of  newbuildings,  including  interest costs and
     supervision and technical costs,  are capitalized.  The acquisition cost and all costs incurred to restore
     used  vessel  purchases  to the  standard  required  to  properly  service  the  Companys  customers  are
     capitalized.  Depreciation  is calculated on a  straight-line  basis over a vessels  useful life from the
     date a vessel is initially placed in service.
     Interest costs  capitalized to vessels and equipment for the years ended December 31, 2002,  2001 and 2000
     aggregated $6.0 million, $2.5 million, and $nil, respectively.
     Expenditures  incurred during  drydocking are capitalized and amortized on a straight-line  basis over the
     period until the completion of the next anticipated  drydocking.  When significant drydocking expenditures
     occur prior to the expiry of this period,  the remaining  unamortized  balance of the original  drydocking
     cost is expensed in the month of the subsequent  drydocking.  Amortization of drydocking  expenditures for
     the years ended  December 31, 2002,  2001 and 2000  aggregated  $21.8  million,  $14.2  million,  and $9.2
     million, respectively.
     The Company  reviews  vessels and equipment for  impairment  whenever  events or changes in  circumstances
     indicate  the  carrying  amount  of an asset may not be  recoverable.  Recoverability  of these  assets is
     measured  by  comparison  of their  carrying  amount to future  undiscounted  cash  flows the  assets  are
     expected to generate.  If vessels and  equipment  are  considered  to be impaired,  the  impairment  to be
     recognized equals the amount by which the carrying value of the assets exceeds their fair market value.Investment in joint ventures
     The Company has a 50%  participating  interest in four joint  venture  companies  (2001-  three),  each of
     which owns a shuttle  tanker.  The joint ventures are accounted for using the equity  method,  whereby the
     investment  is  carried at the  Companys  original  cost plus its  proportionate  share of  undistributed
     earnings.
     During 2001, a joint venture in which the Company owns a 50% interest sold its three  vessels,  and ceased
     operations (see Note 11).Investment in the Panamax O/B/O Pool
     All  oil/bulk/ore  carriers  ("O/B/O") owned by the Company are operated through a Panamax O/B/O Pool. The
     participants  in the  Pool  are the  companies  contributing  vessel  capacity  to the  Pool.  The  voyage
     revenues and expenses of these  vessels have been included on a 100% basis in the  consolidated  financial
     statements.  The minority  pool  participants  share of the result has been deducted as time charter hire
     expense.Loan costs
     Loan costs,  including  fees,  commissions  and legal  expenses,  which are  presented as other assets are
     capitalized  and amortized on a straight line basis over the term of the relevant  loan.  Amortization  of
     loan costs is included in interest expense.TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
Derivative instruments
     Derivative  instruments are recorded as assets or liabilities,  measured at fair value.  Derivatives  that
     are not hedges are adjusted to fair value through  income.  If the  derivative is a hedge,  depending upon
     the nature of the hedge,  changes in the fair value of the  derivatives are either offset against the fair
     value of assets,  liabilities or firm  commitments  through income,  or recognized in other  comprehensive
     income until the hedged item is recognized in income.  The  ineffective  portion of a derivatives  change
     in fair value is immediately recognized into income (see Note 12).Goodwill and other intangible assets
     In July 2001, the Financial  Accounting  Standards Board ("FASB") issued Statement of Financial Accounting
     Standards No. 142 ("SFAS 142"),  "Goodwill and Other Intangible  Assets," which  establishes new standards
     for accounting for goodwill and other  intangible  assets.  SFAS 142 requires that goodwill and indefinite
     lived intangible  assets no longer be amortized,  but reviewed for impairment  during the first six months
     of 2002 and annually  thereafter,  or more frequently if impairment  indicators  arise.  This statement is
     effective for existing  goodwill  beginning with fiscal years  starting after December 15, 2001.  Prior to
     2002,  goodwill,  which was acquired as a result of the  acquisition of Ugland Nordic  Shipping AS ("UNS")
     (see Note 3), was  amortized  over 20 years  using the  straight-line  method.  As at December  31,  2002,
     goodwill is recorded net of accumulated  amortization of $3.5 million.  During the six-month  period ended
     June 30,  2002,  the  Company  completed  its  transitional  impairment  testing  required by SFAS 142 and
     determined  that goodwill was not  impaired.  Based upon the  Companys  goodwill  balance at December 31,
     2001, the Company  estimates that  application of SFAS 142 will result in an annual increase in net income
     of approximately  $4.5 million,  by no longer amortizing  goodwill.  Had goodwill not been amortized prior
     to 2002,  net income would have been $340.0  million or $8.56 per share  ($8.40 per share - diluted),  for
     the year ended December 31, 2001 and unchanged for 2000.Income taxes
     The legal  jurisdictions  of the  countries  in which  Teekay and the  majority  of its  subsidiaries  are
     incorporated  do not impose  income  taxes upon  shipping-related  activities.  The  Companys  Australian
     shipowning  subsidiaries,  its  Canadian  subsidiary  Teekay  Canadian  Tankers  Ltd.,  and its  Norwegian
     subsidiary  UNS are subject to income  taxes.  UNS income  taxes are deferred  until  payment of dividends
     (see Note 11).  Included in other  long-term  liabilities  are deferred  income taxes of $43.7  million at
     December 31, 2002,  $36.3 million at December 31, 2001 and $4.2 million at December 31, 2000.  The Company
     accounts  for such taxes  using the  liability  method  pursuant  to  Statement  of  Financial  Accounting
     Standards No. 109, "Accounting for Income Taxes."TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
Accounting for Stock-Based Compensation
     Under  Statement of Financial  Accounting  Standards No. 123 ("SFAS  123"),  "Accounting  for  Stock-Based
     Compensation,"  disclosures  of  stock-based  compensation  arrangements  with  employees are required and
     companies are encouraged (but not required) to record  compensation  costs  associated with employee stock
     option awards,  based on estimated  fair values at the grant dates.  The Company has chosen to continue to
     account for stock-based  compensation  using the intrinsic  value method  prescribed in APB Opinion No. 25
     ("APB 25")  "Accounting  for Stock Issued to Employees."  As the exercise price of the Companys  employee
     stock options equals the market price of underlying  stock on the date of grant, no  compensation  expense
     is recognized  under APB 25. The  following  table  illustrates  the effect on net income and earnings per
     share if the  Company  had  applied  the fair  value  recognition  provisions  of SFAS 123 to  stock-based
     employee compensation (see Note 9).Year Ended           Year Ended         Year Ended
                                                           December 31,         December 31,       December 31,
                                                               2002                 2001               2000
                                                                 $                   $                   $
                                                        -----------------------------------------------------------

      Net income - as reported...........................         53,391              336,518             270,020
      Less: Total stock-based compensation expense.......          7,538                6,466               5,571
      Net income - pro forma.............................         45,853              330,052             264,449

      Basic earnings per common share:
      As reported........................................          1.35                 8.48                7.02
      Pro forma..........................................          1.16                 8.31                6.87

      Diluted earnings per common share:
      As reported........................................          1.33                 8.31                6.86
      Pro forma..........................................          1.14                 8.15                6.72

The fair  values  of the  option  grants  were  estimated  on the dates of grant  using the  Black-Scholes
     option-pricing  model with the following  assumptions:  risk-free  average  interest rates of 4.7% for the
     year ended  December  31,  2002;  4.5% for the year ended  December  31,  2001 and 6.6% for the year ended
     December 31, 2000,  respectively;  dividend yield of 3.0%;  expected volatility of 30%; and expected lives
     of five years.Comprehensive income
     The Company  follows  Statement  of  Financial  Accounting  Standards  No. 130,  "Reporting  Comprehensive
     Income,"  which  establishes  standards  for  reporting  and  displaying   comprehensive  income  and  its
     components in the consolidated financial statements.Recent accounting pronouncements
     In July 2002, the FASB issued  Statement No. 146 ("SFAS 146"),  "Accounting for Costs Associated with Exit
     or Disposal  Activities."  This  Standard,  which is effective  for disposal  activities  initiated  after
     December 31, 2002,  addresses  significant issues regarding the recognition,  measurement and reporting of
     costs associated with exit and disposal  activities.  The Company does not anticipate that the adoption of
     SFAS 146 will have a significant  impact on the Companys  consolidated  financial  position or results of
     operations.TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
In  November  2002,  the FASB  issued  Interpretation  No.  45,  "Guarantors  Accounting  and  Disclosure
     Requirements for Guarantees,  Including Indirect  Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45
     requires a guarantor to make significant new disclosures  about its obligations  under certain  guarantees
     that it has issued.  It also  requires a guarantor  to  recognize,  at the  inception  of a  guarantee,  a
     liability  for the fair value of the  obligation  undertaken  in issuing  the  guarantee.  The  disclosure
     requirements  of FIN 45 are effective  for financial  statements  with periods  ending after  December 15,
     2002.  The initial  recognition  and  measurement  provisions  are  applicable on a  prospective  basis to
     guarantees  issued or modified after  December 31, 2002.  The Company has not  determined  the effect,  if
     any, that the adoption of FIN 45 will have on the  Companys  consolidated  financial  position or results
     of operations.2.
Business Operations
     The Company is engaged in the ocean  transportation  of petroleum  cargoes worldwide through the ownership
     and operation of a fleet of tankers. All of the Companys revenues are earned in international markets.
     No customer  accounted for more than 10% of the Companys  consolidated  voyage  revenues  during the year
     ended December 31, 2002. One customer,  an international  oil company,  accounted for 13% ($130.8 million)
     of the Companys  consolidated  voyage  revenues  during the year ended  December 31, 2001. Two customers,
     both  international  oil  companies,  individually  accounted  for 13%  ($118.3  million)  and 12% ($110.2
     million) of the Companys  consolidated  voyage revenues during the year ended December 31, 2000. No other
     customer  accounted  for more than 10% of the Companys  consolidated  voyage  revenues  during the fiscal
     periods presented herein.3.
Acquisition of Ugland Nordic Shipping AS
     As of May 28, 2001,  Teekay had purchased  100% of the issued and  outstanding  shares of UNS (9% of which
     was  purchased in fiscal 2000 and the remaining  91% was  purchased in fiscal  2001),  for $222.8  million
     cash,  including estimated  transaction  expenses of approximately $7 million. UNS controls a modern fleet
     of 18 shuttle  tankers  (including two  newbuildings  on order) that engage in the  transportation  of oil
     from offshore production platforms to onshore storage and refinery facilities.
     The  acquisition  of UNS has been  accounted  for using the  purchase  method of  accounting,  based  upon
     estimates of fair value.  UNS operating  results are reflected in these financial  statements  commencing
     March 6,  2001,  the date  Teekay  acquired a  majority  interest  in UNS.  Equity  income  related to the
     Companys  nine percent  interest in UNS up to December  31, 2000 has been  credited as an  adjustment  to
     retained  earnings.  Teekays  interest  in UNS for the period  from  January 1, 2001 to March 5, 2001 has
     been included in equity income for the corresponding period.
     The following table shows  comparative  summarized  consolidated  pro forma financial  information for the
     years ended  December 31, 2001 and 2000 and gives  effect to the  acquisition  of 100% of the  outstanding
     shares in UNS as if it had taken place January 1, on each of the years presented:TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
Pro Forma
                                                                              Year Ended             Year Ended
                                                                          December 31, 2001       December 31, 2000
                                                                             (unaudited)             (unaudited)
                                                                                  $                       $                                                                        ----------------------------------------------
      Net voyage revenues..............................................         805,754                 713,350
      Net income.......................................................         336,514                 265,554
      Net income per common share
      - basic .........................................................           8.47                    6.90
      - diluted........................................................           8.31                    6.75

4.
Investments in Marketable SecuritiesGross           Gross         Approximate
                                                                        Unrealized     Unrealized        Market and
                                                           Cost           Gains          Losses       Carrying Values
                                                             $              $               $                $
                                                       -----------------------------------------------------------------
      December 31, 2002
      Available-for-sale equity securities.............   21,416                -         (7,786)            13,630
                                                        ----------        ---------     ----------         -----------
                                                          21,416                -         (7,786)            13,630
                                                        ==========        =========     ==========         ===========

      December 31, 2001
      Available-for-sale equity securities.............   24,500                -         (8,474)            16,026
      Available-for-sale debt securities.................  5,028                -              -              5,028
                                                        ----------        ---------     ----------         -----------
                                                          29,528                -         (8,474)            21,054
                                                        ==========        =========     ==========         ===========

Available-for-sale  equity  securities  represent  1,001,221  shares (2001  1,150,221) in Nordic American
     Tanker Shipping Ltd. These shares were acquired as part of the 2001 acquisition of UNS (see Note 3).
     The cost and approximate market value of  available-for-sale  debt securities by contractual  maturity, as
     at December 31, 2002 and December 31, 2001, are shown as follows:Approximate
                                                                                                         Market and
                                                                                          Cost        Carrying Values
                                                                                            $                $
                                                                                      ----------------------------------

      December 31, 2002
      Less than one year ........................................................              -                  -
      Due after one year through five years .....................................              -                  -
                                                                                        ----------          ---------
                                                                                               -                  -
                                                                                        ==========          =========

      December 31, 2001
      Less than one year ........................................................          5,028              5,028
      Due after one year through five years .....................................              -                  -
                                                                                        ----------          ---------

                                                                                           5,028              5,028
                                                                                        ==========          =========
5.
Accrued LiabilitiesDecember 31,      December 31,
                                                                                          2002              2001
                                                                                            $                $
                                                                                     ----------------------------------

      Voyage and vessel..........................................................          37,314             16,450
      Interest...................................................................          22,484             24,180
      Payroll and benefits.......................................................          23,845             10,381
                                                                                        ----------          ---------
                                                                                           83,643             51,011
                                                                                        ==========          =========

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
6.
Long-Term DebtDecember 31,      December 31,
                                                                                         2002              2001
                                                                                           $                $
                                                                                    ----------------------------------

      Revolving Credit Facilities................................................         210,000                -
      First Preferred Ship Mortgage Notes (8.32%) due through 2008...............         167,229          167,229
      Term Loans due through 2009 ...............................................         401,593          416,239
      Senior Notes (8.875%) due July 15, 2011 ...................................         352,000          352,234
                                                                                      -------------     -------------
                                                                                        1,130,822          935,702
      Less current portion.......................................................          83,605           51,830
                                                                                      -------------     -------------
                                                                                        1,047,217          883,872
                                                                                      =============     =============

The Company has two long-term  Revolving  Credit  Facilities  (the  "Revolvers")  available,  which, as at
     December  31,  2002,  provided  for  borrowings  of up to $450.7  million,  of which  $240.7  million  was
     undrawn.  Interest  payments are based on LIBOR (December 31, 2002: 1.4%;  December 31, 2001: 1.9%) plus a
     margin  depending on the  financial  leverage of the Company;  at December 31, 2002 and 2001,  the margins
     ranged between 0.50% and 0.75%.  The amount available under the Revolvers  reduces  semi-annually by $28.8
     million,  with final balloon  reductions  in 2006 and 2008.  The  Revolvers  are  collateralized  by first
     priority  mortgages  granted  on  33 of  the  Companys  vessels,  together  with  certain  other  related
     collateral, and a guarantee from Teekay for all amounts outstanding under the Revolvers.
     The  8.32%  First   Preferred   Ship  Mortgage  Notes  due  February  1,  2008  (the  "8.32%  Notes")  are
     collateralized  by first  preferred  mortgages on seven of the Companys  Aframax  tankers,  together with
     certain  other  related  collateral,  and are  guaranteed  by seven  subsidiaries  of Teekay  that own the
     mortgaged  vessels (the "8.32%  Notes  Guarantor  Subsidiaries")  to a maximum of 95% of the fair value of
     their net  assets.  As at  December  31,  2002,  the fair  value of these net assets  approximated  $171.6
     million.  The 8.32% Notes are also subject to a sinking fund,  which will retire $45.0  million  principal
     amount of the 8.32% Notes on each February 1, commencing 2004.  During June 2001, the Company  repurchased
     a principal amount of $22.0 million of the 8.32% Notes outstanding.
     Upon the 8.32%  Notes  achieving  Investment  Grade  Status (as defined in the  Indenture)  and subject to
     certain other conditions,  the guarantees of the 8.32% Notes Guarantor  Subsidiaries  will terminate,  all
     of the  collateral  securing the  obligations  of the Company and the 8.32% Notes  Guarantor  Subsidiaries
     under the Indenture and the Security  Documents (as defined in the Indenture) will be released  (whereupon
     the Notes will become  general  unsecured  obligations  of the  Company) and certain  covenants  under the
     Indenture will no longer be applicable to the Company.
     Condensed  financial  information  regarding  the Company,  the 8.32% Notes  Guarantor  Subsidiaries,  and
     non-guarantor  subsidiaries  of the  Company  is set out in  Schedule  A of these  consolidated  financial
     statements.
     The  Company  has  several  term loans  outstanding,  which,  as at December  31,  2002,  totalled  $401.6
     million.  Interest  payments  are based on LIBOR  plus a  margin.  At  December  31,  2002 and  2001,  the
     margins  ranged between 0.50% and 1.45%.  The term loans reduce in quarterly or semi-annual  payments with
     varying  maturities  through 2009.  All term loans of the Company are  collateralized  by first  preferred
     mortgages  on the  vessels  to which the  loans  relate,  together  with  certain  other  collateral,  and
     guarantees from Teekay.  As at December 31, 2002, UNS had term loans totaling $313.5 million.  Teekay does
     not guarantee any of the  obligations  of UNS under these  facilities.  One term loan required a retention
     deposit of $4.6 million as at December 31, 2002 (December 31, 2001 - $7.8 million).TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
The 8.875%  Senior Notes due July 15, 2011 (the "8.875%  Notes") rank equally in right of payment with all
     of the  Companys  existing and future  senior  unsecured  debt and senior to the  Companys  existing and
     future  subordinated  debt.  The 8.875%  Notes are not  guaranteed  by any of  Teekays  subsidiaries  and
     effectively  rank behind all existing and future  secured  debt of Teekay and other  liabilities,  secured
     and unsecured, of its subsidiaries.
     Among other matters,  the long-term  debt  agreements  generally  provide for such items as maintenance of
     certain  vessel  market  value to loan ratios and minimum  consolidated  financial  covenants,  prepayment
     privileges (in some cases with penalties),  and restrictions  against the incurrence of new investments by
     the individual  subsidiaries without prior lender consent. The amount of Restricted Payments,  as defined,
     that the Company can make,  including  dividends and purchases of its own capital stock,  is limited as of
     December 31, 2002,  to $440.6  million.  Certain of the loan  agreements  require a minimum  level of free
     cash be maintained.  As at December 31, 2002, this amount was $84.8 million.
     The aggregate  annual  long-term debt principal  repayments  required to be made for the five fiscal years
     subsequent to December 31, 2002 are $83.6 million (2003),  $104.9 million  (2004),  $131.1 million (2005),
     $180.8 million (2006), and $84.8 million (2007).7.
LeasesCharters-out
     Time  charters  and bareboat  charters to third  parties of the  Companys  vessels are  accounted  for as
     operating  leases.  As at December 31, 2002,  minimum future  revenues to be received on time charters and
     bareboat  charters  currently in place are $176.7 million (2003),  $189.6 million  (2004),  $146.7 million
     (2005), $101.9 million (2006), $94.4 million (2007), and $546.5 million thereafter.
     The minimum  future  revenues  should not be construed to reflect  total  charter hire revenues for any of
     the years.Charters-in
     As at December 31, 2002,  minimum  commitments  under vessel  operating  leases are $25.7 million  (2003),
     $10.8 million (2004) and $2.0 million (2005).8.
Fair Value of Financial Instruments
     Carrying amounts of all financial instruments approximate fair market value except for the following:
     Long-term  debt - The fair values of the Companys  fixed rate  long-term  debt are based on either quoted
     market prices or estimated  using  discounted cash flow analyses,  based on rates currently  available for
     debt with similar terms and remaining maturities.TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
Interest rate swap agreements and foreign  exchange  contracts - The fair value of interest rate swaps and
     foreign  exchange  contracts,  used for hedging  purposes,  is the estimated amount that the Company would
     receive or pay to terminate the agreements at the reporting  date,  taking into account  current  interest
     rates, the current credit worthiness of the swap counter parties and foreign exchange rates.
     The estimated fair value of the Companys financial instruments is as follows:December 31, 2002                 December 31, 2001
                                                         Carrying          Fair           Carrying            Fair
                                                          Amount           Value           Amount            Value
                                                            $                $                $                $
                                                      -------------------------------------------------------------------

      Cash and cash equivalents, marketable
        securities, and restricted cash...............    307,040         307,040         203,837           203,837
      Long-term debt ................................. (1,130,822)     (1,143,753)       (935,702)         (952,055)
      Derivative instruments (note 12) ...............
        Interest rate swap agreements ................       (802)           (802)         (2,429)           (2,429)
        Foreign currency contracts ...................        545             545            (343)             (343)
        Bunker fuel swap contracts....................        254             254            (328)             (328)
        Written freight call option...................          -               -            (857)             (857)

The  Company  transacts  all  of  its  derivative   instruments  with  investment  grade  rated  financial
     institutions and requires no collateral from these institutions.9.
Capital Stock
     The  authorized  capital stock of Teekay at December 31, 2002 was  25,000,000  shares of Preferred  Stock,
     with a par value of $1 per share, and 725,000,000  shares of Common Stock,  with a par value of $0.001 per
     share.  As at December 31, 2002,  Teekay had 39,692,060  shares of Common Stock and no shares of Preferred
     Stock issued and outstanding.
     On September 19, 2001,  Teekay  announced  that its Board of Directors had authorized the repurchase of up
     to  2,000,000  shares of its  Common  Stock in the open  market.  As at  December  31,  2002,  Teekay  had
     repurchased 561,700 shares of Common Stock at an average price of $27.97 per share.
     As of December  31,  2002,  the Company had reserved  5,803,471  shares of Common Stock for issuance  upon
     exercise of options  granted  pursuant to the Companys  1995 Stock Option Plan (the  "Plan").  During the
     years ended December 31, 2002,  2001, and 2000, the Company  granted  options under the Plan to acquire up
     to 1,026,025,  863,200,  and 889,500 shares of Common Stock,  respectively,  to certain eligible officers,
     employees  (including  senior sea staff),  and  directors of the Company.  The options have a 10-year term
     and had  initially  vested  equally over four years from the date of grant.  Effective  September 8, 2000,
     the Company  amended the Plan which  reduced the vesting  period for all  subsequent  stock option  grants
     from four years to three years.  In  addition,  the Company also  accelerated  the vesting  period for the
     existing  grants  by one  year.  The  impact  of the  accelerated  vesting  for  the  existing  grants  on
     compensation expense was not material for the years ended December 31, 2002, 2001 and 2000.TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
A summary of the Companys  stock option  activity,  and related  information for the years ended December
     31, 2002, 2001 and 2000 is as follows:December 31, 2002        December 31, 2001         December 31, 2000
                                         --------------------------------------------------------------------------
Weighted-                 Weighted-                 Weighted-
                                         Options     Average      Options      Average      Options      Average
                                         (000s)     Exercise     (000s)      Exercise     (000s)     Exercise
                                            #         Price          #          Price          #          Price
                                                        $                         $                         $
                                         --------------------------------------------------------------------------

     Outstanding-beginning of year....    2,740         28.04       2,860          22.25       3,099       22.14
     Granted..........................    1,026         39.12         863          41.19         889       23.56
     Exercised........................     (190)        22.16        (917)         22.44      (1,080)      23.00
     Forfeited........................      (69)        33.86         (66)         26.86         (48)      22.77
                                         -------                   --------                   -------
     Outstanding-end of year..........    3,507         31.46       2,740          28.04       2,860       22.25
                                         =======                   ========                   =======

     Exercisable- end of year ........    1,739         24.97       1,164          22.99       1,453       23.54
                                         =======                   ========                   =======

     Weighted-average fair value
       of options granted during
       the year (per option) .........                   9.79                      10.19                    6.62

Exercise  prices for the  options  outstanding  as of  December  31,  2002 ranged from $16.88 per share to
     $41.19 per share. These options have a weighted-average remaining contractual life of 7.53 years.10.
Related Party Transactions
     As at December 31, 2002,  Resolute  Investments,  Inc.  owned 41.6% of the  Companys  outstanding  Common
     Stock.  Two of the  Companys  directors  are officers and  directors  of Resolute  Investments,  Inc. Two
     additional  directors  of the  Company  are  directors  of the entity that  ultimately  controls  Resolute
     Investments, Inc.
     Payments made by the Company to Resolute  Investments,  Inc. or companies related through common ownership
     in respect of port agent services,  legal and  administration  fees,  shared office costs,  and consulting
     fees for the years ended December 31, 2002,  2001 and 2000 totalled $0.9 million,  $1.5 million,  and $1.6
     million,  respectively.  In 1993 the Company  purchased all of the issued and  outstanding  shares of Palm
     Shipping Inc. (now Teekay Chartering Limited) from an affiliate of Resolute  Investments,  Inc. During the
     year ended  December 31, 2002,  the Company  accrued and expensed in other (loss) income $6.0 million as a
     settlement of a contingent  payment,  which was required under the terms of the Palm Shipping  acquisition
     agreement.11.
Other (Loss) IncomeYear Ended      Year Ended       Year Ended
                                                                December 31,    December 31,     December 31,
                                                                    2002            2001             2000
                                                                     $                $                $
                                                               -------------------------------------------------
      Loss on disposition of vessels and equipment.........              -               -           (1,004)
      (Loss) gain on disposition of available-for-sale
      securities...........................................         (1,130)            758                -
      Equity income from joint ventures ...................          4,523          17,324            9,546
      Deferred income taxes ...............................        (11,413)         (6,963)            (999)
      Miscellaneous........................................         (3,455)         (1,011)          (3,679)
                                                                 -----------     -----------       -----------
                                                                   (11,475)         10,108            3,864
                                                                 ===========     ===========       ===========

TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
12.
Derivative Instruments and Hedging Activities
     The Company adopted SFAS 133,  "Accounting for Derivative  Instruments and Hedging Activities," on January
     1,  2001.  The  Company  recognized  the fair  value of its  derivatives  as  assets of $2.2  million  and
     liabilities of $1.3 million on its  consolidated  balance sheet as of January 1, 2001.  These amounts were
     recorded as a cumulative effect of an accounting  change as an adjustment to stockholders  equity through
     other  comprehensive  income.  There was no impact on net income.  In  addition,  a deferred  gain of $3.2
     million on unwound  interest rate swap  agreements  presented as other  long-term  liabilities at December
     31,  2000,  was  reclassified  to  accumulated  other  comprehensive  income and will be  recognized  into
     earnings over the hedged term of the debt.
     The Company only uses  derivatives  for hedging  purposes.  The following  summarizes  the Companys  risk
     strategies with respect to market risk from foreign currency  fluctuations,  changes in interest rates and
     bunker fuel prices and the effect of these strategies on the Companys financial statements.
     The  Company  hedges  portions of its  forecasted  expenditures  denominated  in foreign  currencies  with
     forward  contracts and a portion of its bunker fuel  expenditures  with bunker fuel swap contracts.  As at
     December 31, 2002,  the Company was committed to foreign  exchange  contracts for the forward  purchase of
     approximately  Singapore  Dollars 2.0  million,  Norwegian  Kroner 74.3  million,  Canadian  Dollars  84.0
     million and Euros 1.9 million  for U.S.  Dollars,  at an average  rate of  Singapore  Dollar 1.78 per U.S.
     Dollar,  Norwegian  Kroner 7.39 per U.S.  Dollar,  Canadian Dollar 1.59 per U.S. Dollar and Euros 0.93 per
     U.S.  Dollar,  respectively.  As at December  31,  2002,  the Company  was  committed  to bunker fuel swap
     contracts  totalling  20,400  metric  tonnes with a  weighted-average  price of $116.00  per tonne,  which
     expire between January 2003 and May 2004.
     As at December  31,  2002,  the Company was  committed  to interest  rate swap  agreements  whereby  $20.0
     million  of  the  Companys  floating  rate  debt  was  swapped  with  fixed  rate  obligations  having  a
     weighted-average  remaining term of 10 months,  expiring between March 2003 and May 2004. These agreements
     effectively  change the Companys  interest  rate exposure on $20.0 million of debt from a floating  LIBOR
     rate to a weighted-average fixed rate of 5.75%.
     The  Company is exposed  to credit  loss in the event of  non-performance  by the  counter  parties to the
     interest  rate swap  agreements,  foreign  exchange  forward  contracts,  and bunker fuel swap  contracts;
     however, the Company does not anticipate non-performance by any of the counter parties.
     During the year ended  December 31, 2002,  the Company  recognized a net gain of $0.1 million  relating to
     the ineffective  portion of its interest rate swap agreements and foreign currency forward contracts.  The
     ineffective  portion of these  derivative  instruments  is presented as interest  expense and other (loss)
     income, respectively.
     As at December 31, 2002, the Company  estimates,  based on current  foreign  exchange  rates,  bunker fuel
     prices and interest rates,  that it will reclassify  approximately  $1.5 million of net gain on derivative
     instruments  from  accumulated  other  comprehensive  income to earnings  during the next 12 months due to
     actual voyage,  vessel operating,  drydocking and general and administrative  expenditures and the payment
     of interest expense associated with the floating-rate debt.TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
13.
Commitments and Contingencies
     As at December 31, 2002, the Company was committed to the  construction of two shuttle,  three Suezmax and
     six Aframax  tankers  scheduled  for  delivery  between  March 2003 and October  2004,  at a total cost of
     approximately  $496.6 million,  excluding  capitalized  interest.  As of December 31, 2002,  payments made
     towards these commitments  totalled $127.3 million and long-term financing  arrangements existed for $16.3
     million of the unpaid cost of these  vessels.  It is the  Companys  intention  to finance  the  remaining
     unpaid amount of $353.0 million through  incremental debt or the utilization of surplus cash balances,  or
     a combination  thereof.  As of December 31, 2002, the remaining  payments  required to be made under these
     newbuilding  contracts  were $245.9  million in 2003,  and $123.4  million in 2004.  With the exception of
     four Aframax  tankers  scheduled for delivery in 2004, all of the vessels upon delivery will be subject to
     long-term charter contracts, which expire between 2009 and 2015.
     The  Company  is  also  committed  to a  capital  lease  on an  Aframax  tanker  that is  currently  under
     construction  and is expected to deliver in the fourth  quarter of 2003.  The lease will  require  minimum
     payments of $66.9 million (including a purchase obligation payment) over the 15-year term of the lease.
     Teekay and certain  subsidiaries  of Teekay have guaranteed  their share of the outstanding  mortgage debt
     in three 50%-owned joint venture  companies.  As of December 31, 2002,  Teekay and these  subsidiaries had
     guaranteed  $82.7 million of such debt, or 50% of the total $165.3  million in  outstanding  mortgage debt
     of the joint venture  companies.  The  outstanding  mortgage debt has maturity dates ranging from May 2008
     to August 2009. These joint venture companies own three shuttle tankers.
     On December  16, 2002,  Teekay and Statoil ASA  announced  that they had entered  into an agreement  under
     which  Teekay  will  acquire  Statoils  wholly-owned  shipping  company,  Navion ASA  (excluding  its oil
     drilling ship and related operations and one floating  production,  storage and offload vessel), on a debt
     free-basis,  for approximately $800.0 million in cash. Navion, based in Norway,  operates primarily in the
     shuttle tanker and the  conventional  crude oil and product tanker  markets.  As of December 31, 2002, the
     Company had made a deposit of $76.0 million towards the purchase price,  with the remaining  unpaid amount
     being due upon closing,  which is expected to take place in the second  quarter of 2003. It is anticipated
     that the  acquisition of Navion will be funded by borrowings  under a new credit  facility,  together with
     available cash or cash generated from operations and borrowings under other existing credit facilities.14.
Change in Non-Cash Working Capital Items Related to Operating ActivitiesYear Ended      Year Ended       Year Ended
                                                                 December 31,    December 31,     December 31,
                                                                     2002            2001             2000
                                                                      $                $                $
                                                                -------------------------------------------------

      Accounts receivable....................................         (13,508)         23,993          (49,405)
      Prepaid expenses and other assets......................          (5,002)          5,152            3,443
      Accounts payable.......................................          27,375             666            2,613
      Accrued liabilities....................................          (1,827)         (1,614)           6,673
                                                                    -----------     ------------      -----------
                                                                        7,038          28,197          (36,676)
                                                                    ===========     ============      ===========
TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
           (all tabular amounts stated in thousands of U.S. dollars, other than share or per share data)
15.
Subsequent Events
     (a) On February  1, 2003,  one of the  Companys  vessels,  the  Alliance  Spirit,  was empty of cargo and
     waiting off  Skikda,  Algeria to load crude oil when a severe  storm arose and pushed the vessel  aground.
     Subsequent to the grounding,  the vessel has been  classified as a constructive  total loss.  Although all
     bunker fuel,  diesel fuel, lube oils,  paints and chemicals on board have been  successfully  removed from
     the vessel,  between 40 and 80 metric  tonnes of residual oil cargo remain in the cargo tanks.  The vessel
     is insured for its full value and thus,  the  Company has  requested  payment of the  insurance  proceeds,
     which is anticipated to cover the vessels full value.  The Company also maintains  insurance  coverage on
     the vessel for  environmental  damage or  pollution  liability  in an amount of  $1 billion.  The  Company
     believes any liability  resulting from the escape of any oil into the environment  would be  substantially
     below this amount.  Under the applicable  global  convention,  any liability  above $1 billion for any oil
     spill in this region relating to this incident would be limited to approximately $32 million.
     (b) As of February 18, 2003, the Company  completed an offering for gross  proceeds of $143.75  million in
     mandatory  convertible  equity units  pursuant to its currently  effective  universal  shelf  registration
     statement  filed with the U.S.  Securities  and  Exchange  Commission.  Each  equity unit  includes  (a) a
     forward  contract  that  requires  the holder to purchase  for $25 a specified  fraction of a share of the
     Companys  Common Stock on February 16, 2006 and (b) a $25  principal  amount,  subordinated  note due May
     18, 2006. The forward contracts provide for contract  adjustment  payments of 1.25% annually and the notes
     bear  interest at 6.0%  annually.  Upon  settlement  on  February  16,  2006 of the 5.75  million  forward
     contracts  included in the equity units, the Company will issue between  3,267,150 and 3,991,075 shares of
     its Common  Stock  (depending  on the average  closing  price of the Common Stock for the  20-trading  day
     period  ending on the third  trading day prior to February 16,  2006).  Proceeds  from the offering may be
     used  to  finance  potential   acquisitions  and  for  general  corporate   purposes,   including  capital
     expenditures, working capital, and the repayment of debt.SCHEDULE ATEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                             CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
                                        (in thousands of U.S. dollars)
Year Ended December 31, 2002
                                          ----------------- -------------- ---------------- --------------- ----------------
8.32% Notes                                        Teekay
                                               Teekay         Guarantor     Non-Guarantor                   Shipping Corp.
                                           Shipping Corp.   Subsidiaries    Subsidiaries     Eliminations   & Subsidiaries
                                                 $                $               $               $                $
                                          ----------------- -------------- ---------------- --------------- ----------------

Net voyage revenues                                   -          36,480         649,624         (142,232)        543,872
Operating expenses                               17,191          34,314         515,253         (142,232)        424,526
                                          ----------------- -------------- ---------------- --------------- ----------------
     (Loss) income from vessel                  (17,191)          2,166         134,371                -         119,346
operations


Net interest expense                            (41,575)              -         (12,905)               -         (54,480)
Equity in net income of subsidiaries            111,177               -               -         (111,177)              -
Other income (loss)                                 980               -         (12,455)               -         (11,475)
                                          ----------------- -------------- ---------------- --------------- ----------------
Net income                                       53,391           2,166         109,011         (111,177)         53,391
Retained earnings (deficit), beginning
of the year                                     935,660         (15,278)      1,036,401       (1,021,123)        935,660
Dividends declared                              (34,079)              -               -                -         (34,079)
Repurchase of Common Stock                         (967)              -               -                -            (967)
                                          ----------------- -------------- ---------------- --------------- ----------------
Retained earnings (deficit),  end of
the year                                        945,005         (13,112)      1,145,412       (1,132,300)        954,005
                                          ================= ============== ================ =============== ================

                                                                    Year Ended December 31, 2001
                                          ----------------- -------------- ---------------- --------------- ----------------
8.32% Notes                                        Teekay
                                               Teekay         Guarantor     Non-Guarantor                   Shipping Corp.
                                           Shipping Corp.   Subsidiaries    Subsidiaries     Eliminations   & Subsidiaries
                                                 $                $               $               $                $
                                          ----------------- -------------- ---------------- --------------- ----------------

Net voyage revenues                                   -          34,688         899,218         (144,412)        789,494
Operating expenses                               10,809          32,660         506,974         (144,412)        406,031
                                          ----------------- -------------- ---------------- --------------- ----------------
     (Loss) income from vessel                  (10,809)          2,028         392,244                -         383,463
operations


Net interest (expense) income                   (22,548)              -         (34,505)               -         (57,053)
Equity in net income of subsidiaries            369,023               -               -         (369,023)              -
Other income                                        852           1,663           7,593                -          10,108
                                          ----------------- -------------- ---------------- --------------- ----------------
Net income                                      336,518           3,691         365,332         (369,023)        336,518
Retained earnings (deficit), beginning
of the year                                     641,149         (18,969)        671,069         (652,100)        641,149
Adjustment for equity income on step
acquisition                                         198               -               -                -             198
Dividends declared                              (34,102)              -               -                -         (34,102)
Repurchase of Common Stock                       (8,103)              -               -                -          (8,103)
                                          ----------------- -------------- ---------------- --------------- ----------------
Retained earnings (deficit),  end of
the year                                        935,660         (15,278)      1,036,401       (1,021,123)        935,660
                                          ================= ============== ================ =============== ================

                                                                     Year Ended December 31, 2000
                                           ---------------- -------------- ---------------- --------------- ----------------
8.32% Notes                                        Teekay
                                               Teekay         Guarantor     Non-Guarantor                   Shipping Corp.
                                           Shipping Corp.   Subsidiaries    Subsidiaries     Eliminations   & Subsidiaries
                                                  $               $               $               $                $
                                           ---------------- -------------- ---------------- --------------- ----------------

Net voyage revenues                                    -         35,137         776,291         (167,159)        644,269
Operating expenses                                   420         25,202         433,578         (142,606)        316,594
                                           ---------------- -------------- ---------------- --------------- ----------------
     (Loss) income from vessel operations           (420)         9,935         342,713          (24,553)        327,675


Net interest (expense) income                    (17,373)            46         (44,192)               -         (61,519)
Equity in net income of subsidiaries             287,127              -               -         (287,127)              -
Other income                                         686              -           3,178                -           3,864
                                           ---------------- -------------- ---------------- --------------- ----------------
Net income                                       270,020          9,981         301,699         (311,680)        270,020
Retained earnings (deficit), beginning
of the year                                      404,130        (28,950)        369,370         (340,420)        404,130
Dividends declared                               (33,001)             -                 -              -         (33,001)
                                           ---------------- -------------- ---------------- --------------- ----------------
Retained earnings (deficit),  end of the
year                                             641,149        (18,969)        671,069         (652,100)        641,149
                                           ================ ============== ================ =============== ================
______________
(See Note 6)

SCHEDULE ATEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                                 CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
                                        (in thousands of U.S. dollars)
Year Ended December 31, 2002
                                          ----------------- -------------- ---------------- --------------- ----------------
8.32% Notes                                        Teekay
                                               Teekay         Guarantor     Non-Guarantor                    Shipping Corp.
                                           Shipping Corp.   Subsidiaries    Subsidiaries     Eliminations   & Subsidiaries
                                                 $                $               $               $                $
                                          ----------------- -------------- ---------------- --------------- ----------------

Net income                                       53,391           2,166         109,011         (111,177)         53,391
Other comprehensive income
     Unrealized loss on
        available-for-sale securities                 -               -            (239)               -            (239)
     Reclassification adjustment for
        loss on available-for-sale
        securities included in
        net income                                    -               -             737                -             737
     Unrealized gain on derivative
        instruments                                   -               -           3,023                -           3,023
     Reclassification adjustment for
        gain on derivative instruments                -               -          (1,815)               -          (1,815)
                                          ----------------- -------------- ---------------- --------------- ----------------
Comprehensive income                             53,391           2,166         110,717         (111,177)         55,097
                                          ================= ============== ================ =============== ================

Year Ended December 31, 2001
                                          ----------------- -------------- ---------------- --------------- ----------------
8.32% Notes                                        Teekay
                                               Teekay         Guarantor     Non-Guarantor                   Shipping Corp.
                                           Shipping Corp.   Subsidiaries    Subsidiaries     Eliminations   & Subsidiaries
                                                 $                $               $               $                $
                                          ----------------- -------------- ---------------- --------------- ----------------

Net income                                      336,518           3,691         365,332         (369,023)        336,518
Other comprehensive income
     Unrealized loss on
        available-for-sale securities                 -               -          (6,636)               -          (6,636)
     Reclassification adjustment for
        gain on available-for-sale
        securities included in net income             -               -          (3,627)               -          (3,627)
     Cumulative effect of accounting
        change                                        -               -           4,155                -           4,155
     Unrealized loss on derivative
        instruments                                   -               -          (2,274)               -          (2,274)
     Reclassification adjustment for
        gain on derivative instruments                -               -            (974)               -            (974)
                                          ----------------- -------------- ---------------- --------------- ----------------
Comprehensive income                            336,518           3,691         355,976         (369,023)        327,162
                                          ================= ============== ================ =============== ================


Year Ended December 31, 2000
                                          ----------------- -------------- ---------------- --------------- ----------------
8.32% Notes                                        Teekay
                                               Teekay         Guarantor     Non-Guarantor                   Shipping Corp.
                                           Shipping Corp.   Subsidiaries    Subsidiaries     Eliminations   & Subsidiaries
                                                 $                $               $               $                $
                                          ----------------- -------------- ---------------- --------------- ----------------

Net income                                      270,020           9,981         301,699         (311,680)        270,020
Other comprehensive income
     Unrealized gain on
     available-for-sale securities                    -               -           4,555                -           4,555
                                          ----------------- -------------- ---------------- --------------- ----------------
Comprehensive income                            270,020           9,981         306,254         (311,680)        274,575
                                          ================= ============== ================ =============== ================

______________
   (See Note 6)

SCHEDULE ATEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                                           CONDENSED BALANCE SHEETS
                                        (in thousands of U.S. dollars)
As at December 31, 2002
                                         ----------------------------------------------------------------------------------
8.32% Notes                                        Teekay
                                              Teekay         Guarantor    Non-Guarantor                    Shipping Corp.
                                          Shipping Corp.    Subsidiaries   Subsidiaries     Eliminations   & Subsidiaries
                                                 $               $              $                $                $
                                         ------------------ ------------ ----------------- --------------- ----------------
     ASSETS
Cash and cash equivalents                              -            -           284,625              -           284,625
Other current assets                               1,500           43           197,390        (96,000)          102,933
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total current assets                          1,500           43           482,015        (96,000)          387,558
Vessels and equipment (net)                            -      258,664         1,807,993              -         2,066,657
Advances due from subsidiaries                   263,105            -                 -       (263,105)                -
Other assets (principally marketable
      securities and investments
      in subsidiaries)                         1,701,937            -           123,748     (1,701,937)          123,748
Investment in joint ventures                           -            -            56,354              -            56,354
Goodwill                                               -            -            89,189              -            89,189
                                         ------------------ ------------ ----------------- --------------- ----------------
                                               1,966,542      258,707         2,559,299     (2,061,042)        2,723,506
                                         ================== ============ ================= =============== ================
     LIABILITIES & STOCKHOLDERS
     EQUITY
Current liabilities                               22,320        7,574           255,661        (96,000)          189,555
Long-term debt                                   519,229            -           572,500              -         1,091,729
Due (from) to affiliates                               -     (105,085)          425,788       (320,703)                -
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total liabilities                           541,549      (97,511)        1,253,949       (416,703)        1,281,284
                                         ------------------ ------------ ----------------- --------------- ----------------
Minority Interest                                      -            -            20,324              -            20,324
Stockholders Equity
Capital stock                                    470,988           23             5,943         (5,966)          470,988
Contributed capital                                    -      369,307           136,766       (506,073)                -
Retained earnings (deficit)                      954,005      (13,112)        1,145,412     (1,132,300)          954,005
Accumulated other comprehensive loss                   -            -            (3,095)             -            (3,095)
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total stockholders equity                1,424,993      356,218         1,285,026     (1,644,339)        1,421,898
                                         ------------------ ------------ ----------------- --------------- ----------------
                                               1,966,542      258,707         2,559,299     (2,061,042)        2,723,506
                                         ================== ============ ================= =============== ================


As at December 31, 2001
                                         ----------------------------------------------------------------------------------
8.32% Notes                                        Teekay
                                              Teekay         Guarantor    Non-Guarantor                    Shipping Corp.
                                          Shipping Corp.    Subsidiaries   Subsidiaries     Eliminations   & Subsidiaries
                                                 $               $              $                $                $
                                         ------------------ ------------ ----------------- --------------- ----------------
     ASSETS
Cash and cash equivalents                              -            -           174,950              -           174,950
Other current assets                               1,101          472           186,946        (96,000)           92,519
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total current assets                          1,101          472           361,896        (96,000)          267,469
Vessels and equipment (net)                            -      264,768         1,778,330              -         2,043,098
Advances due from subsidiaries                   346,430            -                 -       (346,430)                -
Other assets (principally marketable
     securities and investments
     in subsidiaries)                          1,599,746            -            42,783     (1,599,746)           42,783
Investment in joint ventures                           -            -            27,352              -            27,352
Goodwill                                               -            -            87,079              -            87,079
                                         ------------------ ------------ ----------------- --------------- ----------------
                                               1,947,277      265,240         2,297,440     (2,042,176)        2,467,781
                                         ================== ============ ================= =============== ================
LIABILITIES & STOCKHOLDERS
     EQUITY
Current liabilities                               24,813        1,319           197,193        (96,000)          127,325
Long-term debt                                   519,463            -           403,816              -           923,279
Due (from) to affiliates                               -      (90,131)          503,145       (413,014)                -
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total liabilities                           544,276      (88,812)        1,104,154       (509,014)        1,050,604
                                         ------------------ ------------ ----------------- --------------- ----------------
Minority Interest                                      -            -            18,977              -            18,977
Stockholders Equity
Capital stock                                    467,341           23             5,943         (5,966)          467,341
Contributed capital                                    -      369,307           136,766       (506,073)                -
Retained earnings (deficit)                      935,660      (15,278)        1,036,401     (1,021,123)          935,660
Accumulated other comprehensive loss                   -            -            (4,801)             -            (4,801)
                                         ------------------ ------------ ----------------- --------------- ----------------
     Total stockholders equity                1,403,001      354,052         1,174,309     (1,533,162)        1,398,200
                                         ------------------ ------------ ----------------- --------------- ----------------
                                               1,947,277      265,240         2,297,440     (2,042,176)        2,467,781
                                         ================== ============ ================= =============== ================

______________
(See Note 6)

SCHEDULE ATEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                                      CONDENSED STATEMENTS OF CASH FLOWS
                                        (in thousands of U.S. dollars)
Year Ended December 31, 2002
                                                 --------------------------------------------------------------------------------
8.32% Notes                                         Teekay
                                                     Teekay       Guarantor     Non-Guarantor                    Shipping Corp.
                                                 Shipping Corp.  Subsidiaries    Subsidiaries    Eliminations    & Subsidiaries
                                                       $              $               $                $               $
                                                 --------------- ------------- ----------------- -------------- -----------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from operating activities           (51,914)      24,994          241,364                 -        214,444
                                                 --------------- ------------- ----------------- -------------- -----------------
FINANCING ACTIVITIES
Net proceeds from long-term debt                             -            -          255,185                 -        255,185
Scheduled repayments of long-term debt                       -            -          (51,830)                -        (51,830)
Prepayments of long-term debt                                -            -           (8,000)                -         (8,000)
Other                                                   51,914      (14,953)         (69,312)                -        (32,351)
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from financing activities            51,914      (14,953)         126,043                 -        163,004
                                                 --------------- ------------- ----------------- -------------- -----------------

INVESTING ACTIVITIES
Expenditures for vessels and equipment                       -      (10,041)        (160,522)                -       (170,563)
Deposit for purchase of Navion ASA                           -            -          (76,000)                -        (76,000)
Other                                                        -            -          (21,210)                -        (21,210)
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from investing activities                 -      (10,041)        (257,732)                -       (267,773)
                                                 --------------- ------------- ----------------- -------------- -----------------
Increase in cash and cash equivalents                        -            -          109,675                 -        109,675
Cash and cash equivalents,
     beginning of the year                                   -            -          174,950                 -        174,950
                                                 --------------- ------------- ----------------- -------------- -----------------
Cash and cash equivalents, end of the year                   -            -          284,625                 -        284,625
                                                 =============== ============= ================= ============== =================


Year Ended December 31, 2001
                                                 --------------------------------------------------------------------------------
8.32% Notes                                         Teekay
                                                     Teekay       Guarantor     Non-Guarantor                    Shipping Corp.
                                                 Shipping Corp.  Subsidiaries    Subsidiaries    Eliminations    & Subsidiaries
                                                       $              $               $                $               $
                                                 --------------- ------------- ----------------- -------------- -----------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from operating activities            (7,458)      21,446          506,162                 -        520,150
                                                 --------------- ------------- ----------------- -------------- -----------------
FINANCING ACTIVITIES
Net proceeds from long-term debt                       345,045            -          343,336                 -        688,381
Scheduled repayments of long-term debt                       -            -          (72,026)                -        (72,026)
Prepayments of long-term debt                          (22,045)           -         (729,693)                -       (751,738)
Other                                                 (316,034)     (20,502)         301,031                 -        (35,505)
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from financing activities             6,966      (20,502)        (157,352)                -       (170,888)
                                                 --------------- ------------- ----------------- -------------- -----------------

INVESTING ACTIVITIES
Expenditures for vessels and equipment                       -         (945)        (204,102)                -       (205,047)
Purchase of Ugland Nordic Shipping AS                      198            -         (176,651)                -       (176,453)
Other                                                        -            1           25,887                 -         25,888
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from investing activities               198         (944)        (354,866)                -       (355,612)
                                                 --------------- ------------- ----------------- -------------- -----------------
Decrease in cash and cash equivalents                     (294)           -           (6,056)                -         (6,350)
Cash and cash equivalents,
    beginning of the period                                294            -          181,006                 -        181,300
                                                 --------------- ------------- ----------------- -------------- -----------------
Cash and cash equivalents, end of the year                   -            -          174,950                 -        174,950
                                                 =============== ============= ================= ============== =================

Year Ended December 31, 2000
                                                 --------------------------------------------------------------------------------
8.32% Notes                                         Teekay
                                                     Teekay       Guarantor     Non-Guarantor                    Shipping Corp.
                                                 Shipping Corp.  Subsidiaries    Subsidiaries    Eliminations    & Subsidiaries
                                                       $              $               $                $               $
                                                 --------------- ------------- ----------------- -------------- -----------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from operating activities           (19,407)      25,048          327,614                 -        333,255
                                                 --------------- ------------- ----------------- -------------- -----------------

FINANCING ACTIVITIES
Net proceeds from long-term debt                             -            -          206,000                 -        206,000
Scheduled repayments of long-term debt                       -            -          (63,757)                -        (63,757)
Prepayments of long-term debt                          (35,726)           -         (394,200)                -       (429,926)
Other                                                   55,217      (63,293)           2,916                 -         (5,160)
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from financing activities            19,491      (63,293)        (249,041)                -       (292,843)
                                                 --------------- ------------- ----------------- -------------- -----------------

INVESTING ACTIVITIES
Expenditures for vessels and equipment                       -       (1,407)         (54,046)                -        (55,453)
Proceeds from disposition of assets                          -            -            9,713                 -          9,713
Acquisition costs related to purchase of
Bona Shipholding Ltd.                                        -            -           (2,685)                -         (2,685)
Other                                                        -            -          (31,014)                -        (31,014)
                                                 --------------- ------------- ----------------- -------------- -----------------
     Net cash flow from investing activities                 -       (1,407)         (78,032)                -        (79,439)
                                                 --------------- ------------- ----------------- -------------- -----------------
Increase (decrease) in cash and cash equivalents            84      (39,652)             541                 -        (39,027)
Cash and cash equivalents, beginning of the year           210       39,652          180,465                 -        220,327
                                                 --------------- ------------- ----------------- -------------- -----------------
Cash and cash equivalents, end of the year                 294            -          181,006                 -        181,300
                                                 =============== ============= ================= ============== =================
___________________
(See Note 6)

EXHIBIT 8.1List of Significant Subsidiaries

The following is a list of the of Companys significant subsidiaries as at March 1, 2003.
State or          Proportion of
                                                                             Jurisdiction of         Ownership
Name of Significant Subsidiary                                                Incorporation           Interest

BONA SHIPHOLDING LTD...................................                    BERMUDA                      100%
NORSK TEEKAY AS........................................                    NORWAY                       100%
NORSK TEEKAY HOLDINGS LTD..............................                    MARSHALL ISLANDS             100%
SINGLE SHIP COMPANIES (3)..............................                    AUSTRALIA                    100%
SINGLE SHIP LIMITED LIABILITY COMPANIES (46)...........                    MARSHALL ISLANDS             100%
TEEKAY CHARTERING LIMITED..............................                    MARSHALL ISLANDS             100%
TEEKAY NORDIC HOLDINGS INC.............................                    MARSHALL ISLANDS             100%
TEEKAY NORGE LIMITED...................................                    LIBERIAN                     100%
TEEKAY SHIPPING LIMITED................................                    BAHAMAS                      100%
UGLAND NORDIC SHIPPINGAS...............................                    NORWAY                       100%

EXHIBIT 12.1CERTIFICATION PURSUANT TO
                                            18 U.S.C. SECTION 1350,
                                      AS ADOPTED PURSUANT TO SECTION 906
                                       OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Teekay Shipping Corporation (the "Company") on Form 20-F for the year
ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Form
20-F"), I Bjorn Moller, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as
adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)       The Form 20-F fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)       The information contained in the Form 20-F fairly presents, in all material respects, the
financial condition and results of operations of the Company.

Dated: March 31, 2003
By: /s/ Bjorn Moller          _________
Bjorn Moller
Chief Executive Officer

EXHIBIT 12.2CERTIFICATION PURSUANT TO
                                            18 U.S.C. SECTION 1350,
                                      AS ADOPTED PURSUANT TO SECTION 906
                                       OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Teekay Shipping Corporation (the "Company") on Form 20-F for the year
ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Form
20-F"), I Peter Antturi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as
adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)       The Form 20-F fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)       The information contained in the Form 20-F fairly presents, in all material respects, the
financial condition and results of operations of the Company.

Dated: March 31, 2003
By: /s/ Peter Antturi          _________
Peter Antturi
Chief Financial Officer
EXHIBIT 15.1CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We  consent  to the  incorporation  by  reference  in the  Registration  Statement  (Form  S-8  No.  333-42434)
pertaining  to  the  Amended  1995  Stock  Option  Plan  of  Teekay  Shipping  Corporation  (Teekay),  in the
Registration  Statement (Form F-3 No.  333-102594) and in the related Prospectus of Teekay for the registration
of up to  $500,000,000  of its common  stock,  preferred  stock,  warrants,  stock  purchase  contracts,  stock
purchase  units or debt  securities  and in the  Registration  Statement  (Form F-3 No.  33-97746)  and related
prospectus  of Teekay for the  registration  of  2,000,000  shares of Teekay  common  stock under its  Dividend
Reinvestment  Plan of our report  dated  February  13, 2003  (except for Note 15(b) which is as of February 19,
2003), with respect to the consolidated  financial  statements and the financial schedule listed in Index: Item
18 of Teekay and its  subsidiaries  included in this Annual Report (Form 20-F) for the year ended  December 31,
2002.Vancouver, Canada,
Dated:     March 24, 2003
/s/ ERNST & YOUNG LLP
Chartered Accountants